What Directors Told Us:

Earlier this year we interviewed a number of Non-Executive Directors (NEDs), focusing on the topic of CSR & Sustainability. The NEDs each sit on multiple boards, with most of their companies producing CSR & Sustainability reports. Our review of the reports before the meetings showed companies with high quality reports, others with some pretty interesting (euphemism alert) reports. We’ve summarized below the key findings and understandings that we gained.  We would like to thank all the individuals who assisted with and participated in these interviews.

Starting, Finishing:  CSR & sustainability are a journey in thinking.  Almost all the Directors we spoke to started from a position of comfort about their businesses reporting and performance, to a level of discomfort.  Frequently they started by saying how confident they are that their firms were doing a good job.  By the end of many discussions, they said that they needed to go and ask some questions.

Assurance: Directors told us of their discomfort in with the level and quality of assurance that is being provided over the information in CSR & Sustainability reports.  Some Directors go beyond discomfort to being dismissive of the assurance (or "Advisors Report") that is provided.  In one case we saw an advisors report provided by a company in the same industry as the reporting company – a clear case of one Fox confirming how sustainably another Fox is managing the hen-house.

Issues of assurance fall generally into two buckets:

• Was the same level of review and assurance provided over sustianbility information as is provided over financial information?
• Is the information in the sustainability report the same information as provided in the annual report of SEC filing?

Financial return trumps CR/Sustainability:  Investors and investment funds (pension funds for example) are looking for returns, and are not so worried about CR messaging.  Nice to have, but only because everyone else is doing it.  Interesting positioning - "in good times CR didn't matter".  But when pressed, he does not seem to think that it matters in difficult times either.

Two years ago vs Today: We had a very interesting discussion with one NED/Investor, on the ability to sell a company.  Two years ago anyone could sell any company "as long as it was breathing". Today it is much more difficult to get the multiples, the financing, or the interest. So does that make CR more or less important today? He is not sure, but he is certain the that focus is now on performance.

Management Information: Where is the quality MI (Management Information), both content and systems, that enable Directors to see impact on performance targets and post performance.  In too many cases we heard Directors say that the information provided to the board was light on data, past performance or targets, or specific KPIs that are tracked.  "What gets measured gets managed".

Who Owns CSR?: The assumption was that CSR/Sustainability reporting was being run out of Investor Relations.  This was a common assumption across the firms. From our experience, we have tended to see such reporting usually coming either from Marketing (and external communications - different from IR) or Operations.  Sometimes we see the information coming from both sources, delivered to to different audiences.

Management Committee - Greenwashing?: Where management committees focusing on CSR exist, Directors were either very confident in the quality and effectiveness of those committees, while other Directors were dismissive of the management committee that deals with CSR.  This may be from a lack of visibility and lack of effective reporting of result to the board.

CSR = EH&S: A common theme is a perception that CSR/Sustainability equals EH&S.  This leads to a mind-set that says this is nothing more than a compliance exercise.