BA 850
Sustainability-Driven Innovation

 

Corporate Sustainability Reports (CSRs)

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An Explanation of Sustainability Reporting

The Global Reporting Initiative offers forth the following summary of sustainability reporting:

A sustainability report is a report published by a company or organization about the economic, environmental and social impacts caused by its everyday activities.

A sustainability report also presents the organization's values and governance model, and demonstrates the link between its strategy and its commitment to a sustainable global economy.

An increasing number of companies and organizations want to make their operations sustainable and contribute to sustainable development. Sustainability reporting can help organizations to measure, understand and communicate their economic, environmental, social and governance performance. Sustainability – the ability for something to last for a long time, or indefinitely – is based on performance in these four key areas.

Systematic sustainability reporting helps organizations to measure the impacts they cause or experience, set goals, and manage change. A sustainability report is the key platform for communicating sustainability performance and impacts – whether positive or negative.

To produce a regular sustainability report, organizations set up a reporting cycle – a program of data collection, communication, and responses. This means that their sustainability performance is monitored on an ongoing basis. Data can be provided regularly to senior decision makers to shape the organization's strategy and policies, and improve performance.

Sustainability reporting is therefore a vital resource for managing change towards a sustainable global economy – one that combines long term profitability with ethical behavior, social justice and environmental care.

We will spend significant time this semester working with CSRs as a type of source material for innovation and strategy. So while we will be taking a far more technical and critical view of CSRs as the weeks pass, I'd like to offer a primer here.

The Effective CSR

There tend to be two ends of the CSR spectrum: one of which represents the very conceptual and aspirational, long on vision, but short on execution... and the other which tends to take a more accounting-like view of reporting, simply laying out the numbers, without emotion, context, or philosophical underpinnings.

Upon reading many CSRs, you may begin to see that some seem to just flow. They're interesting, they're charming, they have aspiration and vision, but are also practical and show vulnerability. You may find you feel a certain bond to the brand after reading it. In fact, there is a case to be made that the purest expression of a brand may not lie in its advertising, but in its sustainability report. Advertising talks at you, but many times, sustainability reports talk to you. We may consider five facets of an effective CSR as a lens through which to not only critically evaluate the content of a sustainability program, but also how it is presented.

VISAS: Five Facets of a Compelling and Practical CSR

Vision.

Compelling CSRs hold a central vision and mission closely. The influence of the mission and vision on the organization's sustainability efforts and CSR is unmistakable. The vision and mission is what bounds the sustainability efforts, keeps it focused in the right direction (according to the organization), determines what are long-term goals and what are secondary. This vision tends to be articulated early in the CSR, and referred to often.

Less compelling CSRs tend to perhaps make passing reference to the organization's vision for sustainability, but that vision is not infused and embodied in the sustainability program. It is simply used as a garnish. Less compelling CSRs also have a tendency, ironically, to set visions which are so lofty as to be completely unrealistic and entirely unsupported. Chances are an organization which does not capture or allude to a single sustainability metric will not single-handedly make 'sustainable commercial development' a reality.

Innovation.

Compelling CSRs tend to be infused with a feeling of innovation which one could consider simultaneously practical and playful. In many cases, this innovation tends to be because the CSR reflects a sustainability mission which is well-developed and embraced by the entire organization, and therefore becomes a hotbed for thought and interest. As the entire organization becomes more engaged in the vision and the program matures, the CSR tends to become a reflection of that enthusiasm. Innovative initiatives are developed and flourish as different people and functions within the organization bring their talents to the sustainability program. By nature, sustainability is a widely multi-disciplinary field, and innovation in sustainability requires understanding, enthusiasm, and a sense of partnership.

Less compelling CSRs tend to go through the motions of innovation, perhaps highlighting one initiative or another as interesting. These programs struggle to create what could be considered a "veneer of innovation." An example of this is when an organization may have had an interesting initiative four or five years prior, yet is still touting its exploits. Interesting CSRs tend to be out of date before they are published, as there is constant movement, imagination, and innovation happening.

Storytelling.

Compelling CSRs tend to be rich with stories. These may be stories of triumph or ingenuity, passion or failure, but they are real stories with faces and voices. Rich storytelling is, in many ways, the byproduct of a sustainability program performing well on the other VISAS facets, as these stories tend to be a reflection of an organization's engagement in the sustainability vision and the empowerment of everyone to better the organization. With this kind of entrepreneurial spirit happening, one could expect that some great stories would arise.

Less compelling CSRs tend to either be entirely without stories, or have a sprinkling of highly sanitized stories. These stories are completely devoid of any emotion or persona, and tend to be bland because they are either wholly fabricated or intended as some sort of corporate parable: "A Generic Co. associate was walking into work at one of our 600 proud facilities nationwide and thought it would be nice to recycle office paper..."

