By reporting on CSR activities, businesses can engage stakeholders, strengthen market value, and gain competitive edge.
What is CSR Reporting?
Corporate social responsibility (CSR) reporting details companies’ social and environmental efforts. Sometimes called sustainability reports, these accounts are a complement to traditional financial reporting.
CSR reporting has become a “must” for many companies. In 2020, 90% of S&P 500 companies provided CSR reports. CSR reporting takes many different forms, but its benefit to companies and society is clear.
Why Should I Report on CSR Activities?
Report CSR to boost stakeholder engagement.
In a study of 180 firms, those that integrated environmental and social activities into financial reporting experienced lower stock price volatility than less sustainable peers.
Report CSR activities to strengthen market value.
In a study of 622 firms from the S&P 500, DSI 400 or both, firms with low but consistent levels of CSR had higher market values than firms with occasional spikes in CSR. Consistency matters when it comes to CSR action and reporting.
Report CSR activities for competitive edge in industries where product differentiation is difficult.
A multinational phone company that actively sought CSR publicity saw improved brand integrity and employee willingness to pay a premium.
What Activities Should I Report?
Investors care about action, not targets.
In a study of 174 energy-intensive companies, firms that had achieved emission reductions had higher Tobin’s q scores than their carbon-emitting peers. In the same study, firms that just reported on emission targets had lower ROE and Tobin’s q scores than companies who had achieved goals.
Disclose your mistakes.
Firms that voluntarily disclosed their involvement in the 2006 backdating scandal experienced stock price declines of 2.7 per cent compared to 3.5 per cent for firms that were exposed by others.
This article was originally published in 2013. See NBS’s most recent guidance on effective sustainability reporting for up-to-date tips and models.