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Directions                                         No
                                                        04
Trends in CSR reporting 2003-2004
A joint report by salterbaxter and Context


                                   social
                                   environmenta
                                                  contex
What’s inside



                                                                            04
                                                                Is your head in the sand?
                                                                      by Francis Sullivan

              01
        Introduction                            02
                                          Pass the celery
                                          by Mark Weintraub                                                06
                                                                                            The glass is definitely half full
                                                                                                        by Context




          32
       About us




         31
  Beyond Reporting



                                                                                                              08
                                                                                                 Operating and Financial
                                                                                                 Review – Worth the wait?
                                                                                                         by salterbaxter




           20                                                                                             10
UK Top 250 sector analysis                                                                        The fluffometer
                                                                                               by Context and salterbaxter

                                                                                   12
                                                                            Methodology


                                                     16
                                           US top 50 analysis
                           18
                   Euro top 50 analysis                                13
                                                                Analysis overview
Introduction                 Sharpen those shears!
                             It’s time to cut the fluff in
                             CSR reporting.




                             Welcome to the new sobriety in reporting non-financial
Peter Knight, Context
                             performance. The corporate lexicon of homilies, generalities
peterk@econtext.co.uk        and soft assurances that characterises much CSR
                             reporting – fluff – is on its way out. This trend is being
                             driven by sceptical audiences and tightening regulation
Simon Propper, Context
simonp@econtext.co.uk
                             such as Sarbanes-Oxley and the UK’s Operating and
                             Financial Review (OFR).
                             A less fluffy future is good news because the emphasis is
Nigel Salter, salterbaxter
nsalter@salterbaxter.com     strongly on reporting, not spin. This is what the purists have
                             always wanted – quasi-statutory documents that talk about
                             a company’s non-financials in a thoroughly grown-up way.
                             The unloved Global Reporting Initiative (GRI) has always
                             called for sobriety (at excruciating length and detail).
                             Does this mean boom time for the beleaguered GRI?
                             Unlikely. And that’s simply because of market demand for
                             short, pertinent reports that allow you to take a company’s
                             pulse quickly. There is little call for the GRI bible approach.
                             We predict more factual, shorter reports (Mark Weintraub of
                             Shell shows how on page 02), although we know it will take
                             time for the obese to slim down.
                             But as reporting sharpens up, companies are beginning
                             to see a greater need to communicate their non-financial
                             performance in other ways, to different audiences. To go
                             beyond reporting.
                             Fluff-free doesn’t mean fun-free. Good news, progress,
                             innovation and achievement will still have their place in
                             corporate communication. Leave your shears here and
                             head for page 31 to find out how to go Beyond Reporting.




                                                                                           01
By Mark Weintraub
           Editor of the slimmed-down Shell Report
           (32 pages including cover)




CORPORATE SUSTAINABILITY REPORTS ARE BECOMING
EVER FATTER. PERHAPS IT’S TIME FOR A DIET.




                                                                         the
             Pass                                                                                                      celery
Like many people, I’m concerned about the                   actually having?) the information that really           and systems. There’s always too little about
problem of obesity. But in my professional life,            matters for judging our performance, we                 our actual performance and what the people
the expanding girth I’m worried about is in                 simply throw everything we’ve got in the fridge         impacted by our activities really think of us.
cellulose, not cellulite. Corporate sustainability          into the pot.
reports are growing fatter at alarming rates.                                                                       A diet is needed. Not the craziness of Atkins
Shelves (and trees) are falling. Costs are                  We are also unclear about who we are                    but something pleasantly old-fashioned,
rising. Looming above it all is the question:               writing these reports for. Non-governmental             based on the principle that less is more. A bit
who actually reads these 100+ page epics?                   organisations (NGOs) and single-issue                   of self-restraint and selectivity in sustainability
                                                            campaigners? The socially responsible investor          reporting goes a long way, not only in
I blame no one but ourselves – we who produce               community? Mainstream investors? Staff? The             increasing readability (raising the chance that
and benchmark and provide guidelines for                    general public? Judging from most reports I see,        more people might actually read them) but
corporate sustainability reports. The emphasis              the answer seems to be everyone. And in trying          also improving the quality of reporting.
is remorselessly on breadth over depth,                     to please everyone, we satisfy no one. There
inclusiveness over relevance, and comprehen-                is inevitably too much specialist detail and            Every diet needs its instruction manual. Here
siveness over material importance. Not sure                 arcane debate for the general reader about the          are my suggested five steps to slimmer and
about (or not willing to take a view on? Or not             mechanics of reporting or internal processes            more successful sustainability reporting.




                                                                              GOs or
                                                                     ’t see N
                                                    staff. We don ce they want
                                           rs and              xperien              at
                                  n leade            In our e             is form
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                                                                                                                                  ll the web
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                                                                 ’s certa                                                                      means a
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                                                                                                                       e specialis
                                                                                                                                   t informa             lot of
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                                                                                                                               er printed on on the web
           with th om ongoing                      hole th ne investmen                                  on and tr
                    y fr                 n the w              o                  please.”    informati              ansparen                 reports m
           alread community. O rankings. As                              e data                         on to the             cy in tota
                                                                                                                                         l – just       ean more
                       l                                        Just th                     The printe              med
                                                                                                         d report is ium that best serv tailoring the
            financia r comparative n’t do words.
                      rs o                 do                                               people w                  the tip of               es the au
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                                                                                                                                                          d
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                                                                                                                                                     .

02
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       but leave o t Italia
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                   t          y                    t        in w
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                                                            t



                                                                       Try to write it for a 12-year-old. Not for the cognoscenti.
                                                                       You’ll inevitably land somewhere in the middle. But in doing so
                                                                       you’ll strip away the corporate jargon and have a better chance
                                                                       of being actually understood by intelligent people not deeply
                                                                       familiar with sustainable development. The subject is important
                                                                       enough for everyone to be able to understand how well you are
                                                                       (or aren’t) doing. Constant vigilance and considerable tact are
                                                                       required in helping colleagues overcome their love of corporate
                                                                       speak. If you want to keep your friends, the phrase “great, now
                                                                       lets see if we can say that in English” is best kept as a last resort.




                          Like any
                                    commun
                         feedbac              ication,
                                  k. We ru             y
                         our sust           n the sa ou need to get sy
                                  ainabilit          me read               stematic
                        program            y report          er surve
                                  mes, usin         s as              y prog
                        We use               g an exte with our other c rammes for
                                that hard              rn                 ommunic
                       individu             data, mo al market resea                ation
                                al mana               re than             rch grou
                                         gers, to             the part
                                                   shape o
                                                           ur report   icular ta p.
                                                                                stes of
                                                                    .




                       Diets are never easy. It means difficult discussions internally, for example with
                       specialists who spend all their waking hours on a particular topic. Telling them they
                       have a whopping 250 simple words to get the crux of their story across doesn’t
                       always make for a jolly conversation. People who really live and breathe their issue
                       can rarely order breakfast in less than that word count. Giving them a serious chance
                       to address the specialists in language they are more comfortable with on the web
                       helps. But it remains a battle. It is a battle I believe worth fighting in the name of
                       clarity, transparency and effective reporting.
                       PASS THE CELERY, PLEASE.



                                                                                                                                                03
By Francis Sullivan
           Adviser on the Environment
           HSBC Holdings plc




DOES THE FOCUS ON HOT ISSUES SUCH AS ETHICS, DIVERSITY,
HUMAN RIGHTS AND GOVERNANCE MEAN COMPANIES ARE IGNORING
THE THREAT OF A DECLINING ENVIRONMENT?




Is your head
                                                    in the sand?

