LONDON - At Business in the Community’s annual ‘A Better Way of Doing Business’ conference July 10, Richard Lambert of the Bank of England’s Monetary Policy Committee presented ‘Indicators that Count’, the report published on July 7 on indicators found useful and measurable as a base line and starting point for measuring and reporting social and environmental impact. (Indicators that Count report available on CSRwire.)

I would like to argue as strongly as I can that:

1.) It’s opportunity, not risk, that should be driving the agenda.
2.) The agenda needs to be set in the context of a measurable business case. If it passes this test, it’s likely to be realistic and sustainable. If not, not.
3.) The agenda is moving: and for reasons which I’ll explain, it’s about to take a great leap forward.

I remember years ago talking to a company which had produced a long and totally incomprehensible set of ethical guidelines for its employees. I asked the boss what it all meant. “Nothing at all”, he confided. “But if one of our lads turns out to be a crook, and I bet we have a good few of them around, well we can brandish this to the press and show that he had broken our rules.

If you go into corporate responsibility to create business opportunities, rather than to avoid business risks, the mindset is quite different. Looking through the window of Business in the Community’s membership over the years, I’ve seen loads of examples of companies that have created tangible benefits for all their stakeholders – certainly including their investors – by bringing their social and economic goals into alignment to the benefit of everyone involved.

I don’t need to persuade this audience that companies do not function in isolation from the society around them. On the contrary, their ability to compete successfully depends on a whole range of external factors – which include health and security, standards of education and everything else which directly impacts on the business environment in which they operate.

But why do you need to report on all this stuff? Isn’t this sort of information almost by definition all soft and fuzzy – just the very kind of stuff that lets in the box tickers?

There are at least three answers to that question: three reasons why nonfinancial reporting – when it’s well done --makes solid sense.

1.) Reporting can be a powerful management tool. Financial reporting can tell you a certain amount of stuff about a company’s past performance, but it’s not so good at presenting a picture of the risks and opportunities it might face in the future. In his foreword to the BITC report on Indicators that Count, Phil Hodkinson of HBOS used a line that I liked a lot. He said that people involved in this programme of roadtesting nonfinancial performance indicators had come to recognise that the benefit of active reporting went well beyond the reputation credit to be accrued. Much more than that, he said, the disciplines of reporting, and the processes required to do so, had created a shared understanding across each business about the role that corporate responsibility can play in business success.

2.) Non financial reporting can make markets work better. Investors and analysts, employees and customers, need to be told about risks and opportunities – and of course these are not just expressed in financial numbers. By providing relevant information about social and environmental as well as economic performance, companies can build confidence in what they are doing and help to promote a more efficient market in their shares.

3.) This kind of reporting also responds to a clear and growing demand from a wide public for information about how a company impacts on the society in which it operates. As Mark Moody Stuart wrote the other month, “the escalating demand for information from analysts, rating groups, benchmarking organisations and advocacy groups shows no sign of abating. Business must choose whether to lead on reporting, or to be led.”

This is where the proposed new operational and financial review comes in. You can look at in two ways. It could quickly become a meaningless piece of routine – a process that companies go through because governments and the business establishment tell them to do so.

Or it could – and I believe should – represent a brilliant new opportunity for a company to express its own unique personality. To say what it stands for, why it is in business, and what it aims to contribute to society.

The high level objective of the review will be “to assess the strategies adopted by the business and the potential for successfully achieving them”, and boards will be given considerable freedom to make up their own minds about what is – and is not – material.

It could turn out to be box ticker heaven. Or it could provide the biggest boost to the notion of corporate responsibility since Julia Cleverden bought her first magenta tee shirt.

And this is why I think those companies that have been working for the past two years on BITC’s Business Impact Review Group all deserve shouts of applause. We all know about the kind of stuff that could be measured. By their practical experience and hard work, they have shed on the things that can and should be measured, and which make sense to publish.

They have made it clear that one size does not fit all, and that what matters is relevance – rather than simply setting some arbitrary template. Instead of aiming for breadth across all the indicators, companies will be asked to focus on what seems most material to their particular activities.

And these things are not going to be set in stone. A Reporting Development Group will regularly review business uptake of the indicators, and tweak them as and when appropriate.
The indicators will help companies understand and manage their approach to corporate responsibility. They will help different groups of stakeholders to understand how stated business policies translate into actual business practice.

And with consultation now under way on the shape and structure of the operational and financial review, the timing of today’s publication couldn’t be better.

This all adds up to a great new opportunity for business to roll the agenda forward.

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