August 13, 2003
Will Ford's Transparency Affect Its Performance?
by William Baue
While lauding the transparency of Ford's 2002 Corporate Citizenship Report, analysts caution that
it remains to be seen whether such reports and the Global Reporting Initiative reporting guidelines
will help improve corporate performance (part two of a two-part article).
article focused on the transparency of Ford Motor Company's (ticker: F) 2002 Corporate Citizenship Report, which uses Global Reporting Initiative (GRI) guidelines as its
reporting platform. Today's article looks at the company's performance as it is reported using GRI
guidelines. Analysts express concern that praise over Ford's transparency may obscure the
company's shortcomings with regard to its actual environmental and social performance.
"Ford presents a wealth of detailed data and overall seems willing to address the tough
challenges: climate change and appropriate technology advances; overseas labor and human rights
efforts; and product safety--especially the SUV rollover issue," said Andrew Brengle, an analyst
with KLD Research & Analytics, a socially
responsible investment (SRI) research firm.
Mr. Brengle points to a graphic on page 20 of
the report depicting a collage of unflattering newspaper headlines, revealing that Ford tunes into
critiques of the company's policies and practices. The report also presents information on Ford's
more positive social and environmental initiatives, such as community giving, minority contracting,
diversity in the workplace, and pollution prevention in its manufacturing plants, among many other
"For these reasons, I believe the report will help Ford's image and possibly
market position," Mr. Brengle told SocialFunds.com. "On the other hand, if the expectation is that
GRI will give audiences the straight story on Ford, I don't think the format necessarily guarantees
Ford's report, however, does explicitly state cases where it has failed to meet its
For example, Ford predicted in 2000 that it would increase its
overall product fuel efficiency 25 percent by model year 2006, and the report candidly admits that
the company will not meet this projection. While Ford is to be applauded for this transparency,
the fact remains that its slower rate of improving fuel efficiency impacts the environment.
Sports utility vehicles (SUVs), which fall under the "light truck" category, are largely
to blame. Trucks, which constitute Ford's largest product line, get the worst gas mileage
according to Mr. Brengle (an estimated 21.3 miles per gallon, compared to 28.3 miles per gallon for
Ford cars). Mr. Brengle notes the irony that Ford's progress toward its fuel economy target for
SUVs actually took a step backward. While fuel economy improved 8.4 percent in the 2002 model
year, it improved just 5.2 percent in the 2003 model year.
"Recently, Ford lobbied
Congress to not increase the CAFE [Corporate Average Fuel Economy] standards," said Pierre Trevet,
an analyst with the research firm Innovest
Strategic Value Advisors.
Congress defeated the proposed legislation requiring new
vehicles to average 40 miles per gallon by 2015. Claiming to be a responsible corporate citizen
while simultaneously funding such lobbying opens Ford up to criticism.
"The report does
demonstrate the limits of a voluntary reporting protocol on substantive progress," Mr. Brengle
said. "No matter how well-organized and readable a report is, it is not going to have much of an
influence [on company performance] in the near term."
A specific point of criticism of
Ford's report is that it is not audited or verified by a third party.
"In our 2002
report, much data has been verified internally and/or externally," explained Rob Frederick of
Ford's corporate responsibility department, but he admitted that "we have not certified the report
in its entirety."
In contrast, many of Ford's competitors had their corporate social
responsibility (CSR) reports on social and environmental performance audited.
"DaimlerChrysler (DCX) has invited NGOs [nongovernmental
organizations] to verify their CSR report, Volkswagen (VOW) had their report audited by
KPMG, and Toyota (TM) had theirs audited by Deloitte
& Touche," Mr. Trevet told SocialFunds.com. Renault (RNO) and Porsche (PSEPF.PK) also
had their CSR reports audited, according to Mr. Trevet.
Despite this criticism, analysts
find much value in the Ford report and the GRI format, likening their potential positive effects to
those of the Toxic Release Inventory (TRI), which requires companies to disclose data on their
toxic chemical emissions.
"I am one who is willing to give GRI time to see if some kind of
binding transparency mandates or TRI-like sunshine effects result from the exercise," said Mr.
Brengle. "It's still a good idea."