Mandatory reporting unnecessary, says Context

London, 27 July: Most major companies are reporting on their environmental and social impacts voluntarily, making proposals to introduce mandatory reporting redundant, a corporate responsibility consultancy has said.

Context, which helps produce reports, says that companies are reporting of their own accord and do not need government intervention to increase transparency.

Two thirds of the world's leading public companies produce reports, it says, including all but 10 of Europe's top 100 firms and a "majority" of US blue-chip companies.

"Our analysis clearly shows that top companies don't need regulation to make them report on social and environmental performance. They are doing it anyway – for good business reasons," said Context director Peter Knight.

But Context's research also reveals that, although most European firms have their reports assessed externally, this is less common in the rest of the world and "very rare" in the US.

Asked whether some sort of mandatory reporting standards are necessary to ensure companies produce comparable information that reveals areas of poor performance as well as successes, Knight said: "Let people produce crap reports and they will be found out."

"This is the one difficult area of voluntary reporting, because why publish bad news about yourself?" he admitted, but argued that firms that are less than frank will "ruin their credibility".

In addition, although many corporations say they support the Global Reporting Initiative (GRI), which aims to set a common standard for producing these reports, very few adhere to their rules, Context says.

"I think it's always been an expectation that reports will be comparable [and] we can bring down non-financial issues to a KPI [key performance indicators]," said Knight. "That's been really a fantasy of those who have thought that we can really pursue the triple bottom line," that is, combining economic, social and environmental measures of corporate performance.

He argued that some issues – such as diversity – are impossible to reduce to comparable and meaningful indicators, instead suggesting that a firm's commitment to CSR could be deduced from the "narrative" of their report.

However, Knight acknowledged that the current system can be confusing, noting that the number of ways of reporting on carbon emissions makes it hard to compare companies' performances.

Meanwhile, Friends of the Earth today called on the UK government to force companies to standardise the way they report on environmental issues, because of the difficulty in comparing performance.

The campaign group noted that it was unable to produce an accurate comparison of how much BP and Shell are investing in renewables, as a proportion of their total investments, because of a lack of information in the companies' quarterly reports.