Sustainability Reporting Central

Back to basics (11): Sustainability – the next Kondratiev supercycle?

2008-03-03T13:27:00.004+01:00

The last edition of “back to basics” did focus on the ongoing discussion about managerial trends and was proposing that sustainability needs to get into the DNA of management practice, starting from the Board room and supported from bottom-up, which will of course only happen if management theory accepts sustainability as a principle that keeps the organization alive (license to operate) and embeds the opportunity to prosper (license to grow). It remains to be seen what the consequences will be for Weber-type demand and control hierarchy, for the ongoing increase of workload for less staff in efficiency driven management programs, the ongoing ‘parallel worlds’ corporate governance, strategy development and sustainability management, Taylor-style way segmentation of work packages and one-way communication to customers. The champions of the last decade, including Google, Starbucks, Yahoo, ebay, but also Gore, Timberland and others throw a lot of this over board, use seamless stakeholder engagement and web 2.0 technology to enable internal and external networking communities and shape their business models. The internet development marks the most important milestone of the 5th Kondratiev supercycle, and at the same time shapes the path into the 6th Kondraftiev cycle; maybe this next supercycle will carry the name “sustainability cycle”?

Here’s a quick Wikipedia explanation of the phenomenon of so-called Kondratiev cycles (http://en.wikipedia.org/wiki/Kondratiev_wave): “The Russian economist Nikolai Kondratiev (1892-1938) was the first to bring these observations to international attention in his book "The Major Economic Cycles" (1925). (…) According to the innovation theory, these waves arise from the bunching of basic innovations that launch technological revolutions that in turn create leading industrial or commercial sectors. (…) Most cycle theorists agree on five waves so far since the industrial revolution, and the sixth one to come. These five cycles are:

1. The Industrial Revolution—1771,
2. The Age of Steam and Railways—1829,
3. The Age of Steel, Electricity and Heavy Engineering—1875,
4. The Age of Oil, the Automobile and Mass Production—1908,
5. The Age of Information and Telecommunications—1971.”

All new supercycles are normally aligned by recessions, a tendency currently eminent. It is clear that from a technology perspective this next supercycle will focus on technologies that aim to sustain human life on this planet; health care, biotechnology (biomimicry etc.), next generation renewable energy and also – although conflicting - gene technology are subcategories. Even visionary concepts for the next generation internet is taking biological processes as the basis for further adaptation.

For all of us working in organizations and dealing with management issues one of the most important questions will be: will biology and its inherent logic of adaptation and communication also bring about a new mangement style? Will the next Kondratiev cycle include innovation in technology AND management? Will we see a continuous flow of newcomer organizations becoming big in short time just simply because the earlier cycle champions became to slow to adapt because of their structure and size?

You may aks ‘what does all of that has to do with GRI and is G3 Guidelines?’ Well, first of all the existence of GRI itself is a logic answer of interested stakeholders – like many other GAN’s (Global Action Networks) - to the slow adaptability of world trade mechanisms, governments and companies with regard to the overall transparency needs of a fair and successful implementation of globalization. The idea is that world markets can simply function better (and will survive) if sustainability is accepted as the roadmap and the necessary transparency needed is available. This will increase the speed into the next Kondratiev supercycle.

GRI’s G3 Guidelines purposefully ask in great depth what management’s reaction to these new challenges is. Is sustainability part of Board room discussions and is the organization aware about its impacts on sustainability issues? Vice versa, how do sustainability problem areas already affect strategy and business models? (see GRI G3 chapter on ‘Strategy and Analysis’). G3’s Disclosure on Management Approach then asks how the results of this analysis are translated into the management system implementation. Last but not least G3’s indicators ask about the performance achieved and the targets and objectives aligned to them. In that sense using G3 and implementing a proper reporting process are a useful means to increase the above described adaptability into an age of high speed change.

Back to basics (10): Sustainability - a new gene for the management DNA

2008-02-02T09:44:00.000+01:00

If you compare the discussion in companies around sustainability with a decade ago one could agree that quite a lot has already happened. Tools that help to demystify the meaning of sustainability and decode its general principles into how-to guidance for operational management are available and regularly updated; adaptation to the deeper needs of specific industries, but also public authorities and NGOs are under development. The landscape for globally accepted and applicable tools (conduct principles, management system approaches and balanced scorecards, reporting guidelines, assurance standards, life cycle assessments, and the relevant IT tools supporting all this) becomes clearer. A new layer of internal transparency around problematic sustainability issues helps as an additional radar screen to reduce company risk and to foresee danger up on the horizon. And more often sustainability reports reveal that there is progress towards sustainable excellence and a closer understanding of the 3D reality surrounding these organizations; so far, so good.

But still two major obstacles prevent companies from moving faster: firstly, the difference between political talk and concrete political action in global and regional debates doesn’t give companies the feeling that they are able to act in reliable and fair market conditions; a “wait and see” attitude becomes logic. Well, we also know that some companies and their industry federations are often also causing or at least influencing these toxic environments in the political arena through their lobbying activities, very often to the disadvantage of the few proactive industry peers, some of them are quite disappointed that their industry companions are hiding behind their strong backs.

Secondly, maybe a reaction to the first obstacle, sustainability as a paradigm to come to new value creation opportunities hasn’t been taken seriously enough in board rooms; let the middle management struggle with it. What we miss are crystal clear top management commitments and related actions (top down) that could create enough trust at staff level (bottom up) to enthusiastically embrace the paradigm of sustainability as a fountain of youth for that sort of innovative products and services that would rapidly help solving the most burning problems of this planet. Some good examples are rather the exception to the rule and do not yet create the inspiration avalanches that are needed (how nice for the first movers!); most industries continue to fine-tune the existing product and service range and prefer to milk existing cash cows until the cow collapses. Simply, sustainability is not yet part of the management DNA. So here we are, rubbing our eyes and wonder why everything that has to do with sustainability happens in slow motion while the world is changing in rapid motion and our opportunities to pull the plug where the planet needs it reduces from day to day.

2008 could become the year where we might see some change. There is obviously an appetite to increase the speed for clearer commitment from top management to wake up the sleeping beauty “sustainability” and shift from risk reduction to opportunity and sustainable value creation. Here are two examples:

The first wake up call came from the World Economic Forum’s “Global Risks 2008” report that was published shortly before the January WEF in Davos (see www.weforum.org). This report categorizes economical, geopolitical, environmental, social and technological trends, issues of concern and risks. The report concludes with a call to action: “Leadership on global risk issues will be an increasingly precious commodity”. It remains to be seen if this call will be understood by enlightened industry leaders to embed sustainability into their business models. Of course, this call also went to politicians, but that’s only a side note.

The second wake up call has been published in a white paper that tackles the needed change in the overall management DNA to create the “sustainability revolution”. This white paper, called “A new mindset for corporate sustainability” (http://www.biggerthinking.com/en/sustainability/innovation.aspx), was sponsored by BT and Cisco and summarizes the evident strategic opportunity for management and offers a 10-step program to turning the company into a sustainability-driven innovator. No wonder that BT and Cisco were the initiators of this approach that brought together academic thought leadership in a virtual discussion space (no travel was needed to bring them together; the ecological footprint of this project was close to zero). BT is a regular award winner for their proactive sustainability program that enables them to quickly adapt to market needs and simply “gets it”; Cisco is a major supplier to BT and a willing companion in this project.

I was especially pleased to see “bring your stakeholders on board (actively encourage them to participate in your innovation and encourage them to develop sustainable opportunities themselves)” and “use people power (ensure that sustainability is a clearly stated value at every stage of your people management process)” as two of the 10 principles. These two steps are the really difficult ones because they are so much against the current plan and control management mainstream and this surprising belief that one can have a highly adaptable organization while the majority of staff are actually de-linked from the products, customers, relevant management information, most of the other colleagues and last but not least also from the owners of these organizations. How much real passion for the company vision can be expected from these people?

I personally believe that the really innovative companies that are able to successfully implement sustainability into their DNA will be those with less hierarchy and that are closer to all of their stakeholders and allow them influencing decision making. Furthermore those companies will be rewarded that allow all staff a time buffer to create mental space for “crazy ideas” how to connect company value with social value; this means a huge step back from the lean management hype (or do you think that staff that already have difficulties to manage a work/life balance and suffer from the "overflow error" symptoms will be in the mood to think creatively?). Charles Darwin already warned us: “It’s not the strongest of species that survives or the most intelligent; it’s the one that is most adaptable to change.” It will be those that integrate sustainability into their DNA.

Back to basics (9): The world is a "polder" - a parable for sustainability today

2008-01-14T20:41:00.000+01:00

Welcome back in 2008! One of the things that I have been thinking about a lot in 2007 was the question “what is it that really and most effectively drives sustainable change”? After many years in the sustainability business my list has actually boiled down to four major drivers: legislation (let’s face it), competition, cost advantages and – maybe most important - education. There are definitely more, but these seem to be the most effective and high level ones (please let me know if you think differently).

Fair market conditions and a high level of transparency are prerequisites that these four drivers can actually flourish towards a more sustainable world; GRI plays a major role in increasing transparency about sustainability issue areas and provides a major instrument to allow structured discussion through the GRI Framework. While legal compliance, competition and cost advantage are quite well-known and managed in the corporate world, the overall and most important driver for me is actually education, meaning awareness about the interconnectivity of many sustainability problem areas and the ability of people and organizations to reflect on what their own impact is and how a certain history, religion, regional or company culture is influencing behaviour.

During the Christmas break I took the opportunity to read Jared Diamonds book “Collapse: how societies choose to fail or succeed” (Penguin books). If I could recommend books to start education and raising awareness about sustainability, Diamond’s book would be amongst the top 3. He looks into the past and what emerges is a fundamental pattern of environmental catastrophe which still exists today, globally and at higher level. In the last chapter Jared Diamond analyzes today’s political and market interconnectivity and develops a fragile picture of the world and concludes that the risk we face is of a worldwide decline.

As somebody living in the Netherlands I was especially touched by a picture painted by Diamond that explains “the world as a polder”: 1/5^th of the Dutch landmass is reclaimed from the sea, is up to 22 ft. below sea level and a complicated drainage system is pumping water back out into a river or the North Sea. This is why the Netherlands had so many windmills in the past (replaced today to steam, diesel or electric pumps). He quotes one Dutch friend who said: “You have to be able to get along with your enemy, because he may be the person operating the neighbouring pump in your polder. And we’re all down in the polders together. It’s not the case that rich people live safely up on tops of the dikes while poor people live down in the polder bottoms below sea levels. If the dikes and pumps fail, we’ll all drown together”.

Diamond concludes that most of the needed technology to not drown together already exists. But what is crucial is to also make the right choices towards long-term planning, and willingness to reconsider core values. He finishes his book by saying: “Thus, we have the opportunity to learn from the mistakes of distant peoples and past peoples. That’s an opportunity that no past society enjoyed to such a degree”.

So, let’s learn from the past, understand the value of transparency and make a real difference! Educating sustainability and finding the right parables to make people understand what is at stake is probably the biggest challenge we need to solve. 99% of the people of this planet still don’t have a clue.

Back to basics (8): Schumpeter's disequilibrium today

2007-11-12T23:23:00.000+01:00

Another often quoted economist and political scientist is Joseph Schumpeter (1883-1950). He was actually born in Moravia, became Austrian and then left for the US where he taught in Harvard, an interesting career. In his book “Capitalism, Socialism and Democracy” (1942) Schumpeter introduced the concept of "creative destruction" in which the old ways of doing things are endogenously destroyed and replaced by the new. He described that the real driving force of capitalism is “disequilibrium”, opportunities coming up by new (today: global) demands, inspiring innovation, a recipe to also avoid monopoly power. He also warned governments not to protect certain markets or organizations that were unable to succeed in transformation processes. One could argue that this is pure Darwinism for economy dummies.

Those who understand sustainability as the roadmap to successfully implement globalization should nowadays find Schumpeter quite inspiring because his baseline for a healthy capitalism is very much in line with what is really needed now: we are facing the fact that we need to overcome several divides between the global North and South (e.g. market divide, digital divide, education divide, etc.), dematerializing by at least factor 10 until 2050, while another 3 billion people will join us until then, the majority of them in the developing and emerging market countries. The ecological footprint (a methodology to measure the planet’s biocapacity that is already used up, invented by several institutions now captured in the “Global Footprint Network”) tells us that we have already overstretched the global capacity by 20%, growing to 100% until 2050, meaning we would need TWO planets if we allow business as usual. What else than “creative destruction” can be the way forward to successfully integrate countries into the global world markets?

We already see first successful examples of creative destruction in countries like India, Mexico and Brazil, wonderfully captured by C.K. Prahalad in “The future at the bottom of the pyramid”; completely different business models that absorb the needs and adapting to the infrastructural shortages of differently developed markets. Some global companies are amongst these examples, but most of the innovative ones are rooted in developing or emerging market countries. The title of this book already indicates the failure of any “top down” approach, just exporting Northern business models to the global South in an attempt to just simply copy what has worked in the global North.

