Wednesday, August 14, 2019

10 ways not to attend the Asia Sustainability Reporting Summit

The first week of September is going to be #reportingmania week in Singapore, as the third annual Asia Sustainability Reporting Summit (ASRS) on 4th and 5th of the month promises to be the biggest and bestest yet. With 70 speakers from almost as many countries, it's going to be a packed two days of learning, inspiration and exchange. So here are 10 coping mechanisms just in case you cannot make it this year. 

1. Spend 30 minutes a day meditating, using the collage below of ASRS 2019 speakers as your inspiration - it won't help you predict what they might say, but it will make you realize what you are missing. If you start now, there will be just enough time to register before the start of the Summit.


2. Sign up for my pre-conference workshop. You will be compelled to continue the conversation for a further two days at the Summit. 


3. Order a three day supply of ice cream in a range of flavors. Only ice cream 🍦🍦🍦can take away the pain of not attending the most fun Summit on Sustainability Reporting in Asia. 

4. Sign up for the live-stream conference feed. Ooops. No live stream. You will just have to book your ticket. 

5. Gather your thoughts about whether sustainability reporting should be mandatory or self-regulated. This will be an illuminating debate in a panel session with 5 leading figures in the Sustainability Reporting world. While the session is taking place, you will be able to imagine yourself following the insights of these experienced practitioners and agreeing or questioning their thoughts.   


6. Plan a vacation in Singapore to coincide with the two days of the conference. Once you get to Singapore, you will be magnetically drawn to the Novotel Clarke Quay Hotel to register for the conference. Who needs vacations anyway? 

7. Take a look at the Summit Agenda and try to imagine yourself sitting at home or in the office while all this is taking place. Do you really think you can do it? Be kind to yourself and resolve this inner struggle by signing up without delay. 

8. Reconnect with #womenpower. 57% of the speakers at ASRS 2019 are women. This summit is a celebration of women's leadership in sustainability. If you are  a woman, man or individual of any gender, you will know that women's leadership is always INCLUSIVE. And that means inclusive of YOU. So sign up for the Summit and be included.  


9. Focus on the future. Think about your next sustainability report and how you will refresh your reporting, ensuring you are abreast of innovation, frameworks and new regulation in the region and globally. Think about how you might get a concentrated boost of energy, motivation and inspiration to fuel your next reporting cycle. Don't let your mind wander to the fascinating debates and insights that will take place at ASRS. Don't dwell on the time you will waste by not attending ASRS where you have everything under one roof over 48 hours. Got a plan? Think you can cope without attending the Summit? Feeling confident?  Great, but if not, you might want to send in your ASRS registration. Jus' sayin. 

10. Finally, if all the above doesn't work, you will probably need the Deep Detox solution. Book in at the Sustainability Reporting Detox Clinic for a two day intensive full body and mind detox, where the words sustainability and reporting are banned and people talk only about sunshine, beaches, Netflix, gourmet meals, ice cream flavors and places to visit when you retire. Any mention of anything connected to sustainability reporting sends you to solitary confinement for your entire stay with no internet, no phone, no connection to the outside world and no ice cream. Best to do this before the Summit starts, so that if it doesn't work, you still have time to register

For all of you for whom these coping mechanisms are not likely to work, see you in Singapore!




elaine cohen, CSR consultant, Sustainability Reporter, HR Professional, Ice Cream Addict. Owner/Manager of Beyond Business Ltd, an inspired Sustainability Strategy and Reporting firm having supported 100 client reports to date ; author of three books and several chapters on Sustainability Reporting and the Human Resources connection to CSR; frequent chair and speaker at sustainability events and judge in several sustainability awards programs each year. Contact me via Twitter , LinkedIn or via Beyond Business  



Monday, August 12, 2019

AIMing for Best in Class Reporting

I was recently asked by a client to prepare an overview of Best In Class Sustainability Reports. 

