Day 4: Transparency takes center stage

The keynote speaker today was Sir Michael Rake - former KPMG boss and four weeks into his chairship of the British telecomms giant BT.

Several months ago, in his position as aruguably the most influencial accountant in the world, Sir Mike started to stir up the business, accounting, and investment community by saying its time for a new sort of business reporting - and the past should not be used as a road map for the future. He called for a redesign in reporting standards, and the incorporation of metrics that show a more three dimensional view of a company - including economic, environmental, and social risks.

Sir Mike gave a thought provoking speech today at the conference - addressing a wide ranging number of topics such as how to rebuild trust in the corporate sector to how companies can use their products and services to gain buainess advantage while tackling some of the worst global development and environmental issues.

But I was glad to hear during the question answer period his reference to the GRI and the role that disclosure can play in building trust, and also to justify atttention and expenditure on social and environmental risks.

Day 3: Greenpeace and Coca Cola are now friends

The buzz on the opening day of the annual BSR Conferece here in San Francisco was a story Gerd Leipold, Executive Director of Greenpeace, was telling about its former arch enemy Coca COla. After well over a decade of Greenpeace pressure, Coke has agreed to install Greenfreeze refrigeration units at the Beijing Olympics and other venues worldwide (about 100,000 units total I think) that will save several thousand tons of hydroflourocarbons (HFC) over their lifetime. HFC's are a nasty contributor to climate change. (You might recall chloroflourocarbons CFC's were banned in the 1980's in most industrialized nations for their contribution to Ozone Layer depletion - at that point most refrigeration units shifted to utilizing HFCs instead).

Some people thought this was very good news. It showed that long term committment to issues by NGOs do result in sigificant change, and that civil society can work together with businesses to take on the difficult challenges of our times. It gave hope to people who had previously lost hope or interest in these sorts of collaborations.

But others were disappointed in Greenpeace. After 10 years of work how could they claim that Coca Cola's 100,000 frig units was a success story? Why did it take so long? Why not a complete phase out of HFCs? Why did they settle? What happened to the Greenpeace of old?

For me every small victory is a victory and it all adds up. It shows that we have changed a lot as a global community as well - for the better perhaps. Collaborative instead of confrontational. Celebrating the postive rather than the negative. Building the foundations for future collaborations and wins.

Day 2: Tech sector gets material

The Global e-Sustainability Initiative (GeSI) is an industry association of 20+ members - mainly European telecomms but some other global players in the ICT sector are also among the membership. They are working together to address the common sustainability issues their sector faces. One of their projects is on the topic of accountability. To improve their accountability for impacts caused by their products and services, GeSI decided it was time to first agree - on a general level - on what issues were most "material" for the industry. They hired BSR to conduct some research on the subject and today I was invited to attend a stakeholder dialogue to review and discuss the results of this research.

I read the 40 page paper before hand and was generally impressed at its depth and breadth, but there was certainly room for some stakeholder dialogue on how to expand, focus, and improve it!

Firstly, their definition of materiality was important to note. They decided to rank issues according to its importance to the companies and the importantance to "influencial stakeholder groups". The old addage "if a tree falls in the forest and nobody hears it" came to mind. What if the sector was having a huge sustainability impact in a certain area but there just didnt happen to be an influencial stakeholder group that was fighting for it? Does this mean the companies are off the hook?

Secondly, lets look at their issues identification. They clustered their issues into ten categories:
1. Climate change
2. Waste and materials use
3. Access to ICT
4. Freedom of expression
5. Privacy and security
6. Employee relationships
7. Customer relationships
8. Supply chain
9. Product use issues
10. Economic development

Stakeholders in the room suggested that it may be more helpful for the industry to re-organize these issues differently so they could be better understood: impacts on environment, impacts on suppliers, impacts on employees, impacts on customers, etc. Others thought that some key issues were left out or were not prominent enough - such as labor issues, human rights, and water.

One of the most interesting ideas I have heard in a long while came out at this meeting. We always do life cycle assessments for our products and services which focus on the environmental impacts. What about a social or societal LCA?

