July 23, 2017

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Sustainability Reports Should Have Nothing To Do With CSR

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Obviously, sustainability reporting regards CSR. I am a researcher in the field of corporate sustainability, and non-financial reporting is my main research interest. I have investigated the relationship between non-financial disclosure and environmental performance, reporting and market value, national culture and sustainability reporting, as well as sustainability reporting in SMEs. My studies and experience brought me to the position shortened in the title.

When I first approached the sustainability reporting phenomenon, I strongly believed in the equivalence between disclosure and sustainability performance. The equation was quite clear in my head: the more a company discloses the better its performance is. Non-financial reporting is a voluntary practice, so if a company discloses information about relevant (today we would say “material”) social and environmental issues it means that it is a good performer, as it wants to show its superior ability to pursue the so-called triple bottom line. Worst performers, instead, prefer to remain silent. Elementary signaling theory.

Then, I discovered that many environmental offenders do a lot of sustainability reporting. Clearly, my elementary signaling theory was not working. One can argue that good performers are using reporting as an “opportunity platform” to signal their superior management, while bad performers are using it as a “safety net” to defend their legitimacy to operate. Still, the two positions share a common limit: they conceive the report only as a green marketing pamphlet. This entire reporting thing is powerfully driven by external motivations such as the attainment of legitimacy and reputation.

When it comes to gaining legitimacy and reputation, the appearance rather than the fact of conformity is often sufficient to do the job. That is why sustainability reporting fails to prove evidence of having any substantive influence on business behavior, remaining in the symbolic management domain. Notwithstanding, the practice of non-financial reporting is widely considered as a sign of sustainable behavior. International organizations providing reporting guidelines, such as the GRI and the IIRC, as well as international institutions like the UN and the WBCSD or stock exchange sustainability indexes like the DJSI or the NASDAQ Global Sustainability  implicitly promote the equation between the disclosure of sustainability related information and corporate sustainability.

It can be argued that a precise, sound and shared definition of what is corporate sustainability and how to measure it does not exist. Still, this does not justify the confusion between transparency and sustainability. This reporting trend provides an “operational” dimension of corporate sustainability, made out of indicators, narratives, statements and symbols, without knitting all this data in substantial managerial action. We do not know whether and how these reports are used for further decision making and real action. We have very few (if any) examples of reports that describe a company gap between the current model and what could be called truly sustainable. All that we have is the rational myth that “what gets measured gets managed”. Are you buying this? I am not.

Paradoxically, decoupling the reporting process from the immediate attainment of a sustainability image is the first step to consider it a management tool before a green marketing brochure. The reporting process include tasks, practices, learning cycles that should affect a company organizational behavior, eventually shaping the strategy. Sustainability reporting has to be considered beyond its corporate communication purpose, having its own internal strategic value. Encouraging the equation between non-financial reporting and sustainability will only promote business-as-usual and lead companies towards an unsustainable path.

The opinions, beliefs and viewpoints expressed by CSRwire contributors do not necessarily reflect the opinions, beliefs and viewpoints of CSRwire.

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