Consumer industry moves to make sustainability reporting more measurable, finds KPMG study

Consumer companies seek best practices to quantify sustainability reporting

While 80% of consumer markets organisations claim to already have a corporate sustainability strategy in place, only 35% currently issue public reports on sustainability performance, and an even smaller percentage report targets and performance results that are both specific and measurable.

The study of 132 of the world’s largest consumer businesses found that sustainability reporting is rapidly becoming a critical issue for consumer market organisations and their customers.

According to a recent study on corporate sustainability by KPMG International 1, almost 85% of consumer market companies believe that sustainability reporting will become a significant priority over the next 12 months. And with previous surveys two showing that 70% of consumers are now willing to pay a premium for products that support a certain cause, sustainability reporting will increasingly influence a consumer brand’s value and performance in the market.

“For consumer companies, enhancing brand reputation is clearly ranked as the top driver of their sustainability programmes,” noted Willy Kruh, KPMG Global Chair of Consumer Markets and a partner in the Canadian firm. “This puts additional pressure on these organisations to properly measure and report their achievements in a clear and consistent manner to their key customers, stakeholders and investors.”

In this most recent KPMG study, Measuring Up: Improving Sustainability in Consumer Markets, a high degree of variance in the quality and quantity of information being reported was observed across the various sustainability reports that were examined.

“There is a growing consensus among industry leaders and stakeholders that sustainability reporting needs to become more standardised and consistent, yet progress in this regard has been slow,” Mr. Kruh commented. “When it comes to reporting the results of sustainability initiatives to the market, we have found that inconsistent approaches and metrics may actually be creating more confusion in the minds of customers and investors.”

Measuring everything or nothing
The study focused on 10 key sustainability metrics common across consumer markets: energy and carbon emissions; supply chain and agricultural practices; health and food safety; water management; fair competition; labor management, equity and diversity; product performance and innovation; waste and recycling; materials and packaging; and community development.

The research found that specific and measurable targets are rarely reported for a number of key measurements such as community investment (which almost 80% of respondents report on, but only 10% have specific and measurable targets for) or water management (where around a quarter of respondents have measurable objectives versus the almost 70% that report on this metric). The study also found significant variances in metrics and reporting across the industry sectors. Some highlights include:

• The Alcoholic Beverage companies unanimously report on health and food safety, but none do so against specific and measurable targets;
• The Consumer Goods companies are low on reporting specific metrics across most  categories, with the exception of energy and carbon emissions, where more than 80% have targets;
• The Food and Drink companies are more likely than any other consumer market segment to report on all the metrics but, surprisingly, less than 25% have specific and measurable targets for health and food safety reporting;
• Outside of the Energy and Carbon Emissions category, the Retail and Luxury Goods companies have lower measurable targets in other categories;
• Tobacco companies are the least likely to report on all metrics, and very few provide specific and measurable targets.

“The business principle of ‘what gets measured gets managed’ is absolutely true in this case,” Mr. Kruh noted. “But not all risks are equally significant for each sector, so business leaders will need to focus on defining and measuring those risks that are likely to have the greatest impact on their key customer segments and stakeholders.”

Communicating progress and creating benchmarks
Another core challenge for organisations included in this study centers on catering to different audiences with a one-size-fits-all approach to reporting. However, the increasing adoption of new media channels and social media vehicles may be changing the game by providing companies with a dynamic set of tools for reporting and communicating bite-sized datasets to meet the unique needs of niche audiences.

“Despite its apparent importance to consumer-focused companies and their customers, our research shows that although fulsome and quality reporting exists, the market is awash with inconsistent reports, focusing on a myriad of different types of data,” Mr. Kruh added. “But without the clear and adequate communication of a company’s sustainability efforts, the impact of such programmes on brand and customer perception is greatly diminished.”

1. Corporate Sustainability: A progress report, KPMG International, March 2011.
2. “Corporate Social Responsibility Branding Survey,” Penn Schoen Berland Associates, 2010.