Tuesday, 7 October 2014

Compliance fatigue and sustaining sustainability

Is the proliferation of disclosure and reporting schemes capable of undermining efforts for more sustainable, responsible business?

Now, it is very hard to refute the merits of the 'disclosure revolution' on environmental, social, and governance (ESG) issues that has come in recent times at least to major Western listed firms.

The merits are fairly obvious. The more we and the market know, the better we can ascribe meaning to a firm's value proposition. The more a firm knows about its own ESG impact (through committing itself to data collection, analysis and disclosure), the better it can address potential disruptions and problems in its operations or supply-chain. Do well while doing good, etc.

The same goes for the proliferation of voluntary, hybrid or other multi-stakeholder, quasi-regulatory schemes for addressing issues ranging from a firm's impact on local insecurity to transparency around revenues paid to host governments.

In this light, the recent announcement by Unilever of a new human rights reporting and assurance framework is good news, and consistent with the due diligence elements of the UN 2011 Guiding Principles on Business and Human Rights.

One would hardly want to curb the energy and enthusiasm evident around institutionalising the responsible business agenda within corporate systems and cultures. Yet it was that announcement that prompts this week's post. Because there seem to be so many schemes and initiatives and regulations and conferences that I imagine the landscape now is becoming somewhat bewildering even to a well-meaning executive within a major publicly-listed firm.

(A related issue is the proliferation of single-issue charity, aid and advocacy groups: that industry now talks about engaging with business but might require some rather hard-headed business strategies to reduce the over-heads and donor fatigue associated with organisational proliferation, and focus instead on delivering social value 'at scale'. But hush -- the same could be said of proliferating blogs...!).

I cannot put a finger on it, but do think there's an issue with this flowering of schemes and initiatives, in terms of strategic considerations relevant to the business sustainability / responsibility agenda, such as the resources and attention-span and goodwill of corporate decision-makers.

Instead of carrying on further, I refer to a post from pre-Christmas 2012 (here), on proliferation and fatigue related to the many initiatives on responsible and sustainable business.

See too this recent piece in The Gaurdian on how over 2,500 different metrics are in use for measuring and reporting supply chain sustainability.

It is true that reporting on 'non-financial' issues can serve a commercial and risk-management purpose and is increasingly being incorporated into core business strategies; it is true that leading firms think beyond compliance to how the sustainability agenda can be an opportunity to create both social and commercial value; it is true that there is a counter-trend to this proliferation, where broader concepts such as 'materiality' are being deployed rather than  endless multi-indicator checklists and indices. It is true that the field is evolving and emerging, and this flowering of schemes and requirements may settle into something more sustainable and manageable without becoming complacent or quieted.

Yet this proliferation phenomenon is relevant (or is perceived as relevant) to compliance burden and cost, and so to the competitiveness of responsible business and finance (see here, a past post on regulation and values amid perceived strategic competition for access to markets and resources).

Now I believe there is no necessary trade-off between being responsible and being competitive when investing in developing regions. Indeed in time one might only be competitive through being responsible (and being seen that way).

Nevertheless the perception remains in those places inside firms and funds where it matters.

Those interested in promoting sustainable and socially responsible business practices ought to reflect more, I think, on whether the proliferation of schemes and reporting processes is confusing 'the means' with 'the ends' in ways that do not advance the end goals. 


See too this past post reflecting on who the audience is for corporate sustainability communications.

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