Monday, February 26, 2007

Climate change: Impacting the bottom line?

Not so long ago it was largely assumed that climate change was an emissions oriented issue. Extractive companies and major manufacturers bore the brunt of the world’s concerned citizens and were forced to reduce the amount of CO2 and other greenhouses gasses they emitted into the atmosphere during the creation or lifetime use of their products.

Over the past year or two previously unsuspecting service oriented companies have also joined the emissions reductions game – we now have banks, advertising agencies, and government ministries that are operating as ‘carbon neutral’. All doing their part to reduce the pollutants that may cause the global climate to warm.

But a new aspect to climate change management has landed squarely on the agenda, and has come as a surprise to most. Climate change is already having an impact on company’s bottom lines.

A study released this week in Canada found that recent mild winters and dry summers has caused the mountain pine beetle population to increase to epidemic levels in some areas, devastating forests of lodgepole pine. If the warming persists, the beetle infestations could spread north to the Jack pine in the boreal forest across Northern Canada. This is an enormous current and future risk to the financial stability of one of Canada’s most important industries.
(Click the title of this blog entry to be redirected to the study).

The benefit of relying on a multi-stakeholder consensus seeking process to create the GRI Guidelines means that we are able to capture the cutting edge of sustainability trends. As a result of stakeholder interest in this new aspect of risk associated with climate change a new indicator was introduced in the G3 version of the Guidelines released in October last year:

EC2: Financial implications and other risks and opportunities for the organizations activities due to climate change.

As we start to see companies report on the new G3 Guidelines, this indicator will not only serve as a useful warning signal that climate change may be more material than companies previously thought, but will also elicit some interesting information that can help bolster the precautionary approach.

Thursday, February 22, 2007

SMEs: How much is too much?

An interesting article appeared last week in the Financial Times "Slimmer accounting rule book targets small companies." It describes the decision by the International Accounting Standards Board (IASB) to create a second version of their 2500 page accounting standard specifically for small and medium sized enterprises in emerging markets - they cut it down to only 320 pages.

IASB states they did this as a move to try and push for a single set of accounting rules worldwide to make accounts cheaper to produce and easier to read. It is hoped that this provides a boost to smaller companies in Asia, Africa, and EU accession countries specifically to up their financial accounting practices and make for a more stable and competitive economy.

We have had this same discussion over the years in the GRI network. Although our sustainability reporting guidance is far less complex and comprehensive than its cousins on the financial accounting side, it is still about 100 pages long (including protocols) and contains 79 indicators in total (50 are designated as core).

Although some have called for a lighter version of the GRI Guidelines made for SMEs specifically, the overall feeling - including from the SMEs themselves - is that the diversity of SME businesses, sizes, and location means it is better if SMEs can pick and choose from the whole GRI indicator collection to custom make their own set of indicators to report on - rather than being told that they MUST report on a specified list of 10, for example. The importance of flexibility and diversity means a principles-based approach to reporting must override a perscriptive based approach.

Instead we have focused our energies on creating resources that help SME's navigate the reporting process. Check out GRI's new handbook by clicking the title of this blog.

Monday, February 19, 2007

Gender: Hotter than Climate Change in the USA?

Most people think that the climate agenda will drown out all other issues of environmental or social injustice in the coming period, but gender issues managed to steal a little space in the limelight over the past two weeks in the USA.

One out of every 300 people in the USA work for Wal-Mart in some capacity - and two thirds of these are women. Last week a federal judge in San Francisco granted class-action status to a sex-discrimination lawsuit against Wal-Mart Stores, the nation's largest employer. The case, which now covers as many as 1.6 million current and former female Wal-Mart employees, can be decided en masse because it is based on a statistical analysis that shows Wal-Mart paid female workers less and gave them fewer promotions than men. Although it will be a long and windy road, and major multi-million (or billion!) dollar payouts are rare, it has already resulted in companies everywhere taking a closer look at their own gender practices. Already a victory if you look at it in that way.

Harvard University, a place famous for its liberal thinking and MBA case studies designed to help companies avoid such crises, itself has been gripped in a gender scandal. About a year ago the then president, Larry Summers, made some unpoetic comments about the differences between the sexes which seem to have been the cause of his eventual downfall. This week Harvard named Drew Gilpin Faust as its new president - the first woman to hold the post in that institution's long history.