Interestingly, the year 2000 Lisbon EU strategy for innovation explicitly mentioned Schumpeter’s creative destruction as a way forward to foster innovation, enabling social and environmental renewal. It broadly aimed to make Europe the most competitive and the most dynamic knowledge-based economy in the world by 2010. Not too much has been achieved since then, so one should not wonder that companies from developing and emerging markets that have successfully tested their business models in their local markets now start to also take over their Northern competitors that are stuck in a protective political climate, trapped in existing infrastructure and sunk capital investments. To sum it up, Schumpeter’s ideas today seem to better work in the bottom-of-the-pyramid context where opportunities are just simply taken when they arise, no foot on the brake. If Schumpeter would still be alive he might have again packed his bags, heading towards India or Brazil!?!

Back to basics (7): Recalibrating the "invisible hand of the market"

2007-11-01T11:39:00.000+01:00

The critics of the concept of sustainable development and CSR always argue with Milton Friedman’s famous quote that “the business of business is business” and also refer to Adam Smith’s theory of the “invisible hand of the market”. They see especially CSR as an attempt to more regulation through the backdoor and a way to restrict the market power and the players within their specific markets; overall CSR is bad for modern capitalism. Even worse, these two famous quotes seem to permit amoral behaviour if there are no laws against certain ways to pursue self-interest.

But wait a minute! When Adam Smith published “An inquiry into the nature and cause of the wealth of nations” in 1776, partnerships were the dominant form of enterprise in which ownership and management meant the same thing. Adam Smith was against the idea of corporations, or "joint stock companies." Why that?

Sad but true, most lobbyists of the "invisible hand of the market"credo are not aware that Adam Smith did also publish “The theory of moral sentiments” in 1759, where he explains that the self-interest of the market players (buy and sell side) needs to be pursued by people of conscience and with a clear moral capacity; he argues that sympathy is required to achieve socially beneficial results. The self-interest he speaks of is not a narrow selfishness that allows whatever market transaction, but something that involves sympathy. He regards pure selfishness as inappropriate, if not immoral, and that the self-interested actor has sympathy for others. He continues that the self-interest of any actor includes the interest of the rest of society, since the socially-defined notions of appropriate and inappropriate actions necessarily affect the interests of the individual as a member of society. This context is useful to understand why Adam Smith was against the idea of corporations or joint stock companies, where he already envisaged the problems of a disconnect between ownership and management.

I would argue that Adam Smith’s idea of the self-interested market player that has developed a moral capacity and can make informed market decisions in the aim to achieve socially beneficial results will find a lot of merit in integrating sustainability thinking and CSR as a tool to implement that thinking into his/her understanding of necessary fair market conditions: a better understanding of the needed changes in legislative frameworks (and its enforcement) to support sustainability as a means for fair markets, a changed mindset about the basic role of a company (counterpoint to Milton Friedman), the need for broader education on sustainability issues in all economic curricula (to disable amoral behaviour and enable Adam Smith's concept of "sympathy"), and a broadly developed set of indicators of economic, environmental and societal impacts of the transactions of the organization and of the individual (to increase the available information to make good market decisions). Needless to say, GRI plays a crucial role to achieve continuous improvement of some of these mentioned points through its multistakeholder global platform for dialog, its guidelines and sector supplements. GRI’s learning services add to solving some of the educational challenges.

Adam Smith, a sustainability activist more than two centuries ago - a very different take on his legacy? At least he was somebody sustainability advocates of today can lend more credit from than the narrow-minded lobbyists of modern capitalism who haven't got the whole story about Adam Smith.

Day 4: Transparency takes center stage

2007-10-26T03:29:00.000+02:00

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

2007-10-25T02:31:00.000+02:00

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

2007-10-24T02:15:00.000+02:00

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

2007-10-23T01:56:00.000+02:00

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

2007-10-21T01:48:00.000+02:00

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"?

2007-10-18T21:21:00.000+02:00

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

2007-10-12T23:41:00.000+02:00

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

2007-10-11T13:11:00.000+02:00

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?

2007-10-08T22:25:00.000+02:00

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

2007-10-06T00:39:00.000+02:00

"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

2007-10-05T14:12:00.000+02:00

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

2007-10-03T13:58:00.000+02:00

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.

Back to basics (2): Globalization and sustainability

2007-09-21T18:38:00.000+02:00

For quite some time I do start my presentations with a slide that shows the famous graph of the world population growth in developed and developing countries. "Oh, that one again ;-(" the audience might think, but honestly, do we really understand the impact of what's in front of us?

China - although still applying a one-child policy - will grow by another 150 million people by 2050 (another one of those "rebound effects": due to a higher life span a full generation of Chinese people will "mathematically not have died" between 1990 and 2050). India will see another 500 million Indians until 2050, more than the population of whole Europe today. 90% of all kids below 18 years now grow up in developing countries - NINETY PER CENT! The sheer size of these numbers should make us think what that means in terms of sustainable development. Also, what does that say about tomorrow's markets? Here’s my take on it:

What would happen if the countries that are integrated in world markets today fail to integrate developing countries into the world markets? For sure, waves of migration, war for resources, new epidemics and negative effects on climate change strategies would be some of the effects. Our Western (and emerging) societies will simply not be able to cope with the overwhelming brutality of these effects. So, as failure would be a disaster, there is simply no other way than to accept the challenges of globalization and its world market logic. But how does that link with sustainability?

Isn't sustainability just simply a synonym for a situation where everybody on this planet has the opportunity to participate in (globalized) world markets without being restricted by any rule that favours one person or place over another? The terms fairness and balance come to mind as well. And isn't sustainable "development" not just the broad highway in front of us, aligned by stable crash barriers (meaning globally accepted and globally applicable rules of behaviour that ensure fairness and balance, based on transparency and openness)? The question that remains though: how much time do we still have to continue walking barefooted on that highway? That is the picture that I always have in mind when I read the latest about WTO's never ending tragic soap "Nightmare on Doha Street". In that sense - for me - sustainable development is the blueprint for a successful implementation of globalization.

Anniversaries: ISO 14001 is 10

2007-09-18T22:43:00.000+02:00

Stumbling across ISO 14001 certification figures a few days ago jogged my memory to the days when it was first released - I must admit that discovering 14001 was released 10 years ago this past June was a bit of shocker - time flies!

It was controversial back then. The standard had the backing of governments and many businesses were stongly incentivized to get on board with it. I remember when Ford and GM joined forces a year or two later and made it mandatory for any company providing products or services in their supply chain to become certified under ISO 14001.

But pushback came from companies and environmentalists who said that the standard was causing weaker performance - not stronger. Some companies in Japan, the US, and western Europe had already adhered to high levels of environmental management, and the ISO standard - built with wide global uptake in mind - actually lowered the bar instead of raising it. Of course, there were the to-be-expected complaints of cost and burden as well.

Some say that ISO 14000 has been a solution to many problems: unintentional trade barriers created by environmental standards; the inefficiency of command and control regulations; and the plethora of permits, inspections, regulations and standards faced by companies trading across international borders.

I think the standard has done much for environmental management overall - not the least by creating a standardized set of vocabulary, expectations, actions, and (10 years on) a worldwide infrastructure of practitioners that can help companies cope with their environmental risks.

But is it actually improving performance? Does anyone out there know of any studies or impact assessments of ISO 14000 certifications?

Back to basics (1): The value of transparency

2007-09-17T22:46:00.000+02:00

Sometimes overwhelmed by so many different views, details, different priorities and cultural takes on sustainable development, I find it useful to really go back to the "heart of the matter", summarizing what we really need to achieve for a better future.

I'll start with an exercise that most of us go through at a certain moment of their career in GRI, trying to explain to others in not more than 60 seconds why GRI and sustainability reporting are so important. Here's my take on it:

"In today's globalized world transparency is absolutely fundamental to create trust, which is the basic ingredient to create partnerships (we already know that we will only be able to create sustainable change in partnerships!); only through partnerships continuous improvement will be possible, which finally is a necessary essential to create sustainable change. Accepting this logic simply means that without the right level and depth of transparency sustainable change will not be achieved.

Since we know that trust in most organizations is at an all-time low all over the world (open any newspaper on any day and just count how many articles you will find on this or somehow related topics), we need to work towards higher levels of transparency to recreate the necessary trust.

This is where using the GRI Framework can help. GRI facilitates the necessary dialog of all stakeholder groups from all over the world to define the aspects any organization should take into account while assessing how to close their own transparency gap. The problems we need to solve are global, so the format that structures the expected level of transparency to create sustainable change needs to be global as well. There is no other format than the GRI Framework that serves this purpose. So, why hesitate using it?"

We all need to decide if we can agree to this simple logic. Otherwise the other simple logic of W. Edwards Deming applies: "It is not necessary to change. Survival is not mandatory!"

ISO 14001 - on the menu in Asia

2007-09-16T22:18:00.000+02:00

I was somewhat surprised to find out that International Organization for Standardization (ISO) does not officially track the number of certifications to its 14001 environmental management standard. All these years I have been jealous of ISO assuming that they can track certifications with ease due to the compliance oriented nature of their standard. We are have always struggled to track the users of the Sustainability Reporting Guidelines because they are a flexible framework - certifications are not required, nor are companies required to inform GRI (or anyone else) when they have issued a report based on the Guidelines.

Anyway, I stumbled across some data from the German Environment Agency (UBA) while surfing the web this evening that seems to be the closest thing we have to a tally of total certifications. They tracked just over 129,000 certifications worldwide by the start of 2007 - they claim this figure represents a rise of about 25% from the previous year. I took that as a good sign that ISO 14000 is still growing that strongly.

Organizations in Asian countries account for over 45% of certifications globally - with Japan and China in the number 1 and 2 spots respectively (approximately 20,000 certifications each), and South Korea, India, Taiwan, and Thailand all in the top 20.

The ususal suspects from western Europe can be found in the top 20 as well - Spain (11,000 certifications - good for #3 spot), Italy, Germany, UK, Sweden, France, and Switzerland. But possibly more interesting is the appearance of some new CEE nations rounding out the bottom of the table - Romania, Czech Republic, and Hungary make the top 20 for the first time with a combined certification total of nearly 5000.

The USA is 5th on the list with 8000 certifications, and Canada is 11th with nearly 2600. No African companies made the top 20, but the survey shows that South Africa has over 400 certifications to-date.

I wonder if reporting rates will or do follow ISO certification rates. Has anybody out there seen any correlation?

Frankfurt Motor Show: Environment on Parade

2007-09-13T16:12:00.000+02:00

The International Motor Show or Internationale Automobil-Ausstellung (IAA) is the world's largest motor show and it opens today. IAA is held biennially in Frankfurt, Germany and is known in English as the Frankfurt Motor Show. It will attract at least 1 million visitors and will debut no fewer than 250 new passenger vehicle models.

I am no car junkie, so don't follow this closely but I did watch a segment on the morning news today previewing the models that visitors will be treated to when they arrive at the show this year. Clean, green, hybrid, electic, and other environmentally friendly prototypes will dominate the show apparently. I saw images of tiny space-age looking electric cars, and fancy luxury brands like Audi with the word HYBRID painted over the distinctive sleek bodywork.

Growing up not far from Detroit MI where the annual Auto Show dominates people's calendars, I remember it was all about being big and bad in those days! Large Hummer-type vehicles, trucks with industrial grade power being sold on the consumer market, and big heavy fuselages (I know that is an airplane term, but some of the cars were so large they looked larger than a small plane!).

Nice to see that the most anticipated new models this year are the enviro-friendly ones. They will have their place in the spotlight over the course of the next two weeks in Frankfurt - but the real road test will come when they hit the market. How will consumers vote?

Where I was on September 11th & how GRI helped

2007-09-11T16:24:00.000+02:00

It was a terrible morning that most people won't ever forget. I recall arriving at work around 8.30am at the Tellus Institute in Boston (where the GRI spent its formative years - Ceres shared office space at the Tellus building back then!) and being aware immediately that something was wrong as I could feel tension, concern and confusion in the air. Some of us crowded around a TV screen in the meeting room and watched with horror as the events of that morning unfolded.

Most of us went home early in shock. Some of the planes took off from the Boston airport which set the city into a state of panic, and many of us knew people that would have reported for work around that time at the Twin Towers in nearby New York and were concerned for their safety.

The next morning Allen White (co-founder and acting Chief Executive of the GRI at that time) called myself and my colleague Mark Brownlie (GRI's former Communications Director) into his office. We were supposed to fly out on September 15th for a meeting of the so-called Measurement Working Group (MWG) - a group of nearly 100 people from all over the world and all backgrounds (corporate, investment, NGO, labor, accountants, you name it) in London where we would facilitate their talks on the development of the 2002 version of the GRI Sustainability Reporting Guidelines. Allen told us that the meeting was not canceled, that he had decided he would go, but that we could back out if we were not feeling secure. We both decided to join Allen and fly out on the 15th - just a few nervous days after 9-11-2001.

We eventually found ourselves in London along with nearly 100 MWG members from over 40 countries who had made the same decision as we did. Many, including Allen and I, had to incur major difficulties and travel itinerary changes to get there due to airport shut downs and new security measures. We were surprised that we had nearly 100% attendance, very few people chose not to come and very few refused to let long queues and fear stop them from traveling to this unique gathering.

I will never forget the way Allen White opened up that meeting. He reflected on the difficulties and risks that all had taken in order to be there and play their part in the development of the 2002 Guidelines. He said that our little microcosm of 100 participants committed to working together to achieve something - despite different languages, cultures, religions, citizenships, beliefs, and professional affiliations (not to mention opinions on how to measure environmental and social issues!) - was even more important post-9-11 than it was pre-9-11. Why? Because as long as we, as a global society, refuse to break down barriers and at the very least respect one another - if not try to understand one another - our future would never be a secure and sustainable one.

