Though it was once the specialty of only a few particularly “green” or community-oriented firms, corporate social responsibility/sustainability reporting — CSR, in the parlance — is becoming a retail industry best practice here in the U.S., and a mandatory one in other parts of the globe. Forest City Enterprises published its inaugural CSR report last year, and Kimco Realty Corp. did so this year, though each has already been informally sharing such information with the public for years. General Growth Properties, too, issued its first formal sustainability report this year.
“CSR reporting is sort of taking the place of those old glossy annual reports,” said Dan Probst, chairman of energy and sustainability services at Jones Lang LaSalle. “Companies are putting a lot of time and energy into them to show their environmental goals and initiatives and other social responsibilities as part of their branding.”
There can only be more such reporting to come. A study by the New York City–based Governance and Accountability Institute released in June found that 72 percent of S&P 500 companies published CSR/sustainability reports in 2013, up sharply from 53 percent in 2012 and from 20 percent in 2011. “We believe that over the coming year, we will see similar trends beyond the S&P 500 companies,” said Hank Boerner, the organization’s chairman. Among those firms will be well-known companies in the food, general retail, apparel and electronics sectors, he says. Nearly all of the 250 largest companies in the world now produce a CSR or sustainability report, according to the Boston College Center for Corporate Citizenship. Among the offshoots of such practices are improved financial performance, better innovation and -operating efficiency, and increased employee retention and consumer trust, according to the center.
CSR reporting is increasingly important to communities, investors and regulators, observers say. “The social and environmental impact of business is a critical concern to stakeholders,” said Michael Connor, editor and publisher of Business Ethics magazine.
Westfield, which has 90 shopping centers in four countries, recently issued its fourth annual sustainability report. Like the reports of the other retail REITs, it conforms to the Netherlands-based Global Reporting Initiative’s sustainability-reporting guidelines, considered the international standard for corporate environmental reporting. Aside from an accounting of Westfield’s 2013 energy consumption, greenhouse gas emissions, waste treatment and water use, the 66-page online document also discusses corporate governance philosophy, labor practices, safety programs, community efforts and other company initiatives.
Dozens of retailers too have begun issuing CSRs, including Gap Inc., Nike and Starbucks — all old hands at managing corporate sustainability programs. “That’s largely because the businesses they’re in are acutely sensitive to public and regulatory feedback, especially with regard to their supply chains,” said -Connor.
Brokerage CBRE boasts in its CSR that it is the only firm in its sector to be included in the Carbon Disclosure Project’s climate disclosure leadership index; that the Ethisphere Institute designates it among the 2014 World’s Most Ethical Companies; that CBRE has increased charitable giving by 19 percent; and that it has earned LEED certification for its Los Angeles headquarters.
Business-to-business pressure is prompting smaller firms to issue these reports as well. “Some companies responding to an RFP [request for purchase] from a prospective client are being asked about their environmental track records, and they don’t always have good answers,” said Probst. “For restaurants, there are issues like food sourcing, and for retail [manufacturing], there’s labor sourcing.”
Recruitment is yet another side benefit, Connor says. Sometimes it is presumed that companies publish such reports only for marketing or PR purposes, he says, but there is another aspect. “A number of large companies will tell you that they publish them because these issues are also especially important to their employees, who have lots of choices about where to work,” he said. Wal-Mart Stores pledges in its 2014 global responsibility report to boost its supply of renewable energy globally by some 600 percent within five years or so. Further, the company said, “51 percent of our new hires were women, and 49 percent were people of color.”
Increasingly, investors in retail companies are demanding more information on hiring and sustainability. A 2012 report from the U.S. Center for Sustainable Investment Education said that roughly $3.74 trillion of funds under professional management in the U.S. — about $1 out of every $9 — had been invested in accordance with socially responsible strategies. CSRs also seem to carry weight with stock analysts, according to a paper jointly authored by Ioannis Ioannou, an assistant professor of strategy and entrepreneurship at London Business School, and George Serafeim, an assistant professor of business administration at Harvard Business School.
In the early days of CSR reporting, in the 1990s, analysts tended to issue more-pessimistic recommendations for those firms with high CSR claims, but the Ioannou-Serafeim research indicates that analysts have since begun assessing them with growing generosity, even to levels of “high optimism” over the past few years, as companies refine their reporting. Moreover, U.S. firms expanding globally find that their CSRs serve as gauges for foreign partners and governments of how those firms may be perceived in the global marketplace, says Connor.
Sustainability has been among Forest City’s core values for about a decade, but the timing was right for formal external reporting in 2013 because the firm “really wanted to have a handle on what we were doing and have some great programs in place and have something good to tell the public,” said Jill Ziegler, Forest City’s sustainability manager, at a NAREIT forum. “We just felt it was time.” Shareholder response to that initial report of 2012 data was overwhelmingly positive, she says. “All of the audiences that we target, internal and external stakeholders, really thought it was an amazing report.”
In Kimco’s CSR, released in August, the firm cites such 2013 highlights as reductions in energy consumption from 2012, its investment of $2.1 million in 109 sustainable property improvements, diversion of nearly 60,000 metric tons of waste from landfills, and investment in employee health, development and training, plus new initiatives in wellness and volunteerism. The firm also trumpets its receipt of a NAREIT 2013 Leader in the Light Award for sustainability and transparency. Though Kimco has set forth its corporate responsibility activities on its blog and other forums, it too feels that such information -ultimately should be paired with formalized -reporting, -according to Will Teichman, the company’s director of sustainability.
Vornado Realty Trust’s 2013 sustainability report heralds its fourth consecutive Leader in the Light Award, with such metrics as 350 green leases signed, about $5.4 million invested in energy-efficiency efforts, some 20,000 tons of recycled materials and the reduction of about 42,000 megawatt hours of energy usage across Vornado properties.
Simon has yet to release a formal CSR, but the firm has for years been reporting sustainability data to investors and to the global marketplace; in September Simon was included in the 2014 S&P 500 climate disclosure leadership index, and the firm has been recognized as a retail industry Green Star leader by The Global Real Estate Sustainability Benchmark. Further sustainability reporting plans are under development, Simon said in October. Regency Centers, which this past spring completed the sale of some $250 million in 10-year “green bonds” in its sustainable projects, is another green pioneer that has yet to issue a formal CSR.
Consumers, particularly younger ones, seem to be paying attention. About 55 percent of the respondents to a Nielsen study in June of 30,000 online consumers across 60 countries said they are willing to pay more for products and services from companies committed to environmental and social efforts.
In Europe the expectation is that by 2017 CSRs will become mandatory for some 6,000 companies with upwards of 500 employees, including several shopping center firms, following an April directive from the European Parliament. The European reports will be required to include environmental policies; risks and outcomes; social, human rights and employee-related initiatives; anticorruption positions; and boardroom diversity — and they must conform to Global Reporting Initiative guidelines. “Companies, investors and society at large will benefit from this increased transparency,” said Michel Barnier, European Commission vice president in charge of internal markets and services, in a written statement.
In British Land’s CSR in 2013, CEO Chris Grigg said this reporting is increasingly relevant to sustainability-minded tenants and the community at large. “The reputation of business is being challenged in a way that it hasn’t been for many years, which has implications for us and our supply chain,” Grigg wrote. “The way we behave and how we work with our stakeholders is more important than ever.”
A growing push in coming years for social-responsibility reporting among regulatory bodies and every type of company stakeholder is a surety, Connor says. “Companies that opt not to have that discussion,” he cautioned, “do so at their peril.”