In the last year, it has become fashionable         reputation that doesn’t get shredded or           now reaching a point in some businesses where
to dismiss companies’ CSR activities as spin.       cause sniggers when your company name             reducing their impact on the environment is
In fact in some quarters the mistrust of            is mentioned over dinner.                         not seen as a valid concern of management?
companies has grown so strong that you
might think their sole purpose is to rip off        To be truly sustainable, a company needs          Sometimes the absence of visible
their customers, exploit their staff, destroy       to focus on the economic, social and              environmental disasters on the scale of the
the environment, subvert legitimate                 environmental aspects of the business.            Exxon Valdes or the burning rainforests of Brazil
government and bully their suppliers. In a          This has led to some far-sighted companies        and Indonesia, means people assume these
very small number of cases companies                producing triple bottom line accounts.            problems have been ‘solved’. But we must not
continue to behave in a way that reinforces                                                           forget that forests continue to disappear, there
this view. But it is incorrect to assume that all                                                     are dozens of ‘minor’ oil spills a year and the
companies are the same – all equally wicked.        ARE WE NOW REACHING                               threats to people and nature from global
                                                    A POINT IN SOME                                   warming grow daily as the carbon dioxide
Having worked in both the charity and the                                                             concentration in the atmosphere builds up.
corporate sectors, I have found that many           BUSINESSES WHERE
NGOs talk about ‘business’ as a uniform             REDUCING THEIR IMPACT ON                          The UN Millennium Development goals provide
monoculture focusing purely on the bottom                                                             a good framework to address all three aspects
line. Interestingly, too, many private sector
                                                    THE ENVIRONMENT IS NOT                            of sustainability and should be used by more
workers, largely through ignorance, group ‘the      SEEN AS A VALID CONCERN                           businesses. These goals were adopted in 2000
NGOs’ into one mass of critical back-stabbers       OF MANAGEMENT?                                    by 191 governments with a series of targets
out to ruin legitimate business.                                                                      covering social and environmental issues –
                                                                                                      such as addressing global poverty, ensuring
With such polarised views about business            Undoubtedly it is a challenge to keep all three   environmental sustainability and achieving
performance, CSR has taken a battering. But         elements in focus. Worryingly, over the last      universal primary education for all children.
despite this CSR is starting to flow around the     few years there have been signs that the
veins of the most hardened business people.         environment is slipping off the corporate         Many existing CSR activities can be hung from
At its simplest, it’s about a licence to operate,   agenda. Concerns have risen about the social      this framework. For instance, in HSBC’s new
to find and keep good staff and to have a           impacts of business, and rightly so. But are we   Strategic Plan, the first imperative is:

0
44
“To make HSBC one of the world’s leading             To help us apply these principles to high-risk
brands for customer experience and corporate         sectors, specific guidelines are being
social responsibility”. This calls for consistency   prepared. The first, the Forest Land and
between corporate strategy, business                 Forest Products sector guideline, was
behaviour and our wider responsibilities to          launched at our AGM in May. This will
communities and the environment.                     also be applied to our own paper and
                                                     furniture purchasing. Consistency
As an example, HSBC has signed up to the             is key. Over the coming months,
Equator Principles. These voluntary                  other sector guidelines will be
guidelines provide a framework to address            prepared, covering freshwater                       In the future, it may be
the environmental and social issues that             infrastructure, metals and                        better to talk about Corporate
arise in financing projects. As a result, we will    mining, and energy.                              Responsibility rather than CSR.
not provide loans directly to projects where
the borrower will not, or is not able to, comply     We know these issues matter –
with the Equator Principles or our own               our customers DO write to us.                    We need to remind ourselves that it’s not just
internal environmental, reputational and             Our objective is to ensure,                      social issues that matter. But above all it’s not
social policies – whichever carries the              through the implementation of                    words that make a difference here, it’s deeds,
higher standard.                                     clear lending criteria, that over                 and it is CSR performance that counts, not
                                                     time we phase out support of                        only commitment and policy.
                                                     activities that do not contribute
THE FIRST IMPERATIVE IS                              to sustainable development, and
TO MAKE HSBC ONE OF THE                              increasingly seek out those that do.

WORLD’S LEADING BRANDS
FOR CUSTOMER EXPERIENCE
AND CORPORATE SOCIAL
RESPONSIBILITY

                                                                                                                                                     05
                                                                                                                                                      5
By Simon Propper and
                   Peter Knight Context




COMPANIES ARE CONSTANTLY                      Hutch days of the 1970s when it was (quite         to view the world through a half-empty glass.
                                              rightly) being exhorted to do more for the         Even when you factor out the self-serving
CAJOLED TO BE MORE                            environment. The refrain has now been taken        nature of these sentiments (we consultants
RESPONSIBLE. HOW BORING.                      up by the CR community – same mantra,              all have something to sell), it’s rather depressing
LET’S LOOK INSTEAD AT WHAT                    different issues.                                  to think that not much has changed in the way
THEY HAVE ACHIEVED.                                                                              non-business people view business.
                                              Sure, we can always do more. But it is utterly
Business is not doing enough to promote       boring to be told off all the time. If the         Self-appointed CSR gurus who exhort
corporate responsibility. Companies have to   psychology does not work on teenagers, why         corporations to boost their social performance
do a lot more to qualify as responsible       should it have the desired effect on the           generally have a poor understanding of
citizens. The 2004 Global Compact summit      business community?                                business. Many find commercial life distasteful –
was met by this do-more mantra in a slew of                                                      harsh and uncouth. Hence their demands for
reports from organisations, some purporting   Although the 70s fashion for furniture and         business to act in ways that totally defy logic.
to be business-friendly. Business has been    clothes are back, times have changed in            Take the constant call for widespread
under this pressure since the Starsky and     business. It is sad that so many people continue   stakeholder dialogue and for business to set

06
up systems that track, audit and report on the       that others think appropriate. In doing this they   Novo Nordisk and the Co-operative Financial
process. While it’s certainly good for business to   will quickly discover – as any half-intelligent     Services, for staying the course. And a high-five
talk to others and gain a better understanding       parent has – that praise drives action. And         to Amnesty International for being one of the
of the world (clever operators have been doing       action encourages more action.                      first NGOs to report.
this for centuries), why install yet another layer
of management just to please pressure groups?        Let us look at the world through a half-full        But there are more. Here’s a detailed list of
                                                     glass for a change. Let us praise good, sensible,   positive, responsible actions taken by
The CSR community must reconnect with                business-led initiatives. We congratulate           companies (who are our clients).
business. It needs to understand the role of         Cadbury’s, Gap, Nike and Starbucks (yes) for
business in society and the difficulties business    what they have done to clean up their supply-
faces trying to balance calls to behave in ways      chains. We admire the jumbo reporters,




             Anglo American                          Anglo American, the mining and natural resources company, has pioneered a ground-breaking
                                                     HIV/AIDS policy in Africa, moving much faster than governments and other companies.
                                                     By the end of 2003, 1,048 employees were receiving free antiretroviral therapy.
                                                     More at www.angloamerican.co.uk




             GlaxoSmithKline                         GSK, one of the world’s top pharmaceutical companies, has a social investment programme
                                                     for the developing world that includes donations of medicines. For example, since 1998, the
                                                     company has participated in a global partnership with the World Health Organization to
                                                     eliminate lymphatic filariasis (elephantiasis) by 2020. GSK has donated 240 million treatments
                                                     of preventive medicine (albenzadole) to more than 80 million people since 1998.
                                                     More at www.gsk.com




             HP                                      HP, the information technology provider, has 25 projects under way in 20 countries on five
                                                     continents, looking at ways to make information and communication technology available to
                                                     more than four billion people who can’t afford computers. More at www.hp.com




             Shell                                   Shell produced one of the shortest reports of 2004 in a bold attempt to improve communication.
                                                     It was the first energy company to commit not to explore or drill for oil in World Heritage Sites.
                                                     More at www.shell.com




             Unilever                                Unilever’s CR activities are now widely quoted, especially its efforts to innovate in new markets
                                                     among the rural poor, and meet basic needs in nutrition and hygiene. It has, for example,
                                                     developed biscuits in Ghana fortified with vitamin A and zinc to boost children’s immune systems.
                                                     These and other products are often produced in small packages to make them more affordable.

