Ceres conference day 3: questions, questions and more questions on G3

Its the final day of the annual Ceres conference here in Boston and I just finished my morning session for about 100 participants on the in's and out's of the new G3 Sustainability Reporting Guidelines.

I walked the group through an overview of the development process behind the G3, and then pointed out the main innovations and new things to look for in the G3 (versus the earlier 2002 release of the Guidelines). I highlighted the new action-oriented reporting principles - with a focus on the principle of materiality. I also outlined the boundary setting guidance, as this can be a tricky question for larger and more complex companies. Then I went into the standard disclosures section and outlined the new profile disclosure on strategy and analysis, the new disclosure on management approach system, and finally ended on an overview the state of the performance reporting indicators.

Of great interest to the audience was the new economic indicator on "financial risk of climate change" - I must admit that through this blog I have been mis-representing the Ceres conference slightly as I am only covering reporting-related topics, but the main focus here is on climate change - so there was no surprise that this particular indicator caused a stir in the audience.

The audience was interested in questions on the new application levels system, on what GRI says about frequency and medium of reporting, why reporting is slow to gain traction in the USA, what new opportunities does XBRL present for reporting, and how is GRI going to move sustainability reporting somewhat closer to financial reporting and build bridges between the two types of standards.

All in all a great session. I can't thank Ceres staff person Anne Kelly enough for pulling the session together and offering all participants a champaign and orange juice refreshment for showing up at the early hour (it was a breakfast session!).

If you are interested in listening to the G3 briefing download the podcast here:
http://www.globalreporting.org/Services/ResearchLibrary/Podcasts/

More final reflections on the Ceres conference tomorrow.

Ceres conference day 2: Multi-stakeholder dialogue for systemic change

This morning started bright and early with a 7am panel consisting of American members of GRI's Stakeholder Council - an elected governance body that provides policy advice to the Board of directors. The panel comprised representatives from a company, an investor, an NGO, and a consultant. The question posed to them by the moderator - Paul Freundlich, GRI Stakeholder Council Chairperson, was on the value of the multi-stakeholder collaborative approach for solving complex problems (in this case, the example of inventing a global language for sustainability reporting was presented as a case study).

The panelists were able to share a wide variety of insights from their work as stakeholders not only in the GRI system but in other working groups and collaborations for a wide variety of other issues. The basic message I took away from the session was that in order to cause systemic and lasting change in the way the world works it will take the agreement and buy in of all stakeholders. Step one is to come to some agreement on the expectations of each party (ie. where do responsibilities lie for sustainability issues - with governments, businesses, investors, consumers, etc. we all have a unique role to play) and then what we are going to collectively do about it.

The GRI process is about 10 years old, and I had the opportunity in the session to applaud those on the panel and in the room, and the other several thousand stakeholders from 60 countries not here at the Ceres conference who have volunteered their time for the long haul. The only thing they ever have in common with each other is that they agree that there should be a framework for sustainability reporting - but exactly what should be in that framework is something that takes many hundreds of hours of dialogue for some level of consensus to be reached. Many of the stakeholders in the GRI process keep coming back to the table even though the process is slow - because they see the establishment of globally accepted Sustainability Reporting Guidelines as being one vehicle for lasting change.

Ceres conference day 1: NGOs and reporting

Ceres is a US-based non-profit that is basically a network of investors and environmentalists that are working towards "sustainable prosperity". They work collaboratively with US companies to help shift towards a new way of doing business. I am at their annual conference in Boston, USA this week and will post a daily blog reflecting the discussions among the 600+ attendees.

Today two Ceres staff presented their findings from a survey they did of US and international NGOs on how they view the GRI and how they use sustainability reports from companies of interest to them to advance their missions.

The findings were encouraging as most respondents agreed that the GRI framework was suitable for their information needs and they were strongly supportive of the mission and work of GRI. But it was clear that NGOs were only just beginning to understand how reports and the continual reporting processes that companies undergo in the lead up to issuing a report could be of greater value to NGOs in terms of their relationships with companies or the advancement of their mission or campaigns.

One of the barriers to better use of reports by NGOs was cited as the inappropriate way in which sustainability information is communicated. Usually in large printed or PDF documents, NGOs dont have the capacity or patience to sift through and dig out the information of interest to them. Many times NGOs operate on an issues basis, not so much focused on one company, so they are not always as interested in the full sustainability story a company has to tell, but instead focued on a smaller subset of issues.

Participants concluded that more dialogue between NGOs and companies is needed for creative solutions to be found for ensuring the right information gets to the right stakeholders in the right way.