(Sidenote - elsewhere in the world it was announced recently that Ms. Julia Marton-Lefèvre was appointed as IUCN's new Director General - filling the rather large shoes of outgoing DG Achim Steiner - now Executive Director of UNEP. Congratulations to IUCN, the worlds largest union of NGOs working toward environmental conservation, on this appointment and a new era.)

Now the big question on everyone's mind in the USA: Is the country ready for its first female president?

Keep your eyes on the GRI website for a new resource on gender and sustainability reporting in the coming months.

Wednesday, February 14, 2007

Sustainability: What's in a word?

GRI uses the term "sustainability reporting" to describe the topics its Guidelines cover. These topics range from environmental, economic, and social impacts. The term sustainability is derived from the original term "Sustainable Development" as coined by the former Prime Minister of Norway, Gro Harlem Brundtland just over 20 years ago - she used the phrase to describe the aspiration that we use today's resources in such a way that we do not negatively affect the ability of future generations.

But wherever you go around the world you hear different terms being used interchangeably for this same concept. Triple Bottom Line. Corporate (Social) Responsibility, Corporate Citizenship, Extra Financial Reporting, and others. We do hear from some companies that the term 'sustainability' doesnt really resonate in their businesses since its not a term that is normally associated with environmental and social impacts in the business context - but is usually used with reference to single bottom line - financial results.

Since the other terms (CSR, TBL) differ so broadly in meaning and use globally, and do not always tie directly to the sustainable development imperative, GRI decided to continue to use the term Sustainability Reporting when it updated its Guidelines recently. Its a reflection of a committment to the overall sustainable development agenda and is the most accurate terminology.

Which is the best term in your opinion?

Tuesday, February 06, 2007

GRI Book Club: Yunus and Grameen

I have been following Mohammed Yunus and Grameen Bank since they came across my radar as a student in the late 1980's. I have been stunned at the power of their microcredit model and the success it has had in Yunus' native Bangladesh, and where it has been replicated elsewhere in Asia, Africa, Latin America, and even the United States.

It was a thrill to see Yunus and the Bank win the Nobel Peace Prize in late 2006 in recognition of over 20 years of dedication to helping the world's poorest people lift themselves out of poverty. Just look at the numbers for Grameen Bank alone: nealry 6.6 million borrowers in Bangladesh, 97% of these are women, all of which were operating in the informal sector or not generating income at all before their Grameen loan. There have been US$ 6 billion in loans since 1983, with US $ 5.6 billion paid back - a loan recovery rate envied by most conventional lenders.

I recently finished Professor Yunus' book "Banker to the Poor" and there are just so many facinating messages that I could highlight from it, so its hard to choose just one to focus on today - but I will. Among Yunus's small number of strong convictions (the major one being that the poor always pay back their loans) underlying the main operating principles of Grameen Bank is that globalization and capitalism can work to eradicate poverty forever as long as the company finds a way to balance its capitalistic ("greedy") nature with its role as a fundamental player in society. Grameen is a case in point here, as it runs at a profit and has spun off dozens of other profitable companies ranging from telecoms, fisheries, textiles, insurance, mutual funds, and home loans.

You wont regret picking up this book. It will inspire to think of ways your business can engage with "base of the pyramid" populations for the benefit of your business and our societies.

Friday, February 02, 2007

Climate change: driving disclosure?

What a week it has been for climate change advocates. This morning the Intergovernmental Panel on Climate Change released its report on "The Physical Science Basis" which found that humans are, indeed, to blame for changes in the climate tracked thus far and for future damage predicted on the short and long term horizons.

Add this to yesterday's nomination of Al Gore for the Nobel Peace Prize for his work on the subject (interestingly, a co-nominator was a representative of Inuit groups in the north worried about their cultural viability), and Wal-Mart's agressive stance at a press conference in London where it promised to flex its muscle and reduce climate impacts via its operations (eco-efficiency solutions) and products (sales of energy saving bulbs).

Working back one day further, we get to Wednesday, when the US groups Ceres and Calvert released the findings of their recent study on the state of climate oriented disclosure among the Fortune 500 companies. Although they did find that nearly half are beginning to get active via the GRI Guidelines or the Carbon Disclosure Project, a full 30% still cite "confidentiality" issues as the reason they dont disclose their climate oriented data.

What will it take to transform issue awareness and acceptance into action, and specifically accurate management, measurement and disclosure of risks and opportunities? How much longer will policy makers, investors, citizens, employees, and others allow companies and organizations of all shapes and sizes to get away with citing confidentiality issues as a way out of rigorous disclosure?