                                                     Unilever has been working in partnership with a wide range of organisations to develop
                                                     guidelines on sustainable agriculture and to promote sustainable fishing practices. It has been
                                                     managing, measuring and reporting on its environmental impact for nearly a decade. This year
                                                     it launched ice-cream freezer cabinets using hydrocarbon refrigerants that do not contribute to
                                                     climate change or ozone depletion. More at www.unilever.com




             Vodafone                                Vodafone, the world’s biggest mobile telephone company, has set up a team to develop
                                                     products that meet specific social needs, such as helping the disabled and elderly, or enhancing
                                                     communications in education. It has begun to explore how mobile telecommunications can
                                                     support the provision of micro-finance among the rural poor. The company collected 1.5 million
                                                     used handsets in 2003 – recycling 82% and reconditioning 18%.
                                                     More at www.vodafone.com/responsibility




We’d say the glass is definitely half full.
                                                                                                                                                      07
Operating and Financial Review
Worth the wait?
SO IT’S ALMOST HERE. AFTER A PROLONGED GAME OF ‘NOW
YOU SEE IT, NOW YOU DON’T’, THE UK GOVERNMENT FINALLY
PUBLISHED ITS GUIDANCE PAPERS FOR THE NEW OPERATING
AND FINANCIAL REVIEW (OFR) IN MAY 2004. THE REGULATIONS
THAT WILL MAKE THE OFR COMPULSORY FOR ALL QUOTED
COMPANIES ARE STILL IN DRAFT FORM BUT ARE EXPECTED
TO COME INTO FORCE IN 2005.
THE OFR HAS BEEN TRUMPETED AS A RADICAL RE-THINK
OF CORPORATE REPORTING, BUT WHAT DIFFERENCE
WILL IT REALLY MAKE?


      By Nigel Salter
      salterbaxter




                                                           What were the intentions?
                                                           The goal is to address the weaknesses
                                                           identified by the Company Law Review that
                                                           reported the following:


                                                          “Company accounting and reporting
                                                           remains essentially backward looking
                                                           and based on financial indicators.
                                                           There are few statutory requirements
                                                           to report on the main qualitative
                                                           factors which underline past and future
                                                           performance (or for future performance,
                                                           even financial factors) – in particular on
                                                           strategy, prospects, opportunities and
                                                           risks; on tangible, and so-called ‘soft’
                                                           assets (which may contribute
                                                           significantly to success but are not
                                                           well captured in traditional financial
                                                           statements); and on key business and
                                                           wider relationships. As a result, the
                                                           information provided is defective and
                                                           directors do not have the discipline of
                                                           accounting for stewardship on some
                                                           key responsibilities.”


08
In the Government’s                                So in essence, the OFR is intended to get             2. Companies could, ironically, use this as
 own words, this is what the                        companies thinking about and explaining likely        an excuse for less disclosure
 OFR is intended to do:                             future performance and reporting on a range of        Many companies have been dragged, reluctantly,
                                                    relevant non-financial indicators including social,   to reporting on CSR. The requirements of
                                                    environmental, ethical and human resource issues.     the OFR may actually mean a backwards step.
                                                                                                          Companies may cut their investment in CSR
                                                    The intentions are hard to argue with.                reporting and simply tick the boxes that the
     “Shareholders                                  The test is whether or not the thing works.           statutory report requires. It’s easy to see
                      can exercise ef                                                                     how some companies may hide behind the OFR
      control only if                   fective
                      they have clea                Will it work?                                         formula and go no further – and that would
      meaningful info                   r and
                       rmation about                That all listed companies will be required            be a shame.
     main drivers of                       the      to incorporate CSR issues and performance
                       a company’s pa
     future perform                        st and   into their annual reporting process is no             3. Forward looking statements, lawyers and
                      ance. The OFR
     designed to ar                      is         doubt a good thing. And the best aspect               auditors simply aren’t compatible
                    m shareholders                  is the emphasis on performance reporting –            The regulations want companies to look
    that informatio                      with
                      n. It will enable             ie numbers and proof – not just a few                 forwards and discuss potential performance
    to make a prop                        them
                     er assessment                  paragraphs of fluff.                                  and developments. But without safe harbour
   only of past pe                      not                                                               protection (as exists in the US) it is unlikely
                    rformance but
   the directors’                      also of      But we see a variety of problems and risks.           that the lawyers and the auditors will allow
                   view on the co
  future prospect                   mpany’s         These are the top three:                              much to be said that is meaningful or helpful.
                     s and its approa
  to managing al                         ch                                                               Expect lots of legal caveats and generic
                   l those factors                  1. The compliance approach can be                     statements unless the lawyers and auditors can
 environmental                        –
                   perf
 issues, relations ormance, employee                blindingly dull                                       work together to develop a methodology that
                     with suppliers,                As CSR journalist Roger Cowe points out:              makes this exercise genuinely worthwhile.
 customers and                                      ”CSR reporting will no longer be the primary
                   local commun
which are cruc                      ities
                  ial to the compa –                responsibility of corporate affairs (ie PR)
future success                        ny’s          specialists – which is good news if you have
                  and reputation.
                                     ”              faith in company secretaries, but bad news            So…
                                                    if you buy the argument that they are risk-
                                                    averse bureaucrats.“                                  The importance of CSR will be recognised in
                                                                                                          regulation but there’s a risk this will be an
                                                    If companies simply read the recommendations,         excuse for companies to lose sight of the
                                                    take them on board and respond at face value          innovation, business improvement and energy
                                                    then not only will annual reports become              that CSR has delivered in many organisations.
                                                    even more boring, but imaginative and relevant
                                                    CSR reporting could be killed off before it           Yes, it’s a good thing that CSR issues and
                                                    really gets going. I like annual reports (and         performance measures will be addressed by
                                                    companies) that try to express personality,           all listed companies. But only if companies
                                                    where a management style is made visible,             approach the new requirements in a positive
                                                    and where there is a clear attempt to be              and imaginative way.
                                                    interesting, engaging and open. More guidance
                                                    risks more boredom.                                   Was it worth the wait? Companies now have
                                                                                                          the choice between going the extra mile or
                                                                                                          simply complying with regulations. Time will
                                                                                                          tell if this results in improved reporting.




                                                                                                                                                     09
By Nigel Salter salterbaxter
                                  and Simon Propper and
                                  Peter Knight Context




     CSR reports can become lists                                               WE PREFER CLARITY TO WOOLLINESS.
     of data and good case studies,                                             WE THINK ALL REPORTS SHOULD HAVE
                                                                                       A LOW-FLUFF COUNT.
     but to be of value they should
     reflect the real issues facing
     the business. These are not
     always ‘easy’ issues or the ones
     that make the best pictures.
                                                                                   We are a people business and our
                                                                                   people don’t leave their values at
                                                                                   home. We want to create a workplace
                                                                                   where nobody needs to compromise
                                                                                   their ethics and where difficult
                                                                                   issues are openly discussed.



                                                Animal research is essential to understand disease.
                                                It enables us to evaluate the effectiveness and safety
                                                of new medicines before they are given to people.
                                                Regulations require the use of animals to establish
                                                that new medicines are safe and to test some types
                                                of vaccines after each batch is produced.



         The fact that we don’t always get
         everything right is one reason why we
         are committed to transparency, dialogue
         and a multi-stakeholder approach.



 We continue to make progress, but recognise
 that we still need to work hard to improve
 performance at projects and operations where
 we have not yet got it right.
 [We] ended a joint venture and 49 contracts
 due in part to concerns about their willingness
 to operate in line with our Business Principles.
 Reported cases of bribery in 2003: 8.




10
As a responsible business, [company
                                                                                name] has an important role to play
                                                                                in balancing social, economic and
                                                                                environmental factors in accordance
                                                                                with society’s transition to more
   HERE ARE SOME EXAMPLES.
                                                                                sustainable forms of development.
WHERE DOES YOUR REPORT REGISTER
     ON OUR FLUFFOMETER?                                                        We similarly approach a comprehensive
                                                                                understanding of the full life cycle and
                                                                                safe use of our products to ensure all
                                                                                their benefits are delivered.


           In our company, we pursue a corporate culture that
           combines the determination to achieve economic success
           with cosmopolitanism, trust, transparency and responsibility
           for our environment. This attitude is reflected in all areas
           of the company and is absolutely essential if we are to
           put the Group’s current product and marketing offensive
           successfully into practice and thus safeguard the future of
           the Group on a sustainable basis.




We have always said that corporate
responsibility is a journey, that whatever                                Whilst integrating corporate responsibility into the fabric
we have achieved there is always more to be                               of the organisation is an objective in itself, ensuring that
done. As this web site shows, we have come                                it effectively sits at the heart of business strategy and
                                                                          corporate values, it is not one that should be showcased
a considerable way over the past year.                                    and then forgotten.
                                                                          We know very clearly that companies which adopt and
                                                                          embrace corporate responsibility are more likely to create
                                                                          wealth and shareholder value than those that don’t and,
                                                                          in so doing, link this to their core business principles.
                                                                          Because of the large number of diesel storage facilities
                                                                          identified we were unable to develop spill response
                                                                          plans. Instead, the pollution control training course will be
                                                                          modified to incorporate the training about how spill
                                                                          response plans should be developed.




