Estonia ranks companies in 2010: Lowest scores… and why?

We are back with some more information on Estonian Corporate Responsibility Index 2010.  This time – lowest score (average 48%) were received for the question block on stakeholder relations & communication.

My first question was – why? Is it so hard to inform, share, agree not only on CSR policies, but on company operation in general? Lets look what the questions were:

The 4th block of questions is titled “Measurement, reporting and communication” with two areas of focus – does your company measure impact related to (a) community, (b) environment, (c) marketplace and (d) workplace. And the second focus area was on communication: how, to whom, and in what form (reports, standards, audits).

I contacted Elina Rääsk about their post on http://www.csr.ee/10342 to get more information on what are the reasons and explanations behind the low scores.

The impact measurement section received average score of 47% only. I was wondering whether there is any systematic measurement in place, a reference to any audits and it seems no. Moreover, Elina’s observation is that neither stakeholders are holding companies accountable.  It seems that more detailed overview of % in the 4 categories of impact measurement would give even clearer picture – are companies doing measurements towards Community, Environment, Marketplace or Workplace impact. My presumption is that Workplace and Environment would within this section receive higher points, again primarily because the regulations in this area are rather strict and companies are including these subjects in their annual reports or environmental reports, if such are required.

For those interested to measure impact in these areas, you will have to look for standards or reporting mechanisms that include indicators and frameworks to ease your work, but also see the ongoing EU funded project – CSR Impact http://www.csr-impact.eu and while there is little information available yet, the results seem to be promising.

Communication and reporting section of the index refers to stakeholders and transparency. Most used resources for communicating are

• company websites
• intranets
• annual reports

Very few companies have separate CSR reports, those usually being subsidiaries of MNCs or larger companies, who have investors interested in CSR. Are they needed? I would say no… IF the issues are well integrated and transparent in the Annual report it would show even more strategic thinking and links between core business and the CSR issues of interest.

It is easier to report if there is a clear standard to follow and the main ones listed by companies were ISO (environment, quality), EMAS (http://ec.europa.eu/environment/emas/documents/legislative_en.htm), less OHSAS (http://www.ohsas.org/ – on occupational health and safety) and only 1 company considered using SA8000 (see a useful description and other information on CSR on http://www.mallenbaker.net/csr/CSRfiles/SA8000.html). Unfortunately, there are too many differing standards, but companies can find the one most relevant to their materiality issues and get inspiration from others.

When thinking about the reporting to stakeholders I came across an interesting article by Graham Hubbard http://www.corporateregister.com/crra/2008-ceremony/media/UnsustainableReporting.pdf This report concludes that great deal of contents of reports can be classified as greenwash: not material (CSR is not linked to issues essential to company – strategy, governance, economic indicators, environment, employees, customers, suppliers and community), not assured by external auditors, not measured (CSR impact not linked to company performance data), not aggregated information, not comparable with other organisations due to different standards being used and presented favorably to the organisation rather than objectively.

Recommendations provided by Prof. Hubbard are useful to the Baltic companies when thinking about starting the reporting processes and improving performance in the indexes:

• focus the report on specific needs of your organisation – make them “material” to your business strategy and reflect the specific context of operations
• involve internal and external stakeholders to define the issues of materiality to your company
• aggregate reporting of all data, rather than focusing on single case studies
• develop standard measures to all material issues: environment, employees (for example, diversity indicators, employee satisfaction), carbon emissions and others
• set clear performance targets
• audit or externally verify your reports!
• And integrate your CSR reports with the financial reports/annual reports and get board of directors approval

To conclude – why is it so difficult to score high on the measurement and reporting section? I would say: limited transparency culture of current management practices, which also includes stakeholder involvement, no (or limited) external verification of reports and I dare to say – also the lack of materiality of reports, though qualitative assessment of contents is not done by either Estonian index or the Latvian one.

Good luck with your reporting! And if you need assistance – contact us: Dace on dace_kavasa@yahoo.com & Arjan on arjan@whowalksthedog.com