A recent EU Commission report shows how Europeans regard corporations and the role they play in our society. Will imminent legislation to make European companies report on sustainability bridge the communications gap?
By Elaine Cohen
New research just published by the Directorate-General Enterprise and Industry at the European Commission, reaching over 32,000 respondents in the 27 Member States of the European Union (EU) and in Croatia, Israel, Turkey, Brazil, the United States, China and India, brings interesting insights into how companies are regarded by a broad base of citizens within the countries polled.
Eurobarometer 363 was designed with the intention of understanding views about companies, the role they play in society, the degree of trust they command and whether they are actually a positive influence or not.
Corporate Influence: Citizens Vote
The results of the Eurobarometer survey show that 52 percent of European respondents believe that companies have an overall positive influence in society, 41 percent think they have an overall negative influence and seven percent don't know.
Interestingly in Europe, the average positive response is much lower than in other geographies. In Brazil, for example, 79 percent believe companies have a positive influence and even in India, where CSR practices are, arguably, still in an early stage, 73 percent of respondents agree that companies are more positive than otherwise.
Fifty-three percent of Europeans who work in a company – 37 percent of respondents in total – believe that their companies have taken measures to advance CSR and that these measures are effective. In other words, 47 percent believe their companies are not effective in their CSR efforts, not making any CSR efforts or they simply don't know.
This is an important piece of data for all the protagonists of employee engagement – here is 47 percent of an opportunity.
And here comes the crunch.
Socially Responsible Behavior: Interested Yet Uninformed?
Just over one third of Europeans (36 percent) say they feel informed about what companies do with regard to socially responsible behavior [compared to 62 percent who do not]. In contrast, 79 percent of respondents from the EU confirm they are interested in what companies do to behave in a responsible way towards society.
This completes the double-whammy.
Not only do Europeans not know how companies are behaving, many of those who do know believe they are not effective, and overall, the result for European companies is almost more negative than positive.
Ironically, data from CorporateRegister.com confirms that European companies have always led the way in Sustainability Reporting, and by a very large margin indeed when compared to North America, Asia and every other region of the world. European companies have been seen for years as the leading light in transparency, setting a benchmark, which other parts of the world can only dream of achieving in the near-term.
The Purpose of Sustainability Reports: Who's Reading?
Perhaps this confirms what many of us have long suspected: people are not reading Sustainability Reports. The message is apparently not getting through. But it's even worse. The message is not even getting across.
Another recent piece of news may give information-thirsty Europeans some grounds for optimism. The European move to enhance business transparency on social and environmental matters proposes the adoption of legislation that will require companies to "disclose information on policies, risks and results as regards environmental matters, social and employee-related aspects, respect for human rights, anti-corruption and bribery issues, and diversity on the boards of directors."
The potential legislation will apply to all EU companies with more than 500 employees, leaving the choice of how to report with the companies themselves. The EU release refers to the UN Global Compact, ISO26000 and the German Sustainability Code as possible frameworks, omitting to mention, interestingly, the current leading globally applied Sustainability Reporting Framework, the Global Reporting Initiative.
Additionally, the EU advises that, "If reporting in a specific area is not relevant for a company, it would not be obliged to report but only to explain why this is the case."
The Thing With Disclosure
While this, then, is a good move forward for transparency, in the hope that the legislation will be adopted in the not-too-distant-future, the question remains, how will such disclosures be communicated?
Investor-related players are welcoming this move, which appears to go a long way to satisfy the need for information from financial stakeholders. However, to what extent the EU proposal will help regenerate trust in business, and a belief among a more general sample of Europeans that businesses are accountable for their impacts and playing a positive role in society, is unclear.
Of course, while disclosure does not always bring good news, there is a generally accepted level of positive correlation between transparency and improvement of impacts.
More importantly, perhaps, will the 62 percent of uninformed Europeans actually know where to seek this information and be able to understand it?
Part of the Sustainability Reporting debate is not only whether companies disclose, but how they leverage their CSR communications to ensure that their information reaches the interested public.
Far too often, we see companies publish Sustainability Reports and then demonstrate surprise that their customers, consumers and even employees have not read them.
How to effectively disseminate social and environmental information, and use it as an effective platform for engagement beyond the narrow focus of the financial community, is as much of a challenge as how to disclose it.
This, the EU, will not regulate. At least, it appears, not in our lifetime.