XBRL Taxonomy for G3

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

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

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

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

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?