BSR and GeSI will take our feedback and conduct two further dialogues in Europe and Asia. An updated list of material issues will surface and will help companies in the sector focus on the right things, and work collaboratively to tackle some of the most challenging issues.

Day 1: Responsible Procurement UN-style

The UN Global Compact is trying to stir up some interest for building sustainability into procurement practices. I attended a workshop today in San Francisco with about 50 others. We spent the day pondering the various challenges and huge potential that weaving sustainability into supply chains has for putting sustainability at the heart of business operations globally.

The day was opened with remarks by Aron Cramer, president of BSR, who pointed out that if sustainability requirements were woven into procurement contracts this could have a very powerful effect worldwide on environmental and social spheres. He also noted that due to the interconnectivity of supply chains today it was important that businesses do not compete in the realm of sustainability - but instead collaborate to raise the bar. The market would suffer if companies with similar supply chains started demanding all sorts of different standards, disclosures, and requirements. It would be a win-win-win for companies, suppliers and society if there was more collaboration in this area.

My favourite panel of the day was a threesome that included a major multinational that provides cafeteria services for tens of thousands of office employees in five locations in the US, the catering company that services these cafeterias, and a representative of a group of small organic farmers in the California region that the catering company sources from. They all had the opportunity to talk about what sustainable procurement meant to them, the opportunities it offered, and some of the stumbling blocks they faced. It was the first time I had seen a real "supply chain" sitting together and talking openly about the challenges they face as they transform their businesses towards more sustainable practices.

I think the other companies in the room were inspired by the degree to which they could work with their caterer to integrate sustainability into their service. The caterer was able to show how they were able to add value up and down the supply chain by brining new options and solutions for sustainability for both the client and the source farmers. And finally the farmer perspective made us all realize that small scale and local agriculture is superior to mass agriculture in terms of health and taste, and we need to find ways to improve their market access.

If you are interested in supply chain issues, visit my colleague Joris's blog on the topic.

A week of sustainability in San Francisco

I will be in San Francisco, California, all week mainly to attend and participate in the annual "BSR Conference" run by the American industry association called Business for Social Responsibility.

I will blog at the end of each day to reflect back on things that I saw, heard, and learned!

Back to basics (6): Ever heard of "craggers"?

I just returned from Germany speaking at a CSR roundtable that E&Y has started to offer quarterly in their offices, this time Düsseldorf. The Anti-Law of Jante (see Back to basics (5)) immediately came to my mind when the organizers told me that this was now the second meeting where the normal 20% no-show rate of registered participants didn’t work, the place was packed with 120 people and extra chairs were necessary. It was a nice mix of male and female participants, coming from several sorts of organizations, many of the participants still pretty young. Are we finally all waking up?

On my train ride back to Amsterdam I found this article in the International Herald Tribune* that caught my attention because it introduced a new abbreviation: “CRAG”, meaning “Carbon Rationing Action Group”, groups of volunteers (you might say on grass-roots level) that “aim to hold each other to account by imposing fines on members of the group who fail to keep their individual emissions under a certain quota”. This CRAG phenomenon has started in the UK, but I learnt that there are not only around 20 CRAGs with more than 160 individual members in the UK, but already many more that started in the U.S., in France and many places elsewhere. The members of the group define the rules, so fines are not common everywhere. A London 60 staff consultancy has also decided to voluntarily attempting to keep their personal annual emissions under the British average of 6.000 kilograms CO2. Some CRAG’s allow their members to roll over their credits accumulated during a low-carbon year to allow for occasional high-carbon indulgences like flights.

Two things are worth mentioning here. First, what would all of this be without transparency, both in terms of now being able to define allowed emissions for each individual (based on the available data), and secondly to be able to be held accountable based on the individual real consumption of CO2. These people test out new ways of living together, helping each other through learning, and last but not least can share experience with those who like the idea that every individual should have an emissions account in the future. Well, why not, if this system allows for some flexibility (where do you live, what are available options and barriers to access new technology, available income, cultural differentiation, etc.)?