                                                                                            Regional employment equity officers
                                                                                            have played a significant role in
                                                                                            highlighting regions where employment
                                                                                            equity is not practised as vigorously
                                                                                            as executive management would prefer.
                                                                                            In so doing, these officers enable
                                                                                            corrective action to be taken and ensure
                                                                                            that the entire [company name] staff
                                                                                            is aware of the imperative represented
                                                                                            by employment equity.




                                                                                                            Note 1
                                                                                                            Sources available on request.
                                                                                                            Note 2
                                                                                                            We are heartened by the difficulty
                                                                                                            in finding truly fluffy examples.
                                                                                                            We hope that in a few years fluff
                                                                                                            will be on the endangered list.


                                                                                                                                            11
We have made every effort to ensure that the data in Directions are
Methodology                                                               accurate. Our research is based on information on company websites
                                                                          and in printed reports. The research findings were verified with each
                                                                          company on the telephone – our thanks to Christina-Maria Weiss who
                                                                          carried out the research this year. In just a few cases companies
                                                                          declined to participate, but most were extremely helpful and keen to
                                                                          have their entry checked. If we have missed data, please get in touch
                                                                          and we will update our records.

                                                                          Although our categories are simple and non-judgemental, we still had to
                                                                          apply some rules and definitions to ensure a consistent approach
                                                                          between companies. These are:




1. The cut-off date: for data inclusion was                               7. Section in annual report: typically refers to                            11. Covers supply-chain: is a new category
July 31 2004 and our assessments are based on                             content of one full page or more. We indicate                               added this year. We identify when supply-chain
information in the public domain on that date.                            if data are included where possible. Only in                                issues are covered only briefly and specific
                                                                          exceptional circumstances is a company that                                 information is reported.
2. The top 250 UK companies: were taken from                              only publishes information in its annual report
the Financial Times website on June 7 2004.                               classified as a reporter.                                                   12. FTSE4Good: a dot in this box means a
                                                                                                                                                      company is included in either the World or
3. The top 50 US companies: were taken from                               8. Independent verification statement: refers                               UK index.
the Standard & Poor’s 500 index on July 31 2004.                          to formal auditing of the report by third parties
                                                                          and excludes informal comments by external                                  13. Dow Jones Sustainability Index: a dot
4. The top 50 Euro companies: were taken from                             commentators.                                                               in this box means a company is included in
the Financial Times website on July 31 2004.                                                                                                          either the World or European STOXX index.
They are the top 50 excluding UK companies.                               9. Includes environmental performance:
                                                                          covers a range of issues e.g. emissions and                                 14. BitC CR Index: only records the companies
5. Number of years reporting: refers to either                            discharges, resource use and waste. A dot in                                that appeared in the top 100, not the full list
environment or CSR reports. Mergers and                                   this box means that some but not necessarily                                of participants.
acquisitions may affect these data by reducing                            all the company’s impacts are reported, ideally
the number of years recorded.                                             with data.                                                                  15. Investment Trusts: are excluded because
                                                                                                                                                      they are not regarded as trading companies.
6. Web reports: it is important to note that                              10. Includes social and ethical performance:                                Their places have been taken by the next
what some companies call a report is actually                             covers a range of subjects e.g. business ethics,                            largest companies outside the top 250.
only a couple of pages. We attempt to identify                            community, employment, health and safety,
the level of information covered and make a                               and human rights. A dot in this box means that
judgement about what can reasonably be                                    some but not necessarily all relevant issues
classified as a ‘report’.                                                 are reported, ideally with data. Companies
                                                                          reporting community/health and safety data
                                                                          only did not receive a full dot.
                                                                                                                                        ce
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 051       A COMPANY                                   ––                     a           b     ––        ––         ––        ––        ––                    1       a Comment b More    comments



KEY       Yes   a   See comments   AR Annual Report   BitC CR Index Business in the Community Corporate Responsibility index   DR Directors’ Report   H&S Health and Safety   SHE/EHS Safety, Health & Environment




12
Analysis
overview



                        24 of the top 250 UK
                        companies reported for the first
                        time this year (29 a year ago)




Number of




                                                                                                                      0
                                                                                                                    e5
                                                                             0




                                                                                             100




                                                                                                        50
                                                                           25




                                                                                                                 rop
companies that:




                                                                        UK




                                                                                          UK




                                                                                                     US




                                                                                                               Eu
                          REPORT                                  145 (132)               83 (84)    27 (22)   44 (40)

                          REPORT ENVIRONMENTAL                    123 (98)                75         21        42
                          AND SOCIAL PERFORMANCE

                          REPORT ENVIRONMENTAL                    140 (132)               81        26         44
                          PERFORMANCE

                          REPORT SOCIAL AND                       127 (100)               79         22        42
                          ETHICAL PERFORMANCE

                          COVER SUPPLY-CHAIN ISSUES                54                     37          6        18

                          ARE DEFINED AS                          105 (118)               17         23         6
                          NON-REPORTERS

                          HAVE INDEPENDENT VERIFICATION            60 (45)                44          2        21

                          ARE REPORTING FOR THE FIRST              24 (29)                 7          8         6
                          TIME THIS YEAR

                          PRODUCE NO REPORTING OF                  44 (56)                 6 (16)    24          1
                          SUBSTANCE (NO CSR REPORT
                          AND NO SIGNIFICANT SECTION
                          IN ANNUAL REPORT)

145 of the top 250 UK     REPORT ON THE WEB ONLY                   43                     26          5        13
companies now report
                          REPORT IN PRINT ONLY                      3                       1         0         0
(132 a year ago)
                        Last year’s figures shown in brackets where available.




UK sector with:
                                                                                                          0




                                                                                                                  100
                                                                                      r




                                                                                                        25
                                                                                   cto




                                                                                                     UK




                                                                                                               UK
                                                                                 Se




                          LEAST COMPANIES REPORTING           Software and computer services        0/5        0/1
                                                                          Insurance                  1/5       1/1
                                                                    Leisure and hotels              2/17       4/6
                                                                Speciality and other finance        3/14       2/2

                          100% COMPANIES REPORTING                           Beverages              4/4        4/4
                                                                              Tobacco               3/3        3/3
                                                                              Utilities             8/8        4/4

                          MOST FIRST-TIME REPORTERS                   Support services              4/18       1/6
                                                                    Media & entertainment           4/19       4/9




                                                                                                                          13
Analysis overview




                                    123 of the top 250 UK companies
                                    report environmental and social
                                    performance (98 a year ago)




44 of the top 250 UK companies produce
no CSR information of substance, in any
report (56 a year ago)




                                                                      60 of the top 250 UK companies
                                                                      have independently verified
                                                                      reports (45 a year ago)

14
83 of the top 100 UK companies report,
       compared with 44 of the European
       top 50 and 27 of the US top 50




37 of the UK top 100 companies report on
supply-chain issues, compared with 18 of the
European top 50 and 6 of the US top 50




                                               15
US top 50




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(S&P 500 ranking on the left)


 001      GENERAL ELECTRIC                            2                                             ––                  a                 ––         ––          a H&S    and Community only

002       MICROSOFT                                   1                                     ––      ––        a         a        ––                  ––          a Limited    data

003       EXXON MOBIL                                 4                                         a   ––                           ––       ––         ––          a With    data

004       PFIZER                                      3a                                            ––                  a        ––                              a Last    report published in 2001    b H&S       and Community only

005       CITIGROUP                                   4                                             ––                           ––

006       WALMART STORES                              ––           ––          a                    ––      ––        ––                  ––         ––          a Fact
                                                                                                                                                                      sheets on community, people and energy; Good
                                                                                                                                                                  Works community web section; Statement of ethics

007       AMERICAN INTERNATIONAL                      ––           ––          a            ––      ––      ––        ––         ––       ––         ––          a Code    of conduct only
          GROUP

008       BANK OF AMERICA                             4            ––           a                   ––                 b         ––                  ––          a 2003
                                                                                                                                                                      update to 2002 environmental report and
                                                                                                                                                                  community webpage b Community data only

009       JOHNSON & JOHNSON                           8                                             ––

 010      INTEL                                      10                         a           b       ––                           ––                              a Separate    EHS and Global Citizenship report
                                                                                                                                                                 b Brief   reference to social reports