Now, I read, review and judge hundreds of sustainability reports each year, and also write several. I find reporting fascinating in all its forms, and there is no sustainability report that is not a source of insight, inspiration or interest for me. Sustainability reports are as diverse as the companies that publish them, and I find it hard to find an overall measure that represents Best in Class. In many of the awards programs in which I participate as a judge, the ultimate selection often becomes the report that achieved an aggregated highest score across a range of criteria - is that the definition of Best in Class? 

Best In Class is defined by the Business Dictionary is: The highest current performance level in an industry, used as a standard or benchmark to be equaled or exceeded.

But sustainability reports can be assessed across so many dimensions that it's not so simple to select a single report that can be used as a standard to be equaled or exceeded. Sustainability reporting is so unique and specific to each company that, while it is possible to compare use of selected reporting frameworks, or the scale of disclosure, or the length, or the colors of the design, creating a single Best in Class standard for reports is misleading. It's possible to compare certain types of disclosure across reports - such as how a company discloses carbon performance or employee engagement - so maybe it's possible to identify Best in Class reporting on certain topics. But overall Best in Class? Is Class every single sustainability report that's published? Or Best in Class for certain types of company, company size or industry sector?

The impossibility of the Best in Class assessment is why I prefer a threshold approach to evaluating the effectiveness of reporting. Framework-agnostic, metrics-agnostic and generally-agnostic, I use a simple model to the evaluate reports I come across every day. It's called the AIM Model. I developed this model for the publication of my annual list of the Top Ten  Sustainability Reports of the year in 2011. Either a report broadly meets the expectations for AIM reporting, or it doesn't. It's not about a score or a leader-board - it's about doing the job or not doing the job.

The AIM (Authenticity, Impacts, Materiality) Model goes like this:
Authenticity stands for: credible reporting that appears balanced and complete; it links reporting to purpose; it uses stakeholder voices to supplement internal narrative; it demonstrates consistency with prior reporting and shows evidence of long-term commitment with a strategy through targets and reported progress against targets; it includes a clear set of policies and positions on important topics and a CEO statement that you believe the CEO has actually read
Impacts stands for: How has the company made a difference, and how it measures that difference; not just a shopping list of activities; measurable outcomes; focused storytelling that supports describing impacts in specific cases.
Materiality stands for: clear materiality process that connects to the materiality topics identified and selected; description of the stakeholder interactions that have influenced the selection of material topics; contextual information that helps us understand the material topics and their relevance and explicit deep-dive reporting on the material topics selected.

Now, some reporters do a great job year after year in delivering reports that meet the AIM Model criteria - generally I know even before I look at the report that these companies will deliver reports that I will find inspiring. Here are three reporters that deserve a recurring 🎯 AIM Award 🎯 for their consistent reporting effectiveness. In random order. 

Marks and Spencer
Marks and Spencer plc is one of the strongest, most consistent, most comprehensive reporters that never fails to impress me with the scale of its programs and the meticulous nature of its planning, target setting and disclosing. The iconic Plan A (that has now become Plan A 2025) is a masterpiece of branding, engagement and evolution of leading sustainability practice. The 2019 Plan A Update is a fairly nuts and bolts 18-page document, no fancy design and no stories, but covers all the Plan A news in brief. Enough so that we know what M&S has been getting up to in the past year.

The prior Plan A Report for 2018 was a fuller update, more colorful (though not much more) and much more detailed.



It includes for example, as well as the individual updates against Plan A's 2025 pillars across all 100 commitments, details of how the company creates value and several pages with the governance structure for Plan A and named individuals responsible for each piece fitting into place. There are also commentaries from external stakeholders.


The Plan A overarching goals are all about Impacts - supporting customers in sustainable living, helping people live happier and healthier lives, transforming communities, science-based carbon targets and more - M&S's goals have been developed from the outside in, understanding global priorities and driving change through the business and its engagement with customers and communities.
The Material focus of Plan A is clearly described and the stakeholder input used to help define and assess material topics is explained. I find it a little odd that M&S does not publish the specific results of the materiality assessment, which they claim to have performed, in an overt way. Rather, the claim is that the most material topics, around 40 of the 100 commitments, are independently assured and a couple of asterisks denote these throughout the report. So, if you have an hour or so to spare, you can compile this list, though it's a little fidgety. Bottom line, however, it that Materiality is defined and there is a lot of supporting information as to how it was done.
And finally, Authenticity. I cannot imagine a company maintaining this scale, scope and pace of achievement and reporting year after year since the launch of Plan A in 2007 (was it that long ago?!) and reporting more generally on sustainability prior to that, without a large measure of Authenticity. Many elements support this including the transparent Plan A governance structure, the clear reporting on performance whether positive or less positive and the detailed methodology of selecting the Plan A components. Definitely worthy of an  🎯AIM Award 🎯