Secondly, this is the prototype of testing the possibility of the Anti-Law of Jante where the individual can show that a different world is possible without going back to Stone Age and that “the public perception that you’ve got to be rich to be green” is not true. Clearly, the major problem remains to “persuade the wider public that individual efforts, resulting in only microcosmic cuts, were worthwhile, particularly at a time when emissions are skyrocketing in other parts of the world like China”. I am convinced that we all need to start somewhere, why not starting a CRAG?

* Neighbors agree: Thou shalt not emit, IHT, October 17, 2007, Page 1 and 10

Back to basics (5): The Law of Jante

In one of his last books* Paulo Coelho explains to the reader the meaning of the “Law of Jante”, first introduced by the Scandinavian writer Aksel Sandemose in his 1933 novel A Fugitive Crossing His Tracks. In short the Law of Jante means something along the lines of “You are worthless; no one is interested in what you think, therefore you had better opt for mediocrity and anonymity. Do this and you will never face any major problems in life.” Coelho continues by saying “that it is thanks to the Law of Jante that the world has been manipulated in all kinds of ways by people who often end up achieving their own evil ends; we see the great gap between rich and poor, see social injustice, violence and people who are forced to give up their dreams.”

What will happen a couple of generations from now when people will look back at the beginning of the new millennium? Will they realize that civil society, business and politics, although knowing all the facts that have been presented by the IPCC and clearly communicated by leaders like Al Gore, haven’t really done enough to prevent climate change, so that everything got worse and made life impossible in many areas of the planet, causing huge migration waves and decimation of humankind by until then unknown diseases that appeared because of an immense number of people living on very limited space in megacities of 50 million citizens and bigger? Will they simply say “well, blame it on the Law of Jante?”

I prefer Paulo Coelho’s proposal to create an “Anti-Law of Jante” to prevent things from getting worse: “You are worth much more than you think. Your work and your presence on this earth are important. Of course, such ideas could land you in a lot of trouble breaking the Law of Jante, but don’t be intimidated. Continue to live without fear, and you will triumph in the end.”

With Al Gore and Rajendra Pachauri (for the IPCC) receiving this year’s Nobel Prize for Peace the Nobel Committee in Stockholm has sent a clear wake-up call to the world today: let’s not allow this to happen. All necessary information is transparent; let’s fight the Law of Jante now!

We in GRI are proud of having had the chance to hear Al Gore at the first GRI Global Conference on Sustainability and Transparency in 2006 and are already looking forward to the second conference in May 2008 when Mr. Pachauri will be with us.

* Paulo Coelho: Like a flowing river, HarperCollins Publisher, 2006

We want to work for the good guys

Graduates seek out socially responsible companies as employers, according to PWC research.

In a study of 2739 graduates from China, USA and UK published by PWC earlier this week, 86.9% of all the graduates questioned said that they actively seek out employers whose corporate social responsibility behavior reflects their own. 90% of the graduates from the USA agreed to this statement compared to 87.2% in China and 71% in the UK. The graduates were questioned as part of a larger study about their expectations of work and careers.

Employees and prospective employees are some of the most important audiences for sustainability reports. People want to work for companies that share the same values as they do. Although there have never been more people on earth as there are now, all reports say that finding and keeping great staff have never been harder.

There is a category in the GRI Readers Choice Awards for best report from the perspective of employees. Get online and score your employers report today!

Source: 'Managing Tomorrow’s People: The Future of Work to 2020’

Back to basics (4): Who reads sustainability reports?

Last week GRI launched the GRI Readers’ Choice Awards, giving readers a platform and a voice what they value most in sustainability reports and which reports they liked most because they addressed the material issues in a convincing way. We thought it was necessary to address the question “who is reading all these reports and is it really worth the effort?” This is of course exciting, and the first days after the website was launched the interest was already huge. But still, two things make me really wonder:

Firstly, I am always amazed how much capacity and money is available in nearly all companies that I have seen for their normal annual reporting process and print design, while sustainability reports still have to be produced with budgets that are “too much to die, but not enough to live”.

