June 3, 2008

The 3 Keys To CSR Reporting Are Materiality, Materiality And Materiality

In the past, the importance of CSR reporting was that it existed at all. Stakeholders just wanted to know if a company was willing to talk about their impacts on the community or the environment. Once companies opened up a communication channel in the form of a report, then the focus became the Global Reporting Initiative (GRI). This framework was necessary for the comparability, consistency and credibility of the report.

The GRI has legitimized sustainability reporting and brought it to the masses. Today, over 50% of the world’s biggest 250 companies report and over 2,500 worldwide. This new level of transparency and information has opened up new and unthinkable conversations between companies and its stakeholders. It has helped support, and is necessitated by, the sea change of responsible business initiatives seen around the world.

But the GRI has had an unintended consequence. I have heard it referred to as the “doorstop” or “phone book” effect. CSR reports have grown steadily in size and scope. It is not uncommon to hear about 200+ page reports these days. As someone who puts together CSR reports, I understand the desire to add more to the report. Consistent reporting begets more data and better understanding of societal and environmental impacts. It is hard not include all this newfound information in successive reports.

After all, the idea is to be transparent, right?

While I agree with the sentiment, I don’t agree with the idea that more information is better. I think the duty of corporate CSR reporters is to relentlessly refine the information they release in public reports. Their guidance should be based on what is most material for their stakeholders.

All companies have a group of interested stakeholders in their organization. A company could spend all their time reacting to stakeholder inquiries about the many facets of their business operations. My basic premise is that a CSR report should be seen as a tool of efficiency. A well-crafted report should be a platform that harnesses this general societal interest and focuses it on the impacts that are most important. Topics like climate change, global human rights and community engagement are difficult, but worthy, goals for companies. They require collaboration between civil society, governments and corporations if we want to see progress.

This is not to say that a company should fail to talk about sensitive topics - quite the opposite actually. Also, companies must still provide a holistic view of their operations. Make this information available, but not at the forefront of corporate communications. Put the data online so that the information exists, but spend your resources going deep on the material issues.

To borrow some phrasing from the real estate industry, the three keys to CSR reporting are materiality, materiality and materiality.

Perhaps I am being repetitive. But isn’t that the point? Focus on material impacts, provide quantitative targets and then, next year, tell us your progress against that metric. Trend data leads to the understanding of, well, trends. This insight allows companies to allocate resources to the areas of business that most need them.

Today, CSR reporting is an important component of an overall strategic focus on sustainability. Once the right pieces are in place - strategic alignment, trend data, collaboration, sustained effort - we can start to see progress against some of the most significant challenges our society faces.

Alex Hausman is CSR Reporting Manager at The Timberland Company.

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