UK companies making bold claims about social and environmental achievements are using incorrect and irrelevant data, say researchers at the University of Leeds and Euromed Management School (France).
Researchers analysed more than 4,000 corporate social responsibility (CSR) reports, rankings and surveys published by companies worldwide over the past 10 years. They found unsubstantiated claims, gaps in data and inaccurate figures.
Dr Ralf Barkemeyer, a lecturer in Corporate Social Responsibility at the University of Leeds, said: "Some examples show that the quality of environmental data in sustainability reports remains appalling at times, even today. In financial reporting leaving out an undisclosed part of the company in the calculation of profits would be a scandal. In sustainability reporting it is common practice. How can stakeholders assess or compare performance without exactly knowing what the data actually covers?"
A forthcoming study coming out of the university's Sustainability Research Institute will show that out of 443 European Union companies featuring in the FTSE All World Index between 2005 and 2009, fewer than one in six reported greenhouse gas emissions that covered all corporate activities, while others did not say which activities their data referred to.
Researchers also found a range of surprising facts in UK telecommunications company BT's 2007 sustainability report. According to BT, a repeat reporting award winner, 99.8% of its international waste is produced by just a handful of office workers in Belgium; its Irish and Dutch employees did not travel at all during the entire year; and in stark contrast, employees throughout its Southeast Asian and Australian operations only travelled by plane wherever they went, and did not consume any water whatsoever.
The researchers' findings appear to contradict a survey released last week by consultancy KPMG claiming UK firms lead the world in corporate sustainability reporting. The survey assessed CSR reporting by the 100 largest companies in 34 countries including the US, UK, China, Japan, Australia and South Africa. It found that out of the UK's 100 largest firms, all published a CSR report in 2010/11. The 100% reporting rate for the UK compared to a 64% average reporting rate across all the 34 countries, making the UK the "lead country" for reporting.
But Dr Barkemeyer said this was only part of the picture. He said CSR rankings, ratings and surveys such as the one published by KPMG tend to largely focus on the question of whether companies report - not what they report.
Dr Barkemeyer said: "Very few criteria applied in CSR ratings relate to the actual impact of corporate activity on the environment and society. Instead, aspects such as the existence of a strategy or the implementation of environmental management systems or policy formulation take centre-stage in the identification of 'best practice'.
"Put provocatively, companies get points for knowing where they want to go. But nobody seems to check whether this is where they are heading. Aspiration replaces performance. We need to change the way in which we process quantitative corporate sustainability information - in essence, now that companies are starting to provide it, we need to actually start using it."
In the KPMG survey, 80% of companies that took part used the Global Reporting Initiative (GRI), which has become the de facto standard for sustainability reporting and is intended to address a lack of standardisation in CSR reporting.
Professor Frank Figge, Professor of Sustainable Development and Corporate Social Responsibility at Euromed Management School, said the GRI has helped to improve the quality and comparability of reporting across different companies. However it is not legally binding, often misused and poorly implemented.
Other bizarre CSR cases includes a claim made by Italian energy company ENEL in its 2009 report that its carbon emissions amounted to a staggering 122,089 million tons - the equivalent of four times the emissions of planet earth.
In addition, multinational ABB overstated its SOX- and NOX-emissions by a factor of 1,000 over several years. Volkswagen and E.ON found an elegant way of making a power plant and with it an annual amount of 2.5 million tons of CO2 disappear. Ford reported more mineral waste generation in North America than worldwide - including North America. And for many years the multinational oil company BP has labelled itself "Beyond Petroleum" - a bold statement for a company with a carbon footprint that equals the entire Finnish economy.
Dr Barkemeyer said: "Examples such as these lead to the conclusion that stakeholders are either not using data published in corporate social and environmental reports, or that they are using erroneous data without spotting flaws in the information. Even worse, they might even ignore data altogether when they assess a company's sustainability performance."
Dr Ralf Barkemeyer
Lecturer in Corporate Social Responsibility
Sustainability Research Institute
School of Earth and Environment
University of Leeds
Tel: +44 113 343 7485
Professor Frank Figge
Professor of Sustainable Development & Corporate Social Responsibility
Euromed Management School
Domaine de Luminy - BP 921
13 288 Marseille cedex 9
T: +33 (0) 491 827 922
University of Leeds
0113 343 4031