Of course, there are difficult, sometimes overwhelming legal requirements to fulfil when pulling together annual reports. And yes, strict assurance practices are necessary as well; all that has to be well prepared and does cost money. However, it is mainly a look into the rear mirror, addressed to one stakeholder group only and not really covering the long-term future needs (in that sense: sustainability) of the company. One could argue that all these efforts are necessary for the readers, but – let’s be honest – how many readers do annual reports really have apart from maybe 200 industry sector specialists, asset managers, ranking institutions, an probably some competitors and employees? How many printed short versions of annual reports have you personally thrown away into the bin without having taken one single look at them?

In contrast to this I have met so many companies where employees have learnt so much about their company (especially when they were large and/or multinationals) and have used sustainability reports as a reference document when visiting customers, shared them with friends and still have them at home, keeping every single version. I have seen students reading reports when figuring out which company could be a good employer, MBA students using the GRI matchmaker program to study sustainability reports in their MBA courses and discuss the question what a specific company should be responsible for and how they would react in case of a certain dilemma, digging deep into the problems and build understanding of the rationale behind a specific decision that had to be made. We see more and more of the usual suspects for annual reports consumption reading sustainability reports because they want to learn how to invest more sustainable and long-term, making investment decision with a real sense - while still making money. We see more and more suppliers reading sustainability reports because they expect to be asked next about their specific responsibility in the supply chain by their customers, and we see more and more communities and ministries really thinking about making sustainability information a requirement for their own procurement activities. So, is there anybody out there who likes to follow my bet that already more people really read sustainability reports than annual reports?

Clearly, I am not arguing that less money should be spent on annual reports if it’s absolutely necessary. But it’s definitely time to make sure that sustainability reporting processes get the budgets they deserve! If the budget for the preparation of a good sustainability reports remains low over time a clear story is told: it is not the lack of money, but the wrong prioritization of sustainability as a really important issue.

Secondly, isn’t the basic question asked not also a warning signal that stakeholder engagement is still not fully understood? While it is pretty clear that during the development of the sustainability report stakeholders need to be involved to define material issues, the question how to continue to involve stakeholders after the publication of the report still seems to be a weak spot. Or has the communication strategy suddenly ended with the launch of the report (maybe with an A5 card in the back as feedback form?) instead of making the launch of the report the starting point for even more stakeholder engagement (=input for the next report)? In summary the fact that we still ask ourselves the basic question about the readers of sustainability reports makes it clear that some inefficiency in the overall reporting and feedback process still exists. Answers are welcome; therefore please join the GRI Readers’ Choice Awards.

Back to basics (3): The business case for sustainability

"Business cannot succeed in failing societies", how often have we already nodded when this quotation has been used in articles, brochures or presentations. But if that is a given, why do we so often discuss the question "What's the business case for sustainability (and sustainability reporting)?" Here’s my take on it:

Organizations often lack a vision what sustainability really means for them and what they want to achieve over the next 20 or 30 years for itself, for society and the environment. Or in short: what responsibility is taken over by whom and for whom? If I read sustainability reports I very often read about objectives and targets for the next reporting period, maybe for 2 years, but only a few organizations present a long-term vision and define mid- or short-term targets through “reverse engineering”, deciding through that lens what the necessary next milestones need to be. What gets lost is the overall context and rationale why and how the organization will contribute to solve global problems through its specific business model or how its business model design is already influenced by those problems today. The GRI G3 Guidelines purposefully ask reporters to make exactly that two-way assessment in the strategy and analysis part.

A lack of a long-term vision will consequently lead to a lack of understanding what investment is really needed and when it is needed. All expenses for CSR today are therefore seen as costs and necessary capacities for the longer term will not have been properly budgeted. CSR managers are too often pushed into a corner where they are only tolerated because they help to secure a basic compliance to laws; they do lack the acceptance to be seen as important multipliers for business opportunities. In this environment an understanding for the long-term value of sustainability cannot really grow.

