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?

Water: The next oil?

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

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

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

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?

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?