Kingfisher
Kingfisher's reporting is bold, creative, inspiring, coherent and absolutely in line with the AIM model. I have been following Kingfisher's reporting over the years, and even selected Kingfisher's Net Positive 2012-2013 Report as one of my Top Ten CSR Reports of 2013. Kingfisher has the knack of distilling its sustainability vision, mission, program and performance into eye-level, easy-to-follow messages that get through to our minds and hearts. It's reporting for everyone: Kingfisher's 2018-2019 Sustainability Report shows meticulous transparency with on-point metrics across a range of targets alongside well-flowing narrative supported by big bold highlighter pages that anyone can understand.





In terms of Authenticity, Kingfisher publishes performance - successes and challenges - clearly against annual and long-term targets. An external commentary from a sustainability expert and a case study from the community build in external stakeholder voices. A seemingly genuine message from the CEO, Véronique Laury (Yes, it's a woman CEO. YAY!!) expresses both the positioning, the positives and the challenges of Kingfisher's sustainability journey: "In several areas our progress has been slower than we would have liked and challenges with our data systems mean we cannot report this year on two important KPIs relating to timber sourcing and sustainable home products. We know how important these issues are and we are addressing these challenges as a priority."   
Progress against 2018/2019 targets en route to 2050 are set out with clarity:



Kingfisher's entire sustainability strategy is about its overall Impact on the world. Like Marks and Spencer above, it's an outside-in strategy with four net-positive aspirations to 2050 that focus on how Kingfisher makes a difference in the way people live their lives. Kingfisher has guidelines for customers so they can make sustainable choices and measures the proportion of sales that these choices represent. 



Outside-in strategies tend to be closely aligned with the Sustainable Development Goals. Kingfisher goes a step beyond most companies by aligning its Impacts with specific SDG targets.


As for Materiality, yes, that's in there too, supported by a description of the process used to create and revise this list annually, including a specific materiality assessment in 2018 on 25 raw materials used in Kingfisher's products, assessed for human rights and environmental practices, that will be integrated into the overall materiality assessment.


While this report does not follow the In Accordance level of GRI guidelines, an online GRI Content Index is provided.
The CSR Reporting Blog hereby grants an 🎯AIM Award🎯 to Kingfisher for consistently impressive and meaningful sustainability reporting.

Baoviet
Baoviet is one of the leading financial-insurance groups in Vietnam. As a judge in the annual Asia Sustainability Reporting Awards (ASRA), I have been reading Baoviet's reports each year for the past few years and have always been impressed with the way this company pulls its report together with diligence and scrupulous attention to detail. Always rather (too?) long (the 2018 report is 257 pages!), Baoviet presents its comprehensive GRI Standards-based disclosure in a logical and lucid way. As previous reports, Baoviet's 2018 Sustainability Report, Mastering Hi-tech to unlock Sustainable Future, also shows how Baoviet masters disclosure, and not just sustainable insurance.



The report is laid out using the GRI Standards framework, addressing the disclosures in order of the 100, 200, 300 and 400 Standards sets. This is not my personal favorite way of presenting content, but it's a very respectable way of reporting, and has some advantages in terms of easy navigation to each group of topic-connected disclosures. In the case of Baoviet, this is done quite neatly, with a symmetrical order to each page, following the GRI prescribed content for disclosure of Management Approach and associated data.





Wholly AIM, this report covers Authenticity, Impacts and Materiality exhaustively. A deep-dive into risks, opportunities and context supporting the selection of Material topics helps us understand the sustainability challenges of Baoviet.



