10 Trends in Corporate Disclosure

In honor of the release of Trendwatch 2012, we'll be rolling out posts about sustainability and economic recovery. You can find them here all week, or read the whole set here. Please also join us for a free webinar on February 29th where we'll be discussing the role of sustainability in economic recovery. Shakespeare’s dictum came into its own last year, as truth-telling drove the Arab spring, stirred the Wikileaks controversy, and brought down a series of politicians and candidates.  We believe that corporate truths “will out” soon, thanks to the convergence of a number of powerful trends that will encourage more corporate transparency. Corporations and other organizations have been gradually increasing their disclosure about their non-financial activities and behavior for years.  A KPMG study recently found that 95 percent of the 250 largest companies in the world now report on their corporate responsibility.  The penetration of reporting in Europe is especially high—over 70 percent of the companies they studied. According to Corporate Register, the number of companies that issue corporate social responsibility (CSR) reports has climbed spectacularly since the middle 1990s. Social changes remain gradual and linear until we reach a “tipping point” where a sudden shift occurs in “norms” and behavior.  We believe several trends are driving corporate transparency and disclosure towards a tipping point where disclosure will be normal and opaque behavior will be aberrant:

1. The power of crowds.  There is no point trying to hide a secret that a lot of people know.  Through social media (Facebook and Twitter), sustainability-oriented websites (such as TriplePundit, Greenbiz, JustMeans, and EnvironmentalLeader), and thousands of bloggers, activists, and non-governmental organizations, a company can no longer “control” disclosure.  Companies must instead participate interactively via social media to help shape how their behavior is perceived.
2. Mainstream media is starting to notice.  We’ve recently seen or heard from Bloomberg, Yahoo!, and the Huffington Post that they are starting or expanding coverage of sustainability.  These channels are both responding to market demands for this information and are helping to grow and define that demand.
3. Government regulation. Regulation is a dirty word, currently, in the US.  But, we have seen significant new rules regarding disclosure of social issues both in the US and overseas.  Some companies have seen enough demands for social information that they have decided to integrate their CSR reporting with their financial reporting in an “Integrated Report.”  If this becomes the norm, there could be a significant increase in both the amount and quality of data companies disclose. For instance, we expect the EPA’s implementation of its Greenhouse Gas Reporting program will increase resource and energy use reporting, despite an uncertain regulatory future for carbon pricing in the U.S.
4. The power of employees. Increasingly, employees want to work for a company whose social performance is consistent with their values.  88 percent of graduate students and young professionals factor an employer’s CSR position into their job decision and 86 percent would consider leaving their job if their employer’s CSR performance no longer held up according to PricewaterhouseCoopers.  Employees can tell if their company is not progressing or just not communicating its progress. Employee dissatisfaction with their employer’s social performance may contribute to poor productivity and high turnover.
5. Supply chain management. Corporate supply chains are large, complex, fast-changing and critically important.  In addition to a fast-growing suite of supply chain management tools to squeeze cost and performance advantage from their suppliers, companies are now starting to use these and other tools to generate social performance from them.
6. Competition. A company’s social responsibility posture reflects on its relationship with its customers, suppliers, and other stakeholders.  As such, it is a component of any serious brand discussion and a component in corporate strategy.  Companies who benchmark themselves will find places where they are doing well, but may be communicating their performance poorly.  Stepped up communication of one company’s performance will drive a cycle of additional disclosures from its competitors.
7. The tide is turning.  There is enough information available on about 5,000 companies and organizations to generate a broad and fair picture of their social performance.  (For example, the performance information and ratings on CSRHub.) But, there are millions of organizations that do not report much or any information. Each wave of disclosure into new areas such as second and third world companies, private companies, and not-for-profit organizations helps start sweeping everyone else along.
8. CSR is a profession. A growing cadre of corporate managers have experience managing programs that improve corporate sustainability. Some of these professionals have benefited from formal training programs—some even hold a degree from one of the sustainability programs that have been established at schools such as Columbia, University of Michigan, Bainbridge Graduate Institute, and Stanford. These managers will seek to incorporate the skills they have learned in more programs and—as they rise up the chain of command in their companies—they will communicate these skills to others.
9. A distinct and fast-growing market. According to a recent study by OgilvyEarth, at least 16 percent of U.S. consumers already strongly identify themselves as sustainability-oriented. This is double the 8 percent estimate we had from another source three years ago—and we expect this market to keep growing rapidly.
10. Integration. Sustainability is being integrated into company business models. Vanguard companies such as Nike have already benefited from integrating sustainability principles into their innovation, employee engagement and marketing practices. For example, Nike has partnered with nine organizations, including Yahoo, Best Buy, Creative Commons, IDEO, Mountain Equipment Co-Op, nGenera, Outdoor Industry Association, salesforce.com, and 2degrees to form the GreenXchange, a web-based marketplace that Nike claims will allow "companies [to] collaborate and share intellectual property (IP) which can lead to new sustainability business models and innovation."

These ten trends are all moving companies and organizations towards greater disclosure and greater strength.  They are near the tipping point.  It is time to do all we can, to help push them towards transparency. [Image credit: shimonkey, Flickr] Cynthia Figge, co-founder and COO of CSRHub, is a forerunner and thought leader in the corporate sustainability movement. In 1996, she co-founded EKOS International, one of the first consultancies integrating sustainability and corporate strategy. Cynthia has worked with major organizations including BNSF, Boeing, Coca-Cola, Dow Jones, Noranda and REI to help craft sustainability strategy integrated with business. She was an Officer of LIN Broadcasting/McCaw Cellular leading new services development, and started a new “Greenfield” mill with Weyerhaeuser. She serves as Advisor to media and technology companies, and served as President of the Board of Sustainable Seattle. Cynthia has an MBA from Harvard Business School. Cynthia is based in the Seattle area.