Directions Monthly
October/November 2007Issue 17
Some companies are alreadybeing brave and smart enoughto define their own path innon-financial reporting. Moreneed to think for themselves andbreak out of the pack mentality.
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covers other suppliers. Also it would be moremeaningful if the findings were categorisedby the risk they relate to, eg labour practices,health and safety, etc. A good next step wouldbe to include KPIs on supplier audits.The ‘avoided mileage from back and forwardhauling’ indicator presumably helps managegreenhouse gas emissions and the topical‘food miles’ issue, however a definition wouldaid clarity. The report also discusses anothertopical issue, customer health and nutritionalinformation, but unlike some others in thesector, KPIs are not included.Overall, Waitrose discloses KPIs in most ofthe areas covered by its peers, apart fromhealth and nutrition. One competitor also hasa brownfield development metric and anotherhas an employee ethics code KPI. Waitrosemay consider that these are not materialbecause of its strategy or ownership structure(employee owned partnership). No one in thesector reports KPIs on the impact of largeretailers on local businesses.The 3i report is by far the shortest (7 pages)but this is not necessarily a bad thing. Thereport covers their approach to employeedevelopment, health and safety, environment,and community investment. A performanceindicator is included on each aspect and thereis a target on their office greenhouse gasfootprint. This appears to be 3i’s first reportso no comparison is made with previousyears’ performance. The report says thatcorporate responsibility is taken into accountin investment decisions but no details orindicators are provided. This is surely of thehighest level of interest to stakeholders?The Vodafone 2006 Corporate ResponsibilityReport includes indicators across thedimensions of CR including revenuedistribution, diversity, community investment(voluntary investments and those made underlicence conditions), supplier evaluations,investor and opinion former concerns and theresults of a MORI survey on mast siting. Thereare no KPIs on electromagnetic radiation,but the subject is discussed in detail. KPIsare provided on the re-use of handsets in“lower-middle-income countries”. However,an explanation on the ultimate fate of thisequipment at the end of its life would beuseful, particularly in countries where theredoes not appear to be a local operatingcompany (such as Nigeria which receives43% of re-used phones). Overall, the KPIsdisclosed are very similar to those reportedby the other European mobile operatorsindicating that these are what the sectorconsiders most material.The KPIs presented in the ExxonMobil 2006Corporate Citizenship Report are based onthe sector reporting guide from the AmericanPetroleum Institute/International PetroleumIndustry Environmental ConservationAssociation. Consequently the ExxonMobilreport includes KPIs that are similar to itspeers and cover what the industry considerto be the material issues for which data isreadily available.Disclosing KPIs on revenue transparencyhas been problematic for the internationaloil companies, but Exxon does disclose totaltaxes paid to governments (aggregated –not detailed by each country) and refersto reports published under the ExtractiveIndustries Transparency Initiative (EITI)on payments to certain host governmentssuch as Chad.Unlike many of its European peers, it is notExxon policy to prohibit political contributions,but they do disclose the contributions madein the US (albeit that such disclosure is legallyrequired in other regulatory filings). Exxonalso have a gender and US/non-US workforcediversity KPI.
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The important ones to stakeholders areKPIs on the issues that are most materialto the business.
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However, unlike some of their peers, Exxon donot disclose KPIs on breaches of their ethicalbehaviour requirements or environmentaland safety fines paid. Exxon do include somemetrics concerning their workforce malariaand HIV programmes in Africa, but theseare not to the same level of detail as in theAnglo American report.The Heineken 2006 Sustainability Reportpresents KPIs on safety and environmentalperformance including accident rates, waterconsumption, effluent, emissions to air, andpackaging. There are no metrics on supplychain environmental impacts such as transport,or biodiversity and sustainable agriculture.There are no KPIs on social investment, healthand wellness, responsible drinking, marketingand consumer education. Additional metricsare provided in the GRI G3 Index anddata sheet on the web, including seniormanagement diversity, workforce turnover,political contributions and a survey ofoperating companies on the considerationof human rights in supplier selection. Thedata sheet does not include year-on-yearperformance comparison or targets. I alsocouldn’t help noticing that there wereno cases of discrimination reported in acompany with over 55,000 employees.Overall then, which is the best of this bunch?The KPIs and boundaries in all of the reportsare for the most part reasonably clear.The distinguishing factor and probably theimportant ones to stakeholders are KPIson the issues that are most material to thebusiness. Therefore the best one has to beAnglo American – it presents indicators on keyissues such as HIV, taxes and royalties paid toeach government, and economic value added(although the latter needs further explanation).What is the future of KPI reporting? Currently,it appears that in some cases reportersare collating information specifically forreporting and complying with GRI. A morepragmatic approach to applying GRI is touse the company’s materiality process todetermine what metrics to report. Indicatorson material issues are also more likely to beused in managing the business. Currentlymetrics also tend to be output/laggingmetrics (emissions, incidents, etc) withsome input/leading indicators (eg, communityinvestment). Engagement with businessleaders and investors would be enhancedwith indicators on outcomes – linked tokey factors such as brand and strategy.Some companies are already being braveand smart enough to define their own pathin non-financial reporting. More need tothink for themselves and break out of thepack mentality.
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