  011     IBM                                         14                        a           ––      ––                           b        ––         ––          a Report    pdf and additional web information
                                                                                                                                                                 b Describe    supplier evaluations, but little data

 012      CISCO SYSTEMS                               1            ––                       a       ––        b         b        ––                  ––          a Brief   reference    b Limited   data

 013      PROCTER & GAMBLE                            11             a          b           c       ––                           d                               a Summary        report b Report pdf
                                                                                                                                                                 c Reference       to Sustainability report    d Policies


 014      JP MORGAN CHASE                             ––           ––          a            b       ––      ––        ––         ––       ––         ––          a Communityweb section mainly covers policies;
                                                                                                                                                                  Community data only b Covers community

 015      COCA-COLA CO.                               3                                         a                       b         c                  ––          a Brief   reference b Limited data
                                                                                                                                                                 c Brief   mention, Supplier Guiding Principles

 016      VERIZON COMMUNICATIONS                      ––           ––          a            b       ––      ––        ––         ––                  ––          a Community    and environment web sections, limited data
                                                                                                                                                                 b Covers    community only

 017      CHEVRON TEXACO                              1              a                              ––                           ––       ––         ––          a Summary        report

 018      MERCK & CO                                  2            ––                       a       ––                           ––                  ––          a Covers    access to medicines

 019      ALTRIA GROUP                                ––           ––          a                    ––      ––        ––         ––       ––         ––          a Responsibility
                                                                                                                                                                              web section mainly covers policies;
                                                                                                                                                                  community data only

020       WELLS FARGO                                 ––           ––          a            b       ––      ––        ––         ––                  ––          a Sections    on community and diversity
                                                                                                                                                                 b Covers    community only

 021      DELL INC.                                   5                         a           b       ––                                    ––                     a Report    pdf and additional web information
                                                                                                                                                                 b Brief reference


 022      PEPSICO                                     1            ––          a             b      ––        c         c        ––       ––         ––          a Citizenship     web section mainly covers policies
                                                                                                                                                                 b 15   pages     c Limited
                                                                                                                                                                                          data

 023      SBC COMMUNICATIONS                          ––           ––          a            ––      ––      ––        ––         ––                  ––          a Corporate
                                                                                                                                                                           citizenship web section covers mainly
                                                                                                                                                                  community and diversity, limited data

 024      UNITED PARCEL SERVICE                       1                                     a       ––                           ––                              a Reference      to Sustainability report

 025      TIME WARNER                                 1a                        b           ––      ––      ––                   ––                              a Last    report published in 2002        b Pdf




