CSR reports are increasingly popular, argues Chad Upham, and those firms that fail to release them are missing out nine key benefits

A sustainability report might be compared to seeing a doctor for a complete physical examination. A good doctor will ask lots of questions; listen to heartbeat; feel bones and tissue for irregularities; and run a wide range of blood tests. Of course, a clean bill of health is the desired outcome, but a thorough exam will sometimes uncover the need for corrective action.

The reality is that many corporations are "unhealthy" in their social and environmental performance. A financially unhealthy company knows it -- and their shareholders know it, too -- as a result of annual and quarterly reporting. Only recently have corporations begun to take a good look at their social and environmental health, disclosing the findings publicly, and developing strategies to get better.

Anatomy of a Sustainability Report

Introduced in November 2006, The Global Reporting Initiative (GRI) "G3" -- third generation -- Sustainability Reporting Guidelines has become the global standard for reporting on social and environmental performance. Organizations electing to use this framework self-declare an application level of C, C+, B, B+, A, or A+ corresponding to the degree of thoroughness and third-party assurance achieved. Reports include three types of standard disclosures: organizational profile, performance indicators, and management approach.

The organizational profile presents an overview of the company's operations, a strategy and analysis narrative by senior decision makers, a description of governance and engagements, and specific disclosures on the scope and boundaries of the report. The performance indicators are comprised of 49 core and 30 additional (or elective) indicators in six major categories: Environmental, Product Responsibility, Society, Labor Practices and Decent Work, Human Rights, and Economic. The management approach discloses the organization's specific strategies for improving performance in each category. The guidelines include principles for defining report content and principles for ensuring report quality.

The reporting cycle is typically a 12-month engagement with senior management and representatives from all disciplines within the organization responsible for implementing sustainable practices. Consultants may be employed to assist in the following capacities: a) envision the report content and structure; b) address stakeholder interests through workshops or surveys; c) facilitate internal/external team collaboration and workflow; d) establish and monitor mechanisms to collect performance data from global operations; e) compose the organizational profile and management approach narratives; f) plan and execute internal and external communication campaigns; and g) design and publish the print and/or online report. While the scope and scale of a report depends on the industry, size of the organization, and desired application level grade (C through A+), a world-class report for a global corporation is a minimal investment of $500K to $2 million.

Nine Healthy Benefits of Sustainability Reporting

As of July 2007, nearly 20 percent of U.S. Fortune 500 companies have published a corporate sustainability report or citizenship report utilizing the Global Reporting Initiative (GRI) guidelines. For the other 80 percent -- and for entities of any size -- the following nine healthy benefits of sustainability reporting offer just a few reasons why there is no better time than the present to get started.

1) Be Proactive vs. Reactive: Ignoring social and environmental impacts won't make them go away. Don't wait for angry stakeholders to point them out. Sustainability reporting gives you the advantage to mitigate concerns.

2) Know Where You're Going by Knowing Where You Are: Scouting teaches disoriented hikers to use the acronym STOP: Stop Think Observe Plan. Likewise, time spent on sustainability reporting will bring clarity for more effective action.

3) Open and Maintain Dialogue with Stakeholders: Customers, suppliers, employees, community members, shareholders, and NGOs all have different stakes in your business. Listening and addressing those interests will bring goodwill and creative solutions to shared problems.

4) Prioritize with Performance Indicator Targets and Goals: Some take a shotgun approach to sustainability, launching "green" initiatives without measurable, corporate-wide performance goals. The numbers will show you the priorities and help you define success.

5) Communicate Internally and Externally: Sharing a common vision for sustainability within the company is just as critical as communicating to customers and shareholders. The report is the best medium for sharing this vision in a unified voice, whether in print or online.

6) Innovate and Collaborate to Meet the Toughest Challenges: What obstacles prevent your company from completely eliminating harmful social and environmental impacts? Put it to your best and brightest to find solutions that improve the bottom line.

7) Improve your Industry through Healthy Competition: Be a leader. Change the game from being a race to the bottom, to being a race to the top. Sustainability reporting is designed to encourage comparison between companies in an industry. Outperform your competitors with more than just profits.

8) Look Down the Road at the Future of your Business: By looking squarely at the social and environmental challenges your company faces, you can develop long-term strategy to address them. What are the top five long-term challenges? Make a plan today to adapt your business to the coming reality.

9) Recognize CSR as the New Annual Report: Would you look at your balance sheet just once every five years? By acknowledging that social and environmental performance is just as crucial for the success of your business as financial results, you will soon be eager to share the measurable return of sustainability initiatives, too. Caring for customers, their communities and the environment is not a fad. Sustainability reporting will be around for a long time. Start now -- and get good at it.

Chad Upham is the founder of Covive, a San Francisco based consulting firm providing research, writing, and design of corporate sustainability reports utilizing the Global Reporting Initiative (GRI) Guidelines. Covive is registered as a 2007 GRI Organizational Stakeholder.

Chad holds an MBA in Sustainable Management from Presidio School of Management and a BFA in Graphic Design from the Art Center College of Design.

This article first appeared at Greenbiz.com