A version of this article appeared in the “Sustainable San Diego” advertising supplement in the April 18 issue of San Diego Business Journal.
The past 100 years have drawn our attention to the effect we have on our environment—and how it, in turn, affects us. Both individuals and businesses are tasked with doing our part to mitigate our impact. Simply put, it’s the right thing to do—so it’s no wonder corporate social responsibility (CSR) reporting has become common practice in the past decade.
Most large, global businesses have been issuing CSR reports for years, and midsize businesses aren’t far behind. For all but the smallest companies, investing in CSR reporting pays back—not only in the cost savings associated with better resource management but also with respect to your long-term business strategy.
The Business Case for CSR
Many businesses are already on the same page concerning sustainability, but it helps to have a business case.
As with other forms of reporting, CSR reporting adds transparency by identifying and mitigating potential risks to the long-term sustainability of a business. Inefficient use of scarce resources doesn’t make social or fiscal sense, and it only drives up the cost of performing the same operations over the long term. In the short term, careful resource management can result in immediate cost savings as well. Double-sided printing, energy-efficient lighting, and the repurposing of waste materials all add up. On the personnel side, investing in employee health and wellness programs or other retention efforts may temporarily increase costs, but in the long term it reduces health costs and increases productivity.
Further, sustainability is an increasingly important public relations issue. A negative public perception can make working with you a risk for vendors, business partners, and customers. This is important on an internal level as well, considering demographic shifts in the workplace. Everybody wants to feel good about where they work, but it’s an attitude even more widespread among millennials. Taking corporate social responsibility to heart helps attract, engage, and retain this audience, improving your talent profile and sparing you the costs of high turnover.
Sustainability comes with other financial benefits too. Many government agencies, utilities, municipalities, and other organizations continue to invest in programs that reward and incentivize organizations that make investments to increase energy efficiency and sustainability or reduce their environmental footprint. These incentives include grants, tax credits, accelerated deductions, sales tax and property tax rebates, and favorable financing arrangements. Normally, qualifying for these incentives requires some effort, but the data you collect for a CSR report may be useful in qualifying and monetizing your businesses investments.
Getting Started
Most companies are already making choices they can and should track in a CSR report. If you don’t yet have a CSR report, consider simple changes you can make: If you don’t recycle, start. If you do recycle, start measuring how much, and compare it to how much waste you generate. As leases and contracts with vendors expire, make sustainability a part of the selection and request-for-proposal process.
Four best practices as you begin:
Decide on a framework. Information overload is common when companies organize their first CSR report. A defined framework will help you gather, analyze, and audit the information that’s most meaningful. The Global Reporting Initiative and the Sustainability Accounting Standards Board offer two common frameworks.
Define your goals and measurement systems. To demonstrate the credibility and quality of your report, clearly articulate your baseline, set benchmarks and long-term goals, outline how you’ll track progress, and implement a monitoring system.
Demonstrate a connection. Explain how your mission statement, growth plan, and overall business strategy tie into the key performance indicators (KPIs) laid out in your report. As a chemical manufacturer, for example, you’d choose to track very different KPIs than a professional services firm or a technology manufacturing company.
Be consistent. Consistency between your sustainability report and other public reports, such as SEC filings or press releases, is crucial. A lack of transparency will decrease your report’s validity and undermine trust in your findings.
Trade associations or other nongovernment organizations can help you develop a starting point for your report by requiring compliance with particular standards.
Upping the Ante
If you’ve already implemented a CSR reporting process, you’re on the right track—but don’t get too comfortable. In addition to continuing to improve your KPIs, look forward. If you’ve focused on environmental impact in previous reports, consider branching out into new areas, such as your economic impact on the community and how you compensate and treat your employees.
Some companies are already required to report nonfinancial information, providing data on their supply chain for conflict minerals or their internal controls surrounding customers’ personal information. There’s a push toward integrating CSR reporting with required financial and nonfinancial reporting, which would give investors and other stakeholders a more holistic view of a company’s risk areas. If you have a CSR report, consider making it a part of your larger reporting package.
In addition, consider implementing third-party verification of your report. Independent assurance and monitoring add credibility and quality to your report and can help keep you accountable for continuous improvement.
Take Your Next Step
Whether you’re improving on an existing CSR report or just getting started, there’s momentum behind you. To learn how we can help you track progress against your KPIs and issue a meaningful report, or for more information on our sustainability services, contact your Moss Adams professional.