Maybe our group was just a drop in the bucket, but it was a start, and we were building something that would help standardize communications about important economic, environmental, and social issues globally which we felt could help break down barriers and misunderstandings even further.

GRI working group consensus-seeking processes are always incredible experiences for the participants as people learn (sometimes for the first time) to reach out across boundaries to try and understand one another - but the meeting in mid-September 2001 in London was an exceptional example of that. It was one of those experiences that changed my life both personally and professionally. I think of it every time I come across the stamp in my passport that marks my arrival at London Heathrow on 16 September 2001.

In memory of Carlton Bartels, climate change innovator.

Harvard Business Review asks how reporting helps manage climate risk

2007-09-05T10:18:00.000+02:00

To round out a threesome of unprecedented media interest in GRI recently (see previous two posts this week) the Harvard Business Review was in touch to talk about what everyone is talking about - climate change.

The editor wondered how reporting could play a role in helping companies strategically manage risks and opportunities associated with climate change. Here were some perspectives I shared.

Lagging indicators: The starting point for navigating the risks of climate change is to first understand what impact the company’s operations, products and services are having on the environment. By knowing their own ‘carbon footprint’ with certainty, companies can start to take action to reduce their impacts. Benefits of measuring and reporting include realizing cost savings due to energy efficiency, to remain one step ahead of regulation, and to protect brand value by showing accountability and responsibility for environmental responsibilities.

Real time indicators: The climate change issue is so prominent that companies cannot afford to seem like they are not actively looking at their own impacts and helping to shape a more positive future. Benefits of reporting on these indicators include earning and maintaining a license to operate in the public domain, demonstrating a leadership position on one of the most pertinent issues of our time, and earning customers and clients by differentiating the company in the marketplace as responsible on this issue.

Leading indicators: Scientists tell us that climate change will alter our climatic patterns and our physical landscape. Reporting on forward looking indicators lets a company tell its story about how it is going to adapt and innovate to mitigate risk that climate change could cause – such as emerging risks to places where the company has operations, or risks to resources the company is dependant on (e.g., forests or agriculture), and risks associated with rising energy costs. Leading indicators also help the company show how it will capitalize on new market opportunities afforded by climate change – such as introducing new products and services that do not rely on fossil fuels, or engaging in carbon trading.

Search GRI indicators here.

Honesty note:
The Economist and Business Week contacted me this week, but I have to admit that the editor from Harvard Business Review contacted me about three months ago to talk about sustainability reporting and climate change. Since I am on a roll blogging big media interviews this week I couldn't resist adding it to the list. Look for the HBR interview in this October's issue.

Business Week asks why SMEs would report

2007-09-04T09:52:00.001+02:00

Its been a big week for media interviews here at GRI. Today I heard from a journalist working on a story for Business Week on small and medium sized enterprises and sustainability. She was wondering why SMEs might start reporting. Here is the just of my response:

There seem to be two very different drivers for reporting based on where the company operates/originates (that we have detected!)

SMEs from USA, Canada, Australia, Western Europe: the driver for embracing sustainability and producing a report is usually a competitive differentiator when it comes to products and services – ie., these are companies that produce “green” or “sustainable” or “natural” products and services, and they use reporting to walk the talk on what they are doing. The value of reporting to these companies is brand enhancement and better communication channels with key stakeholders such as customers, communities, providers of capital, and employees. Of course this is a broad generalization - an exception I know of would be a group of Chilean fruit growers are trying to break into the UK and US organics marketplace, and they are finding that sustainability reporting is helping convince buyers that their product is genuinely “sustainable”.

Emerging markets SMEs (Africa, Asia, South America, Central and Eastern Europe) seem, for the most part, to be driven by efforts to enter – and be competitive – in the global marketplace. Buyers are forcing a plethora of ‘codes of conduct’ and other related initiatives (formal and informal) at them and they must show that they do adhere to sound environmental and labor/human rights practices in order to compete. As we have seen with the recent product safety and quality scandals in China – buyers are held responsible for what happens in their supply chains in the court of public opinion. This does seem ironic in a sense, as buyers have been shifting their contracts over the past decade or so to emerging markets where goods/services can be produced at lower cost – in part because the local governments do not impose stringent regulations when it comes to environment and social performance by the corporate sector. The regulation is still coming down the pipe – but in a different form and from a different authority – the international buyers (whether these be B2B or consumers directly). Companies with their eyes on the future are staying ahead of social audits and the like by getting a better idea of their social and environmental impacts and starting to manage potential risks.

The Economist asks whats ahead in '08 for sustainability reporting

2007-09-03T18:36:00.000+02:00

I was quite honored this week when a reporter from The Economist contacted me to ask what I thought might be coming down the line for sustainability reporting in 2008. They are gearing up for their "Year Ahead: 2008" annual issue to be released in the next few weeks and I think its a great sign that they were researching sustainability reporting. Researching it doesn't mean that the topic will actually make it into the issue - but I still took it as a great sign!

Here was how I responded when asked for my perspective on interesting developments for 2008:

• The rise of sustainability reporting through supply chains. GRI is working with four multinationals right now as they roll out reporting among suppliers in ‘high risk’ emerging markets – ie. places where human rights, environment, corruption, or product responsibility issue are prone to arising mainly due to lack of legislation or enforcement in certain countries – reporting is one way for global companies to have more control and confidence in the conduct of their suppliers – which they are being called to account by investors and consumers. We will see a marked increase in B2B reporting and smaller enterprise reporting due to information demands in the supply chain in 2008.

• A marked increase in reports out of Russia and India to combat negative assumptions in the international community about corruption, labor standards, governance practices, and environmental impacts. Early movers, such as Jubilant Organisys in India, have been rewarded for reporting on these issues by being able to attract international capital and by being competitive in international acquisitions. This is helping to set the stage for others to follow.

• The US responsible investment community has mounted a campaign to increase the quantity and quality of sustainability information available for data analysis and decision making. Their goal is to have all 100 of the S&P 100 reporting based on the GRI Guidelines by 2008, if they achieve this they will move on to the S&P 500 by 2011. As per early 2007 they had noted a 20% increase in S&P company GRI reporting – accounting for about 50% of the S&P 100. At this rate they will achieve their ambitious goal of all 100 S&P companies issuing GRI reports by end of next year.

• XBRL on the rise? The financial reporting community has been toying with XBRL as a way to exchange data for the past few years, interest at the SEC is helping to fuel this – the GRI Guidelines are now available in this format. Will this have an impact on the volume, accessibility, comparability, and demand for information in the marketplace in 2008?

• Climate change and human rights emerging as main stream agenda issues that companies are expected to be doing something positive about. Accountability, transparency and reporting on these issues will become expected and will drive increased numbers of reports issued in 2008.

Korea: Trends in transparency

2007-08-30T13:48:00.000+02:00

A research institute affiliated with Korea's main independant daily The Hankyoreh released the results of their look at sustainability reporting in that country.

The large South Korean multi-nationals, known as "Chaebol" have really made their name on the global stage as big consumer brands - Samsung, LG, Hyundai, and Korean Air as examples. Stockbrokers are surely pleased with the level of transparency about financial performance, but how do these companies stack up in terms of transparency on economic, environmental, and social performance?

The Hankyoreh researchers found that Korean companies are strongest when it comes to reporting on environmental performance and product responsibility. Their analysis reveals that the level of transparency on human rights.

On a scale of 100, the highest score went to Yuhan-Kimberly with 57. Korea South-East Power came second with 55, followed by POSCO and Daewoo Securities with 52 each, finally Samsung and Korea Electric Power rounded out the top cluster with 48 points. A total of 22 companies were ranked overall. Of the top scorers, all use the GRI Guidelines as the basis for reporting except Daewoo Securities.

The lead author Lee Won-jae thought the results were positive and although past benchmarks are not available, he commented that the shift to greater transparency and the fact that most Chaebol embrace the global norm for reporting is a good sign. This group will continue to monitor trends in reporting in Korea into the future.

Has an Aussie found the business case for sustainability reporting?

2007-08-24T17:19:00.000+02:00

Thanks to Phil Hughes, the Director of the Centre for Public Agency Sustainability Reporting in Melbourne Australia for bringing an interesting tidbit to my attention.
He spotted a new report that reveals strong economic case for sustainability risk reporting to be adopted by Australian businesses.

On August 1st 2007, the Financial Services Institute of Australia (Finsia) released the first economic analysis to examine the costs/benefits to business and the economy of sustainability risk reporting in Australia.

The report, Tip of the Iceberg, found that benefits arise because companies with sustainability risk reporting benefit from lower corporate borrowing costs as a result of reduced risk, and higher labour productivity and sales from the boost to their reputation with employees and customers.

“In short, there is a strong economic case – to the tune of $1.2 billion GDP per annum and a significant profit gain of 2-3 per cent for medium and large companies that voluntarily report on sustainability risks”.

“Overall, the voluntary adoption of SRR [sustainability risk reporting] by more Australian businesses appears to be a worthwhile investment for them, as well as having wider economic benefits, and so should be encouraged by Australian Governments”.

The report also found that the proportion of Australian top 100 companies reporting of sustainability risks was likely to increase from 23 per cent to 60 per cent within three to five years.

Finsia commissioned the independent study conducted by Econtech, to determine the costs/benefits of environmental, social and corporate governance for sustainability reporting to business and the overall economy. They refer to this style of reporting as sustainability risk reporting (SRR).

The report is part of Finsia’s Tip of the Icebreg – investing for the long-haul campaign on sustainability risk reporting. The report was released at a sustainability summit in Sydney and is now available to download (large 7M paper).

Mattel: Hindsight 20-20

2007-08-23T15:40:00.000+02:00

I covered the case of Mattel on August 2nd - an article appeared in the New York Times a few days earlier that praised Mattel for avoiding major social and environmenal crises by having more control over suppliers since they were actully owned by Mattel outright.

But in the days and weeks that have followed the press has been overrun with stories about product safety scandals and guess who is right in the middle of the scrum? Mattel! The company has been hard hit with recalls of some of its highest profile products due to quality issues arising out of factories in China.

A blog reader pointed out the strange 'coincidence' that the positive article ran only days before the product safety expose. This inspired me to take a closer look at the situation. Sure enough, Mattel owns many of its suppliers in China and Indonesia. Its hard to tell if the factories that issued Barbie dolls with lead paint (presumably not part of the original specs!) are owned or not.

Here is a letter to the editor that my colleague Katherine submitted to the Financial Times today (not sure if it will get published):

Rather than avoiding purchasing products from China, consumers should push for greater transparency and accountability by companies sourcing from Chinese suppliers and from Chinese companies themselves. Sustainability reporting is integral to improving transparency and a valuable tool for companies who want to manage their economic, environmental, and social impacts.

If companies working in China want to differentiate themselves from those caught up in these scandals, they should be promoting their sustainable credentials through sustainability reports. As well as bringing many other internal and external benefits sustainability reporting using a globally recognized framework, such as the Global Reporting Initiative’s G3 Guidelines, can build customer confidence in a company’s brand, products and services and be used to mend the damaged “Made in China” brand.

I will let you know if it gets published!

We've entered a new archaeological period (apparently)

2007-08-15T14:43:00.000+02:00

I mentioned yesterday that I was a fly on the wall recently at a gathering of very unique and creative thinkers - members of the Association of Management for Innovation.

I had the pleasure of introducing the concept of sustainability to this group. I used illustrative examples to show how the increasing interconnectivity of a fast growing human population is creating a whole new set of conditions within which businesses need to learn how to operate. In this new era there are risks - such as diminishing resources and variable human rights standards - and there are opportunities - such as greater mobility and access to new markets at the 'bottom of the pyramid'.

The group pondered and discussed this new set of conditions and concluded that they did agree - business has never before done business under these circumstances. A re-writing of the rule book is underway.

It was during this discussion that one of the participants shared that he was recently on an archaeological tour of Greece and his guide pointed out that it is generally accepted that we have indeed crossed into a new and distinctly defined archaeological period. 10,000 years from now scientists examining their ice & soil cores and digging up ruins from human settlements will notice a distinct delineation around the time of the 20-21st centuries. This will mark the start of an era where humans significantly impacted their environment.

Will they find evidence of large scale urbanization? Open pit mines? Deforestation? Elevated carbon levels? Ruins from manufacturing sites? Will they find differing clues on different continents? What will they conclude about the civilization that dominated the globe during the period 1900-2500?

Diversity: are we looking deep enough?

2007-08-14T13:22:00.000+02:00

I had the pleasure of spending a few days with members of the Association for Management Innovation when they met here in Amsterdam late last week (explains my absence from the blog!). This is group of people spanning nearly every industry and consultancy-type you can think of, and have absolutely nothing in common except that they are in charge of innovation and/or change in their organizations. (Sidebar: They also knew nothing of sustainability or corporate responsibility but decided that this would be the theme of their August meeting so they invited me to come along.)

In one of the sessions a member of the group presented her thoughts around diversity in organizations. She argued that although there will always be room to improve, most companies DO have solid diversity policies and procedures in place - ensuring a good blend of people from different genders, age groups, races, religions, nationalities, sexual orientation, languages, and other measures. In this globalized world most companies see diversity as a competitive advantage.

Although some companies performance on diversity may fall short of the mark, the presenter identified what could be a potentially bigger problem when it comes to diversity: character.

