This is the second post in this series that covers observations I’ve shared with companies after analyzing their Corporate Social Responsibility (CSR) reports. Typically, CSR reports effectively lay out the long term goals companies are working toward, but those goals are often reported over several years and without reference to others in their industry. CSR reports with clear progress between years add value to the process and allow stakeholders to see the direct impacts of various activities over the course of the year. Additionally, I’ve seen more and more reports describing their various tools to connect with numerous stakeholders, but one group that is often left out of CSR reports is the board.
This post focuses on two tenets:
- Benchmarks, Year over Year Progress, and Transparency
- Stakeholder Engagement
Benchmarks, Year over Year Progress, and Transparency
One thing I have noticed going through recent CSRs is an in-depth listing of impressive statistics on progress made on certain initiatives. However, many of these statistics exist in reports without relative and recent comparisons. Additionally, there is often limited discussion of how the accomplishments compare to industry benchmarks or targets. It can be difficult to fully understand progress from the previous year when longer term trends are emphasized. There is value in both analyses, but a yearly CSR becomes less effective if the differences between years are not highlighted.
The trend for independent certification around “green”, “healthy” or “sustainable” labels in the industry does not lend itself to consumer education or build credibility with smart shoppers. I believe that companies will continue to face pushback from skeptical, savvy consumers in the face of litigation over health claims that are not standardized or globally accepted.
Even reports that are transparent in penalties faced are typically silent on litigations that are well covered in the media. A major piece of social responsibility reporting is to acknowledge missteps and describe corrective and preventative actions.
Questions to consider:
- How do your corporate social responsibility goals compare to your peers? How can you best take advantage of the strategies of leaders in other industries?
- In the absence of globally accepted standards for “green”, “healthy”, and “sustainable” labeling or claims, what is the best path forward for CPG companies?
- What can be done to ensure the CSR addresses difficult topics with candor and transparency?
It is encouraging to see more and more reports with sections devoted to stakeholder engagement. It displays the methods through which companies are actively listening to and communicating with the broad array of stakeholders interested in how business is conducted. One key area I usually don’t see in stakeholder analyses is the mechanism for engagement with the board. I understand the complexities of the board engaging directly with shareholders. Directors must walk a fine line, balancing rules and legislation while at the same time engaging with shareholders. However, boards are an asset to firms and should be leveraged accordingly. It is also leadership’s responsibility to ensure that board of directors are provided with independent and unbiased information in a timely manner. Such information must include not only traditional financial reports of the company, but also consumer sentiment, industry trends and market expectations.
Questions to consider:
- What tools and processes are in place to allow the board to participate in shareholder and investor engagement?
- What risks lie ahead as the communications between shareholders and board of directors continue to evolve?
The next post will conclude this series on feedback to CSR reports, centering around innovative packaging and lifecycle assessments as they relate to corporate social responsibility and as they are communicated in CSR reports.
We at Clarkston Consulting focus on partnering with businesses in the consumer products industry to realize their competitive advantages and create value. Amongst other key areas, we support the efforts of CPG companies in their measurement and transparent reporting of corporate responsibility initiatives. Clarkston recognizes and admires the efforts of companies to proactively address corporate responsibility across all meanings of the words.
Read the next blog in this series: A Review of Today’s Corporate Social Reporting: Packaging and Life Cycle Assessment