Reporting on Community-Related Activities

As with all aspects of sustainability reporting, practices of companies regarding their disclosures relating to community engagement and investment have been evolving as time has passed and stakeholder interest in such activities has increased.  Although mandatory reporting requirements have been slow to emerge, the need to keep communities informed has found its way into global standards such as the OECD Guidelines for Multinational Enterprises which provide that enterprises are expected to ensure that timely, regular, reliable and relevant information is disclosed to the community regarding the activities, structure, financial situation and performance of the enterprise and relationships between the enterprise and its stakeholders; and communicate information to the community regarding the social, ethical and environmental policies of the enterprise and other codes of conduct to which the enterprise subscribes (including voluntary standards relating to community involvement and development).

A useful reference point was provided by the Global Reporting Initiative (“GRI”), which is the well-known multi-stakeholder developed international independent organization that helps businesses, governments and other organizations understand and communicate the impact of business on critical sustainability issues such as climate change, human rights, corruption and many others.  GRI pioneered sustainability reporting since the late 1990s, transforming it from a niche practice to one now adopted by a growing majority of organizations.  GRI’s Sustainability Reporting Standards are the most widely used standards on sustainability reporting and disclosure around the world and available for use by public agencies, firms and other organizations wishing to understand and communicate aspects of their economic, social and environmental performance.

As part of its research into tracking reporting practices and implementation the GRI, working in collaboration with the University of Hong Kong and CSR Asia, reviewed and analyzed 72 sustainability reports in 2008, 58 of which included a specific declaration that they followed the then-current version of the GRI Reporting Framework (the “G3”).[1]  In its report on the survey (the “GRI Reporting Survey”) the GRI noted that the selected reports reflected a diversity of sectors as well as an inclination towards those seen to have a relatively substantial community impact.  Perhaps not surprisingly, the companies represented in the survey followed a wide range of diverse approaches in reporting on community performance and showed a significant level of individuality in their reporting.  Nonetheless, GRI and its collaborators were able to make several key observations[2]:

• The researchers identified 17 categories of topics that were covered in the reports, acknowledging some overlap, and found that the two topics most frequently covered were education and training and philanthropy and charitable giving (both covered in 63% of the reports) and that the other three topics in the “Top 5” were community services and employee volunteering (49%); total community expenditures (46%) and community engagement and dialogue (46%).
• 69% of the companies choose to group community related topics under a distinct section in the report, which usually focused on topics relating to charity and philanthropy as opposed to sustainable community development.[3] When organizing and presenting the information companies reported according to sites of operation and subsidiaries; used testimonials, dialogues and interviews; used case studies, although there did not appear to be a common practice in terms of which was included in relation to understand the impact of the company’s community contribution or participation; and included general anecdotal write-ups, tables and graphs within the report.
• Community performance was explicitly defined as a corporate goal in less than half of the reports and usually not very clearly. This lack of precision continued in the failure of a large percentage of the reporting companies to indicate their general approaches, policies or goals behind significant community activities such as philanthropy and charitable giving and community services and employee volunteering.
• Companies usually focused their reporting on their own performance in relation to community initiatives (e.g., sum of money donated/invested for initiatives and number of people covered by initiatives) as opposed to measuring and describing the impact of those initiatives on members of the community and the environment (i.e., benefits and positive changes). When impacts were reported a majority of the companies emphasized positive contributions without mentioning any negative impacts.
• Context, in terms of geographic location and business sector, matters with respect to the focus of reporting; North American and Asian companies tended to report on education and training, philanthropy and charitable giving and community services and employee volunteering more often than European companies and community engagement and dialogue was noticeably more important among companies in the mining sector than among companies in the chemical sector.

One of the main purposes of the GRI Reporting Survey was to determine how well actual reporting practices on community impacts aligned with the guidelines included in the GRI Reporting Framework.  The overall conclusion was that while a majority of the reporters claimed that they were reporting in accordance with the G3 Guidelines and Indicator Protocols on community, the reality was that this was not the case.  In particular, the authors of the GRI Reporting Survey were critical of the weaknesses of reporting companies with respect to fulfilling the requirements as stated in the GRI management approach for community issues and found that in most, although not all, cases companies were simply not able to define and report on community impact in a meaningful way.[4]  The indicators used for reporting were overwhelmingly focused on performance, probably because measurement of performance (“inputs” such as the amount of cash donated to charities or the number of people who participated in an event or activity) is easier to measure than the impact of community programs, activities and contributions.  The action items from a reporting framework development perspective were to try and determine whether companies had no interest in tracking and reporting impact or lacked the capacity to collect and analyze the necessary information and/or guidance on how best to report on impacts.[5]

While more and more companies produce reports that emphasize the importance of being a good “community citizen” and effectively managing their relationships with community members and the community environment those same reports often reflect difficulties in identifying and describing specific goals for community involvement and the impact that company activities are having on the community.  The researchers who compiled the GRI Reporting Survey noted that companies could access the framework proposed by the London Benchmarking Group (“LBG”) to better quantify and organize information about their corporate community investment activities and, most importantly, assess and report on the impact of their relationships with communities and how to manage it.  Other tools for reporting on impact have included return on investment (ROI) frameworks; the social, ecological and environmental footprints; Ethos Indicators and work done by partnerships between NGOs and multilaterals that have attempted to conceptualize impact related to broader sustainability dimensions.[6]

This article is part of the Sustainable Entrepreneurship Project’s extensive materials on Community Engagement and Investment and an excerpt from Community Engagement and Investment: A Guide for Sustainable Entrepreneurs by Alan S. Gutterman, which is available for purchase at various online booksellers.  Readers may also enjoy the author’s Responsible Business: A Guide to Corporate Social Responsibility for Sustainable Entrepreneurs.

[1] Reporting on Community Impacts: A survey conducted by the Global Reporting Initiative, the University of Hong Kong and CSR Asia (Amsterdam: Stichting Global Reporting Initiative, 2008), 4.

[2] Id. at 4-5.

[3] The researchers found that reporting on many of the community-related topics appeared in other sections of the report such as information related to community environmental impact due to operations and community environmental campaign/problem solving being placed in the section of the reporting dealing with the environment (and reported based on GRI environmental indicators as opposed to GRI social indicators) and information related to direct economic impact and helping local business/producers being placed in the economic section of reports.  Id. at 5.

[4] Analysis of the attempts by the companies included in the survey to make disclosures on their management approach on community found that less than half were compliant with respect to disclosure of goals and performance and policy and that disclosures were even weaker with respect to organizational responsibility, training and awareness and monitoring/follow-up.  Id. at 10.

[5] Id. at 5.

[6] Id. at 6.