She claimed that companies consciencely or sub-consciencely carved out a "keyhole" in terms of the type of person that they would like to promote and succeed and lead the organization. This results in a very homogenous top tier of executives - typically a set of clones of the CEO. She said it takes great courage for a CEO (and the organization at large) to break out of this tendency and hire or promote people of very different character. She argued that although the day to day interactions may be more difficult due to the natural tensions that would exist due to the diveristy of perspectives, in the long run players would build up trust and respect for one another, and the organization as a whole would be strengthened by this diversity of character.

Although the GRI indicators do cover diversity in its various forms, there isnt one to measure the range of character diversity!

The two "i"'s of business: innovate and integrity

2007-08-07T17:56:00.000+02:00

A nifty little report landed on my desk today from Arthur D Little, the consultancy. It has a complex mathematical equation as its title:

Integrity + Innovation = Sustainable Performance.

It caught my eye at first because the opening paragraph of the report states that the growth of the number of companies that have produced a report based on the GRI Guidelines has grown from 20 to 1000 in a 7 year period. It was presented as being an indicator of the growing corporate committement to sustianability. So I read on to discover that "...while this activity is taking off, the familiar competitive pressures of business are not going away. Instead they continue to mount, compelling companies to keep finding new and better ways to deliver the goods and services that socity wants more efficiently and profitably."

ADL's solution for companies is a twofold committment to integrity and innovation. The equation is simple:

INTEGRITY: consistently fulfull stated business principles as an integral part of decision making, rather than managing "CSR" as an additional business activity.

INNOVATION: find successful new ways of value creation in response to the changing needs of markets, societies, and the environment.

The result: sustainable prosperity. They only have anacdotal evidence compiled at this point to try and illustrate the success of this equation, but they outline evidence from successful companies such as Novo Nordisk, BT, and GE - and present these in sharp contrast to those companies that have lost their integrity such as WorldCom, Enron, etc.

For better results, own your supply chain

2007-08-02T10:05:00.000+02:00

Buried so deep in this weeks New York Times was a story on toy giant Mattel (maker of Barbie, Hot Wheels, among others). Unlike most retail manufacterers based in the US and Europe, Mattel actually owns the factories in China and elsewhere in Asia where most of its core products are produced. They do outsource non-core products and components to other suppliers, but only amounting to about 35% of total production.

This practice runs in sharp contrast to most other retailers who contract with factories in Asia for the low cost production. The article cited quality control, a committment to decent workplace conditions, and toy safety as the key reasons Mattel has opened its own factories in China - as opposed to outsourcing. I do recall the Dateline episode about 10 years ago when secret camera's entered one of Mattel's contract factories in Indonesia and revealed horrendous workplace conditions - in the lead up to the busy Christmas toy season this was disasterous for Mattel.

Prakash Sethi, an internationally renowned supply chain, ethics, and work place condition expert was hired to help Mattel get back on track after that expose. To this day he still has open access to any Mattel owned factory for surprise visits and is allowed to post his findings publicly. Now that is a true test of how confident the company is in its factory conditions!

From the perspective of sustainability reporting this bodes well for the company. Most companies struggle with their report boundary. The boundary for financial reporting is clear - it includes all entities that a company owns. But for sustainability the boundary is not as clear. The classic example is supply chain issues. A big brand retailer typically does not own the factories that produces its goods - and therefore it does not directly control the performance of that factory. It does exert some level of influence over that factory however - and it is via this influence that it can insist on improved conditions. This can be reported as policy or procedures - but performance results are often difficult to track. Mattel has the benefit of being able to control their factories directly - and therefore know the performance results.

What do CEO's say about sustainability? (Part 3)

2007-07-26T17:12:00.000+02:00

Globalization is not only here to stay, but is maturing to a next phase - earlier phases being typified by outsourcing and supply chain shifts from "Western" economies to emerging markets. But this next phase will show a marked increase in global integration with China and India in particular being new drivers of demand - not only supply.

The McKinsey study concluded that expectation around adherence to sustainability by companies will become even higher as a result of our entering this next phase. Why? Greater service integration across national boundaries would make intangibles more valuable, and Chinese and Indian companies will need to find ways to demonstrate their "local" loyalties in parallel with their efforts to build globally integrated value systems.

CEO's seemed to agree. When asked which trends would be most important in influencing society's expectations on business "increasing environmental concern" scored highest - a whopping 61%. This was followed by a cluster of three responses scoring in the 30's - Greater demand for and limited supply of natural resources (38%), Emergence of China and India in the global marketplace (37%), and increasing technological connectivity (33%).

There were 7 other responses to this question, all scoring between 6-18%, and included decreasing trust in business, pressure from NGOs, globalization backlash, and overburdened public sectors.

The green business case in Europe

2007-07-24T15:24:00.000+02:00

Sometimes a committment to sustainability at the heart of your business pays off - big time. The headlines of the Financial Times in Europe this past weekend read "France an UK push for green tax cuts". Seems that the new leaders in charge of France (Sarkozy) and the UK (Brown) have wasted no time putting the environment first and foremost.

Their main plan is to implement lower Value Added Tax (VAT) on emergy saving goods and services.

Sarkozy was quoted "It is unfair that a polluting car costs less than a car that does not pollute."

The business case cannot get any clearer. Now let's see how long it takes, and how many hoops have to be jumped through for this scheme to actually be implemented!

What do CEO's say about sustainability? (Part 2)

2007-07-19T17:35:00.000+02:00

Building on yesterday's discussion about perceptions of CEO's about the expectations of society regarding the public responsibilities of companies, today I move on to who CEO's think are having influence on their companies.

The 400 CEOs surveyed by McKinsey & Co cited that not fulfilling sustainability obligations would lead to declining market shares and loss of talent. It is not surprising to find that employees ranked highest (48%) when asked which stakeholder group will have the greatest impact on the way companies manage societal expectations. I was happy to see that customers was the second most important group following closely behind with 44%. Customers need to start voting with their dollar!

Local communities, regulators, media and NGOs came next, all scoring in the mid-20% range. Also interesting from GRI's perspective at the moment as we are going to focus the next year on engaging with report readers, such as the stakeholders listed above, to find out if they are indeed using report information to advance their relationships with companies.

Interestingly investors scored fairly low, only 16%. This doesn't bode well for the hope that many of have about the mainstream investor world waking up to the value of sustainability information. At the moment CEOs seem to think that environmental and social risks and opportunities are not on the minds of investors. A harsh wake up call that we have a long way to go still.

What do CEO's say about sustainability? (Part 1)

2007-07-18T14:01:00.000+02:00

My boss (Ernst Ligteringen, GRI Chief Executive) handed me a publication by the consultancy McKinsey & Co today - he picked it up at the recent Global Compact Leaders Summit in Geneva. Its an interesting look at how tides are definitely changing in the mainstream business community. I will feature a few of the most interesting findings over the next few days.

400 Cheif Executive Officers of leading companies worldwide were surveyed about the emerging new rules of competition.

Question: Percent of CEO's that believe society has higher expectations for business to take on public responsibilities (environmental and social) than five years ago: 97% of CEO's from public companies, and 91% of CEO's from private companies agree.

When asked to motivate this, the CEO's cited the rapid erosion of public trust in companies as one indicator that expectations have and will continue to change. Another factor was the shifting emphasis on the creation of long-term shareholder value - and the need to maintain or boost their legitimacy in socitey as one key way to ensure this.

Goldman Sachs links corporate responsibility to market leaders

2007-07-13T18:32:00.000+02:00

The study came out late last week at the UN Global Compact Summit in Geneva - those of us not used to seeing the GS name associated with corporate responsibility took note! Mainstream investors have always been wary of sustainability and sustainability reporting - could it be that we are witnessing the winds of change?

The study's main finding is that companies that are considered leaders in environmental, social and governance (ESG) policies are also leading the pack in stock performance—by an average of 25 percent.

More specifically, in an analysis of more than 120 ESG leaders from five different industries—energy, metals and mining, food and beverage, pharmaceuticals and European media—Goldman found that companies in four of the sectors for which it had published reports (energy, mining and steel, food and beverages, and media) outperformed the MSCI world Index by an average of 25 percent since August 2005. 72 percent of the companies on the list outperformed industry peers.

This is a significant result for those of us trying to convince companies that a commitment to sustainability is indeed rewarding!

Interstingly, the main complaint Goldman researchers had was that disclosure remains an issue, the data is hard to get and is not consistent. Sarah Forrest, head of the research project said "We call on companies, industry groups and regulators to address this challenge."

Look no further, GRI Guidelines are here!

Anniversaries: Halfway to 2015

2007-07-12T18:18:00.000+02:00

I read today that July 7th 2007 was the official halfway point in our long journey towards achieving the Millennium Development Goals - or MDG's as they are affectionately known. Back in 2000 the UN convened governments of the world and managed to reach agreement that we would commit ourselves to an agressive agenda to rid the world of its worst development problems by 2015.

The goals include:
- Halve the number of people living on less than a dollar per day
- Ensure ALL children complete primary school, and educate boys and girls equally
- Significantly reduce child mortality rates, and maternal mortality rates
- Halt the spread of deadly diseases like HIV
- Havlve the number of people who do not have access to water and sanitation
- Increase aid and improve governance

By most accounts these goals won't be met by 2015 - at least if we continue along the rate we are going today. Enormous strides have been made on some of these issues in specific countries, but on the whole it is an uphill struggle. One school of thought that has been surfacing lately is that governments cannot possibly do all of this alone. The private sector has a role to play - but what?

Economic value-added is the main contribution a company can make - provide jobs directly or via the supply chain, pay taxes, and invest in infrastructure. Many companies that operate in emerging markets are actively playing a role here and are conscious of the MDGs and their role as a key partner. But what about maternal mortality and childhood education? Most companies do not see themselves as having a responsibility to provide social services or infrastructure that typically falls into the domain of governments.

Will we remain in this stalemate, or is there a future where the public and private agendas could be more closely linked?

Anniversaries: The Universal Declaration of Human Rights is 60

2007-07-04T17:38:00.000+02:00

... well, it's still only 59. But we got an email from Mary Robinson (former Prime Minister of Ireland, and currently the head of the Ethical Globalization Initiative)and Chris Avery (Director, Business & Human Rights Resource Centre) asking for our ideas about how the 60th anniversary of the Universal Declaration of Human Rights in 2008 might be marked.

We couldn't resist but to suggest that the 60th Anniversary should be the year of transparency. How can things start to change if we don't even have a good understanding of what is happening, the cause and effects, and the roles and responsibilities?

Worldwide, the human rights agenda has reached a cross-roads. Stakeholders agree that human rights are a core necessity – but the roles and responsibilities of governments, business, and civil society towards achieving these goals remain less defined.

At the global level, Professor John G. Ruggie was appointed Special Representative of the UN Secretary-General on Business & Human Rights in 2005. Under this mandate, extending until 2008, Professor Ruggie is convening a multi-stakeholder process for the UN-High Commissioner for Human Rights to draw out the current “state of play” on stakeholder responsibilities on human rights. This process will result in a set of recommendations on the roles different groups play towards achieving human rights.

The GRI’s own multi-stakeholder approach is part of the current global dialogue on human rights and will make a contribution to the greater understanding by business, civil society and governments about expectations, roles, and responsibilities.

Human rights disclosures in the G3 Guidelines will need to evolve in step with these changing expectations. We are just starting with the process to evolve the indicators, so if you want to get involved, please do!

Anniversaries: The Brundtland Report is 20

2007-07-03T17:28:00.000+02:00

The year was 1987 and Gro Harlem Brundtland was the Prime Minister of Norway - and busy chairing the UN's Commission on Environment and Development. The findings of this Commission were captured in a handy little booklet called "Our Common Future" where the term "sustainable development" was first coined.

I read an article by Bill Baue recently and he reminded readers that "Sustainability is an ancient concept, best articulated in the Gayaneshakgowa, or the Great Law of Peace of the Six Nations Iroquois Confederacy: "In our every deliberation we must consider the impact of our decisions on the next seven generations."

Fast forward to 1992 to find this blogger up to her eyeballs in an undergraduate degree where every single course related to sustainable development assigned an essay asking us to define, debate, justify, or reject the term "sustainable development" - I remember thinking how ironic it was that we were expending all our brain cells trying to define and re-define this new term (or prove it to be an oxymoron) when all I really wanted to know was how I could put it into practice.

And here we are in 2007 and this blogger is still trying to find ways to put sustainability into action. Looking back over the past 20 years we seem to have concluded that the term "Sustainable Development" is not infact an oxymoron, which is a good start, and we have indeed found some great ways to put the concept into action - but that it still remains on the fringes of our economy, society, and environment - the very things the concept was meant to lie at the heart of.

What do you think?

Are we talking sustainability reporting or sustainability performance?

2007-06-27T14:33:00.000+02:00

A reader recently inquired about whether or not I had seen any ranking or indexing scheme that rates companies on their actual sustainability performance - not just the quality of their reporting. My answer: surprisingly hard to come by!

The professional indicies such as the Dow Jones Sustainability Index and the FTSE4GOOD use sustainability reports and other data provided by companies on the list (or competing to get on the list) to make a valuation of their performance from a risk exposure and future value perspective. Often times the methodology is not made public because these of course are proprietary products. (Note: I am not sure if the two above-mentioned products make their methodologies public or not).

