Abstracts - Integrated creative services

Corporate social responsibility (CSR) is now undertaken by most of the larger financial institutions in some form. Although reporting on CSR activities is currently not a legal requirement, the recent Royal Assent given to the Companies Bill in the UK is likely to change the nature and scope of reporting. There are also many reasons, aside from the legal, why the finance sector should produce a CSR report or brochure, or CSR-specific content as part of an annual report.

Why report?
The key reason for undertaking CSR reporting in the financial sector is, simply, that your stakeholders expect it. Investors want to know about environmental costs and human rights risks; employees – and potential employees – want to know how the company is responding to global issues, such as climate change; non-governmental organisations (NGOs) may be scrutinising investments for labour and environmental compliance.

In a post-Enron climate, transparency and accountability within the financial sector is also more critical. A good CSR report makes your company more transparent. Reputation management is also a factor and a large company will lose credibility if it is unable to respond to questions relating to its businesses practices and CSR activities.

For many companies, reporting is a laborious, time-consuming and expensive add-on to the business. However it is becoming an essential cost: On 8 November 2006, the Companies Bill received Royal Assent (with the Act expected to follow a fortnight later). It included explicit requirements for quoted companies to report, as part of their business review “and to the extent necessary for an understanding of the business”, information on environmental matters, employees and social and community issues. These UK stipulations are believed to be the first in the world.

Whether a legal duty or not, a good, honest CSR report, preferably with external verification, is able to boost a company’s reputation, inspire employees and give a proactive kick to CSR.

If you’re stuck on getting started, here are some best practice tips:

What should a CSR report cover?
There is no single approach to CSR; compliance standards are mostly voluntary and, consequently, CSR reports do not follow a blueprint. However, this means you can report in a way that best suits your business and sector.

A simple starting point is to divide the report or brochure into key areas which affect your business. Then gather information from all areas of the business – such as human resources, legal, compliance and marketing. Ensure that you address the following:

Your sector: how are your activities contributing to an overall improvement of your sector?
Good governance and standards: what compliance standards are implemented in the business? – for example, Investors for People, ISO standards, supply chain management standards and your code of conduct; State your policy on dealing with clients, including client selection and rules of engagement.
Supply chain: the supply chain is, as far as stakeholders are concerned, part of your business. A transparent report will cover processes and procedures within the supply chain, your investment practice and terms of engagement with suppliers.
The environment: what programmes and initiatives are in place to help reduce your impact on the environment? For example, using carbon offsetting, green car fleets and sustainable paper with the endorsement of external environmental standards bodies, where possible, such as the Carbon Disclosure Project.
Societal value: what are you doing for the communities in which you operate? How are you dealing with human rights issues that affect your business? What are you doing for your local communities – at home and abroad? Also, include any philanthropic giving to areas like the arts and culture (this will often overlap with sponsorship activities).
Employees: what are you doing for your employees in terms of diversity, migration issues and labour standards? How are you engaging your employees in CSR? How have they contributed to the community in quantifiable employee volunteering hours?
Current issues: how is the company responding to current events that may have arisen in your sector over the past year, or at a global level? (For example, many companies reported on their response to the tsunami).

Make it factual

Quantify your contribution: how much have you contributed in terms of pre-tax profit? How many hours have your employees contributed to CSR activities?
Include targets and KPIs: your report will be more transparent and credible if you include targets and Key Performance Indicators that can be assessed.
Measure your ambitions: reporting is an ongoing process supported by ongoing activity. This year’s report will need to be improved next year. Make sure your goals are able to be both implemented and measured over the coming year.

Style and tone of voice

Be honest: state the dilemmas faced by your business and how you are trying to resolve them, even if the solution is unclear at the moment.
Keep it manageable: if a report is too big a step then produce a brochure or interim report – do not report for the sake of it.
Keep it coherent: think about the content from the audience viewpoint – what are they looking for? What questions need to be answered?
Substantiate what you say: you need to be able to back up all your points. Weak reporting may be accused of “green-wash”.

Use external sources

Have a review committee: this is becoming more common practice (see the Nike report for best practice) and can be a useful process. Be bold in selecting your committee and include those who critique you, such as the NGOs.
Get your report externally verified: external verification, while an extra cost, will add to the credibility of your report.
Look to the multinationals and standards bodies: best practice is partly defined by the standards and rankings bodies, like the Global Reporting Initiative and Dow Jones Sustainability Index (DJSI). Also look beyond your own sector, as it will provide guidance on reporting trends and expectations. The consumer companies, like Sky, Nike and Gap, and extraction industry reports, like BP, Shell and Rio Tinto, offer a useful insight.
Use your stakeholders: they can be a soundboard for feedback on your CSR report and advise on improvements for next year. This includes maintaining good relationships with the NGOs to highlight the issues which affect your business and sector, and steps needed to address those issues.
Use new media as a tool for information: while the report should be available on your website, you should also be tracking new forms of media, like blogs, to find out what is being said about your company. Many PR agencies offer this service.

Looking ahead
CSR reporting is a long-term cost and investment but is now a necessity in the financial sector. The business case for reporting can be strengthened by including ways to measure the impact of CSR – assessing how your CSR activities affect employee morale, investor confidence, your reputation among NGOs and your brand equity. Internal surveys on CSR activities can be a good place to start acquiring data.

Well-implemented and well-reported CSR can still differentiate a business whether it be large or small. As reporting becomes the default standard across the financial sector, small to medium sized businesses will have to follow suit.

In the longer term, good CSR will help improve the way business is done in the financial sector, with environmental concerns and social impact taken into consideration when conducting business. Eventually CSR practices may simply become the standard way of doing business in the financial sector. The first step is for companies to realise the importance and benefits of CSR reporting.

Melissa Davis

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