Accomplishment.

Compelling CSRs are clear about metrics, goals, and accomplishments. They do not hide metrics or otherwise obscure progress toward goals, instead tending to distil what could be complex measures into simple, visual, easily understood metrics. These metrics may be backed by tremendous amounts of data and supporting assets, but the compelling CSR does not seek to impress with reams of fine print. Furthermore, in the interest of transparency and brevity, they are also equally likely to recount disappointments or missed goals, electing to embrace them as opportunities for learning.

Less compelling CSRs tend to bask in complexity to further appearances they have meaningful goals and accomplishments. They may have 40 or 50 poorly structured, redundant metrics, and may also tend to obscure how the metrics are derived. A common practice in these types of CSRs can be to index the next decade of performance to a "year zero" baseline. While they may provide impressive year over year performance (i.e., "in 2015, we reduced electricity usage 20% over our 2005 baseline."), they, in many cases, simply highlight how poorly performing the organization was in the baseline year. Furthermore, less compelling CSRs have a tendency to not "raise the bar" on metrics after they are reached, instead choosing to rest on their accomplishments as long as possible.

Structure.

Compelling CSRs have a logical flow and structure, and clearly depict sections. While this may sound to be a rather tactical and low-level concern, a well-articulated structure in a CSR makes the other facets that much more compelling. The reason for this is that CSRs with strong structure tend to take on an almost narrative quality, and read as a single, unified story as opposed to an assemblage of unrelated components. Think of anything from a compelling TED Talk to timeless literature, and they all follow one variation or another of the classic narrative structure: Orientation - Complication - Resolution. No CSR ends in total, perfect resolution of all problems, but ends on a hopeful note by showing progress made toward important goals.

Less compelling CSRs tend to lack the narrative feel, and therefore result in the reader skimming or choosing selected passages to review. In essence, it is very difficult to create an interesting story without a compelling viewpoint, meaningful accomplishment, notable struggle, or interesting characters. Interesting stories write themselves by comparison because the source content has richness.

Vision, Mission, and Values

A section of the CSR I would like to call attention to specifically is the Vision, Mission, and Values (VMV) of the organization. It may go by any one of those names, or some derivative, but it is typically set forth quite clearly early in the CSR, and acts to set the context of the organization's sustainability. The VMV acts as the frame by which we can judge a company's sustainability efforts. VMV sets the desired destination, so our first goal is not necessarily to judge the destination, but to understand if the organization's stated strategy, approach, and indicators align with the destination. In essence, we do not bring our preconceptions or existing frames to measure the organization, but we use their own words and definitions of what is important to their organization.

In keeping with the theme of this week's case, the below is a sample of the stated VMVs for a handful of outdoor products companies:

Mission Statements
Organization Stated Vision / Mission / Values
The North Face

[From CEO's letter]

"Our love of the outdoors anchors our focus on exploration, protecting recreation areas, and addressing the environmental effects of our business. To marshal our resources most effectively, we are targeting our energies at the areas where we can achieve the greatest impact. For The North Face, this means focusing on resource efficiency and material selection in our product manufacturing."

Patagonia "Our Reason for Being: Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis."
REI "REI’s purpose is to inspire, educate and outfit for a lifetime of outdoor adventure and stewardship. At the co-op, being a good steward is reflected in how we care for the world in which we play, work and live, and how we connect people to nature.

Specifically, our efforts are designed to:

  • Facilitate the active conservation of nature
  • Inspire the responsible use and enjoyment of the outdoors
  • Enhance the natural world and our communities and the places in which we work through responsible business practices
  • Foster opportunities for outdoor recreation, with a focus on young people
  • Maintain REI as an employer of choice, where employees are highly engaged and reflect the diversity of our communities"
Columbia "At Columbia Sportswear, we are committed to building a company of which we can all be proud – not only of the innovative products we create and the financial results we achieve, but the manner in which we achieve them. Whether it’s responsible sourcing, giving back to our communities, or reducing our environmental impact, we believe corporate responsibility is a company wide effort."
ARC'TERYX "The single biggest area of our company’s environmental impact is the products we design and make. As a result, our environmental initiatives are primarily structured to address the footprint and composition of our product and materials.

In general, we seek to operate in a responsible, efficient, and mindful way.

This translates to minimizing waste in our operations, to sourcing safe and effective materials, and perhaps most importantly, to designing and manufacturing products to be the longest lasting and best performing in our industry.

Our environmental initiatives, like our product design in general, focus on extending the lifetime and performance of the products.

These initiatives span product design and care, materials research and development, efficient manufacturing, and responsible sourcing."

As you can see, the VMVs of a relatively defined group of companies vary greatly in their formality, depth, and areas of emphasis, but nonetheless, set forth a context by which their sustainability efforts may be judged.

Five word summary - Understanding what's important and steps taken