The only other performance evaluations I can think of are award schemes. There are publications like the former Business Ethics Magazine (now the CRO)that rank the 100 Best Corporate Citizens. Many industry associations also award their members or companies in the industry for performance. In the UK, the membership association Business in the Community (BiTC) runs a very high profile and competitive Corporate Responsibility Index annually.

Quality of reports often act as a proxy for performance. Take for example the bi-annual Global Reporter's survey done by SustainAbility, UNEP, and Standard & Poor's which ranks report quality. Check also the Roberts-McKenna Pacific Sustainability Index which ranks companies reports on a system that awards companies for the breadth and depth of issues they cover.

Why is it easier to find rankings of report quality than it is to find rankings of performance quality?

GRI Book Club: The Wal-Mart Effect

2007-06-25T14:39:00.000+02:00

The Financial Times ran a news story yesterday with the headline "Wal-Mart postpones its green report." Seems that a draft circulated to its main stakeholders "was rejected as inadequate" according to the journalist. The world's largest company had originally promised a sustainability report by mid-2007 - a promise made back in 2005 when shareholders and advocacy groups put Wal-Mart under fire on their sustainability practices.

I see a real opportunity for Wal-Mart here - they have the chance to revolutionize the practice of reporting and make real strides towards understanding their sustainability footprint and reinforcing the global movement toward a common language for reporting. Fingers crossed they also see it that way.

No one really knows how Wal-Mart sees such things claims Charles Fishman - author of "The Wal-Mart Effect". Its an easy-to-read book which I am about 3/4ths of the way through. Mainly it's about the economic impact that Wal-Mart has on communities and its suppliers, but just last evening I came across a case study on the Chilean Salmon industry which highlights the power Wal-Mart could weild on workplace and environmental conditions if it so desired.

Fishman outlines the boggling growth in aquaculture in Chile, and the fact that about 1/3rd of that country's total output is bought by Wal-Mart. The problem is that this intensive fish farming is causing coastline damage and is polluting the sea beds underlying hundreds of pens jammed with millions of Atlantic Salmon (incidentially - the species is not native to Chile). Processing factories have sprung up and replaced subsistence agriculture as the main form of employement for people in the region. For the price to remain as low as $4.85 per pound of Salmon at Wal-Mart you can imagine that rehabilitating the environment or providing up-to-code working conditions for factory laborers are not on the priority list for these suppliers.

All I know is less than $5 a pound for Salmon sounds a bit fishy :-)

But imagine if Wal-Mart demanded low priced fish but produced via adherence to basic environmenal and labor rights codes? Fishman points out that "the result could be a completely new kind of Wal-Mart effect - Wal-Mart using its enormous purchasing power not just to raise the standard of living for its customers, but also for its suppliers."

Sustainability reporting: niche or mainstream?

2007-06-21T16:44:00.000+02:00

The Global Reporting Initiative was founded on a simple premise: That greater transparency on the part of organizations about their economic, environmental, and social performance would result in a shift towards better performance in these areas over time. It is still too early to tell whether or not this premise which seems strong in theory is actually panning out in practice.

Since we don't yet have proof, this reporting-changing-behaviour question is the topic of much conversation and speculation in GRI circles. Just yesterday we had some guests in from ACCA (accounting association) and KPMG (accounting services) and sure enough, the conversation creeped in this direction.

It started when someone at the table said that there were an estimated 80,000 multinational enterprises in the world (UNCTAD estimates) and that only about 2000 at most had started with reporting. Hence, even if reporting did change behaviour we were looking at a drop in the bucket.

But someone else countered with a very different perspective. He claimed that the 500 largest companies on earth were responsible for generating 70% of the volume of the global economy. 75% produce some sort of sustainability report, and nearly all of the largest 100 do extensive reporting. If reporting is resulting in changed behaviour at these organiztions it can be said that reporting has already had an impact on sustainability due to the high volume of economic power they pack.

What is your perspective?

UN World Refugee Day

2007-06-20T16:18:00.000+02:00

Today the United Nations brought the plight of the world's 40 million estimated refugees. I tuned into the UN High Commissioner for Refugees, Mr. António Guterres,web video statement to see what he had to say.

As a person that lives away from my home country I found one of his statements particularily poignent in explaining the difference between people like me and refugees: "In an age of increasing globalization, when more and more people are on the move, refugees are not unique because they are away from home. What sets them apart is that they cannot return there."

Today people do not just flee persecution and war but also injustice, exclusion, environmental pressures, competition for scarce resources and all the miserable human consequences of dysfunctional states.

The task facing the international community in this new environment is to find ways to unlock the potential of refugees who have so much to offer if they are given the opportunity to regain control over their lives.

So many companies are scrambling today to innovate 'base of the pyrimid' strategies - that is to figure out how to engage with the worlds fastest growing markets - those in developing countries. I have yet to hear of any company that has devised strategies for engaging with refugee communities. Any out there?

Sustainability of Olympic proportions

2007-06-15T17:56:00.000+02:00

Guest blogger: Debbie Dickinson

George Monbiot, environmentalist, journalist and one of my fave- gurus, wrote a damming piece in a major UK (quality) newspaper on the legacy left by Olympics in the cities that host them.

He says:

“The Games are supposed to encourage us to play sport; they are meant to produce resounding economic benefits and to help the poor and needy. It’s all untrue. As the evictions in London begin, a new report shows that the only certain Olympic legacy is a transfer of wealth from the poor to the rich.”

He then cites a record of environmental and social disruption failures in city after city that hosts the games. As a big fan of the Olympics, I am also not naïve to their negative implications. Sadly, I couldn’t help but nod in agreement at almost each of Monbiot’s claims. So there’s room for improvement – and who will act?

It’s thus with optimism and eager anticipation that we at the GRI learnt this week that the Vancouver Winter Olympics (2010) released their first sustainability report. It’s the first sustainability report ever issued by an Olympic Organizing Committee, so it’s pretty significant news. Their website says:

"VANOC is the first Games Organising Committee to integrate not only environmental but also social and economic responsibility. The report outlines VANOC’s six areas of direct decision-making and actionable authority, including accountability; environmental stewardship and impact reduction; social inclusion and responsibility; Aboriginal participation and collaboration; economic benefits from sustainable practices; and sport for sustainable living. VANOC is using Global Reporting Initiative (GRI) guidelines, a credible international standard in corporate sustainability reporting."

Whilst other Organizing Committees have considered environmental implications, Vancouver (and London 2012) are the first to have a broader sustainability lens that covers environmental, social and economic implications.

Congratulations to Vancouver 2010 and London 2012 in this high-profile step in planning for a more sustainable Olympics.

Let’s hope Monbiot’s future discussions on the Games reminisce a more positive legacy…

A tale of two motor companies

2007-06-12T19:34:00.000+02:00

Guest blogger: Debbie Dickinson

I noticed in passing last week that Toyota triumphantly announced sales of their innovative hybrid car – the Toyota Prius – is excess of 1 million. Moreover, they’re aiming for sales of 1000 per year within the next few years.

Largely branded as the world’s first mass-produced eco-friendly car, the Toyota Prius has moved from the marginal into an ever increasing mainstream, both in terms of sales, and also in broad social currency: the idea that a hybrid car is a realistic option has made a significant (perhaps intangible) influence on the market.

In parallel news, today I saw that Ford are expected to make some anticipated “official announcements” on the fate of two British models, Jaguar and Land Rover. Over here in the UK (where I’m based) this has generated a fair bit of media interest. Ideas around factory closures, asset stripping, Britain’s manufacturing industry, and off-shore production are dominating the opinions of those most affected by the expected sell-offs. Employing around 20,000 people in Britain’s midlands, the alleged closure will certainly impact many.

But I also wonder about comparisons between the two motor companies. One is well positioned for the future, whilst the other is at a tipping point of uncertainty. Rewind 5 years or so and both Toyota and Ford were waking up to the urgency of sustainability and corporate responsibility. Ford focused on internal sustainability impacts and went about implementing operational changes – green rating offices and the like – whilst Toyota looked towards their biggest sustainability impact and attempted to improve the impact of their cars.

Take us back to today, and we see the success stories of a company that took the risk and tackled its biggest sustainability issue head on. Toyota are now standing well positioned to future carbon-constrained climates and have the brand reputation of innovative eco-solutions.

I wonder if tales of factory closures, brand sell-off and social disruption through job loss (a-la Land Rover and Jaguar) are the continuing evidence of a changing business climate, and perhaps a tale of what happens by failing to incorporate material sustainability risks into core business. Looking for a business case? Seems Toyota found one.

From G3 to G8

2007-06-08T14:23:00.000+02:00

Guest blogger: Debbie Dickinson

There’s been quite a buzz throughout the GRI network over the past two days, as the GRI was mentioned yesterday in the official results from the G8 summit in Germany.

You really can’t help but feel the momentum gaining when eight of the world’s most influential leaders join together and formally encourage organizations to use the GRI framework.

The organizing principle of this year’s G8 summit in Germany is “Growth and responsibility”. Yesterday afternoon featured a session on corporate responsibility and transparency and sustainable growth, in which the reference to GRI was made:

“The development of a consolidated set of principles and guidelines… would help ensue that the [mining] sector contributes to development while at the same time providing a clear and more predictable set of expectations for investors.” The G8 said. As a means to achieve such goals the G8 members said “We encourage mining sector companies to undertake regular reporting using inter alia the Global Reporting Initiative (GRI) framework.”

As well as highlighting mining companies, G8 members also referenced GRI in relation to SMEs, investors and the contribution of transparency and good governance to sustainable development, especially in emerging economies. The GRI network has been something of a buzz since this G8 reference was made.

It strikes me how fast the agenda is changing. A few years ago, we were aiming for mainstream acceptance of sustainability reporting. Whilst challenges still lie ahead it’s nonetheless hugely encouraging to receive political backing and leverage from an international event of as significant as the G8 Summit. To imagine that corporate responsibility and transparent reporting is being linked with good investment and strong development outcomes in as high-profile arena as the G8 summit is a pretty strong indicator that the “old” ways of doing business really are fast becoming outdated. These ideas are some that the network has spent years evidencing – and sometimes on unresponsive ears.

That corporate responsibility and the GRI is amongst the G8 agenda of hard-hitting issues like climate change and African development (two of the major themes of the Summit) is also hopefully a strong signpost for the seriousness with which governments, companies, civil society and others respond to the issue now and in the future.

Perhaps the scale of momentum is causing the buzz through the network at the moment…

Check out the press release, and news story on this event. All the latest happening from the Summit can be found on the G8 2007 website.

Assessing futures: where is globalization leading us?

2007-06-07T11:11:00.000+02:00

Many people think that globalization in a new phenomena, but I would say it has been simmering under the surface for centuries since the times of early traders and explorers. Technology, for the most part, has lead to an unprecedented acceleration of interconnectivity between people and goods in the last decade or so. Most experts agree that "globalization" is HERE rather than HAPPENING now that 20% of the world's GDP is made up of global trade - and this is only set to grow.

The consultancy SustainAbility has put out an innovative report looking at four different scenarios for how the future might unfold. It's a complex report and the scenarios are all somewhat rattling - even the most optimisitc which results in a world where demography, politics, economics and sustainability all gel - but only after a terrible pandemic nearly paralyzes the world but yet shakes us into accepting a new way of living and working together.

I have found in my career thus far that it is wise to heed SustainAbility's recommendations, as they are usually on target. Here are the seven recommendations for business they come up with after playing out four very different potential scenarios:

-plan for the unexpected
-engage in the South
-Don't expect "nice" companies to come first
-co-evolve Earth's eco systems
-think opportunity and innovation
-reach beyond comfort zones to find new models
-take a stand and exercise vision, leadership and courage

It's long, but it's worth a read!

Assessing futures: Where is globalization leading us?

2007-06-05T18:44:00.000+02:00

Many people think that globalization is a new phenomena, but I would say that its been simmering under the surface for centuries since the times of early traders and explorers. Technology, for the most part, has lead to an unprecidented accleration of interconnectivity between people and goods in the last decade or two. Most experts agree that "globalization" is HERE rather than HAPPENING now that 20% of the worlds GDP is made up by global trade - and this is only set to grow.

The consultancy SustainAbility has put out an innovative report looking at four different scenarios for how the future might unfold. Its a complex report, and the scenarios are all somewhat rattling - even the most optimistic which results in in a world where demography, politics, economics, and sustainability all gel - but only after a terrible pandemic nearly paralyzes the world but yet shakes us into accepting a new way of living and working together.

I have found in my career thus far that it is wise to heed SustainAbility's recommendations, as they are usually on target. Here are the seven recommendations for business they came up with after playing out four very different potential future scenarios:
-plan for the unexpected
-engage in the South
-Dont expect "nice" companies to come first
-co-evolve Earth's ecosystem
-think opportunity and innovation
-reach beyond comfort zones to find new models
-take a stand and exercise vision, leadership and courage

It's long, but it's worth a read!

Sustainability in Amsterdam

2007-06-05T16:12:00.000+02:00

Welcome to 209 Keizersgracht in central Amsterdam. This is sustainability week here in Amsterdam, and one of the events organized by the municipality is a series of "Open Houses" around town that feature sustainability oriented organizations, initiatives, or activities happening here in Amsterdam.

We opened the doors of our office for any visitor interested in spending some time with us today. We had a steady stream of passers-by drop in and chat with our staff. There were lots of students from the local universities, staff from the companies and other organizations headquartered here, some press, and some folks that have always admired the historical building from the outside and wanted to take the opportunity to have a peek inside!

