||RARENA Dr. Ralf Resch Sustainability Consulting
Already today enterprises have to inform in their annual report about nonfinancial risks if these are material for the future development.
In future, they need to inform, either integrated in their annual report or as separate CSR report, in addition to risks also about results and strategies of their CSR efforts and initiatives. This regulation responds to the growing expectations towards social responsibility of corporations. In the past, neoliberalism of Milton Friedman style ("The social responsibility of business is to increase its profits") and a school of thought promoting ethical standards for enterprises only through regulatory frameworks dominated. The latter approach leads several entrepreneurs to the conclusion that they are "responsible enough" by complying with the law. Is this really so?
Increasingly views that see the purpose of enterprises solely in profit maximisation within the regulatory framework are challenged. A series of events has contributed to this change in public perception: the obvious lobbying of enterprises to "soften" legislative proposals, the targeted exploitation of legal loopholes for tax evasion and social dumping, precarious living standards, destruction of ecosystems etc. This leads to increased stakeholder expectations that corporations act ethically responsible and don't deteriorate (ideally improve) livelihood. Legality is regarded as a given-legitimacy ("license to operate") requires a far higher performance, and an increased sphere of interest ("license to grow") has to be earned instead of enforced. Corporations should inform and consult their stakeholders regularly about their related policy and initiatives.
Formally only larger enterprises with more than 500 employees and of public interest (often interpreted as publicly listed) will initially need to publish CSR reports. Indirectly this holds also true for their suppliers, because how can a company report about its supply chain or calculate carbon dioxide emission figures without data from suppliers? Suppliers already today need to sign various codices in future this will likely be extended to a more comprehensive description of their CSR policies and activities as input for the report of their large customers.
And there's not only compulsory reporting, but also voluntary initiatives. The financial director of an enterprise with 220 employees told me: "We are not directly involved, but we report voluntarily so we are prepared."
It is hence necessary to widen the view from the fixation on financial figures to a comprehensive consideration of the social environment and of stakeholder interests in order to secure the company's future: sustainability becomes the ability to sustain. Nonfinancial performance indicators are used to control and improve the sustainability performance in business decisions, their communication to stakeholders proves transparency and openness for feedback.
Once a company has decided to publish a CSR report, questions around structure, format and extent evolve. These are individual considerations based on size, industry and stakeholder expectations there's no one-size-fits-all, but various frameworks.
RARENA has supported companies in CSR reporting according to ISO 26000 and GRI, has analysed the German DNK and has published a common good report for his own business. You can utilise this experience for your reporting.
A meaningful reporting about the effects of an enterprise on society and environment demonstrates transparency, accountability and responsible behaviour.
Start CSR reporting with conviction!