A strategic approach aligned to the Sustainable Development Goals shows that Baoviet has invested Authentic thought into its planning and sustainable development direction.




Impacts are presented in a specific section describing "indirect economic impacts" (GRI's Standard 203) summarizing Baoviet's overarching contributions to a more sustainable society, with some case studies later on in the report in the section on community involvement (GRI 413).  Definitely deserving of an 🎯AIM Award 🎯, Baoviet could also do this with a shorter report! I'd recommend trimming some of the evergreen detail from this report in future, giving greater focus to the reporting year achievements.

********


So, coming back to my opening thought, would I consider these reports Best in Class?  The highest current performance level in an industry, used as a standard or benchmark to be equaled or exceeded?

I certainly consider these reports that I find inspiring and can learn from. It's possible they might win awards (and all of these companies have won sustainability reporting awards over the years) when pitched against a limited number of entrants in an awards program (and I admit to making these choices as a judge in different awards programs each year.) In the end, I circumvented the question my client posed to me by providing a selection of reporting elements from different companies and reports, a sort of pick'n'mix showing what can be done to achieve AIM reporting, and in some cases, with a little added creativity.  So I think my message here is about delivering the best report you can, wherever you are on your sustainability journey, targeting to meet the needs of your stakeholders.

If your report does this well, some may consider it to be Best in Class.
I'll probably say that it's worth an 🎯AIM Award🎯 !





elaine cohen, CSR consultant, Sustainability Reporter, HR Professional, Ice Cream Addict. Owner/Manager of Beyond Business Ltd, an inspired Sustainability Strategy and Reporting firm having supported 100 client reports to date; author of three books and several chapters on Sustainability Reporting and the Human Resources connection to CSR; frequent chair and speaker at sustainability events and judge in several sustainability awards programs each year. Contact me via Twitter , LinkedIn or via Beyond Business  



















Thursday, December 27, 2018

Target targets for 2019

Sustainability reporting used to be about activities and actions whereas today it is more about impacts and intentions. Substantiated intentions, that is, by which I mean T-A-R-G-E-T-S. Yes, that awful, threatening, potentially blood-pressure-raising concept of actually making a public commitment to making a difference. One of the things I find most frustrating about many sustainability reports is the extreme lengths companies go to in order to describe their mission, vision, what's important to them, what's important to stakeholders, what's important to the world and why it's ALL so important ("Sustainability is in our DNA" and "The world is about to end") .... but when it comes to saying what they plan to do about it: radio silence. Vague intentions, aspirations, declaratory blurb - it's all very nice but, well, no teeth. 

Andrew Wilson, expert advisor on sustainability, author of Green to Gold and The Big Pivot, has done leading-edge work in this area. He's even quite positive in his views of how targets have progressed and become embedded in the way most large companies report on sustainability. You can gain some comfort from his article from December 2017 here. He concludes that 94% of the largest 200 companies in the world include targets in their Sustainability Reports. 


You can check out Andrew's Pivot Goals database, containing 3,923 goals that have been publicly disclosed by (large) companies in their sustainability communications over the past few years (the database contains some duplication with both original goals and those that have been superseded or replaced). While this is apparent progress, it's by no means close to critical mass for all the thousands of companies that report on sustainability. Also, as you might expect, the distribution of targets is uneven - in the Pivot Goal database, for example, in the pharma sector, I counted 13 companies with targets, ranging from one company that has 62 targets and one that discloses just one target. 

Other aspects of target setting are coverage and quality. Coverage is the extent to which a company discloses targets for all material sustainability aspects versus targets that are limited to one area, say, environmental impacts which is the most popular. Quality is the extent to which targets are SMART. You know what SMART means. SMART is not: "Continue to improve our environmental impacts". Just sayin.  

Many of the reports I view and review are GRI-based and claim to be in accordance with GRI Standards at core or comprehensive level. Now, GRI has made reporting of goals and targets mandatory in the Management Approach Disclosures. Disclosure 103-2 requires (the organization SHALL report) disclosure of goals and targets. Well, sort of. The mandatory part is diluted by the addition of some small print: if the management approach includes that component.  