An official from the City of Amsterdam was on hand in the morning for a presentation about why the City decided to do a sustainability report based on the GRI Guidelines. In the afternoon there was a workshop on reporting and supply chain management put on by a local consultancy. For the rest of the day we just enjoyed the opportunity to talk about sustainability issues with a diverse group of parties from all walks of life.

In my daily job I am so focused on international outreach and communication that it was a pleasure to meet with neighbours and colleagues also pursuing sustainability in their daily lives and jobs.

Inside scoop: GRI Board meeting

2007-06-01T14:27:00.000+02:00

GRI's full board is together today and has been diving into the beginnings of a strategic plan for the organization spanning the next five years. As the person responsible for writing up the strategic plan, its been a pleasure to be invited to be a fly on the wall during these deliberations.

Its such a facinating group, and their rich interactions will benefit the future of the Global Reporting Initiative and the Sustainability Reporting Guidelines as we enter into this new era.

Just to give you a snapshot for the different perspectives the group brings - there is Kumi Naidoo (CIVICUS), Judy Henderson (World Commission on Dams) and Ignaci Carraras (former Oxfam) with major international non-profit leadership experience always providing a 'reality check' about capacity and complexity, fundraising techniques, and importance of network. Then there is Jacqueline Aloisi (former UNEP) an expert in the workings of multi-laterals, governments and local authorities. John Evans (TUAC-OECD) along with Sean Harrigan (former CalPERS) both bring the labor perspective but from two very different sides of the coin. They are complimented by titans of industry such as Kishor Chaukor (Tata), Sir Mark Moody Stuart (Anglo American), and Bjorn Stigson (WBCSD) who lend both their expertise in how to manage sustainability in a company - but also how to manage an organization well. Roger Adams (ACCA) is unprecidented in knowlege about the reporting framework and how it can be implemented.

As their meetings draw to a close the secretariat has its work cut out as they have given us direction on technical development of the GRI reporting framework, learning and services development, brand management, relationship management, fundraising, and network expansion. All of these decisions will help us forge a plan and a path for the future. I will share things along the way over the next months as things evolve.

Sustainability reports database: next steps with Corporate Register

2007-05-31T09:22:00.000+02:00

I just returned from a day in London where a colleague and I visited the small but lively office of corporateregister (www.corporateregister.com) - this is the group that brings you the free database of PDF reports, ReportAlert services, and now EventAlert services. Last October (in conjunction with the release of the G3 Sustainability Reporting Guidelines) GRI formed a partnership with corporateregister to merge our reports databases - and corporateregister would become the host of the GRI reports registry.

It's just over eight months since we shifted from hosting our own database to working with corporateregister to host it and it was a good time for a check in. In general we were really impressed with their ability to track reports - they monitor 7000 companies, of which only 3500 issue reports currently, so they can pick up new reports as soon as they come out. At least two sets of eyes at corporateregister look the report over before it is posted, and dozens of data points are gathered on each one. We feel pretty confident that the data they present are accurate and current.

A few technological challenges remain - such as how to ensure reports written in non-Latin scripts (ie. Russian, Chinese) can be featured or counted in the database. For technical and quality reasons corporateregister can't host these in their database, so we are going to actively look for solutions with partners likely in Asia to ensure we have a complete database. Great news is that corporateregister will work on adding some new sort and statistics features on the GRI register this summer. Our database visitors have been asking for these for some months, so we are excited that they will come online soon.

Let me know what resources you would like to see on the GRI register: http://www.corporateregister.com/gri/

Civil society: Alive and kicking behind bars

2007-05-29T11:57:00.000+02:00

Organized civil society groups play an important role in the ongoing macro-discussion with business, government and labor about expectations, roles, and responsibilities vis-a-vis sustainable development. They often help expose previously unknown issues, bring voices to the voiceless, and represent the interests of 'common good' in discussions around how to change our world towards a more sustainable future - and who needs to play what role in order to get us there.

In the 1980's it was common to see civil society organizations grabbing newspaper headlines with brave and splashy interventions - people were spotted scaling industrial chimneys and chaining themselves to trees - in order to bring awareness and action on important issues. But we don't see these sorts of actions in the headines so much any longer. Is it because the media and the general public have tired of these 'antics' - or is because these groups have changed strategies and are working behind the scenes or in cooperation with business and government?

Unfortunately, I think its the former. Here are two points of evidence to support this position:

Quite by accident I met a real crew member of Greenpeace's famed Rainbow Warrior just last week. It sailed into Amsterdam so the crew could have a few days off before their next mission. Although she swore me to secrecy about their upcoming campaign, I can tell you that they are still as active as ever.

First thing this morning a piece of news arrived in my inbox. Last week was one of the most important gatherings of civil society organizations worldwide - the CIVICUS General Assembly. CIVICUS Secretary-General (and GRI Board member) Kumi Naidoo was leading a campaign to bring a voice to the voiceless - in this case civil society campaigners worldwide who have been imprisioned for speaking out. I can say that I was not even aware that there were so many activists silenced by jail terms in this day and age. See Kumi's column entry (below) for more details about how he got a taste for what his peer's must be experiencing.

Call for civil society watchdogs
By Kumi Naidoo, CIVICUS Secretary-General
I was put behind bars yesterday my friends, and I can tell you that even for those few minutes while photographers snapped, it didn't feel very pleasant. I sat in my 'cell' with youth delegates, Socialist International President and former foreign minister of Greece, George Papandreou. In our hands, placards depicting the images of our friends, imprisoned civil society activists from around the world. As I mentioned yesterday in my column, this was part of a wider campaign to remind the Assembly and the wider world of the plight faced by our colleagues and calling for their immediate release. I was released minutes later to my great relief. Warm regards, Kumi Naidoo.

Everyday Americans waking up to corporate responsibility?

2007-05-24T16:13:00.000+02:00

One of the major critiques of the corporate responsibility movement is that the average person on the street just doesn't really care about companies commitment - or lack thereof - to their social and environmental impacts and risks.

However, we (colleagues and I) have been speculating that the mainstreaming of the climate agenda in Western Europe and the USA will (or has?) usher in the broader sustainability agenda - including the role of the corporation - and help bring this to the attention of the everyday person.

The following little survey caught my eye recently which seems to back up this speculation.

Survey: Americans disapprove of companies performance on CSR

A majority of Americans from all sides of the political spectrum have said that they would look towards legislators to correct poor CSR performance by US businesses, according to a recent survey. 96 percent of Democrats, 80 percent of Independents, and 65 percent of Republicans say that it is either very or extremely important for Congress to ensure that companies are addressing social issues.

Over three quarters of the respondents to the survey, which was carried out by Fleishman-Hillard and the National Consumers League, said US companies had poor records on CSR, with a big focus on sectors such as energy, food, chemicals and pharmaceuticals as needing more oversight by authorities.

"The generally lukewarm perception of U.S. corporations on socialresponsibility, along with the prevailing belief that Congress may need to get involved, could lead to increased oversight of the private sector on Capitol Hill" said former U.S. Sen. Jim Talent.

Hungary: gearing up for privitaization

2007-05-21T11:52:00.000+02:00

Since visiting Slovakia last week, my curiousity about Central and Eastern Europe has been peaked. It's 17 years now since the 'iron curtain' fell and some countries have been fairing better than others in their journeys to establish democracies and stable economies.

One that is slightly ahead of the pack is Hungary. I was speaking to some Hungarians that traveled over to Slovakia for the G3 Breakfast event we held last Friday and they had an interesting story to tell about how sustainability was playing a role in business suceess there. They warned me that we can expect 5-10 new sustainability reports this year out of Hungary. I asked why.

They answered that many Hungarian companies are gearing up for privitization after decades of public ownership and governmental control. Some of the country's most important utilities, service providers, and national brands are opening up for private investors - from within Hungary and from abroad. Many are producing a sustainability report as a part of the package they are preparing to attract the most competitive offers. Showing that they adhere to high standards of environment, health, safety, product responsibility, labour practices, anti-corruption, and governance seems to help improve the value of the company.

That's a concrete business case if I've ever heard one.

Slovakia: Just getting started

2007-05-18T12:32:00.000+02:00

After two days here in Bratislava as the guest of Pontis Foundation and the Business Leaders Forum I can say that I think we have successfully infected the local business community with the sustainability bug!

The economy is booming - nearly 10% growth per year - yet all business people I met felt that even this rate was too slow and the country had much to do to catch up. With such rapid growth of Slovak companies, the introduction of multi-nationals (I met representatives from Orange, Daimler, HP, Tesco, etc) and urbanization on the rise, everyone is trying to ensure that all this growth doesnt happen at a cost to the future economic vitality of the country.

Yesterday's full day conference attracted over 120 participants who were engaged in sessions on everything from the business case for sustainability, the GRI, the Global Compact, community investment, cause related marketing, employee and gender issues, and philanthropy. This morning we gathered about 40 people where I walked them through a more in-depth look at the GRI Guidelines. Guests from Czech Coal and Denso Hungary who have used the Guidelines for a few years now were able to present their company's business case for reporting, along with the challenges and benefits that reporting has brought them.

The prognosis? I think we will start to see some country level reports here in Slovakia - many country units already contribute to the parent company report so putting something out for the national audience won't be a difficult first step. Important will be to engage and build capacity for smaller enterprises to start with reporting. This will happen as Slovakia is held to the same standards for environmental and social performance as its other counterparts in the European Community, and pressure will be on for greater disclosure.

All in all a great trip and a facinating first look at one of Europe's newest members and how sustainability is taking shape here.

Emerging markets: suppliers differentiating themselves

2007-05-15T18:37:00.000+02:00

I appreciate Stephen's reponse to yesterday's post (check it out -its a good one!) and here is his key point which I didn't articulate as clearly "I would find it counter-productive to promote relaxed standards for emerging markets, meanwhile promoting the idea of embracing progressive CSR principles as a way of creating both social and economic value."

This conversation is reminding me of my trip to Sri Lanka in December 2005. I joined my colleague Naoko from the secretariat to attend a working group meeting of the Apparel and Footwear Sector Supplement hosted by a supplier to many major brands called MAS Holdings in Columbo. Besides being a personally emotional trip due to the one year anniversary of the deadly tsunami, it was also a professionally inspiring trip.

It seems the business community had decided that it simply could not compete with its massive neighbours India and China on labor prices, so it had no choice but to compete on quality instead. As a result the government ratified nearly 30 international conventions on environment, labor, and human rights, and is on an agressive time frame for implementation. Interesting to note that Sri Lanka has ratified many conventions that leading economies such as Australia and the USA have not even ratified - where the customer base for most Sri Lankan produced products are located!

Leading Sri Lankan businesses are already shifting their practices to reflect these new higher standards, and they are positioning themselves as uniquely competitive in the marketplace as they are able to deliver quality goods at a good price but within the context of the environmental, labor, and human rights conditions that European and North American discerning consumers expect.

Governments, businesses, and workers seem to be united behind the strategy for Sri Lanka as a whole to develop a reputation for quality based on their environmental and social commitments - thereby making it worth that extra few cents for fabrics sourced there and helping to improve working and living conditions for an entire nation in the process. My understanding is that Sri Lanka is already being rewarded under trade agreements from 'Western' nations as a result.

From GRI's perspective, the public disclosure aspect is a vital ingredient in this picture - companies must prove they are performing to higher social and environmental standards through the use of a credible public disclosure standard.

Emerging markets: Held to the same standards?

2007-05-14T11:36:00.000+02:00

One of the big topics in the GRI network is whether or not the Sustainability Reporting Guidelines as they stand today are applicable - and should be expected for use - by companies and other organizations in emerging markets.

Some say that the bar should be lowered and the standards made 'easier' for companies as a way to entice them to just get started, especially in regimes where the laws for environmental and social conditions are not as stringent as they are in OECD countries and therefore companies have a longer way to go to get up to par with competitors elsewhere.

But in a recent conversation with Mervyn E King, the new chair of GRI's board, an expert in corporate governance, and a native of South Africa, I heard a different story.

King says attracting investment – including foreign investment – in the private sector is a key to energizing economies in some of the poorest nations worldwide. This will only happen if there is both real and perceived adherence to best practice in business management and corporate governance since investors must feel confident.

A study in 2000 published by McKinsey & Co in their Investor Opinion Survey illustrates the point. The survey found that 84% of the more than 200 institutional investors questioned are willing to pay a premium for shares in a well governed company, over one considered poorly governed but with a comparable financial record. The actual premium varied from country to country, for example, a well governed company in the UK would see investors willing to pay 18% more for shares than a poorly governed company. But importantly, the premium went even higher in emerging markets. For example, investors would be willing to pay 27% more for a well governed company in Indonesia or Venezuela versus what they would pay for a poorly governed company with similar financial performance in those same countries.

From his perspective one of the drivers behind the use of international standards, including the GRI Guidelines, is to raise the standards of business management and governance quality worldwide, thereby strengthening the economy and society as a whole. One way a company can prove it is well governed and worthy of investment is to be transparent about its risks and opportunities related to sustainability.

Supply chain: the next reporting frontier

2007-05-09T17:07:00.000+02:00

Many multinationals are struggling with sustainability issues in their supply chains. How can they be sure that the environmental and social standards that they adhere to are also being met in emerging markets where the local laws or common business practice do not have such protections built in?