16      KEY       Yes   a   See comments   AR Annual Report      BitC CR Index Business in the Community Corporate Responsibility index   DR Directors’ Report   H&S Health and Safety        SHE/EHS Safety, Health & Environment
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  • 1. Directions No 04 Trends in CSR reporting 2003-2004 A joint report by salterbaxter and Context social environmenta contex
  • 2. What’s inside 04 Is your head in the sand? by Francis Sullivan 01 Introduction 02 Pass the celery by Mark Weintraub 06 The glass is definitely half full by Context 32 About us 31 Beyond Reporting 08 Operating and Financial Review – Worth the wait? by salterbaxter 20 10 UK Top 250 sector analysis The fluffometer by Context and salterbaxter 12 Methodology 16 US top 50 analysis 18 Euro top 50 analysis 13 Analysis overview
  • 3. Introduction Sharpen those shears! It’s time to cut the fluff in CSR reporting. Welcome to the new sobriety in reporting non-financial Peter Knight, Context performance. The corporate lexicon of homilies, generalities peterk@econtext.co.uk and soft assurances that characterises much CSR reporting – fluff – is on its way out. This trend is being driven by sceptical audiences and tightening regulation Simon Propper, Context simonp@econtext.co.uk such as Sarbanes-Oxley and the UK’s Operating and Financial Review (OFR). A less fluffy future is good news because the emphasis is Nigel Salter, salterbaxter nsalter@salterbaxter.com strongly on reporting, not spin. This is what the purists have always wanted – quasi-statutory documents that talk about a company’s non-financials in a thoroughly grown-up way. The unloved Global Reporting Initiative (GRI) has always called for sobriety (at excruciating length and detail). Does this mean boom time for the beleaguered GRI? Unlikely. And that’s simply because of market demand for short, pertinent reports that allow you to take a company’s pulse quickly. There is little call for the GRI bible approach. We predict more factual, shorter reports (Mark Weintraub of Shell shows how on page 02), although we know it will take time for the obese to slim down. But as reporting sharpens up, companies are beginning to see a greater need to communicate their non-financial performance in other ways, to different audiences. To go beyond reporting. Fluff-free doesn’t mean fun-free. Good news, progress, innovation and achievement will still have their place in corporate communication. Leave your shears here and head for page 31 to find out how to go Beyond Reporting. 01
  • 4. By Mark Weintraub Editor of the slimmed-down Shell Report (32 pages including cover) CORPORATE SUSTAINABILITY REPORTS ARE BECOMING EVER FATTER. PERHAPS IT’S TIME FOR A DIET. the Pass celery Like many people, I’m concerned about the actually having?) the information that really and systems. There’s always too little about problem of obesity. But in my professional life, matters for judging our performance, we our actual performance and what the people the expanding girth I’m worried about is in simply throw everything we’ve got in the fridge impacted by our activities really think of us. cellulose, not cellulite. Corporate sustainability into the pot. reports are growing fatter at alarming rates. A diet is needed. Not the craziness of Atkins Shelves (and trees) are falling. Costs are We are also unclear about who we are but something pleasantly old-fashioned, rising. Looming above it all is the question: writing these reports for. Non-governmental based on the principle that less is more. A bit who actually reads these 100+ page epics? organisations (NGOs) and single-issue of self-restraint and selectivity in sustainability campaigners? The socially responsible investor reporting goes a long way, not only in I blame no one but ourselves – we who produce community? Mainstream investors? Staff? The increasing readability (raising the chance that and benchmark and provide guidelines for general public? Judging from most reports I see, more people might actually read them) but corporate sustainability reports. The emphasis the answer seems to be everyone. And in trying also improving the quality of reporting. is remorselessly on breadth over depth, to please everyone, we satisfy no one. There inclusiveness over relevance, and comprehen- is inevitably too much specialist detail and Every diet needs its instruction manual. Here siveness over material importance. Not sure arcane debate for the general reader about the are my suggested five steps to slimmer and about (or not willing to take a view on? Or not mechanics of reporting or internal processes more successful sustainability reporting. GOs or ’t see N staff. We don ce they want rs and xperien at n leade In our e is form is opinio ain readers. issues than th nything new For u s, that m r a Use othe r channels as the eir par ticula I don’t learn tionship xperts discussio – above a issue e re detail on th rked: “I hope my rela re ns, particular to allow those who ll the web o a If I do, o and face-t much m one NGO re m report. now much m the issue to d want more o-face ability k t hard work rill down detail on allows. As pany’s sustain uble. I should inly no ur key putting th deep. This a ’s certa means a from a com pany is in tro sions.” And it looking for yo st and keep ing it curr e specialis t informa lot of at com discus ey are t analy informati ent. Short ti er printed on on the web with th om ongoing hole th ne investmen on and tr y fr n the w o please.” informati ansparen reports m alread community. O rankings. As e data on to the cy in tota l – just ean more l Just th The printe med d report is ium that best serv tailoring the financia r comparative n’t do words. rs o do people w the tip of es the au numbe ointedly: “We ith a part icular inte the iceberg that le ience. d me p rest to yo a told ur website ds . 02
  • 5. Like you the be s but leave o t Italia t u n and o help t. (Not cookin bad read e: T tran , tha ers his g, the a s i mak paren t reall who fo s NOT rt lies t y t in w wid e that s proces matte cus on o hide hat e s r t t sele risk an electio that i .) You n hose a hings, ct t d is n. W s ex eed reas fina h e t ncia e issue sues m use o ernally a clear , good lly a s a u f a nd t and lo nagem r existi ocused nd o ex cati ent ng c to tern on sy o al s s that stems mpany take m t - hold atter o ers. mos t Try to write it for a 12-year-old. Not for the cognoscenti. You’ll inevitably land somewhere in the middle. But in doing so you’ll strip away the corporate jargon and have a better chance of being actually understood by intelligent people not deeply familiar with sustainable development. The subject is important enough for everyone to be able to understand how well you are (or aren’t) doing. Constant vigilance and considerable tact are required in helping colleagues overcome their love of corporate speak. If you want to keep your friends, the phrase “great, now lets see if we can say that in English” is best kept as a last resort. Like any commun feedbac ication, k. We ru y our sust n the sa ou need to get sy ainabilit me read stematic program y report er surve mes, usin s as y prog We use g an exte with our other c rammes for that hard rn ommunic individu data, mo al market resea ation al mana re than rch grou gers, to the part shape o ur report icular ta p. stes of . Diets are never easy. It means difficult discussions internally, for example with specialists who spend all their waking hours on a particular topic. Telling them they have a whopping 250 simple words to get the crux of their story across doesn’t always make for a jolly conversation. People who really live and breathe their issue can rarely order breakfast in less than that word count. Giving them a serious chance to address the specialists in language they are more comfortable with on the web helps. But it remains a battle. It is a battle I believe worth fighting in the name of clarity, transparency and effective reporting. PASS THE CELERY, PLEASE. 03
  • 6. By Francis Sullivan Adviser on the Environment HSBC Holdings plc DOES THE FOCUS ON HOT ISSUES SUCH AS ETHICS, DIVERSITY, HUMAN RIGHTS AND GOVERNANCE MEAN COMPANIES ARE IGNORING THE THREAT OF A DECLINING ENVIRONMENT? Is your head in the sand? In the last year, it has become fashionable reputation that doesn’t get shredded or now reaching a point in some businesses where to dismiss companies’ CSR activities as spin. cause sniggers when your company name reducing their impact on the environment is In fact in some quarters the mistrust of is mentioned over dinner. not seen as a valid concern of management? companies has grown so strong that you might think their sole purpose is to rip off To be truly sustainable, a company needs Sometimes the absence of visible their customers, exploit their staff, destroy to focus on the economic, social and environmental disasters on the scale of the the environment, subvert legitimate environmental aspects of the business. Exxon Valdes or the burning rainforests of Brazil government and bully their suppliers. In a This has led to some far-sighted companies and Indonesia, means people assume these very small number of cases companies producing triple bottom line accounts. problems have been ‘solved’. But we must not continue to behave in a way that reinforces forget that forests continue to disappear, there this view. But it is incorrect to assume that all are dozens of ‘minor’ oil spills a year and the companies are the same – all equally wicked. ARE WE NOW REACHING threats to people and nature from global A POINT IN SOME warming grow daily as the carbon dioxide Having worked in both the charity and the concentration in the atmosphere builds up. corporate sectors, I have found that many BUSINESSES WHERE NGOs talk about ‘business’ as a uniform REDUCING THEIR IMPACT ON The UN Millennium Development goals provide monoculture focusing purely on the bottom a good framework to address all three aspects line. Interestingly, too, many private sector THE ENVIRONMENT IS NOT of sustainability and should be used by more workers, largely through ignorance, group ‘the SEEN AS A VALID CONCERN businesses. These goals were adopted in 2000 NGOs’ into one mass of critical back-stabbers OF MANAGEMENT? by 191 governments with a series of targets out to ruin legitimate business. covering social and environmental issues – such as addressing global poverty, ensuring With such polarised views about business Undoubtedly it is a challenge to keep all three environmental sustainability and achieving performance, CSR has taken a battering. But elements in focus. Worryingly, over the last universal primary education for all children. despite this CSR is starting to flow around the few years there have been signs that the veins of the most hardened business people. environment is slipping off the corporate Many existing CSR activities can be hung from At its simplest, it’s about a licence to operate, agenda. Concerns have risen about the social this framework. For instance, in HSBC’s new to find and keep good staff and to have a impacts of business, and rightly so. But are we Strategic Plan, the first imperative is: 0 44