Additional guidance suggests including context, time-frame, reference to legislation if relevant and more. 


So, according to GRI, for GRI compliance, reporting of targets is mandatory if you have them. If you don't, no problem. Well, no problem is exactly how most reporters approach the Approach. It's so easy to say "we are committed to", "we place great importance upon", "we are passionate about" and all those other gloriously positive affirmations, but when it comes to the crunch, it's apparently more convenient to ignore the bits that bolt those commitments down in the organization and give stakeholders something to believe in. I believe disclosing targets should be a mandatory element of material topic reporting. Every single GRI Topic-specific Standard should include a requirement to disclose SMART targets - not IF they exist, but BECAUSE they should exist. And if they do not exist, conformance to GRI Standards should not either.

Some (random) examples of how companies commit in sustainability reports:

Arguably the best-of-the-best expression of public commitments and consistent reporting of progress is Marks and Spencer, whose Plan A, when it was created in 2007, immediately set M&S apart from the crowd with a bag of 100 commitments representing the most far-reaching and comprehensive set of targets by any company at that time (as far as I know).  Although Plan A's tagline was "Because there is no Plan B", Plan A has continued to reinvent itself and currently goes under the name of Plan A 2025. Behind the scenes of Plan A is a strong commitment to sustainable business, and business that positively impacts people and planet, and the pace has been maintained even at times when the company's financial results have been a bit wobbly. Marks  and Spencer's 2018 Plan A Report includes a detailed account of progress against all targets across the four Plan A pillars in a way reflects the M&S brand: quality, detail and tailored to meet a range of needs. 



Walmart's 2018 Sustainability Report includes a range of specific commitments at the start of its 230-page report. The targets are SMART enough and cover all areas of sustainability priorities - a comprehensive approach.


At the end of the report, Walmart discloses how it is doing against these commitments:


While it's possible to correlate progress reported to the commitments made upfront, it takes a little detective work to sort it all out as the language used is different in both cases. However, Walmart's (mostly) specific time-bound targets and progress statements are enough to quench my thirst for target-juice in this report. 

CVS Health also does a great job in its 2017 Corporate Social Responsibility Report with multi-year targets and reporting of progress in the reporting year. Across four pages, CVS demonstrates a mature view of its role in society with targets that reflect its impacts on society (help create a tobacco-free generation by acting to reduce youth smoking) as well as targeting improvements it its own operations. The targets are also in line with the material impacts CVS Health defines in its report. 



A super presentation of targets is from Sinyi Realty Group, one of Taiwan's leading real estate agencies in its 2017 Corporate Sustainability Report. For key strategic areas, the company sets long-range goals, medium term targets to 2025 and short-term targets for the coming year. Sinyi transparently reflects performance against the short-term targets set in the reporting year. No room for misinterpretation or detective work required here: it all hangs together very credibly.


Google's 2018 Environment Report includes a set of targets and progress made against these. It's a clear enough presentation and scoreboard markers give you a quick overview of progress. However, while this is totally fantastic, the targets are a mixed bag, for example, two of the targets are: set targets and others are either not time-bound or relevant for the single reported year - which in sustainability terms is no time at all. All targets relate to the direct environmental impacts of Google's own operations, for example, achieving zero net operational carbon emissions, which Google has impressively done for at least the past five years.



Of course, I couldn't write a post about targets without looking at Target Corporation. I mean, if your name is Target, you have to have targets, right? Well, Target doesn't disappoint, though, oddly enough, Target's targets are called goals 😂😂😂 But, whatever they are called, they are extensive and are presented across 7 pages in Target's 2018 Corporate Responsibility Report, followed by a couple of pages of upcoming goals (or targets) in areas not measured to date or not the subject of goals so far.  


There is no doubt in my mind that the inclusion of public commitments is both a way to reinforce trust with stakeholders and a tool to catalyze performance improvements. Several leading companies are doing this really well, and I tend to agree with the analysis above that more are doing so these days than in the past. However, the leading companies across the world represent only a small fraction of the entire population of reporting companies, and many (I might even say, most) of them do not even hint at targets or commitments.

