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
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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.
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