  • 7. “To make HSBC one of the world’s leading To help us apply these principles to high-risk brands for customer experience and corporate sectors, specific guidelines are being social responsibility”. This calls for consistency prepared. The first, the Forest Land and between corporate strategy, business Forest Products sector guideline, was behaviour and our wider responsibilities to launched at our AGM in May. This will communities and the environment. also be applied to our own paper and furniture purchasing. Consistency As an example, HSBC has signed up to the is key. Over the coming months, Equator Principles. These voluntary other sector guidelines will be guidelines provide a framework to address prepared, covering freshwater In the future, it may be the environmental and social issues that infrastructure, metals and better to talk about Corporate arise in financing projects. As a result, we will mining, and energy. Responsibility rather than CSR. not provide loans directly to projects where the borrower will not, or is not able to, comply We know these issues matter – with the Equator Principles or our own our customers DO write to us. We need to remind ourselves that it’s not just internal environmental, reputational and Our objective is to ensure, social issues that matter. But above all it’s not social policies – whichever carries the through the implementation of words that make a difference here, it’s deeds, higher standard. clear lending criteria, that over and it is CSR performance that counts, not time we phase out support of only commitment and policy. activities that do not contribute THE FIRST IMPERATIVE IS to sustainable development, and TO MAKE HSBC ONE OF THE increasingly seek out those that do. WORLD’S LEADING BRANDS FOR CUSTOMER EXPERIENCE AND CORPORATE SOCIAL RESPONSIBILITY 05 5
  • 8. By Simon Propper and Peter Knight Context COMPANIES ARE CONSTANTLY Hutch days of the 1970s when it was (quite to view the world through a half-empty glass. rightly) being exhorted to do more for the Even when you factor out the self-serving CAJOLED TO BE MORE environment. The refrain has now been taken nature of these sentiments (we consultants RESPONSIBLE. HOW BORING. up by the CR community – same mantra, all have something to sell), it’s rather depressing LET’S LOOK INSTEAD AT WHAT different issues. to think that not much has changed in the way THEY HAVE ACHIEVED. non-business people view business. Sure, we can always do more. But it is utterly Business is not doing enough to promote boring to be told off all the time. If the Self-appointed CSR gurus who exhort corporate responsibility. Companies have to psychology does not work on teenagers, why corporations to boost their social performance do a lot more to qualify as responsible should it have the desired effect on the generally have a poor understanding of citizens. The 2004 Global Compact summit business community? business. Many find commercial life distasteful – was met by this do-more mantra in a slew of harsh and uncouth. Hence their demands for reports from organisations, some purporting Although the 70s fashion for furniture and business to act in ways that totally defy logic. to be business-friendly. Business has been clothes are back, times have changed in Take the constant call for widespread under this pressure since the Starsky and business. It is sad that so many people continue stakeholder dialogue and for business to set 06
  • 9. up systems that track, audit and report on the that others think appropriate. In doing this they Novo Nordisk and the Co-operative Financial process. While it’s certainly good for business to will quickly discover – as any half-intelligent Services, for staying the course. And a high-five talk to others and gain a better understanding parent has – that praise drives action. And to Amnesty International for being one of the of the world (clever operators have been doing action encourages more action. first NGOs to report. this for centuries), why install yet another layer of management just to please pressure groups? Let us look at the world through a half-full But there are more. Here’s a detailed list of glass for a change. Let us praise good, sensible, positive, responsible actions taken by The CSR community must reconnect with business-led initiatives. We congratulate companies (who are our clients). business. It needs to understand the role of Cadbury’s, Gap, Nike and Starbucks (yes) for business in society and the difficulties business what they have done to clean up their supply- faces trying to balance calls to behave in ways chains. We admire the jumbo reporters, Anglo American Anglo American, the mining and natural resources company, has pioneered a ground-breaking HIV/AIDS policy in Africa, moving much faster than governments and other companies. By the end of 2003, 1,048 employees were receiving free antiretroviral therapy. More at www.angloamerican.co.uk GlaxoSmithKline GSK, one of the world’s top pharmaceutical companies, has a social investment programme for the developing world that includes donations of medicines. For example, since 1998, the company has participated in a global partnership with the World Health Organization to eliminate lymphatic filariasis (elephantiasis) by 2020. GSK has donated 240 million treatments of preventive medicine (albenzadole) to more than 80 million people since 1998. More at www.gsk.com HP HP, the information technology provider, has 25 projects under way in 20 countries on five continents, looking at ways to make information and communication technology available to more than four billion people who can’t afford computers. More at www.hp.com Shell Shell produced one of the shortest reports of 2004 in a bold attempt to improve communication. It was the first energy company to commit not to explore or drill for oil in World Heritage Sites. More at www.shell.com Unilever Unilever’s CR activities are now widely quoted, especially its efforts to innovate in new markets among the rural poor, and meet basic needs in nutrition and hygiene. It has, for example, developed biscuits in Ghana fortified with vitamin A and zinc to boost children’s immune systems. These and other products are often produced in small packages to make them more affordable. Unilever has been working in partnership with a wide range of organisations to develop guidelines on sustainable agriculture and to promote sustainable fishing practices. It has been managing, measuring and reporting on its environmental impact for nearly a decade. This year it launched ice-cream freezer cabinets using hydrocarbon refrigerants that do not contribute to climate change or ozone depletion. More at www.unilever.com Vodafone Vodafone, the world’s biggest mobile telephone company, has set up a team to develop products that meet specific social needs, such as helping the disabled and elderly, or enhancing communications in education. It has begun to explore how mobile telecommunications can support the provision of micro-finance among the rural poor. The company collected 1.5 million used handsets in 2003 – recycling 82% and reconditioning 18%. More at www.vodafone.com/responsibility We’d say the glass is definitely half full. 07
  • 10. Operating and Financial Review Worth the wait? SO IT’S ALMOST HERE. AFTER A PROLONGED GAME OF ‘NOW YOU SEE IT, NOW YOU DON’T’, THE UK GOVERNMENT FINALLY PUBLISHED ITS GUIDANCE PAPERS FOR THE NEW OPERATING AND FINANCIAL REVIEW (OFR) IN MAY 2004. THE REGULATIONS THAT WILL MAKE THE OFR COMPULSORY FOR ALL QUOTED COMPANIES ARE STILL IN DRAFT FORM BUT ARE EXPECTED TO COME INTO FORCE IN 2005. THE OFR HAS BEEN TRUMPETED AS A RADICAL RE-THINK OF CORPORATE REPORTING, BUT WHAT DIFFERENCE WILL IT REALLY MAKE? By Nigel Salter salterbaxter What were the intentions? The goal is to address the weaknesses identified by the Company Law Review that reported the following: “Company accounting and reporting remains essentially backward looking and based on financial indicators. There are few statutory requirements to report on the main qualitative factors which underline past and future performance (or for future performance, even financial factors) – in particular on strategy, prospects, opportunities and risks; on tangible, and so-called ‘soft’ assets (which may contribute significantly to success but are not well captured in traditional financial statements); and on key business and wider relationships. As a result, the information provided is defective and directors do not have the discipline of accounting for stewardship on some key responsibilities.” 08
  • 11. In the Government’s So in essence, the OFR is intended to get 2. Companies could, ironically, use this as own words, this is what the companies thinking about and explaining likely an excuse for less disclosure OFR is intended to do: future performance and reporting on a range of Many companies have been dragged, reluctantly, relevant non-financial indicators including social, to reporting on CSR. The requirements of environmental, ethical and human resource issues. the OFR may actually mean a backwards step. Companies may cut their investment in CSR The intentions are hard to argue with. reporting and simply tick the boxes that the “Shareholders The test is whether or not the thing works. statutory report requires. It’s easy to see can exercise ef how some companies may hide behind the OFR control only if fective they have clea Will it work? formula and go no further – and that would meaningful info r and rmation about That all listed companies will be required be a shame. main drivers of the to incorporate CSR issues and performance a company’s pa future perform st and into their annual reporting process is no 3. Forward looking statements, lawyers and ance. The OFR designed to ar is doubt a good thing. And the best aspect auditors simply aren’t compatible m shareholders is the emphasis on performance reporting – The regulations want companies to look that informatio with n. It will enable ie numbers and proof – not just a few forwards and discuss potential performance to make a prop them er assessment paragraphs of fluff. and developments. But without safe harbour only of past pe not protection (as exists in the US) it is unlikely rformance but the directors’ also of But we see a variety of problems and risks. that the lawyers and the auditors will allow view on the co future prospect mpany’s These are the top three: much to be said that is meaningful or helpful. s and its approa to managing al ch Expect lots of legal caveats and generic l those factors 1. The compliance approach can be statements unless the lawyers and auditors can environmental – perf issues, relations ormance, employee blindingly dull work together to develop a methodology that with suppliers, As CSR journalist Roger Cowe points out: makes this exercise genuinely worthwhile. customers and ”CSR reporting will no longer be the primary local commun which are cruc ities ial to the compa – responsibility of corporate affairs (ie PR) future success ny’s specialists – which is good news if you have and reputation. ” faith in company secretaries, but bad news So… if you buy the argument that they are risk- averse bureaucrats.“ The importance of CSR will be recognised in regulation but there’s a risk this will be an If companies simply read the recommendations, excuse for companies to lose sight of the take them on board and respond at face value innovation, business improvement and energy then not only will annual reports become that CSR has delivered in many organisations. even more boring, but imaginative and relevant CSR reporting could be killed off before it Yes, it’s a good thing that CSR issues and really gets going. I like annual reports (and performance measures will be addressed by companies) that try to express personality, all listed companies. But only if companies where a management style is made visible, approach the new requirements in a positive and where there is a clear attempt to be and imaginative way. interesting, engaging and open. More guidance risks more boredom. Was it worth the wait? Companies now have the choice between going the extra mile or simply complying with regulations. Time will tell if this results in improved reporting. 09