Congratulations to Ceres Fellow Susan Roe on a great study, you can find out more at www.ceres.org

Happy Earth Day!

People often talk about the three pillars of sustainability - social, economic, and environment. I must admit that this image never really resonated in my mind as one that adequately described the dimensions of sustainability.

An alternative image has conjoured itself up in my mind, follow me if you can:

Imagine instead one large box - lets call this the environment. Within that box image a second, smaller box contained completely within the first - lets call this the social dimension. Within this second box a third exisits - lets label it economic. Finally a fourth box is drawn contained entirely within the third - it is the smallest box but it is at the heart of our diagram - it is labeled financial.

I think this image more accurately portrays the interconnected nature of the dimensions of sustainability. The financial system lies at the heart of of the way the world works today - but it exists in the context of a greater economic system. This economy is the invention of humans, and operates in the context of our cultures and societies - hence the social sphere. Finally, all of this operates within the finite physical boundaries of the planet Earth.

The world celebrated Earth day on Sunday and it was a great excuse to get outside and appreciate the world around us. I headed out of Amsterdam city to the Dutch countryside on my bicycle headed towards the famous tulip fields. They really are a sight to behold if you havent had the chance to see them in person. Acres upon acres of vibrant colours in full bloom, as far as the eye can see (enjoy the photo!). It occured to me that the tulip fields were a great illustration of the interconnectivity of sustainability dimensions. The basic function of the tulip fields is to supply a multi-million dollar trade in tulip bulbs and cut flowers, but this creates a wider economy around it of related products and services, and empowers the Dutch people to participate in the world economy. I still havent determined whether or not the tulip trade has shaped the Dutch culture or if the Dutch culture has shaped the tulip trade, but either way they are a very important part of the country's identity and culture. Finally, they need a healthy environment to grow and flourish, and contribute to the Earth's biodiversity.

Electricity: Is it a basic human right?

One of the things that inspires me about being involved with the GRI is the opportunity to see the multi-stakeholder process at work.

Just last week the 90-day public comment period for one of the forthcoming reporting framework components - the Electricity Utilities Sector Supplement (EUCC) closed. The EUCC was developed by a multi-stakeholder working group of about 20 who together created a set of indicators specific to that industry and designed to be used in conjunction with the GRI's G3 Guidelines. The working group will review the comments received during the open posting and make changes to the EUCC before it gets submitted to the GRI's Technical Advisory Committee for review and approval.

The comments received from over 45 different groups worldwide are a rich reminder of how contentious sustainability issues are today. One of the key points of debate is the basic human need (or human right?) for energy/electricity in order to survive. In fact I remember reading a UN report about two years ago on energy and the Millennium Development Goals which found that 2.4 billion people in developing countries lack modern fuels for cooking and heating and approximately 1.6 billion people do not have access to electricity - that is more than 1 in 6 of us.

In the debate that is playing out during the creation of the reporting guidance for Electricity Utilities we are seeing a tension between the expectations of companies and civil society about who is responsible for remedying this situation. Civil society groups want to ensure access to electricity for all people regardless of whether they can pay or not since in many cases access to electricity is a life or death matter. Companies are happy to provide services in poor areas and some even have excellent programs to help facilitate this, or are even making money from it - but for the most part they do not see themselves as responsible for fulfilling what is essentially a governments role to build and maintain infrastructure and subsizide access to electricity for the poor in their jurisdictions. Many times governments in places where electricity is most scarce are those that are least equipped to make this a reality, and so look to companies operating in their jurisdictions to play a role. And we are back to square one.

Where do you stand?

Globalization’s offspring: a race to the top or the bottom?

In last week’s Economist an interesting lead article ran: “Globalization’s offspring: How the new multinationals are remaking the old.” The rise of Brazilian, Indian, Chinese, and Russian (BRIC) companies as global powerhouses is happening fast and furious. Here in Amsterdam headlines were made a few weeks ago when Tata Steel of India bought Dutch steel giant Corus – the first time an emerging market company bought out a large company in this country - and a foreshadowing of what many feel the future holds.

Many are worried that the multinationals in emerging markets run lower cost enterprises because, in part, they turn a blind eye to social and environmental conditions, and this results in competitive advantage. But the author of this article claimed that the evidence is overwhelmingly opposite to this assumption due to the fact that price alone does not make a successful multinational – quality is equally as important.

The Economist claimed that in terms of ethics, companies seem to “harmonize up, not down” – meaning there is evidence that BRIC companies do indeed spread better working practices and environmental conditions in their home countries, and also adopt local norms when expanding into Western markets. Thus, the gap in sustainability performance seems to be on track to narrow.