Transparency about such issues in the supply chain is turning out to be a big trend lately. GRI is now working with 4 major European multinationals who have each identified 3-4 key suppliers in their chains located in emerging markets - and together we are all going through the reporing process based on the GRI Guidelines. The suppliers are learning how to identify the issues they need to report on for their own local stakeholder needs, but also to remain competitive in the international marketplace.

This photo was taken last week in China by my colleague Leontien from the GRI secretariat. She was there visiting supplier factories that are participating in this project. She said that before she left on her trip she was worried that the suppliers were feeling pressure from the top - but upon her return she had a different perspective. It seems the suppliers are finding their own voices and are seeing the value in communicating in a proactive way about their sustainability issues.

Find out more on this exciting project by clicking the title above.

Web 2.0: Endless possibilities for the GRI network

2007-05-07T18:03:00.000+02:00

A friend of mine gave me a book over the weekend called "Wikinomics: How mass collaboration changes everything" by D. Tapscott and A. Williams. It has dropped into my lap at the perfect moment as I am in the midst of drafting up GRI's five year strategic plan and the book has inspired all sorts of great ideas.

GRI is in essence a mass collaboration. Thousands of people contribute their knowledge, experience, and opinions into one big pot which gets simmered and stirred, and eventually the GRI Sustainability Reporting Framework pops out. We have been doing this for 10 years and have managed to grow the network to include an estimated 30,000 people. And we have done this all the old fashioned way of hopping on airplanes and organizing telephone based conference calls.

Tapscott and Williams outline dozens of examples of successful and thriving online communities - some with a business focus and some with a social good focus. Imagine what we could do if we had access to new tools where people could collaborate on topics directly and not have to go through the Amsterdam secretariat? We could engage so many more people on more topics in more meaningful ways. This also bodes well for cost and carbon savings with less travel and phone time.

Interestingly, Don Tapscott also wrote "The Naked Corporation" all about the importance of transparency in the modern era - with very strong value propositions for sustainability reporting and GRI based reporting. Wow, the world is more closely linked than we all thought!

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

2007-04-26T17:20:00.000+02:00

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

2007-04-25T16:56:00.000+02:00

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

2007-04-24T16:49:00.000+02:00

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!

2007-04-22T16:29:00.000+02:00

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?

2007-04-20T17:38:00.000+02:00

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?

2007-04-18T10:26:00.000+02:00

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

2007-04-16T17:32:00.000+02:00

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?

2007-04-06T16:10:00.000+02:00

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

2007-04-05T14:36:00.000+02:00

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!

XBRL Taxonomy for G3

2007-03-30T13:01:00.000+02:00

Guest blogger: Debbie Dickinson

GRI today released its XBRL taxonomy for the G3 Guidelines. Don’t switch off yet! And yes, I hear you saying it “what does all that mean?” I myself have sat many a-time with Sean Gilbert, our technical director who worked closely with PwC to develop the taxonomy. His patience means I think I finally get it.

Basically, XBRL –eXtensible Business Reporting Language – is way to exchange data. It’s been used for ages in financial reporting systems, and involves “tagging” data. This means that when you go looking for a piece of data, you can search for it and retrieve it via the “tag”, rather than by sifting through reams of spreadsheets, pdfs, documents, web pages etc. XBRL is really set up for exchanging data electronically, between computers.

It’s proven really successful in the financial reporting world. Some say even “revolutionized” the way that businesses report.

For sustainability reporting, the release of XBRL is a huge, positive step. It means we’re moving so much closer to easily comparable reporting. Organization have (and, I believe, rightly so) developed such different styles of disclosing their performance, depending on their needs. But this means it’s sometimes been a lot of work for analysts, employees, stakeholders and other report users to find the exact disclosure item they’re looking for. Now with the XBRL taxonomy, it will be easier to overcome these obstacles and move to more efficient data distribution (for companies) and collection (by investors and other report users). Many tip that XBRL will also reduce questionnaire fatigue.

The moment where I really started to understand XBRL was when Sean (our technical director) told me a little story “imagine two kids drawing, each with their sets of 64 Derwent pencils in front of them (the joy!). One says to the other ‘can I borrow your red pencil color #234’. The other knows exactly which red pencil to hand over; and there is no confusion between either kid as to which shade of red is requested.” So the color numbers are the tagged pieces of sustainability information, and now there’s no confusion between report users and makers about which pieces of economic, environmental and social data are in question.

Find out more about the newly released XBRL taxonomy, developed in collaboration with XBRL experts from PriceWaterhouseCoopers.

Still unsure what it’s all about? Follow the link to “leave your comment” and post your questions here

Evolving agendas: business and sustainable development

2007-03-28T15:05:00.000+02:00

Guest blogger: Debbie Dickinson.

Hi all, I'm Debbie and I’m babysitting Alyson’s blog whilst she’s away this week.

As a bit of a complement to the specific themes Alyson’s been tracing of late (water, investors, China), I thought I’d start with some reflections of where the whole “business and sustainable development” debates are currently at.

I attended a “Corporate Responsibility” conference at Chatham House in London yesterday and Monday. The following struck me:
* overwhelming consensus that the private sector – with its willingness for risk taking and capacity for innovation – is where many solutions to sustainable development are, and will continue to, emerge. Although a running theme over the 2 days, Professor Daniel Esty most compellingly argued this
* the climate change debate has, for the first time in many years, imposed tangible understanding of natural limits to growth. Business, governments, and civil society are already experiencing real consequences
* that “CSR” is already, and should be, dying away as an organizing principle. This is not to say that those who have not yet engaged have gotten away with it! Rather, business and other organizations are faced with the urgency to position sustainable development as core business.
* following the above, there was a strong prediction that sustainability reporting would also shift from “stand alone” reports into more strategic integrations within financial reports – a trend we are already witnessing, and keen to see continue.
* Alan Knight’s concept of “choice editing”: removing the unsustainable options from the market. E.g. via product labelling that makes “low ranking / uncertified” items undesirable, thereby shifting ethical consumerism away from reliance on the “green consumer” and to a broader market change.
* what exactly is the role of governments? If we are at the stage where governments have less a “command and control” or regulation role in sustainable development, but that governments still have a role to play in this environment of innovation and entrepreneurial solutions, then how can they (the public sector) best leverage change? An answered theme was around the types of institutional governance structures that are required in this time of rapid change?

My overwhelming conclusion is how fast the agenda is changing. Whilst it’s still so important to see the challenges that lie ahead, I also useful to stop and reflect on how far we’ve come and remind myself that change is possible.

What are your thoughts? What do you think are the defining points that the business and sustainable development agenda is changing?

Water: Happy World Water Day

2007-03-22T13:13:00.000+01:00

For 15 years World Water Day has been celebrated on the 22nd of March. Seems I blogged on the topic of water about 10 days too early (see post 13 March on the subject!) but that is ok as there is much more to say on the topic!

This year's theme (as determined by the world water day organizers) is "Coping with Water Scarcity." The theme highlights the significance of cooperation and importance of an integrated approach to resource management of water at both international and local levels.

Equity and rights, cultural and ethical issues are essential to be addressed when dealing with limited water resources. Imbalances between availability and demand, the degradation of groundwater and surface water quality, intersectoral competition, interregional and international disputes, all center around the question of how to cope with scarce water resources.

When looking at the GRI reporting indicators on water one might think that this is a straightforward subject to manage as a company (EN8 Total water withdrawal by source; EN9 Water resources significantly affected by withdrawals; and EN10 Percentage and total water recycled or reused). But when considering the ecological and community inter-relationships with this essential shared resource, it becomes clear that we all have to work together to ensure we use it properly.

Investors: Universally accepted ESG measures needed

2007-03-21T12:54:00.000+01:00

One of the largest ever studies to analyze how information relating to environmental, social and governance (ESG) issues is used in valuation and investment decisions arrived in my inbox just yesterday. The authors used data from more than 850 respondents from 88 sell-side and 240 buy-side institutions to forumlate their conclusions. I am not aware of a survey of this size or scope elsewhere in the world, but I do believe most respondents were European.

This is important work as many people think that once mainstream buy and sell side analysts wake up to the value of sustainability reporting (investors refer to this as ESG) and are able to find data in the right quantities and qualities, sustainability reporting will finally become an every day business practice.

Key findings of this study:
· Evidence suggests a growing interest in ESG information, but it remains a niche market. Many sell-side analysts indicated that their institution has not developed an ESG policy, which generally hampers the use of extra-financial information in their analysis.
· Corporate communication practices relating to ESG issues seem to have improved, but many analysts and investors do not perceive that the companies provide enough information to allow effective assessment of these factors' impacts.
· Extra-financial information is believed to have a significantly higher impact on brand and reputation than on market value or financial performance.
· Companies that score high on ESG criteria seem to be rewarded with premium valuation, while companies that score low are likely to be penalised with valuation discount.

And most interesting for GRI reporting:
· Sell-side analysts use extra-financial information to a lesser extent than investors, and point out that the lack of a universally accepted methodology for quantifying ESG data makes it difficult to incorporate extra-financial information into their analyses.

Do you think the GRI Guidelines can be a part of the solution towards a universally accepted methodology?

Study authors: The European Centre for Corporate Engagement (ECCE), click on blog title for link.

China: CSR and stock exchanges

2007-03-15T09:56:00.000+01:00

The CSR Asia weekly newsletter is a handy resource if you are in Asia or if you are interested in following developments there. I was power-scanning yesterday's issue and suddenly hit upon a a passing reference to the Shenzhen Stock Exchange (SZSE) and CSR. This got my attention and I dug a little deeper.

My search led me to CSR Asia Weekly Vol.2 Week 24 (2006) where author Brian Ho described a document issued by SZSE - the smaller of China's two exchanges with 540 companies listed - entitled "Instructions for Listed Companies on Social Responsibility (Draft for Comments)". Wow.

Further searches were hindered by my lack of language skills so I am not sure if this document has moved from Draft to Final, and if it has been implemented by SZSE, but Ho summarized its major parts. The Instructions broadly cover rights of shareholders and creditors, rights of employees, rights of suppliers, clients, and customers, protection of environment and community, and finally in part 6 - "transparency of information and establishment of a mechanism."

Part 6 apparently instructs companies to report on their CSR performance periodically and online, and that the CSR report should describe the company's actual CSR performance versus the benchmark in the Instructions, the reasons targets might have been missed, and a timetable for implementation.

Are these the foundations for GRI reporting in China?

Water: The next oil?

2007-03-13T22:23:00.000+01:00

Let me admit right from the outset that this attention-grabbing title was not conjured from my own mind! Today I read a tidy little report issued by Insight Investment (UK) last week and I must give them all the credit for thinking it up.

Its a great report, and a timely reminder that climate change is not the only environmental issue that poses risks to companies. The Insight Investor report on water walks the novice reader through the basic equation for disaster that awaits us when it comes to water:
* 97% of all water on the globe is seawater, of the remaining 3% that is fresh, only 0.5% is not frozen and is accessible to humans mainly via rivers, lakes and underwater aquifers
* Agriculture and industry are the main users of available freshwater (irrigation, cooling, energy generation, chemical reactions, waste disposal, and as an ingredient for foods and drinks)
* Underground aquifer depeletion is occurring due to overuse by humans (domestic and industrial), and climate change will make it worse

All of this = business risk.

The risks associated run from higher operational costs (capacity constraints, supply chain disruptions, compliance expenditures, plant closures) and brand risk that can result when companies compete with the local communities for access to water. The investors at Insight recommend the development of effective, proactive strategies for dealing with water, and warn companies that ignore water "do so at their own peril." Now that is some refreshing insight from an investor!

If you arent aware of it yet, search around for case studies and discussions online about Coca Cola's water troubles in India. By overdrawing and polluting some local aquifers during the production of Coke's products in some provinces the local farmers, manufacturers, and communities were left without enough to optimize their own needs. This has resulted in severe reputational damage, closure of major plants, and difficulties in siting new facilities. Coke has since recognized the issue as a strategic priority and reports its targets and performance using the GRI reporting indicators on water.

Imagine the headache and heartache they could have saved if they had recognized the importance of this issue before it hit the crisis point?

GRI: A Global Action Network identity

2007-03-09T13:44:00.000+01:00

Global Action Networks (GANs) are a new type of organization that have appeared as a phenomenon in response to major global sustainability issues that require international cooperation - and require cross sectoral or multi-stakeholder participation to tackle. This differs from past approaches where solutions may have been hammered out in governments and then handed down - we are seeing a more participatory and grass roots approach to finding solutions that are more accurate, timely, and credible due to the legitimacy of these GANs.

GRI's founders determined that a generally accepted framework for sustainability reporting was needed in order to create a globally coherent language and information set of sustainability performance data. This reporting framework would be used by all organizations to report, and would benefit internal stakeholders (management, employees, Boards or leadership) and external stakeholders (communities, NGOs, investors, media, etc.) all who would be empowered by access to this data. Additionally professional stakeholders would be involved in helping the users to actually implement this reporting framework (accountants, consultants, software providers, course providers, etc.)

Therefore it was a logical conclusion that the stakeholders that would use and benefit from the reporting framework would get together to build this reporting framework. This is where GRI draws its legitimacy from.

In this sense, GRI is a true GAN - and one of the first ones to appear. Some other GANs exist but tackle very different issues and topics. Check out the Forest Stewardship Council, Transparency International, Global Fund for AIDS, Global Water Partnership, etc.