  • 12. By Nigel Salter salterbaxter and Simon Propper and Peter Knight Context CSR reports can become lists WE PREFER CLARITY TO WOOLLINESS. of data and good case studies, WE THINK ALL REPORTS SHOULD HAVE A LOW-FLUFF COUNT. but to be of value they should reflect the real issues facing the business. These are not always ‘easy’ issues or the ones that make the best pictures. We are a people business and our people don’t leave their values at home. We want to create a workplace where nobody needs to compromise their ethics and where difficult issues are openly discussed. Animal research is essential to understand disease. It enables us to evaluate the effectiveness and safety of new medicines before they are given to people. Regulations require the use of animals to establish that new medicines are safe and to test some types of vaccines after each batch is produced. The fact that we don’t always get everything right is one reason why we are committed to transparency, dialogue and a multi-stakeholder approach. We continue to make progress, but recognise that we still need to work hard to improve performance at projects and operations where we have not yet got it right. [We] ended a joint venture and 49 contracts due in part to concerns about their willingness to operate in line with our Business Principles. Reported cases of bribery in 2003: 8. 10
  • 13. As a responsible business, [company name] has an important role to play in balancing social, economic and environmental factors in accordance with society’s transition to more HERE ARE SOME EXAMPLES. sustainable forms of development. WHERE DOES YOUR REPORT REGISTER ON OUR FLUFFOMETER? We similarly approach a comprehensive understanding of the full life cycle and safe use of our products to ensure all their benefits are delivered. In our company, we pursue a corporate culture that combines the determination to achieve economic success with cosmopolitanism, trust, transparency and responsibility for our environment. This attitude is reflected in all areas of the company and is absolutely essential if we are to put the Group’s current product and marketing offensive successfully into practice and thus safeguard the future of the Group on a sustainable basis. We have always said that corporate responsibility is a journey, that whatever Whilst integrating corporate responsibility into the fabric we have achieved there is always more to be of the organisation is an objective in itself, ensuring that done. As this web site shows, we have come it effectively sits at the heart of business strategy and corporate values, it is not one that should be showcased a considerable way over the past year. and then forgotten. We know very clearly that companies which adopt and embrace corporate responsibility are more likely to create wealth and shareholder value than those that don’t and, in so doing, link this to their core business principles. Because of the large number of diesel storage facilities identified we were unable to develop spill response plans. Instead, the pollution control training course will be modified to incorporate the training about how spill response plans should be developed. Regional employment equity officers have played a significant role in highlighting regions where employment equity is not practised as vigorously as executive management would prefer. In so doing, these officers enable corrective action to be taken and ensure that the entire [company name] staff is aware of the imperative represented by employment equity. Note 1 Sources available on request. Note 2 We are heartened by the difficulty in finding truly fluffy examples. We hope that in a few years fluff will be on the endangered list. 11
  • 14. We have made every effort to ensure that the data in Directions are Methodology accurate. Our research is based on information on company websites and in printed reports. The research findings were verified with each company on the telephone – our thanks to Christina-Maria Weiss who carried out the research this year. In just a few cases companies declined to participate, but most were extremely helpful and keen to have their entry checked. If we have missed data, please get in touch and we will update our records. Although our categories are simple and non-judgemental, we still had to apply some rules and definitions to ensure a consistent approach between companies. These are: 1. The cut-off date: for data inclusion was 7. Section in annual report: typically refers to 11. Covers supply-chain: is a new category July 31 2004 and our assessments are based on content of one full page or more. We indicate added this year. We identify when supply-chain information in the public domain on that date. if data are included where possible. Only in issues are covered only briefly and specific exceptional circumstances is a company that information is reported. 2. The top 250 UK companies: were taken from only publishes information in its annual report the Financial Times website on June 7 2004. classified as a reporter. 12. FTSE4Good: a dot in this box means a company is included in either the World or 3. The top 50 US companies: were taken from 8. Independent verification statement: refers UK index. the Standard & Poor’s 500 index on July 31 2004. to formal auditing of the report by third parties and excludes informal comments by external 13. Dow Jones Sustainability Index: a dot 4. The top 50 Euro companies: were taken from commentators. in this box means a company is included in the Financial Times website on July 31 2004. either the World or European STOXX index. They are the top 50 excluding UK companies. 9. Includes environmental performance: covers a range of issues e.g. emissions and 14. BitC CR Index: only records the companies 5. Number of years reporting: refers to either discharges, resource use and waste. A dot in that appeared in the top 100, not the full list environment or CSR reports. Mergers and this box means that some but not necessarily of participants. acquisitions may affect these data by reducing all the company’s impacts are reported, ideally the number of years recorded. with data. 15. Investment Trusts: are excluded because they are not regarded as trading companies. 6. Web reports: it is important to note that 10. Includes social and ethical performance: Their places have been taken by the next what some companies call a report is actually covers a range of subjects e.g. business ethics, largest companies outside the top 250. only a couple of pages. We attempt to identify community, employment, health and safety, the level of information covered and make a and human rights. A dot in this box means that judgement about what can reasonably be some but not necessarily all relevant issues classified as a ‘report’. are reported, ideally with data. Companies reporting community/health and safety data only did not receive a full dot. ce an ce t en orm an em ex orm erf tat Ind s ing lp erf ns ue ity ort ica lp ort iss tio bil 00 eth rep nta rep ica na ain p1 ex me rif tai nd al ch ars To nd nu ve us la on ly- ort DI ye ex an sS cia nt vir pp nd rep ort OO ts of de in ne en su so RI en ep er en 4G on Jo (FTSE ranking on the left) ed rs rs rs mm CC mb br ep SE cti int ve ve ve w Ind Sector name We Nu Bit Do Co Co Co Co FT Se Pr 051 A COMPANY –– a b –– –– –– –– –– 1 a Comment b More comments KEY Yes a See comments AR Annual Report BitC CR Index Business in the Community Corporate Responsibility index DR Directors’ Report H&S Health and Safety SHE/EHS Safety, Health & Environment 12
  • 15. Analysis overview 24 of the top 250 UK companies reported for the first time this year (29 a year ago) Number of 0 e5 0 100 50 25 rop companies that: UK UK US Eu REPORT 145 (132) 83 (84) 27 (22) 44 (40) REPORT ENVIRONMENTAL 123 (98) 75 21 42 AND SOCIAL PERFORMANCE REPORT ENVIRONMENTAL 140 (132) 81 26 44 PERFORMANCE REPORT SOCIAL AND 127 (100) 79 22 42 ETHICAL PERFORMANCE COVER SUPPLY-CHAIN ISSUES 54 37 6 18 ARE DEFINED AS 105 (118) 17 23 6 NON-REPORTERS HAVE INDEPENDENT VERIFICATION 60 (45) 44 2 21 ARE REPORTING FOR THE FIRST 24 (29) 7 8 6 TIME THIS YEAR PRODUCE NO REPORTING OF 44 (56) 6 (16) 24 1 SUBSTANCE (NO CSR REPORT AND NO SIGNIFICANT SECTION IN ANNUAL REPORT) 145 of the top 250 UK REPORT ON THE WEB ONLY 43 26 5 13 companies now report REPORT IN PRINT ONLY 3 1 0 0 (132 a year ago) Last year’s figures shown in brackets where available. UK sector with: 0 100 r 25 cto UK UK Se LEAST COMPANIES REPORTING Software and computer services 0/5 0/1 Insurance 1/5 1/1 Leisure and hotels 2/17 4/6 Speciality and other finance 3/14 2/2 100% COMPANIES REPORTING Beverages 4/4 4/4 Tobacco 3/3 3/3 Utilities 8/8 4/4 MOST FIRST-TIME REPORTERS Support services 4/18 1/6 Media & entertainment 4/19 4/9 13
  • 16. Analysis overview 123 of the top 250 UK companies report environmental and social performance (98 a year ago) 44 of the top 250 UK companies produce no CSR information of substance, in any report (56 a year ago) 60 of the top 250 UK companies have independently verified reports (45 a year ago) 14
  • 17. 83 of the top 100 UK companies report, compared with 44 of the European top 50 and 27 of the US top 50 37 of the UK top 100 companies report on supply-chain issues, compared with 18 of the European top 50 and 6 of the US top 50 15
  • 18. US top 50 ce an ce t en orm an em ex orm erf tat Ind s ing lp erf ns ue ity ort ica lp ort iss tio bil eth rep nta rep ica na ain me rif ex tai nd al ch ars nu ve nd us la on ly- ort ye an dI sS cia nt vir pp rep ort of ts oo de in ne en su so en ep er en 4G on Jo ed rs rs rs mm mb br ep SE cti int ve ve ve w Ind We Nu Do Co Co Co Co FT Se Pr (S&P 500 ranking on the left) 001 GENERAL ELECTRIC 2 –– a –– –– a H&S and Community only 002 MICROSOFT 1 –– –– a a –– –– a Limited data 003 EXXON MOBIL 4 a –– –– –– –– a With data 004 PFIZER 3a –– a –– a Last report published in 2001 b H&S and Community only 005 CITIGROUP 4 –– –– 006 WALMART STORES –– –– a –– –– –– –– –– a Fact sheets on community, people and energy; Good Works community web section; Statement of ethics 007 AMERICAN INTERNATIONAL –– –– a –– –– –– –– –– –– –– a Code of conduct only GROUP 008 BANK OF AMERICA 4 –– a –– b –– –– a 2003 update to 2002 environmental report and community webpage b Community data only 009 JOHNSON & JOHNSON 8 –– 010 INTEL 10 a b –– –– a Separate EHS and Global Citizenship report b Brief reference to social reports 011 IBM 14 a –– –– b –– –– a Report pdf and additional web information b Describe supplier evaluations, but little data 012 CISCO SYSTEMS 1 –– a –– b b –– –– a Brief reference b Limited data 013 PROCTER & GAMBLE 11 a b c –– d a Summary report b Report pdf c Reference to Sustainability report d Policies 014 JP MORGAN CHASE –– –– a b –– –– –– –– –– –– a Communityweb section mainly covers policies; Community data only b Covers community 015 COCA-COLA CO. 3 a b c –– a Brief reference b Limited data c Brief mention, Supplier Guiding Principles 016 VERIZON COMMUNICATIONS –– –– a b –– –– –– –– –– a Community and environment web sections, limited data b Covers community only 017 CHEVRON TEXACO 1 a –– –– –– –– a Summary report 018 MERCK & CO 2 –– a –– –– –– a Covers access to medicines 019 ALTRIA GROUP –– –– a –– –– –– –– –– –– a Responsibility web section mainly covers policies; community data only 020 WELLS FARGO –– –– a b –– –– –– –– –– a Sections on community and diversity b Covers community only 021 DELL INC. 5 a b –– –– a Report pdf and additional web information b Brief reference 022 PEPSICO 1 –– a b –– c c –– –– –– a Citizenship web section mainly covers policies b 15 pages c Limited data 023 SBC COMMUNICATIONS –– –– a –– –– –– –– –– –– a Corporate citizenship web section covers mainly community and diversity, limited data 024 UNITED PARCEL SERVICE 1 a –– –– a Reference to Sustainability report 025 TIME WARNER 1a b –– –– –– –– a Last report published in 2002 b Pdf 16 KEY Yes a See comments AR Annual Report BitC CR Index Business in the Community Corporate Responsibility index DR Directors’ Report H&S Health and Safety SHE/EHS Safety, Health & Environment