In terms of transparency about performance, we are beginning to see a growth curve in reporting from companies in BRIC nations - most seem to be keen to show their international customers, competitors, clients, and potential business partners that they have earned a license to operate in their home communities and that regardless of slack national laws on human rights and environment these companies meet higher standards.

What is your experience?

Climate change: its not all doom and gloom

It is hard to enjoy the unseasonally warm weather here in Amsterdam with all the talk of climate change and its disasterous effects - infact I have heard that if left unchecked the economic impacts will exceed those of the two world wars and the great depression combined. But report released last week by WWF and SustainAbility is quick to point out the enormous business opportunity that lies under the tip of the climate change risk iceburg (pardon the pun).

The report focuses particularly on the housing, transport, and food industries which together place the greatest strain on the earth. We have all heard the risks before:
*increased resource prices
*investment withdrawal
*supply disruptions
*regulatory pressure

This report goes so far as to say that companies that do not begin to operate within the finite limits of the earth will infact be forced out of the market.

But refreshingly, the authors also present an appetizer for those of us trying to convince ourselves that the glass is infact half full. They point to long term, systematic change. Companies not working alone but in groups, consumers taking responsibility and harnessing their purchasing power, and overall new rules of the game that will facilitate the innovation needed to transform the way business creates value and meets human demands.

Is your company on track to be forced out of the market - or to unlock new value in the face of new challenges?

Governments: how to encourage sustainability reporting?

Today I am inspired to build on something Debbie mentioned in her posting on March 28 - participants at the conference she attended that day in the UK were pondering one of the big questions facing us today - what exactly is the role of governments? Many think that we are at the stage where governments have less a “command and control” role in sustainable development, and that they should now be fostering entrepreneurial solutions.

Little did she know that on that very same day an influencial group of Canadian extractive industry companies, along with their stakeholders from civil society, labour, and investment, reached consensus on a new framework for corporate responsibility that they hope will be embraced by all Canadian industry.

The framework sets out actions that will lead to extractive projects that are more socially and environmentally responsible, and help to distinguish Canadian business. The framework also lays out the role the stakeholders expect the government to play:

The central recommendation in the report urges the government, in co-operation with key stakeholders, to adopt a set of standards that Canadian extractive-sector companies operating abroad will meet and to reinforce them through appropriate reporting, compliance and other mechanisms. This approach will simultaneously raise the bar and level the playing field.

The government is also encouraged to support developing countries that promote investment in the extractive sectors in their efforts to optimize the social and economic benefits that accrue from such investment.

From the perspective of trying to promote the mission of GRI (make sustainability reporting as valuable and common as financial reporting) do these recommendations help? Will this result in entreprenurial solutions and better performance?

Global Compact: Communication on Progress

I spent the past two days in Geneva at the annual United Nations Global Compact (UNGC) Communication on Progress meeting. There were about 5 of us there who were celebrating our third anniversary of attending these annual meetings, but all the other 40 or so particpants were newcomers. As I reflected back I realized that (the proverbial) we have made much progress on this front in a relatively short period of time. Let me explain.

One of the main criticisms of the Global Compact since its inception is the lack of an accountability mechanism associated with its 10 Principles. Thousands of companies have signed up and pledged to embrace these Principles of social and environmental behaviour in their daily business activities - but critics wonder if it all isn't a pile of "bluewash." In response to this the UNGC began the "Communication on Progress" (COP) requirement - companies must submit an annual report detailing how they have actually applied the Principles and what outcomes these activities have had.

This is where GRI comes in. The Sustainability Reporting Guidelines fit like a glove into the COP requirements, and the UNGC have now said that they will accept a COP based on the GRI's Guidelines. So we have been working together to make this an easy exercise for UNGC endorsing companies to undertake.

At the first COP meeting I attended there was still much discussion about what the COP policy and requirements should be. There were only about 100 companies (out of about 2500 endorsers) who had actually submitted a COP. By last year's meeting about 700 companies had submitted a COP and there was much more clarity about the value of the COP and its requirements. This year 2500 companies (out of 3000 endorsers) had submitted a COP and the UNGC had even gone so far as to de-list about 500 companies that had not submitted a COP! That's what I mean by progress.

The meeting participants shared ideas about how to help companies get their COP together, and gave the GRI and the UNGC some great advice on how to improve our guidance on how our two frameworks can be used together. Altogether a very useful meeting, and I am looking forward to year 4!

Do you think the COP mechanism helps to build the credibility and impact of the UNGC?

PS. One of the highlights of the trip was bumping into Kofi Annan himself at the airport on the way home!