The research was conducted through interviews with SRI fund managers, research and rating agencies, and CR and Investor Relations managers in companies. It describes the current state of communications as ‘confused and frustrated’, but found a common desire to improve communications on the business value of corporate responsibility among all parties.
‘Speaking the Same Language’ calls for the SRI community to be smarter and more transparent in how they evaluate companies and warns that the widening scope of some SRI analysis is obscuring efforts to focus down on material issues. It pinpoints a clear need to shift the balance of responsibility for defining what is material away from SRI analysis and towards the company.
Simon Berkeley at Arthur D. Little comments “Our research found that the large volume of information and case studies dominating current company CR reports often obscures rather than reveals the material issues. In addition, the growth in the range and diversity of research and rating agencies asking the questions confuses the company staff on the receiving end which further contributes to the difficulties in communication. As the CR agenda continues to expand, so does the number and complexity of questions being asked of companies – CR means too many things to too many people.”
The research found that improvements are needed in how companies report on material CR issues: how issues affect growth and profitability; the process for tracking and managing material issues over time; the effects of products and services; and sector-specific collaboration on materiality.
It also found there was a strong desire within the SRI community for CR issues to become part of mainstream dialogue between investors and companies, but mainstream investors still cannot see how CR information can enhance their current analysis. The principal reason is the lack of focus to date on materiality. In addition, there are other ways in which the SRI community can enhance its credibility with the mainstream:
* engaging more directly with the companies they assess;
* being more transparent about their identity and purpose;
* improving the quality of research; and using the language of risk (because mainstream fund managers still think of CR issues as risks)
The findings build on Business in the Community’s ‘Investing in the Future’ report (May, 2001) which revealed that companies are selling themselves and their shareholders short by failing to make the case to the City. It identified a need for reliable standardised information that would enable a company’s performance to be compared with that of its peers. This finding was one of the drivers behind Business in the Community developing its recently published Corporate Responsibility Index.
Derek Higgs comments: “There is scope for companies to win greater recognition in the City for their responsible business practice. Companies that have proved to themselves that environmental and social responsibility makes good business sense must now show this clearly in their reporting in a way that makes sense to the City. Business in the Community members commit to integrating responsible business practice throughout their business and we urge them to extend this commitment through to their investor analyst presentations.”
‘Speaking the Same Language’ will be officially launched at a briefing hosted by Derek Higgs, Chairman, Business in the Community’s environment campaign, on Wednesday, June 18, 2003. The briefing will explore the key findings of the research, examine how to overcome the ‘chicken and egg’ syndrome, i.e. ’the City does not ask about CR, so we do not provide anything’ and discuss the current debate surrounding materiality.