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Towards a common framework in reporting

Do stakeholders trust in corporations? Only 10% of consumers in USA believe in what they say. Consumers do require companies to disclose details on what they do to asses the impact that their activity has on environment and society. Additionally, investors ask for information on sustainability issues. Transparency becomes a must for companies to recover trust from people. We could all agree on the fact that transparency adds value.

However, why are stakeholders demanding information? Are there not so many CSR or sustainability reports holding lots of data? What is happening? Are Sustainability reports not useful for consumers, investors, employees…? Do they not include relevant or comparable enough information?

In my opinion we have to think about this and reinvent reporting. A common framework on sustainability report, based on global bases & standards, and also supported by the U.S. SEC, could help us.

As I explained in a previous post, it would offer many advantages:

• To enhance competitiveness, because it would avoid the market fragmentation, especially within the EU. In simple terms, it prevents a company of having several ground rules in different countries.

• To enhance comparability of information. If the information would be consistent, it would be easy to know who makes things better (or worse) on certain basis. And everyone (investors, unions, NGOs, etc) would have access to this information.

• To enhance transparency and its collaterals: investment decisions and an efficient risks management. Transparency is the system “disinfectant”: the more transparency, the more trust and confidence.

• To promote sustainable development, aligning the financial figures (the “how much”) with the sustainable performance (the “how”).

In the meantime multinationals are trying to advance since we need a common base for the subsidiaries in the different markets. In Telefónica we have created a model for all our companies in the Group, to provide annual information to our stakeholders on key issues at a global, sector and local levels. Therefore we have 18 Reports following the same methodology:

• First block: the objective of this is to provide a standardised reporting basis using an inter-sector approach; this is available in the printed, executive version of the Corporate Responsibility and Sustainability report. We base this on the Principles of the Global Compact and follow the guidance of the Global Reporting Initiative (GRI).

• Second block: includes the most relevant issues identified by the Company in the analysis, in a global and local level, the impact on our strategy and the relevance for stakeholders. Telefónica bases this analysis on the one delivered by the Global e-Sustainability Initiative (GeSI) for the ICT sector. The Telefónica S.A. Report and the local Reports cover those issues.

• Third block: available in our local Sustainability Reports and covers special issues for our stakeholders.

 

As you may suppose, I still like the Danish model: the model of “report or explain”; the model that links two global initiatives (Global Compact & Global Reporting Initiative -GRI); the model followed today for a good number of global companies; the model that has received strong support from investors (for instance The Norwegian Pension Fund) with a sustainability approach. This model (the first building block in the Telefónica’s one) will probably help everybody (companies, investors, stakeholders...) to have a common understanding of sustainability performance; this first block might be in the base of a “report or explain” system. The other two building blocks must remain as a “voluntary” practice for companies.

 

Please click here to see our 2010 Annual Corporate Responsibility and Sustainability Report and let us now your thoughts!

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Alberto Andreu

Global Head of Organization & Culture at Telefónica