Reporting CSR
Author:
Patricia Quinn
Last November, President Mary McAleese used the occasion of her address to the Annual Dinner of the Institute of Chartered Accountants in Ireland to air some questions about the nature of corporate social responsibility in Ireland today.
The President declared her interest at the outset - she is Patron of Business in the Community Ireland (BITC-I) - but she talked about CSR in a way that was mercifully free of the jargon that characterises much debate about this topic. Essentially, she drew a link between active citizenship at the personal and the corporate levels, in terms that will be familiar to anybody who has tuned in to the concept of social capital, or the work of the Civil Society Taskforce. Active citizenship, she argued, whether personal or corporate in nature, is fundamentally voluntary in nature, it exceeds the requirements of regulation, and its rewards derive intrinsically from the sense of contributing to a more healthy and sustainable society.
On the evidence of the survey of members on the subject of CSR published last year in the June issue of Accountancy Ireland, many in the accounting profession share the President’s sense of the continuity between personal and corporate conduct. Corporate social responsibility, in the words of one respondent to the online survey, is “simply about giving a damn”, or to quote another “means ensuring that through the activities of the company, society in its broadest sense is treated with the respect that you as an individual would expect to be treated”.
Yet the President also articulated one of the central challenges of CSR. “Where corporate responsibility is about mainstreaming the best social and environmental practice right through the length and breadth of business operations”, she said, “it is difficult to see how it can be described as anything other than good news for society”. But what kind of news? Not, certainly, the “cynical PR exercises” or the "hypocritical window-dressing" decried by the President.
“CSR is doing the right thing even when no-one is looking”, said another respondent to last year’s membership survey, reflecting a widely-held view that the activity of reporting CSR may actually be at odds with the spirit of good corporate citizenship. Quoting Einstein, to the effect that "not everything that counts can be counted and not everything that can be counted, counts”, the President put her finger on a problem at the heart of the whole enterprise of CSR.
The fact is, much of what could quite legitimately be described as corporate social responsibility is not reported at all. A prominent Irish semi-state company, provider of a core utility service, entered a number of years ago into a financial partnership with one of Ireland’s leading poverty relief charities to give practical support to families at greatest risk of getting access to their service cut off – including financial assistance but also debt management advice. A well-known chain of cafes opens its doors very early each morning for the benefit of people living rough on the streets – not to give them yesterday’s stale buns, but to let them freshen up in the bathrooms and start the day with a little more dignity. Another semi-state company ensures that every child who sends a letter (180,000 of them, at the last count) to a certain elderly bearded gentleman based in Lapland receives a personal acknowledgement from him. None of these instances of corporate community outreach is formally reported externally, although it is probably fair to say that in each case they contribute to the sense that employees have in each case of the values of the company they work for.
Everybody could add their own anecdotal experience to this list, and perhaps it goes some way to explaining why Irish companies lag so far behind their international peers when it comes to reporting CSR. Other factors limiting reporting here are considered, by a sample of business people consulted on the subject recently, to include the low level of trust in business by the public generally and the media in particular (and hence the skepticism towards corporate self-reporting); the heavy existing burden of reporting on the range of topics already mandated by regulation or enjoined by the Combined Code; and the unashamedly Friedmanite view still held (in private) by a good many hardy souls to the effect that diverting shareholders money to charitable causes is ultra vires the power of the management or board, and social welfare is other peoples’ responsibility.
Arguments in favour of reporting – what CSR guru Simon Zadek calls the institutionalization of trust – are built on a sense that expressing core values through deeds is not enough – they should be reported in words as well. This ‘words and deeds continuum’ is in fact sustained by many of the published submissions to the members survey on CSR. Perhaps this reflects the extent to which chartered accountants have found themselves moving into the area of non-financial reporting.
