US Firms Put CSR Communication Before Performance, KPMG Says

U.S. companies are “scratching the surface” of corporate responsibility, as a whole concentrating on communication more than performance, according to a global survey by KPMG.

In the KPMG International Survey of Corporate Responsibility Reporting 2011 (pdf), the consultancy analyzed the reports of more than 3,400 companies – the world’s 250 largest, and the 100 largest in each of 34 countries. It then plotted each country in a quadrant based on quality of communications and level of process maturity.

The U.S. falls into the “Scratching the Surface” quadrant. Companies in this quadrant have the highest risk of failing to deliver on their promises, and risk increasing investor pressure. The quadrant shows U.S. companies’ level of process maturity ranking lower than every other country in the survey except Russia and Singapore.

Most countries in the “Leading the Pack” quadrant are European nations, with the exception of Taiwan, Australia and India. These nations’ companies have implemented information systems and processes to ensure reliable information, and have made few or no CR report restatements. They have asked for external assurance, apply GRI guidelines to their reports, and are taking steps towards integrated reporting.

The report said that 71 percent of European companies are now reporting on CR, but the Americas are gaining ground with 69 percent, followed by the Middle East and Africa, where 61 percent of companies now report on CR initiatives. Asia Pacific continues to trail, with 49 percent of its companies disclosing CR data to the markets.

But the report found that Chinese and South Korean companies are doing a good job of implementing processes and systems to measure and govern corporate responsibility issues.

Despite these varying levels of participation, KPMG said that CR reporting has become the “de facto law” for business. It found that 95 percent of the 250 largest companies in the world (G250 companies) now report on their CR activities, a rise of more than 14 percent over KPMG’s 2008 survey. Two-thirds of non-reporting G250 companies are based in the US and will therefore be likely to begin reporting on CR in the near future, KPMG said.

Among the 100 largest companies in each of the 34 countries studied (N100 companies), the total number of reporting companies increased by 11 percentage points, to 64 percent in 2011.

Sectors showing the greatest commitment to reporting include energy and natural resources. KPMG said that the pharmaceutical, construction and automotive industries deserve mention, with growth rates of 39, 33 and 29 percentage points, respectively.

But the consultancy said it was surprised by the comparatively low ranking of other key industries. Transport, for example, has made great improvements incorporating low-emission policies into its business, but only 57 percent of these companies report on their CR activities. Trade and retail continue to rank last, though they picked up 26 percentage points since KPMG’s 2008 survey.

Among the N100, 69 percent of publicly traded firms conduct CR reporting, compared to just 36 percent of family-owned businesses, and about 45 percent for both cooperatives and companies owned by professional investors.

Companies with revenues over $50 billion were twice as likely as those with revenues under $1 billion to report on their CR activities.

KPMG said that data quality appears to be a significant issue, with a third of G250 and over 20 percent of N100 companies issuing a restatement of their CR report. Over a third (35 percent) of G250 reporters with restatements admitted that restatements were the result of an error or omission, which KPMG said is a far higher rate than is acceptable in financial statements.

Other reasons for issuing restatements included updating the scope of reporting (42 percent), improving estimation or calculation methodology (44 percent) and updating CR definitions (28 percent).