I was invited by a group called GAN-net that is trying to help improve the effectiveness and impact of GANs to join a meeting in Stockholm, Sweden. At this meeting I have met about 20 other people that are in charge of communications in their own GAN, or are communications professionals that work with GANs to utilize various technologies that improve their ability to create participatory networks.

It's been a great two days where we have focussed on web 2.0 technology and how these new resources can be used to empower our networks. GRI counts its network at about 20,000 strong in over 60 countries and speaking about 30 languages. We run "formal" and "informal" engagements to build the reporting framework, govern the organization, and generally move the mission forward. We are looking for ways to run these engagements better, and to empower the network to engage with itself to exchange information and best practice - not driven by the secretariat. I have come away with lots of great ideas! If you have ideas about how to improve global action network - style communications, please do not hesitate to contact me!

More about GANs:
Traditional approaches to solving global issues are based on the premise that governments can create effective solutions through international agreements. However, this approach has proven incapable of addressing the scale of important issues in a sufficiently effective and timely manner. GANs have grown up in recent years to fill this gap, offering new strategies to build effective systems.

GANs are distinguished from traditional NGOs and intergovernmental and business organizations because they are formed by diverse stakeholders who are interested in a common issue, and who agree to work together to achieve extraordinary results. The critical contribution that they can provide global issues is their ability to create consensual knowledge and action among diverse stakeholders. GANs are defined by five key characteristics. GANs are:
-Global
-Focused on issues for the public good (not profit-seeking)
-Integrating systems-building agents that foster linkages among diverse organizations and projects that share common goals
-Boundary-crossing – North/South, rich/poor, policy makers, techno-scientists, funders, global institutions, professional disciplines, and cultures
-Inter-sectoral structures that promote fundamental changes by engaging business, government, and civil society (non-profit) organizations collaboratively

International womens day: meet Chahinaz

2007-03-08T12:09:00.000+01:00

On International Womens Day and I find myself in Stockholm, Sweden at a very unique meeting of communications professionals all working in so-called Global Action Networks (GANs). Since the Global Reporting Initiative is considered a GAN I was lucky enough to be able to join this group of about 20 who have come together to share communications approaches, challenges, ideas, and solutions that we use in engaging with our networks (more on GANs tomorrow, visit again!).

Patrice Barrat of Bridge International Initiative shared with us today his Madmundo.tv approach to storytelling about globalization issues. The Madmundo technique is to start the story with one person's experience vis-a-vis a major globalization issue, and through the story the film crawls from the individual experience to tap into the major global forces at play that have affected this person's life. A fantastically illustrative approach. We were watching video segments from his current film about a young woman named Chahinaz who lives in Algeria and is determined to create equal rights for women.

What does this have to do with sustainability reporting? Two things:
- see earlier blog (Feb 19) on gender issues and reporting
- how can the GRI network start to use individual stories and video media to better communication about sustainability or how reporting has changed the situation of an organization, community or individual?

Enjoy meeting Chahinaz below!

Accountability: why it’s never crystal clear

2007-03-06T17:31:00.000+01:00

One of the best definitions of “corporate responsibility” I have come across is as follows:

“Corporate responsibility is the basis on which business renegotiates and aligns the boundaries of its accountability.” (Source).

Business’ negotiating partners are governments and civil society at large. Accountability for who is responsible for positive and negative outcomes is not crystal clear because this dialogue evolves as our world and societies do.

Take for example externalities associated with the use of the car: congestion, road accidents, environmental pollution, and infrastructure damage.

In 1933 there were 26 million motor vehicles registered in the USA. By 2005 there were 26 million Sports Utility Vehicles (SUV’s) alone, and a total of 136 million vehicles registered. In 1933 we had not even heard of things like acid rain and climate change, nor could we imagine the terrible impacts road accidents would come to have on our families and communities.

The dialogue about accountability for externalities among auto makers, civil society, and governments continues to evolve as externalities are revealed over time. Does tackling climate change mean cleaner fuels and engine technology (borne by the automaker) or regulation and carbon capture (borne by the government)? Do cutting road accidents mean improved vehicle safety (borne by the automaker) or better road rules and enforcement (borne by the government?). Civil society has stated their position: the current situation for both of these issues is unacceptable. But who is to blame?

In the end it all leads back to Achim Steiner’s discussion (see blog on 2 March) about who is at the table when standards are being set. The standards, whether on disclosure or behavior, must reflect the current state of the ongoing negotiations between company, governments and civil society about expectations for responsibility.

Accountability: Possible without consequence?

2007-03-02T18:39:00.000+01:00

If you ever get the chance to hear a speech or read an article by UNEP's new executive director Achim Steiner, don't miss the chance. He always leaves you with food for thought - and action (click the title of this blog to find a podcast of Steiner's speech at the GRI conference in October 2006).

Today I read an article he wrote for his former organization's monthly publication called "World Conservation" (January edition, IUCN) where he addresses the topic of accountability.

He first notes that much of the 20th century was spent creating accountabilities - governments alone have passed over 500 trans-national conventions, treaties, and agreements. Standards for financial accounting arose, along with innumerable rules, responsibilities and public committments on everything ranging from quality control to child labor.

So why, in our newly globalized world, do some citizens feel increasingly disempowered? Steiner postulates that it is because we have spent a century creating accountabilities without consequences.

So this begs a question for GRI - will the voluntary approach to sustainability reporting result in a set of Guidelines that no one uses, or a practice of robust reporting that results in better knowledge and change toward a more sustainable future?

Steiner has an answer for this too. He says that we can establish norms and standards as the baseline of accountability which are more legitimate in the modern era by redefining who sits at the table during their creation. "Societies, individuals, and communities are less and less controlled by government so the emergence of the private sector and civil society in shaping public discourse and creating public pressure has to be reflected in the way that norms and standards are developed."

This seems to bode well for GRI since the multi-stakeholder approach lies at the heart of the Guidelines development process. What do you think - is this an accountability mechanism without consequence?

Climate change: Impacting the bottom line?

2007-02-26T13:48:00.000+01:00

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.

SMEs: How much is too much?

2007-02-22T18:11:00.000+01:00

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.

Gender: Hotter than Climate Change in the USA?

2007-02-19T22:46:00.000+01:00

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.

Sustainability: What's in a word?

2007-02-14T12:53:00.000+01:00

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?

GRI Book Club: Yunus and Grameen

2007-02-06T14:17:00.000+01:00

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.

Climate change: driving disclosure?

2007-02-02T17:04:00.000+01:00

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?

Standards: Internationally binding, locally disconnected

2007-01-29T21:35:00.000+01:00

Building on last week's discussion on the reinforcing and synergistic relationship between the GRI Guidelines and the major international conventions, I want to turn my eye today towards what this means for the local practitioner trying to make sense of it all.

Some months ago I was in Australia giving a GRI Guidelines orientation session to a group of people in charge of, or involved in, reporting in their companies and public agencies. When we got to the labor section of the Guidelines indicator LA2 stumped them.

LA2: Percentage of employees covered by collective bargaining agreements.

One participant asked "Why is this indicator in the Guidelines when no law exists on collective bargaining?" Another participant was concerned that their company might look bad in the public realm if they answered "zero" but were not able to explain that they were not legally required to offer collective bargaining to their workforce.

Our senior labor visitor last week explained that all ILO member countries vote to accept or decline the convention at the international level, and that Australia had long ago done that for the collective bargaining convention. The country is then required to alert its parliament (or equivilent law making body) to the existence of the convention, but the country is in no way bound to ratifying it and hence making it bindng in their jurisdiction. In the case of collective bargaining the ILO convention is not the basis of law in Australia, a different approach to industrial relations is taken. Thus, when an Australian company looks to the GRI Guidelines on labor issues, there is a disconnect between the international convention and the reality of the laws applicable to the company.

There are two positives associated with this:
-There is enough flexibility in the GRI reporting framework that a company can report on what it is doing to uphold the law where it differs from international conventions
-The presence of the indicator may help inspire best practice towards international standards, and going "beyond compliance."

Have you experienced a disconnect between the major international connections and the local laws in your region? On what issues?

Standards: The relationship between binding and non-binding

2007-01-24T10:31:00.000+01:00

One of the characteristics that make the GRI Guidelines universally applicable is that they find their roots in the major international conventions and agreements that form the basis for national and international laws on most environmental and social issues.

During the consensus-seeking process that is used to build the Guidelines often the labor community will typically advocate that the Core Conventions of the ILO be taken as the reference point for performance indicators on work-related issues (the 8 conventions are: 029 Forced Labour 1930; 087 Freedom of Association and Protection of the Right to Organize 1948; 098 Right to Organize and Collective Bargaining 1949; 100 Equal remuneration 1951; 105 Abolition of Forced Labour 1957; 111 Discrimination (Employment and Occupation 1958; 138 Minimum Age Convention 1973; 182 Elimination of the Worst Forms of Child Labour 1999.) Similarly, the environmentalists will also advocate for the peformance indicators to take the major conventions such as the Montreal Protocol and the Basel Convention as reference points.

GRI is not the only organization that tries to create non-binding standards based on the major international binding conventions. As examples, look at the ILO Tripartite Agreement on Multi-National Enterprises, and the OECD Guidelines for Multi-National Enterprises. These are different from GRI's Guidelines as they outline expectations for management and behavior, not reporting, but they are similar to GRI in that they try to bring the conventions to life for companies trying to operate with a committment to sustainability.

I had always wondered whether or not the labour community in particular viewed the GRI Reporting Guidelines as something that reinforced or undermined these conventions - and I got my answer yesterday.

We were lucky to have a senior leader from the Netherlands labor movement come and spend a few hours with our staff. He has spent a lifetime at the interface between workers, employers, and internatinal standard negotiations, and is indeed active in GRI processes. He said that since the relevant labor and social indicators contained in the GRI Guidelines do reference the 8 Core Conventions, this helps to reinforce a single, common, globally accepted standard for treatment of workers, and is therefore reinforcing.

Visit me again on Friday to find out how I think a committment to referencing the major international conventions affects companies ability to report on their performance using GRI's Guidelines.

Materiality: The Porter approach

2007-01-18T18:55:00.000+01:00

Those of you engaged heavily in the reporting world will know the term 'materiality' and the continuous global discussion underway to define it vis-a-vis sutainability reporting. When applied in the sustainability context, it differs from the traditional financial reporting definition - that much we can agree on - but what is the right definition, and should we be 'importing' this concept at all? Check the G3 Guidelines for GRI's conclusion:
http://www.globalreporting.org/ReportingFramework/G3Online/DefiningReportContent/

But there are others. I was reading Michael Porter and Mark Kramer's article in December's edition of the Harvard Business Review and although the authors do not consciously attempt to define materiality, they do present a framework for prioritizing sustainability issues that I thought was quite simple and practical.

They identify three categories, and present the case of HIV/AIDS and carbon emissions as illustrative examples:

1. Generic issue/impacts: Those that have been recognized as important to society but do not affect, or are affected directly, by a company's operations.
-HIV/AIDS could be considered a generic issue by a company like Home Depot
-Carbon emissions could be considered a generic issue by a company like Bank of America

2. Value chain issue/impacts: Those that are significantly affected by the company's operations in the ordinary course of business.
-HIV/AIDS could be considered a value chain impact for a company like GlaxoSmithKline
-Carbon emissions could be considered a value chain impact for a company like UPS

3. Competitive context issue/impacts: Those that significantly affect the underlying drivers of competitiveness in the places the company operates.
-HIV/AIDS could be considered a competitive context issue by a company like Anglo American as it affects the direct health of their workforce in mine sites
-Carbon emissions could be considered a competitive context issue by a company like Toyota due to the long term impacts of their products.

Do companies get bogged down in long lists of issues, or are they getting better at understanding the different types of issues they need to manage and report on? Your thoughts?

China: reporting on the rise?

2007-01-16T18:13:00.000+01:00

We will publish a short story in our newsletter this week about a new trend in China - sustainability reporting is on the rise. The G3 Guidelines will soon be made available in Mandarin thanks to our partners ACCA-China and CBCSD. This seems to bode well for those of us hoping that a more transparent business culture may help lead to stronger environmental and human rights conditions there.

In a lead story in the Economist magazine this week (Jan 13-19th edition) the authors review the situation in China regarding financial accounting. They state "For years Chinese companies have diligently accounted for transactions in a way that was baffling to outsiders - and quite possibly to their own managers too." This has led to confused price signals and resource allocation. Apparently the country is now mandating the move toward "something approaching" the International Financial Reporting Standards.

The Economist applauds this move because "...it is a formal endorsement of greater transparency. Transparency should lead not to just better economic management, but also a freer society." Proponents of sustainability reporting couldn't agree more, and are certainly hoping that single-bottom line reporting is not the only type of transparency the country will embrace.

The authors note that any sort of reporting in China is a challenge, namely due to the inevitable unearthing of not-so-nice news, and a culture that does not allow for open dialogue about what the standards should entail in the first place.

So this leaves us all wondering.... With a history of not promoting multi-stakeholder dialogue, nor transparency, can sustainability reporting be meaningful in China? On the surface it seems like true transparency could equate to Mission: Impossible. On the other hand, the Chinese government has slated less than 1 year for financial reporting reform, which is break-neck speed in the accounting community. A committment to participation and leadership in the global economy may necessitate transparency on other material issues as well, including economic, environmental and social.

What do you think?