Investors and consumers need information on the sustainability practices of the companies they invest in to gauge the positive or negative impacts of their investments. One way companies have sought to meet this need is by publishing corporate responsibility statements.
What Is a Corporate Responsibility Statement?
A corporate responsibility statement, also known as a social impact statement, explains a company’s approach to promoting sustainability in the community and environment in which it operates. In addition to establishing baseline corporate social responsibility policies, companies often publish annual reports detailing progress and future plans.
Corporate responsibility statements have become increasingly popular over the last decade. For example, companies have become more eager to build their environmental credentials and explain the steps they have taken to reduce their carbon footprint. Depending on their industry, issues like supply chain management, worker safety, and data security could be relevant, too. Companies also report on their philanthropic efforts and employee volunteer initiatives.
While organizations like the ICAS Sustainability Committee have created corporate responsibility report templates, some companies have made cultivating their sustainability profile a dynamic, “always-on” project, dedicating whole sections of their websites to their ongoing work.
How Do Investors Use Corporate Responsibility Statements?
Corporate responsibility statements are just one tool investors use to inform their portfolio decisions, in part because of the limitations of the format. One line of criticism claims that this kind of reporting is not specific enough. Because these statements are voluntary in the US, the depth of information covered varies from company to company. This lack of standardization and the discretionary nature can make it difficult to compare statements even of companies operating in the same industry.
Additionally, as social impact statements are often crafted with an eye toward marketing to a consumer audience, they may lack the objectivity that investors are accustomed to in the regulated financial reports of public companies.
While studying statements from the same company from one year to the next can give clues as to how its stance on corporate responsibility issues might have evolved, impact investors tend to combine these statements with information found elsewhere to glean an overall picture. This information often comes from third-party sources, for example those that collect data on specific sustainability issues like carbon emissions or those that offer scores and ratings based on proprietary frameworks.
Whether they currently provide valuable information or not, the growth of corporate responsibility reports suggests the power of investors’ and consumers’ calls for companies to help create a more sustainable world.