'Green' reporting: nowhere to hide

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Society should be able to hold companies accountable for their social and environmental impacts. For this to happen, it is essential that shareholders, employees, communities and pressure groups can access information about company activities.

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The government has signalled, through the Business Review and the Companies Act, that publicly listed companies should produce social and environmental reports – a good and very welcome step won after a hard campaign by the CORE (corporate responsibility) coalition. This legislation will force companies that are not already producing reports to begin from this autumn.

But we need to ask how meaningful these reports will be? In the absence of clear statutory standards for reporting, and without auditing requirements, there is a danger that reports will just be used to check the legal requirement box or as a PR tool.

In January, an Accounting Standards Board report showed that the contents of the narrative style reports that companies are issuing lack clarity. Many failed to reveal any risks associated with supplier relationships. They also lacked an understanding of the key performance indicators to be included.

For example, most of the main oil companies produce social and environmental reports that include emissions information on their positive initiatives and discussion of some of the thorny environmental campaigns the company is facing.

But without a statutory standard it is very difficult to make a meaningful comparison between companies. And without performance indicators it is difficult to assess the progress a company is making.

Financial reporting has been standardised so that shareholders and others can review a company’s financial management in a meaningful way. The same cannot be said of social and environmental reporting.

With a few exceptions, the motivation to produce these reports generally stems from a desire by the company to present an environmentally sound image. They are not produced because they are vitally important to the company.

Companies can make a profit from operating in a sustainable way. They can also make a profit from operating in a very destructive way. Yet their reports can easily be spun so that this is downplayed or not properly reflected. It’s up to government and shareholders to demand meaningful standardised reports from companies. Without them, transparency in corporate behaviour is a long way from being a reality.

Hannah Griffiths is corporates campaigner at Friends of the Earth