sri-advisor.com
where checking accounts rebuild communities
Back to homepageInstitutional ReportsSRI Financial Professionals DirectoryToolsNewsSRI Performance and TrendsAbout Us   
News


September 15, 2005
Taking Account of Corporate Social Responsibility Reports
    by William Baue

A Pleon survey of CSR reporting finds differing opinions on best practice for report assurance and verification amongst respondents as well as professional experts.


The term "accounting" carries two primary meanings--it refers both to auditing and to explaining. It also relates to the term "accountable," or answerable, and ties into the phrase "of some account," or esteemed. The title Accounting for Good merely hints at how this new report on corporate social responsibility (CSR) reporting uncannily encapsulates these multiple connotations. The subtitle--The Second World-wide Survey on Stakeholder Attitudes to CSR Reporting--accurately (if more mundanely) describes the scope of the work, produced by the Europe-based international business consultancy Pleon.

It reports the results of a survey of 495 readers of CSR reports from 58 countries, down from the 1,700 respondents to the 2003 survey--likely due to "questionnaire fatigue" (the condition of being overwhelmed by too many requests for social and environmental data) according to Pleon.

The most significant survey finding concerns the auditing of CSR reports, an emerging area also sometimes referred to as "independent assurance" or "external verification."

"There is now a clear majority (59 percent) of international stakeholders who want CSR reports to be 'verified by a professional assurance or verification body,'" states the report.

Support for such assurance or verification is strongest in the financial community (comprising investors and analysts--71 percent), next amongst nongovernmental organizations (59 percent), then academics (57.6 percent), and finally employees (45.6 percent). The means of "accounting" (or creating credibility) for CSR reports also varies, though preferences all hover around the half-way mark.

For example, 52.5 percent of respondents want formal external verification, 49.7 percent prefer honesty about mistakes, 48.5 percent favor the Global Reporting Initiative (GRI), 46.3 percent support independent third party assessment, and 45.5 percent desire documentation of dialogue with stakeholders. It does not take an accountant to recognize that these percentages add up to more than 100, meaning respondents chose more than one option.

These survey numbers tell one version of the "accounting" story; another version of the story comes from a series of commentaries by CSR reporting experts included in the report. Their opinions confirm, amplify, and flesh out the survey findings.

"We believe that external assurance is a key component in providing credibility to our reporting," states Dr. David Bickerton, head of external communications at BP (ticker: BP), which incidentally produced the second-best CSR report behind Shell (RD) according to the survey. "The process of data verification and narrative challenge that we get from Ernst & Young is important in ensuring that our reporting is both accurate and balanced."

The representative NGO voices the polar opposite opinion.

"[W]e don't consider accountancy firms to be reliable or independent auditors of CSR report," says Simon McRae, corporate and investment campaigner for Friends of the Earth UK (FoE). "Firstly, they lack the skills and knowledge to be able to assess social and environmental impacts."

"Secondly, they rarely seek the view of stakeholders apart from employees and management," he adds. "Generally we would be quite skeptical of any CSR report that has not been 'independently verified' by stakeholders."

This perspective is not lost on some in the corporate community, who recognize the elusiveness by which they gain the esteem of those who judge them by their CSR reporting.

"When considering whether a formal external verification can add value to the report one should clarify what is to be verified," says Uwe Bergmann of the corporate sustainability management department at Henkel (HEN.DE). "Are we talking about the reliability of our data management or about the question whether we address the relevant challenges and adequately describe our performance?"

"Companies are judged by their performance, but external expectations and sustainability priorities differ between regions, markets, and particular stakeholders," he continues. "Therefore, we believe a verification statement does little to help our stakeholders assess our performance."

Voices from the academic community cite their own recent research (More Credibility with Assurance Statements?) that reconciles the seemingly conflictory perspectives by pointing out that multiple factors contribute to credibility (as the survey results suggest.)

"Obviously, it is very well possible for a non-verified report to be credible since there are many factors determining credibility," state Thomas Loew, founder of the Berlin-based Institute 4 Sustainability and Jens Clausen, director of the Hanover-based Borderstep Institute for Innovation and Sustainability. "It is equally possible that an externally verified report would still be regarded as less credible by its readers when other credibility factors are not seen as being in line with it, for instance in case of ongoing public criticism of certain aspects of a company's sustainability performance."

"Consequently, it is not wrong to say, as stated in the report, that 'credibility is achieved by an external accountant,...' but the thesis should be reformulated as 'credibility in CSR reporting can be achieved through several factors,'" they conclude. "For example, a well-known sports shoe brand is planning to abandon external report verification in future sustainability reports and to focus instead on the external verification of its activities to improve working conditions and environmental management with its suppliers."

In other words, being accountable to their stakeholders can spur CSR reporters to choose the options that provide the most robust accounting mechanism, be it formal auditing, independent assurance, external verification, or other means, according to Mr. Loew and Dr. Clausen.

 

 
Home
| Reports | SRI Financial Professionals Directory | Tools | News | SRI Performance and Trends | About Us | Contact
© SRI World Group, Inc. - All rights reserved
Terms of use - Privacy Policy - OneReportTM Network