+1-646-6882318
nicki@theglasshammer.com

Measuring Trust: Is Third-Party Verification of Sustainability Reports Bad for CSR?

By Melissa J. Anderson

The Dow Chemical Company recently announced that it has received an A+ for its sustainability report – it’s third A+ in a row – from the Global Reporting Initiative (GRI).

The GRI is an global membership organization founded in 2001, which according to its website, designed the “world’s most widely used sustainability reporting framework.” The framework “sets out the principles and indicators that organizations can use to measure and report their economic, environmental, and social performance.”

Hundreds of global companies, spanning vastly different industries, use the GRI’s framework – including Accenture, Exxon-Mobile, H&M, Nestle, Unilever, and Volvo to name a few. The GRI awarded Dow an A for its report. The company was awarded the “plus” for its use of an external third party to verify the report, which according to Dow’s press release is “increasingly common,” because “third-party verification elevates stakeholder confidence in reporting accuracy.”

A corporate commitment to transparency is a good thing. But the wording of the release is troubling. Why is stakeholder confidence so low that it must be bolstered by third-party verification?

Of Course Stakeholder Confidence in Corporate Sustainability is Low

Take a look at any of your favorite CSR websites. I’ll bet you that at least one of the stories featured on the front page is about BP. We’ve certainly covered the energy company recently on Evolved Employer. BP used to be a CSR darling. But now it’s associated with poor safety standards, a botched oil spill clean-up, and a devotion to cutting corners in the name of cash.

News like this makes the public – and a company’s internal staff and shareholders – skeptical of any public campaign regarding CSR or corporate sustainability.

Three More Reasons Stakeholders are Often Mistrustful of Sustainability Efforts

It’s new. The first reason is obvious. The increasing focus on CSR and Corporate Sustainability is relatively recent, with CSR efforts and their corresponding publicity having grown mainstream in only the past few years. CSR efforts are evolving rapidly – whereas ten or fifteen years ago CSR meant corporate donation to the CEO’s favorite charity, today CSR is a huge, multilayered strategic endeavor. Naturally, there’s little to go on in the way of comparison or measurement, even within the short history of the discipline. Having a third party verify sustainability reporting gives the often underfunded (and occasionally under-respected) CSR team a little extra credibility within the company – from the boardroom and headquarters all the way through the supply chain – and with the public.

It takes a long time. The word “sustainability” itself implies renewable growth in the long term. The problem? Results are often not easy to see in the short term – they’re incremental. Having those incremental results verified by a third party allows the stakeholder feel a little more comfortable trusting numbers or ideas they can’t actually see or touch in the near term.

Shareholders want to see if their investment is paying off. On the other side of the coin, shareholders want to see if their investment in sustainability is paying off. Annual reports are verified by third party accounting firms. Why shouldn’t sustainability reports be verified too? It’s in the nature of shareholders to want to see some proof.

So, to sum up, does an increasing reliance on third-party verification of sustainability reports indicate the decline in trust throughout our society? Is it bad for CSR as a discipline? Not necessarily. I think it indicates an increase in healthy skepticism, which isn’t all bad. Asking hard questions and demanding that companies back up their claims to sustainability can only force them to work harder, innovate more, and find new ways to become better corporate citizens.

Leave a Reply