Over recent decades there has been a growing awareness by business, government and other agencies regarding the impact that business can have on society. Increasingly, companies are stating their commitments to being an agency for positive change for society and for the environment. At the same time there exists a growing emphasis on understanding the impact of business on the environment and on society.
More and more companies are frequently facing the question of ‘what are your impacts on communities where you operate?’ Yet this is also a question which is difficult for most companies to answer. In response to this, the GRI initiated a research project to better understand current practice in reporting in terms of approach, type of information, patterns (in sectors and geographical locations) as well as how this relates to the GRI guidelines. The research was carried out by the University of Hong Kong and CSR Asia, together with GRI staff.
Sample of Report Considered
Seventy-two sustainability reports were randomly selected for this analysis, 58 of which follow the most recent GRI Reporting Framework, the ‘G3’ and have declared the G3 Application level. The selected reports reflect a diversity of sectors as well as an inclination towards those seen to have a relatively substantial community impact.
The regional distribution of the companies is as follows:
- Europe – 36
- North America – 14
- Asia – 13
- Latin America – 3
- Oceania – 3
- Africa – 3
Companies from eight sectors account for over 60 percent of the reports.
How do companies approach reporting on community performance?
Overall, companies take a diverse approach to reporting on community performance and show a good degree of individuality in the way they present their community performance and impacts.
What information is available within the context of reporting?
Companies usually focus on reporting their own performance in relation to community initiatives as opposed to what changes or benefits occur for people and the environment as a result of their activities.
Thus, it is often difficult to paint a picture of community impact based on the information in the reports as fewer quantitative indicators are used for reporting on the impact of community initiatives as opposed to performance indicators.
The majority of companies emphasize their positive contributions without mentioning any negative impacts. Those who do report their negative impacts mostly focus on environment- related problems.
Patterns identified in community reporting
69 percent of the companies choose to group community related topics under a dedicated community section in the report. Out of the 50 reports with a dedicated section, almost half of them (24) list these as major headings in the Table of Contents.
For those dedicated sections which are not major headings, they are usually located under the ‘social’ section of the reports.
In community reporting, the following topics are mostly reported under the community sections:
- Social Inclusion and Aid to Disadvantaged or Minority Groups
- Community Services and Employee Volunteering
- Culture and Leisure
- Education and Training
- Total Community Expenditure
- Philanthropy and Charitable Giving
- Re-settlement
- Infrastructure for Local Community
Information on the topic Community Engagement and Dialogue, is often reported in another section dedicated to stakeholder dialogue. It is noted that there are 32 companies reporting on this topic, but less than half of them (23 percent) used quantitative measures to report their performance and impact in relation to this issue.
How do these approaches and information relate to the GRI Guidelines?
It appears that a majority of reporters claim they are reporting in accordance with the GRI G3 Guidelines and Indicator Protocols on community.
However, on closer inspection it appears that this is not the case. While 37 out of 53 G3 Reports (64 percent) claim that they report on performance related to the society indicator SO1, only 11 percent of the 37 reports reported fully according to the associated indicator protocol.
Most reports are relatively weak in fulfilling the requirements as stated in the GRI management approach for community issues.
What is clear is that companies find it difficult to report on their impacts and there is a need for them to measure, in a more systematic manner, the differences they make as a result of their corporate community investment strategies. There is a need to use tools and techniques that are able to track (monitor) impacts over time.
Top 5 Reported Community Impacts
The most frequent topics addressed are Education and Training and Philanthropy and Charitable Giving in 63 percent of the reports, followed by Community Services and Employee Volunteering, Total Community Expenditure and Community Engagement and Dialogue.
Information on environmental topics such as Community Environmental Impact due to Operation and Community Environmental Campaign/ Problem Solving only appeared in 35 and 32 percent of the reports respectively.
Indicators used for reporting performance and impact
Companies often report on indicators which are easier to measure (performance indicators) but not necessarily on indicators which are most meaningful in terms of understanding community impact in terms of changes in external conditions.
Although indicators for Education and Training fare better by considering the number of people who benefit and are reached, it also weighs heavy with indicators such as the amount of money invested in and donated to educational activities.
At the level of impact, indicators such as changes in performance as well as the possibility of placement post intervention are used by only a few companies. As one would expect, indicators for Philanthropy and Charitable Giving focus on the inputs as opposed to the outputs or outcomes.
Among companies having reported on this topic, only 11 percent have attempted to show the impact of such activities by reporting their activities at the community level and the impact achieved through this initiative.
Similarly, for Employee Volunteering, the focus appears to be on counting the number of organizations served, and the participation of employees as opposed to measuring the effect of this involvement for communities.
It could be argued that many companies look at their employee volunteering programmes in terms of the benefits they have for their employees given the strong ties between employee perception of a companies impact on the community and employee retention.
Reports usually appear to concentrate on reporting what the company has done in relation to community initiatives (that is, performance), rather than what changes, benefits or damage the community initiatives brought to the community (that is, impact).
Information Reported: Positive and negative impact
Among 72 reports, the majority of companies only emphasize their positive contributions without mentioning any negative implications or negative impact.
For those who report on negative impact, most of them focus on environment-related problems, which relate to GRI environmental indicators. However, out of the 23 reports that have reported on community environmental impact, only 4 of them relate environmental impacts to the community, while the rest (19) report on site-specific environmental impact but not necessarily relate these to the community.
Differences in reporting on various topics among regions
North American and Asian companies tend to report on Education and Training, Philanthropy and Charitable Giving and Community Services and Employee Volunteering much more often than European companies. The difference is especially obvious for Community Services and Employee Volunteering.
Reporting on Partnerships with Local Organizations is particularly popular among North American companies in comparison to other regions.
The occurrence of reporting on Community Engagement and Dialogue and Community Environmental Impact due to Operations is especially low amongst Asian reporters. This is in contrast with their North American counterparts. The percentage of reports which address Direct Economic Impacts on communities is relatively higher for European companies.
Key Findings
The majority of the companies do not apply the same sort of measurement rigour to the management of work related to their relationships with community as they would to other aspects of their business. While there are exceptions to the rule, community impacts appear to be something not many companies are able to clearly define or report on. It is clear that companies approach their community reporting in different ways.
Information contained within the reports focused much more on what companies were doing (performance) rather than what changes, damages or benefits impacted communities. The only reference to companies’ potential negative impact was in relation to environmental issues.
Within the topics most frequently found in community- related sections of reports, there is only a limited attempt to look at impact with the majority of information dressing the companies own performance and inputs. 50 percent of companies reporting on the top five topics do not indicate approaches, policies, aims or reasons behind activities. Is it that companies do not see reporting on changes at the community level as an important part of their sustainability report or is it a matter of building the capacity in order to do this effectively? Is the relationship between business and the community simply just about the feel good factor? This research appears to suggest this.
What is clear is that measuring a company’s impact on communities is not an easy task. Companies tend to report on what might be ‘easier’ to report on but not necessarily what matters.
Companies find it very difficult to measure their impacts. It is relatively easy to report on inputs and performance but much more difficult to assess the difference that community investments make. Companies would benefit from a more systematic approach to assessing the impacts of their community investments through tools aimed at measuring the differences that occur (positive and negative) over time.
Note
This report has been tailored for tbl with permission from the Global Reporting Initiative.
” In times of recession there are massive opportunities and fortunes to be made, so for new up and coming entrepreneurs, this is the time to go and start a
business.”
Richard Branson, Founder of The Virgin Group World Economic Forum,
Davos
