Slovakia: Just getting started

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

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?

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

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

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!