Step Two – Development, Production and Publication of the External Report

The second step of the normative model involves the provision of the external report on social and environmental performance to those who have a right to know. As noted in previous chapters the relationship between reporting and performance has been much debated in the literature, and initial results from this exploratory study suggest that there is little association between the resources devoted to organisational investment in social and environmental performance management and investment in external S&ER. An indication of this was acknowledged by the interviewee from Org H when questioned about organisational resources: “Oh well OK there’s two questions there (Org H)”. There appear to be differences between the level of support towards organisational internal social and environmental performance management and external S&ER. This will be explored further in this section, in addition to the reporting methods used by the cases studied, and how they approach the reporting process.

The People Involved in the Development and Production of the Reports

In the cases of Orgs F, G, H and J, the external S&ER was coordinated by a small corporate group, who were situated in, or worked closely with the corporate affairs division of the organisation. In the cases of Orgs C and E external S&ER was coordinated by a “steering

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committee (Org C)” and “working group (Org E)”, and in Orgs D and I by just the interviewees with varying levels of internal and external support. Org B’s external S&ER approach differed slightly to the others in that it appeared to be more segregated, with the interviewee noting:

“So my department and by department I mean my few people, are a corporate function and we look after communication, engagement and specifically environmental reporting. And then there’s other corporate functions that look after safety and health reporting, there’s obviously HR looks after HR reporting, there’s, and then you go into the businesses and that’s where you have SHE managers, product stewardship, you know, well product stewards for the business, and all those people so there’s not, yeah, there’s not one platform that looks after it (Org B)”.

As noted above the S&ER coordinators drew upon varying levels of support from upper and lower levels of the organisation, with the number of people involved ranging from “fifty to sixty (Org J)” to “Me. I’m it (Org I)”. While Orgs D, F and G all had Board level health, safety and environment, or sustainability committees, only the interviewee from Org J referred to direct involvement from the Board in external S&ER. In the cases of Orgs B and D an external reporting consultant was employed “to do a lot of sort of the legwork (Org B)”, because in the case of Org D “the corporation went from having three sites to having eight sites so the task became a lot bigger and as well as, and that was just not compatible with my workload (Org D)”. Orgs C, F, G and J all employed external design consultants, and whilst Orgs E and H did not outsource any aspect of their external S&ER, both employed internal “magazine grade (Org H)” designers, and the interviewees from Orgs E and G were both previously employed as external S&ER consultants.

The Reporting Mediums Used

As discussed in Chapter 3 S&ER may take the form of disclosures in the annual report, triple bottom line, or integrated reports, stand-alone sustainability reports, and web-based reporting. It is increasingly common for organisations to utilise more than one reporting method and consideration must be given to the most appropriate way to make information available to those to whom the organisation is responsible. It was suggested that the provision of both web-based

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and hard copy reports is necessary to discharge S&EAA, and the information needs of those who have a right to know need to be considered.

Each of the cases studied provided some degree of S&ER on the internet, with the level of web- based disclosures ranging from pages on the website (Orgs A, B, C, D, F & I), to the use of customised updates and social media (Orgs E, G & J). Web-based disclosures are explored in further detail in Chapter 10. In addition to web-based disclosures the amount of external S&ER varied. In the case of Org A no additional information was provided, although their intention was to provide some social and environmental performance information in their upcoming annual report. Similarly Org I provided only a limited amount of S&ER in their annual report. The largest amount of reporting was undertaken by Org B, who provided not only a stand-alone sustainability report, but also social and environmental disclosures in the annual report, in addition to the business overview “which is like a marketing document [and] the profit report which is basically just a bunch of numbers that go to the share market (Org B)”. Stand-alone sustainability reports were also provided by Orgs C, D, E, G, H and J, whilst integrated reports were provided by Orgs J, F & G. In the cases of Orgs B, D and J the stand-alone reports were available in soft copy only, whilst the others produced both hard and soft copies. In addition to the stand-alone report Org C produced a condensed version as “a tool to support our global sales force (Org C)”, Org E provided a monthly newsletter, and Org H provided some disclosures in the annual report.

When asked which was their preferred method of reporting the majority of interviewees agreed that online reporting was preferable “because it’s archivable, it’s searchable (Org C)”, and “[j]ust, it’s accessible really (Org D)”, although the interviewee from Org E did comment “I think you need to use them all.” Reasons for providing soft copy reports only were to “try and set the precedent for reducing consumption (Org D)” as “[y]ou can’t sort of go out and say that you’re sustainable if you’re producing 30,000 copies of a 170 page document (Org B)”, and cost. Consistent with this those cases that produced hard copies did so only in limited numbers.

