The demand for more transparency is clear. But are rankings helping or offering yet another marketplace for greenwashing?
By Sarah Coles, SVP and Head of CSR, Ruder Finn
Recently the Dow Jones Sustainability Index (DJSI) and Sustainable Asset Management (SAM) sent their annual survey to 2,500 of the world’s leading corporations.
For the next few months, sustainability professionals across industries will be scouring reports, assembling data and developing responses to highlight their company’s efforts to be a good citizen. This got me thinking about the value we as CSR professionals put on awards and rankings, and how (or even if) transparency can play a role in improving CSR outcomes.
At this year’s Committee Encouraging Corporate Philanthropy’s [CECP] recent Board of Boards CEO conference, statistics revealed that more than half of the CEOs surveyed said that both consumers and shareholders demand greater levels of transparency about a company’s community engagement initiatives than they did five years ago. With the demand for transparency coming from multiple stakeholder audiences, will it be enough to open the doors for more transparent practices?
Role of Rankings in Advancing Transparency
Rankings systems like the Global Reporting Initiative (GRI) and DJSI are valuable in showing metrics such as reductions in CO2 emissions or improving the number of sustainable suppliers a company works with. But in many ways they are also a “first step” for companies just starting to get comfortable with transparency. In fact, more and more evidence points to the benefits of transparency in a company’s general practices.
A recent HBR blog points to transparency as the new “leadership imperative.” While the article focuses more on individual executives’ transparent practices, the reality is that transparency needs to start at the top and cascade its way through the company. With a CEO who is open and willing to be transparent through blogs, events with employees and/or media interviews, there’s a much greater likelihood that the company will practice transparency in its daily activities.
Offering a Window: Intel
In fact, some companies are offering a window – literally – into their daily operations. Intel, for example, has a live webcam at its facility in New Mexico as part of its new Explore Intel campaign, which provides year-round environmental data on air, solar, waste and water use. If an annual sustainability report is good, daily reporting in real time is even better.
This is not to say that some aspects of business are no longer sacred.
As a recent The Economist piece discusses, the Internet has removed confidentiality and security barriers and opened the doors to society – from customers to competitors, much of which driven by consumers with many emphasizing that they work with and buy from companies that they feel are trustworthy and ethical.
Do Consumers Care for Transparency?
One survey of consumer attitudes toward corporate citizenship – 25,000 people in 26 countries – found that more consumers form their impression of a company on the basis of its corporate citizenship practices than they do on brand reputation or financial factors. Moreover, a majority said their view of a company was influenced by factors including labor practices, business ethics, responsibility to society, and the company's environmental impact.
The 2010 BP Oil Spill
In recent history, this was apparent most prominently during the 2010 BP oil spill. With customers worldwide professing dissatisfaction with the information received about the company’s actions before the spill as well as the company’s projections for the impact of the spill, CEO Tony Haywood quickly gained notoriety for his off-the-cuff and at times insensitive remarks.
His infamous line about the potential impact of the spill: “the environmental impact of this disaster is likely to have been very, very modest," struck a nerve.
Patagonia: Contrarion Citizenship
In direct contrast, Patagonia drew attention for a very different reason. In advance of the frenzied shopping online retailers anticipate on “Cyber Monday” after Thanksgiving, the company initiated a campaign imploring their customers not to buy their products, specifically, a jacket.
Instead, they revealed in surprising detail the exact environmental cost of producing that jacket, and suggested that instead of buying one, consumers reflect on their needs.
The bold and contrary campaign was further complemented with a short summary of Patagonia's sustainability philosophy. It was certainly an out-of-the-box tactic (and likely decreased sales), but very likely increased their already strong reputation with consumers.
Connecting Consumers with the Long Term View
Consumers have gotten more sophisticated and interested when it comes to sustainability and the rise of rankings is part of the proof. There are now hundreds of ethical, socially responsible and sustainability rankings – from complex metric systems like the DJSI and GRI to media-driven rankings like the Newsweek Green rankings to countless consumer-driven surveys from academic organizations and consultancies.
Rather than focusing on moving the sales needle as a result of publicizing CSR, it may be more important to consider the intangible benefit earned over time – building public trust in the company’s efforts to do the right thing. As Clare Melford, CEO of the International Business Leaders Forum, wrote recently in The Guardian, companies must become more transparent and accountable when it comes to ethics and corporate policies to rebuild trust.
For me, rankings go a long way in proving a company’s long-term commitment to multi-faceted sustainability efforts. But, at the end of the day it’s a company’s day-in-and-day-out ethos – not to mention how they handle both positive outcomes and potentially damaging issues – that truly defines a sustainable and responsible organization.
While the term “greenwashing” is a bit outdated, it remains just as relevant when it comes to rankings. Companies that truly believe in CSR will always stay ahead of the pack because it’s ingrained in everything they do, in every employee’s business objectives and in everything they measure themselves against.
As CSR professionals, this is going to be one of our bigger challenges: To think about CSR not just as meeting a list of external benchmarks, but also as meeting our own internal goals.
And this can only happen when we weave transparent practices into all our activities – beyond surveys and rankings.