So, let's be clear: If you want stakeholders to believe you are serious about sustainability, or whatever you call it in your organization, make SMART public commitments in key areas of impact and report your progress against these year on year. 

Of course, a great addition to any Sustainability Report would be the inclusion of a target to provide a lifetime supply of free ice cream to anyone who blogs about your targets on the CSR Reporting Blog. 

Happy Holiday Season and Happy 2019 to all CSR Reporting Blog readers!




Tuesday, September 11, 2018

Story of a Sustainability Superwoman

There are plenty of excellent reasons to attend the Asia Sustainability Reporting Summit on 2nd and 3rd October 2018. I won't list them all here.

Just take a look at the website and you'll be convinced. Instead, I'll tell you a story. 

Once upon a time, there was a little girl called Suyin. Suyin lived with her mother and father and seven younger siblings in a remote part of Asia, in a wooden hut, far from the hustle and bustle of the big cities and the stresses of daily living in modern times. Suyin and her family were a close-knit group, relying on each other for love, support and inspiration. They lived on the resources of the earth, fishing, hunting and farming, taking from the land only what they needed to survive without wasting any precious resources. It was a simple existence, but it was a good one. 

As Suyin advanced in age, she noticed with each passing year that life in their region was becoming tougher. Rainfall patterns were changing, water levels were dropping in nearby streams, the soil was not as fertile as it once was, local wildlife had ceased to thrive. Slowly, Suyin was perceiving that her land was refusing to provide for them. And when she was just 19, there was a major typhoon that shook their wooden hut to its foundations, barely leaving it standing.

Suyin was worried about the long-term survival of her family. She knew she had to do something. Amid tears of farewell, she left her family, promising to return. She travelled by foot without a cent to her name until she reached a major city and there, she begged for food and money. What she was given, she saved. And when she had saved enough money, she rented a small room, and took a job in a small store. She did well. She was intelligent, capable and thoughtful and soon enough, she had enough money to fund a place at university, as she knew that without education, she would not advance and be able to help her beloved family. 

After studying, she was fortunate to be offered a job in a large corporation, in the Sustainability Department. In that role, she campaigned to mitigate climate change and advance social programs that would help families living in remote areas. She became a true sustainability leader, speaking all around Asia on the need to save the land and prevent environmental degradation, as well as taking care of communities and their ability to survive and thrive. Many companies followed her lead and joined the sustainability movement to drive positive change for prosperity. During this time, Suyin returned frequently to visit her family, provide them with resources and help them overcome their challenges. For example, she purchased a small farmer irrigation kit from Netafim so that they could irrigate the couple of acres they farmed and gain greater yields of fruit and vegetables with less water. 

In 2018, a colleague nominated Suyin in the annual listing of exceptional female sustainability leaders in the region, Asia's Top Sustainability Superwomen, an initiative of CSR Works International. Suyin was overwhelmed. She had never received such recognition for doing only what she thought was right. But will Suyin's nomination be accepted? Will Suyin shine through? How many more Sustainability Superwomen have been nominated and who will gain recognition at the Asia Sustainability Reporting Summit?


You can discover if Suyin is included in this prestigious list of Sustainability Superwomen in October in Singapore, at the Asia Sustainability Reporting Summit. Even if you don't get to meet Suyin, you will be able to engage with a host of inspiring women sustainability leaders and experts who have driven the sustainability agenda in Asia with passion and overcome challenges to ensure their voice is heard and improve life for all of us.


