Business Week asks why SMEs would report

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.

From G3 to G8

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.

SMEs: How much is too much?

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.