Similarly, “[c]ost. Productivity, paper (Org F, Interviewee 2)” were cited as reasons for producing integrated reports. Another reason for providing integrated reports was that “it is important that [corporate responsibility] be seen as integral to the company, not as a separate activity (Org A)” and “as sustainability becomes more and more core to our business, we

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obviously are starting to report on an awful lot of this stuff in the annual report anyway. [...] This way it becomes more mainstream (Org G)”. These views may be contrasted with those of the interviewee from Org H, who commented that whilst they provide a small amount of social and environmental information in their annual report “I try and actually keep them separate. Yeah, because otherwise we’re double dipping and there’s not enough material to go around as it is and somebody else has to produce the financial report so I think bugger them, find your own material (Org H)”.

Interviewee 2 from Org F, which had recently made the transition to integrated reporting, noted that it had “been an interesting challenge in bringing it in to integrate it (Org F, Interviewee 2), and Interviewee 1 acknowledged both the advantages and limitations of integrated reporting, which, as discussed in Chapter 3 has gained increasing prominence since the establishment of the IIRC:

“I think it’s a, it represents a profound shift. Our reporting, where it is currently is not a profound shift, but the proposition that what we’re talking about is a broad agenda, social and environmental performance and you know the issues, areas of performance, which are material and however you choose to define that, provide insights to value generation, provide insights or have implications for the risk landscape and so on. You know that’s a very compelling proposition. Why wouldn’t you seek over time to be in a position to you know, set out an organisation’s objectives, landscape your risks and opportunities perspectively, the way in which it generates value, and then its performance against objectives. So if you take that view, then you kind of, it leads you to the conclusion that you kind of need to integrate financial and non-financial reporting. [...H]aving said that, you know the down side is, as we’ve touched on, do you, are we losing something in terms of that specificity for particular stakeholders, that, we had space, literally, kind of physical space in a separate report to give issues different treatment, to you know, discuss dilemmas, perhaps in a little bit more detail and so on (Org F, Interviewee 1).

The interviewee from Org J also acknowledged this limitation with respect to integrated reporting, noting that “it’s a question of value to whom and my view it’s a value to stakeholders

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and the IIRC document that’s out at the moment, when it talks about stakeholders, it’s still quite directed to shareholders as a kind of a principal audience or investors and for example, I didn’t see much discussion around customers in there (Org J)”.

In all cases, with the exception of Orgs A and I, it appeared that some consideration had been given to the appropriateness of the communication method for their relevant audiences. For example, at the time of the interview the S&ER of Org D was only available online, and the interviewee noted:

“[Online reporting] was appropriate for our business at the time in terms of Australia and you know, fairly good internet access and, but now we’re operating in a few different countries so we’ll, I think we’re certainly considering going back to a hard copy report and say here’s a glossy brochure and leave it with people to read and think about. So that’s what we’ll probably do this year. A limited number so it becomes a communication tool, hard copy (Org D).”

However of the cases studied none gave greater consideration to the needs of the relevant audiences to that of Org J, with the interviewee commenting:

“Now, why we still do a full PDF is that the feedback that we get from analysts, particularly the environmental and social governance analysts is that they just want a document they can go from cover to cover, they don’t want to be having to work their way through the architecture of a website. They want to be able to understand exactly all the issues that you’ve covered off. And they give us the feedback. They just want something that they can print, ideally, in black and white. So even if it’s in colour they wouldn’t be able to read the charts if they printed it out in black and white. So quite granular feedback. And then we move to the website. And the website is really intended for a very, very wide audience. […] What we’ve tried to do is actually design a site that can appeal to many different audiences and you can quickly find on that front page the information that you’re looking for. […] So we’ve thought really hard about that. We also, when we launch the sustainability report, the website, we send out an EDM. So, an email and we actually tailor that email to different audiences. So we slice and

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dice it. Are you a recruiter working for Org J? Are you one of our customers or a tenant in particular? Are you an employee? Are you someone working in government? And what we do is, we actually point to key aspects of the report or case studies that we think might be of interest to them and the feedback we’ve received has been really positive. We get feedback like, wow, how did you know which bits of the report you knew I’d be interested in? I’m amazed. We’ve thought about it. We’ve actually done that level of analysis to really try and target the report and the content to the right audience (Org J)”.

