Seeking New Social Responsibility Measures

Article excerpt

Flip to the back of any company's annual report, and you'll find the auditor's statement - boring stuff usually, but vitally important.

Every year, even the most secretive public companies let outsiders come in to pore over the books and determine whether the company is telling the truth.

Now, several groups want to audit corporate social and environmental practices, as well. It's a radical idea, but companies in Europe and the United States are warming to it. If the idea catches on, investors will gain a better sense of how companies minimize pollution and improve living standards of workers. For their part, company executives hope to build investor confidence, especially since socially responsible investing now amounts for more than $1 trillion in the US alone. "We believe that public accountability is part of our commitment to environmental and sustainability improvement," says Judith Mullins, director of General Motors' public policy center in Detroit. On environmental and financial issues, she says, "investors want that same consistency of analysis, and they don't have it." Some observers see such audits as inevitable. "In a decade's time, you will see major companies producing one or both an environmental report and human-rights and labor report that are set to a consistent standard and independently verified," says Simon Billenness, senior analyst at Franklin Research and Development Corp., a social-responsibility investment firm in Boston. Other observers take a more cautious view. "It has a chance," says James Post, a management professor at Boston University. But "if {these steps} were easy they'd already be done." So far, the environmental arena has created the most activity. Ever since companies such as 3M saved hundreds of millions of dollars by measuring and cutting their waste streams, other companies have taken a hard look at their polluting. One problem: Every company reports environmental activities differently. Some are thorough; others create "green glossies," says Bob Massie, executive director of the Coalition for Environmentally Responsible Economies (CERES) in Boston. "There are pictures of people planting trees and smiling around the recycling bin, and that's about it," he says. CERES has proposed the Global Reporting Initiative, one set of standards worldwide. Earlier this year, a dozen companies including General Motors agreed to test the standards. "We often get inquiries about our performance," says Ms. …