Come to the summit and celebrate Sustainability Superwomen with all of us. Overall, there'll be more than 60 international speakers (not ALL of them are women, however!) who will cover every important aspect of sustainability reporting in depth. You will hear directly from top leaders from

• Agility
• AIG
• Bangchak Corporation
• Baoviet Holdings
• Bombay Stock Exchange
• CapitaLand
• CDP
• City Developments Limited (CDL)
• CLP Power
• CP Group
• DBS Bank
• EcoVadis
• Golden Agri-Resources
• GRI
• Hang Lung Properties
• Intel
• International Integrated Reporting Council (IIRC)
• John Swire & Sons
• JSW Group
• Kalbe Farma
• Maritime Ports Authority Singapore
• Microsoft
• MSCI
• RobecoSAM (DJSI)
• Schneider Electric
• Sime Darby
• Singtel
• SM Investments
• Suntory Food & Beverage
• Sustainability Accountability Standards Board (SASB)
• Tata Consultancy Services
• Union Bank of the Philippines
• Viego Eiris
• WWF
and the list goes on

And of course, I will be there, co-chairing the summit with the man behind it all, Rajesh Chhabara.

Exciting debates and insights that will help you move the needle include:






Looking forward to a fun couple of days of learning, sharing, challenging and celebrating. Hope to see you there!




elaine cohen, CSR Consultant, Sustainability Reporter, former HR Professional, Trust Across America 2017 Lifetime Achievement Award honoree, Ice Cream Addict, Author of three totally groundbreaking books on sustainability (see About Me page). Contact me via Twitter (@elainecohen) or via my business website www.b-yond.biz (Beyond Business Ltd, an inspired CSR consulting and Sustainability Reporting firm). Need help writing your first / next Sustainability Report? Contact elaine: info@b-yond.biz 
Elaine will be co-chairing  the  second annual Asia Sustainability Reporting Summit 2018 in Singapore on 2/3 OCtober. Join me there!

Sunday, September 9, 2018

Cosmetic materiality

This week, a Press Release announcing the publication of AS MADARA Cosmetics ESG Report for 2017 caught my eye for several reasons. (1) Madara is a Latvian company - not too many of those publish reports - the GRI Database lists just 5 reports in 2017/2018 from Latvia. (2) It's a FIRST report - and you know how much I 💗 first reports. (3) It highlighted a CEO pay ratio of 1.68:1 and (4) It follows the NASDAQ ESG Reporting Guidefor Nordic and Baltic Markets.

Now, as some of you may recall, I wrote about this guide a while back in a post entitled: Materiality: from meaningless to differentiating. The thing about materiality is that so many companies today use it as a box to tick rather than a considered strategic framework for sustainable development and reporting. The low-level thinking on materiality where people, society and the environment are material to every company has rendered materiality fairly meaningless as all companies, no matter what sectors, are driven to report on the same thing. Advanced materiality thinking is differentiating; it identifies those unique impacts where a company has the power to change lives and society for the better. So, a broadscale, unimaginative, limiting approach to materiality doesn't serve to advance sustainable development, it simply serves the purpose of transparency and accountability, albeit that is also a worthy and necessary purpose. I call this operational materiality, and it is reflected in the NASDAQ reporting indicators for all companies, all sectors, all sizes.


Thirty-three basic measures of the ESG performance of the business provide a positive overview of how a company performs from a sustainability standpoint. 

Madara Cosmetics is a woman-led Latvian-based natural cosmetics firm traded on NASDAQ. The Madara report uses this framework, responding to all NASDAQ indicators (most are labelled - five are not labelled but the disclosures are present). Thus, in a refreshingly clean and attractively designed 50-page report, Madara covers off the bases using a compact set of universal indicators in a coherent way. 



However, the brand has gone beyond a simple response to a set of measures. It tells a story.


And it takes a stand.


Part One of the report is an education on organic and/or natural ingredients and the different certifications and standards that govern claims that cosmetics companies make on their labels. While intuitively, anything labelled natural or organic sounds environmentally friendly and healthy, this may not always be the case. 

It is clear where Madara stands here. A new ISO Standard 16128 for natural beauty products permits petrochemical and GMO-based ingredients, according to Madara, and is in general an inadequate and inappropriate standard for natural cosmetic products. Madara also attacks new EU regulation governing claims that can be made on cosmetic products, commenting that the new regulation compromises the rights of consumers to information about products they use and the ability to prefer products that do not contain certain ingredients. This is getting a bit messy according to Madara and may encourage greenwashing rather than science-based true and accurate product labelling.