The target audiences in each case varied from being quite focused (Orgs E and H) to very broad (Orgs B, D and J), although as noted above Org J does “package up the report into three different formats and with the intent of directing that content to different audiences (Org J)”. By far the broadest audience was that of Org C, which was due to the nature of the industry and included:

“So employees obviously, shareholders, investors, health care professionals, patients, plasma donors, government, regulators, who else? I guess they’re the key ones really. Suppliers, collaborators, our MD collaborators. So it’s really quite difficult, and that may include academics, it includes investors which are mums and dads, it includes patients, plasma donors that typically in the US are from low socio economic backgrounds because plasma donation in the US is remunerated (Org C).”

Despite these differences, patterns did emerge with respect to the intended audiences. All of the cases identified existing and/or potential employees as a key audience, although in the case of Org D “[i]nternally, it’s, in our organisation, hasn’t had as much traction as I think other organisations, as a vehicle for informing our people about what we do but that does have that role for those that come across it (Org D).” Investors were also cited as an intended audience for all cases with the exception of Org B, with the interviewee noting “it’s about the governance and the social responsibility the companies have now to the community that I think is actually a bigger deal than addressing it to the shareholders, ‘cause at the end of the day, shareholders care about making money. They don’t care about if you’re doing it in an environmentally sensitive way (Org B)”. The remaining interviewees further classified investors, as a target audience, as being shareholders (Orgs A, C, D, H & J), analysts (Orgs D, E, F, G & J), and institutional

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investors (Orgs D, E & G). Customers were also commonly identified as being amongst the target audience (by Orgs B, C, G, H, I & J). However, it must be noted that Orgs E and F, who were both rated as being ‘high’ with respect to the proximity of product to end user, are conspicuously absent from those organisations considering customers to be amongst their audience.

Less commonly identified target audiences included government (Orgs C, E, I & J), and regulators (Org C), in addition to general references to “stakeholders” (Orgs B, F & I) and “community groups/partners” (Orgs G/E), or “the community, sort of” (Org D). The interviewee from Org B noted that “[t]he media has had a bit of interest in our report of late because of an incident that we had up in New South Wales (Org B)”. These key audiences, namely employees, investors, customers, government, regulators, and the media, appear to be in line with the organisational constituencies identified in the prior literature (e.g. Hybels, 1995). The consideration of the target audience not only influenced the format of the reports, but also the content of the reports. This is discussed further in the section below, which considers how the cases studied prepare the content of the social and environmental reports.

Preparation of the Content of the External Reports

As noted above, in most cases a consideration of the target audience did influence the content of the report, which may be best summed up by the interviewee from Org H:

“It makes you think about firstly, the nature of whatever narrative you might try and run through the whole report. It makes you think about the specific items, whether they’re stories or pieces of data or whatever that you might put in to that report. It makes you think about how you actually write those things cause a lot of the time the material we get is us talking to ourselves about things we think are interesting, you know, and me as editor says, nobody other than me and maybe you, who wrote this report, has any prayer of even understanding what you’re talking about cause they’re writing about some internal system they’ve implemented or something like that. It’s just irrelevant to anybody else and boring as bat shit. Uses a whole lot of words that nobody else is going to understand and so, you either ditch the story completely cause it’s inappropriate

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for the audience or you say, look, there’s actually a good story in there but you’ve managed to conceal it completely, so let’s try and write it again in a way that somebody else might get the point you know. That also applies to data, you know, where you’re presenting data, you’ve got to try and present data that somebody will be interested in and will be able to understand. That’s, particularly for an engineering company, a huge challenge, you know, getting them to talk to an imaginary audience ‘cause they’re not very good at imagining. They’re engineers (Org H).”

This sentiment was reiterated by the interviewee from Org B who noted, “trying to write it so that if you didn’t have a technical knowledge you could still understand it, is quite interesting (Org B).” This may be contrasted with the approach taken by Org C, with the interviewee commenting that despite the case having the largest range of constituents in their target audience:

“I think we more pitch towards more of a higher skilled, a lot of the language we use in the report is very much tipped at a level that’s consistent with the organisation, so it’s a fairly complicated, because it’s medical related, it relates to our therapies, it’s, and patient groups for example, we rely quite heavily on patient groups because we don’t have a direct door into, or a direct door to patients, we use the support of patient groups to get access to patients. So, and they’re all fairly technical terms and technical language. (Org C).”

Similar to Org J, who as discussed above use different S&ER mediums for different target audiences, Org G commented that “it’s all there in the annual report, it’s all there in the website but it’s often not the whole story because it’s different slices and dices for different purposes, where with the sustainability report, we try and make sure that we’ve got a really good kind of explanation of everything that the business does (Org G)”. However, “[t]rying to create a report for everyone is very hard (Org E)”, “because they all have different wants and needs and