Voluntary reporting – for example on environmental impact, community engagement, ethical standards - is seen as meeting the legitimate information requirements of investors and other stakeholders, thereby reinforcing reputational capital. In sectors that rely on a highly motivated and educated workforce, it is part of the proposition for attracting or retaining the most ambitious and talented people. It is considered by others to be intrinsic to hard measures like performance management and target setting, and soft ones like ‘boundary scanning’, especially when it comes to emergent issues where public opinion might seriously impact the bottom line in a few years’ time.
Irish companies that have taken the leap into full-on CSR reporting - not a few token words reproduced in every annual report but a progressive account over time of how the company interprets and manages its responsibilities and non-transactional relationships – are still a small minority. The Irish companies that have taken the leap are a handful of plcs and a couple of semi-states – including Togher Oil, Irish Life and Permanent, RTE and the ESB. In the main, these reports are light on the kind of corporate citizenship that involves philanthropic corporate giving to good causes, and stronger on the business case for behaving in an accountable way.
The most recent of these – RTE Corporate Responsibility 2006 – is ambitious in scope, in that it amplifies for a general public the kinds of knotty issues that are too often buried in submissions to government departments or reports by management consultants. It also breaks with the standard BITC-I reporting model used by most Irish companies, and includes a discussion of government and regulators as a key stakeholding interest. It is framed in approachable language, is published in hard copy and on RTE’s website (in English and Irish) and was issued by the Director General of RTE in the second half of 2006 with an express invitation to provide feedback on its contents (see http://www.rte.ie/about/policies.html). To date, the level of public or media comment or response from stakeholders – audiences, staff, business interactions, government and regulators, environment – has been minimal, according to Director of Communications Bride Rosney, with the notable exception of RTE staff.
So perhaps we could add to the list of reasons why CSR reporting hasn’t taken off in Ireland as it has elsewhere: who cares, exactly? Public advocates for the practice of greater corporate responsibility (besides the President, of course) include a small number of prominent business people or public sector leaders and their companies, and the excellent folk in BITC-I. CSR has not been adopted as a political issue to the same extent as elsewhere (the UK has a Minister for CSR and the US State Department runs a programme of CSR support for multinationals), CSR reporting is hardly noticed in the media here, Ireland has not yet developed the army of CSR consultants and researchers that abound in Britain, in the US and in mainland Europe, and with the exception of a couple of high profile campaigns, the NGO sector (driver of many human right/consumer rights/environmental campaigns internationally) is largely silent.
Does this mean that we are unlikely to see any significant change in the pattern or business adoption of the disciplines of corporate responsibility in Ireland any time soon? What could opinion leaders and business advisors like the members of the Institute do to contribute to this debate? A few things emerge from the evidence as sketched in this short article.
-People (as evidenced by the Institute’s survey of its members) have a genuine desire to express their personal values in the work as well as their private life, and smart companies encourage their employees to put their values to work
-The internal audience is the first, and perhaps the most critical audience for any initiative in CSR – if staff don’t see it and believe it, it’s not likely to strike anyone else as authentic. CSR is not meant as public relations, but reports on it too often are.
-“When I use a word, it means just what I choose it to mean - neither more nor less”, to quote a less eminent personage than Albert Einstein (Humpty Dumpty, in fact). We need to begin talking about the same thing when we use the term CSR – and voluntary donations to charity motivated solely by corporate philanthropy are still widely confused with an integrated management system for identifying, meeting the expectations of and reporting on key stakeholding interests.
More generally, the accounting profession perhaps needs to think about its own role. Currently, only a handful of Irish companies (CRH being one example) look for and publish external validation of their external corporate responsibility reporting. While it is not true to say that all unverified reports are inevitably untrustworthy, international evidence suggests that more and more, credibility in CSR reporting is achieved by three factors in combination. These are: external independent verification (whether by an accountant, by CSR specialists or by an independent reputable public figure or panel of such people); candour about failures to live up to expressed standards or targets (with an indication of how they will be addressed); and adherence to some widely recognized code or standard – such as the UN’s Global Reporting Initiative Guidelines .
In the coming year, the ICAI will convene a group of thought leaders from within and without its own membership, to reflect on these issues and contribute further to public debate.