A bold move. In this first report, Madara has chosen to take a strong and well-articulated stand against market regulatory developments that influence how consumers perceive natural cosmetics and influence competition for natural and organic share. This is a good use of the Sustainability Report. It helps us get to know the company and what it stands for. It places the company operations in a market context that showcases how Madara positions its brand and stands out from the crowd. This is part of the brand identity and a clear element of the way Madara impacts lives. Had the company developed a differentiating set of materiality topics, "accurate natural product labelling" and "influencing regulation governing natural cosmetics for the benefit of consumers" might well have appeared on the list.  

What I am missing, however, are the rest of these broader impacts. After the regulatory and ingredient-type discussions, the report continues in three sections - environment, social and governance - using the NASDAQ guidelines as a (mainly chronological) basis to report. However, beyond product formulations, I am wondering how the company reaches and impacts the lives of consumers. "Deeper than skin" is the company motto. I would like to understand why Madara's products are so transformational for consumers and what a difference they really make. What consumer needs are Madara products responding to and how successful are they? These impacts are overlooked in this report. 

However, this first report is a good example of an activist company using reporting to amplify its message and differentiate itself while observing stakeholder expectations on transparency and disclosure. In fact, with a report such as this, you wonder - would using the GRI Standards have made any difference? Or would it have simply complicated the reporting process? 

I tend to think that identifying material impacts is a positive step and creates a clear focus that guides the reader. A materiality assessment, robustly developed and clearly presented is a good backbone for reporting and I would have appreciated this addition in the Madara report. On the other hand, there are interesting and important disclosures in the NASDAQ framework that I believe all companies should report, whether or not their materiality assessment picks them up (and we all know that processes for determining materiality are somewhat arbitrary in most cases). A GRI-compliant report would probably not have included these disclosures.

In my post of last year, then, I talked about operational and differentiating materiality. Those who read GRI's Annual Report for 2016-2017 will have noticed a similar presentation.



As you can see, this matrix is split into two parts: operational and mission effectiveness, which, coincidentally or otherwise (who knows!?) are pretty much how I was seeing it in August 2017, a little before the publication of the GRI Annual Report in May 2018. Operational issues are the ones GRI directly controls - transparency, advancing people, and partnerships. Mission effectiveness are the indirect impacts - the difference the organization makes in society as a result of its operational activities - driving better sustainability performance, reporting and harmonizing the sustainability landscape. The thing you notice about this is that the operational impacts could relate to any company. The mission effectiveness topics are differentiating and unique to GRI. 

(As an aside, not all indirect impacts are linked to mission effectiveness. An indirect impact of GRI, for example, might be job creation in the sustainability sector, as more reports means more reporters. But this is not the mission.)

I think we are at the point where we must elevate our approach to materiality so that it refers to real ways that companies affect our lives, and not just the things that companies do. We are lacking a robust process for determining materiality. Currently, each company individually defines the degree of stakeholder engagement required to define material topics and ranks the topics raised in unclear ways. The was the big fail of G4 (and now GRI Standards) when it first put materiality center-stage in 2013. It made materiality pivotal but did not provide the tools for companies to apply it adequately. If materiality is at the center of sustainability strategy and reporting, and not just a cosmetic addition, the process for defining the material topics should be more clearly prescribed and evidence-based.

Well done to Madara Cosmetics for reporting and for speaking out on issues that affect people's lives. Materiality or otherwise, this is an authentic and credible report. I give it three cones -  🍦🍦🍦 - including one for a first report. 





elaine cohen, CSR Consultant, Sustainability Reporter, former HR Professional, Trust Across America 2017 Lifetime Achievement Award honoree, Ice Cream Addict, Author of three totally groundbreaking books on sustainability (see About Me page). Contact me via Twitter (@elainecohen) or via my business website www.b-yond.biz (Beyond Business Ltd, an inspired CSR consulting and Sustainability Reporting firm). Need help writing your first / next Sustainability Report? Contact elaine: info@b-yond.biz 
Elaine will be co-chairing  the  
second annual Asia Sustainability Reporting Summit 2018 in Singapore on 2/3 OCtober. Join me there!
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