Reading sustainability reports offers a simple litmus test if an organization is willing to go the extra mile to explore the real value of sustainability : how is sustainability/CSR organized within the organization? Is CSR simply managed by an add-on department (extra question: “Is at least someone from the top management responsible for that department?”)? Are there responsible managers in all corporate departments, business lines and regional operations (matrix organization)? Are there policies that are properly enforced by measurement and reporting processes? Finally, is sustainability/CSR integrated into corporate or business development and gets regular top management attention? Shouldn’t it belong there if the connection to the business strategy is so urgently needed? Clearly, the level of organizational integration reveals if sustainability is seen as a risk reduction necessity (survival strategy) or an opportunity for long-term business development (growth strategy).

Apart from the question on how CSR is organized my personal check list while reading reports continues like this (starting with the lowest priority for the business model): how much do I read about philanthropy activities, then about efficiency programs (e.g. some years ago zero waste costing was really en vogue), then about integration into risk management; next would be integration into corporate governance, and finally into research & development and/or (corporate) business strategy? That simple check list is a nice and easy rooster to quickly detect where an organization stands with regard to CSR.

From my perspective sustainability needs the attention of top level strategists and integration into business model development. This ensures a connection with long-term target setting and the translation into strategies and milestones. The question about the business case for sustainability should then become obsolete. It’s a simple truth that if you don’t know where you’re going, you might simply not get there.

The value of sustainability information

The big buzz around here this week is the launch of the GRI Readers Choice Awards. These are not just awards for the sake of awards - they represent a whole new era for sustainability reporting.

Sustainability reporting will not become a mainstream practice unless a freeflowing market for such information develops. People who stand to benefit the most from sustainability information as disclosed by companies today either don't know this information exists, or it comes to them in a form that is not usable or optimal. Who are these current and potential beneficiaries of sustainability information? Journalists, employees or prospective employees, investors and analysts, board and management team members, NGOs, consumers, and broader civil society.

Until now GRI has focused on the information issuers by creating Guidelines and supporting materials for them to use as the basis for reporting economic, environmental, and social information. But now GRI is trying to create, stimulate, educate, and add value to the information users side. The Readers Choice Awards are designed to engage these information users/report readers directly and give them an avenue through which they can express their opinion.

Readers are invited to select the reports of interest to them, and then assign scores to each of these reports based on their assessment of the quality and usefulness of the report to them.

Reports that gain the highest scores in nine different categories will be declared the winner in a high profile ceremony in May 2008 - but really its the readers and the movement towards better accountability and transparency that will be the real winners.

We predict that the results of the scoring will lead directly to changes in the current practice of sustainability reporting. By getting a better understanding of what readers/users want and need, report preparers will thing about reporting differently.

Early signs look good - after only 48 hours online the Readers Choice website had nearly 2000 visitors from 70 countries and hundreds had registered and started to score reports. We certainly hope thousands and thousands will join these early participants. I will keep you posted as we progress in this big experiment!

Public sector still needs convincing

We were lucky enough to have Phil Hughes visiting us this week in Amsterdam. He traveled over from Melbourne to meet with various members of the GRI staff to reflect back on our three years of partnership and look ahead to the future. GRI helped to co-found the Centre for Public Agency Sustainability Reporting, which Phil now directs, with ICLEI-ANZ, City of Melbourne, and State of Victoria's EPA.

We were comparing notes on the rate of uptake of the GRI Guidelines among public sector organizations (such as municipalities, federal departments, other public agencies) and the rate of uptake among businesses. The practice has been slow to take hold in the public sector, and Phil surmises that it is (at least in part) due to the lack of recognition of the three dimensional role these agencies play, and the size and complexity of their impacts.

But I reflected that it was not that long ago that companies were in the same place. We seemed to have crossed over from that lack of awarness (whether purposeful or not!) to an understanding that companies do have complex impacts (postive and no-so-positive) on societies, economies, and the environment - and we are moving into an era of action. Maybe public agencies are a few steps behind, but Phil and I decided we had reason enough to remain optimistic that they would move along this curve some point soon as well.