Wednesday, June 13, 2012

The A+ Myth of Sustainability Reporting: Stop the Hype

I have just noticed the sparkling new Corporate Responsibility Report for 2011 published by ATOS, an international IT Services company, their third report. The first thing that struck me, even before I started to scan the report, was the delight and pride at Atos's achievement, for the second time, of the A+ Application Level of the GRI Framework. The Press Release is entitled: Atos Received Highest GRI Rating for its Corporate Responsibility Report. The Chairman's remarks start with: I am pleased to report that Atos has been awarded an A+ rating in accordance with the GRI standards for the second time in a row and the first in a list of 2011 key highlights is "Global Reporting Standards Recognition", which refers to the prior report's A+ rating and notes that this is: "recognizing Atos’ leadership position in the field of sustainability." Further on, in the Business Profile Section, Atos mentions its number of employees (74,000), its annual revenues ($8.5 billion) and yes, you guessed it : "Awarded an A+ by the GRI for its sustainability reporting." The "rated A+ by the GRA" statement appears again on yet another page mentioning 2011 Achievements.

The GRI Framework, as you know, offers three levels of reporting transparency - C (some disclosures and 10 performance indicators), B (all disclosures and 20 performance indicators) and A (all disclosures and all core indicators). The "+" refers to an external assurance statement. The decision at which level of transparency to report is a voluntary company decision. The GRI offers an Application Level Check which assesses whether the declared transparency level of the report actually conforms to the GRI Framework, and if so, issues a certificate to the reporting company to this effect. The wording of the GRI Statement is very clear:

Part of the GRI Statement from the ATOS report
The GRI Application Level Check is a quality assurance process, confirming whether a company has applied the guidelines in the intended and prescribed way. It is actually a very useful process. I have submitted two reports just this last month or so for a GRI for Application Level Checks on behalf of clients, and, I find that this is very helpful in ensuring rigor in preparing the report (you know from the outset that the disclosures and indicator responses will be scrutinized in detail) and in picking up issues which may have been overlooked, such as an incorrect page number in the Index, or a missing piece of data against one of the indicators. For new or inexperienced reporters, I am sure the GRI Application Level check also picks up some very significant omissions. I have spoken often about the quality of reporting - which is critical if reporting really is to become mainstream - and adhering to a selected Framework in the correct way is one part of delivering a quality report. The issue with the GRI Application Level Check is of course that it is only evaluates a small number of indicators and disclosures and is therefore not a comprehensive quality check. However, it is a worthwhile process.

Back to ATOS and the deliriously happy way in which they present the achievement of the A+ level as "recognition for sustainability leadership". Is the achievement of an A+ reporting level "sustainability leadership"?

In the GRI Reports Database for 2011, there are currently 2,802 reports, of which 68% declare an Application Level and 17% of the total number of reports declare an A+ Application Level (472 reports). Of these 472 reports, 248 (52%) are checked by the GRI and have received the GRI Application Level Statement.  Does this mean that 248 companies in 2011 are "Sustainability Leaders"?  Is conformance to the GRI Framework a reasonable measure of this leadership?

I am reminded of a whitepaper published earlier this year by BrownFlynn and CSRHub , entitled: "GRI Application Levels: Why Strive for an A". The PR about the study says: "The study demonstrates why companies with a higher Application Level are better able to manage their sustainability impacts, and provides evidence of a correlation between a company’s GRI Application Level and its reputation for sustainability performance. The study also clarifies the confusion around differences between Application Levels." Excuse me (or not) for being critical, but this contention requires a massive leap of faith, and this whitepaper, in my personal view, may encourage the type of thinking that puts more emphasis on the reporting level than on the report substance.

This is the conclusion of the whitepaper: ".. we conclude that a GRI Application Level can serve as a proxy for sustainability performance management and that a company looking to improve its sustainability performance should strive to achieve an Application Level B or higher."  While I fully agree that transparency is a catalyst for performance improvement, I am not convinced by the correlation put forward by this whitepaper. The conclusion is based on two main assertions:

First: that the GRI Framework has "implicit quality controls" : This is what the whitepaper says: "GRI subtly influences report quality through the specificity of the required disclosures. Although the Application Level is not downgraded when a company gives less information than the protocol requires, GRI is certainly not silent on the issue of report quality. GRI writes specific questions, encourages the use of third-party assurance, and then leaves it to the stakeholders to review the quality of the company’s disclosure." Well, errrrrrrrr, the GRI IS silent on the issue of report quality. There are no "implicit quality controls". The GRI provides guidance on how to respond to the performance indicators. That's it. A large cross-section of reports, I regret to say, do not apply these guidelines correctly at the declared levels, and even those checked by the GRI are only partially checked. The GRI offers a bonus "+" for third party assurance, which, in many cases, is hopelessly inadequate and does little to contribute to the quality of disclosure.

Second: that disclosure at Level A or B is evidence of "stronger sustainability performance". The whitepaper states: "A-Level and B-Level reporters disclose their policies, procedures, management approach, training strategy, goals and internal controls, whereas C-Level reporters do not. The conceptual differences .... predict that a company with well-defined sustainability training, goals, policies and controls in place is likely to have higher-quality data and risk management structures and, thus, demonstrate stronger performance. The CSRHub scores support this claim." I find this unconvincing. The GRI Framework is about consistent transparency of sustainability practices and results, not specifically about the quality of performance. The fact that a company discloses that is has a system in place for managing sustainability does not necessarily mean that it is performing any better than another company that does not disclose this information. The correlation of reporting levels to CSRHub scores is also a bit of a black hole for me. The whitepaper says that the CSRHub score, which is an aggregate of several external rankings, is higher for A Level reporters than for, say, C level Reporters, the difference being 57.4 versus 54.9 on the CSRHub scale. I have no idea what this means. How many A, B or C level reports were analysed is not disclosed and what a difference of 2.5 points actually means in terms of the quality of sustainability performance is opaque.   

Clearly, there has to be a correlation between transparency and sustainability maturity and performance quality. Clearly, a company performing well in sustainability has more extensive material that is relevant for inclusion in a Sustainability Report. Clearly, such a company may choose to report at the higher level of transparency. Even, and yes, I agree, companies use the GRI Framework as a form of benchmark to help them determine the sort of sustainability program they want to put in place. In this sense, the more extensively they adopt the Framework, the more their sustainability performance will mature and their ability to be transparent on a wider range of issues will be more significant. In our Global Transparency Index methodology, which measures the Website Transparency of the largest 25 companies in different countries,  more weight is given to A Level Reporting than B or C level Reporting. Transparency is a reflection of performance at some level.

However, this is a far cry from maintaining that disclosure at Level A or B is proof of "stronger sustainability performance".  You can be transparent and have rubbish carbon emission levels. You can be transparent and have 1% of women in management. You can declare GRI A Level and report on hardly any of the meaningful, material indicators by selectively navigating the GRI Framework. You can get a GRI A Level certification through good fortune that the inadequate indicators have not been picked up in the GRI Check. You can perform fabulously in terms of sustainability and choose not to report in line with the GRI Framework, or declare an Application Level.

Let's keep a sense of proportion, folks. The GRI Framework is a critically useful tool and has undoubtedly helped many companies develop their performance and their transparency in a consistent way. I am a  GRI supporter and recommend its use in all reports I write for my clients around the world. But let's be clear: an Application Level is not an "award", it is not "recognition" and it is not evidence of "sustainability performance leadership". Let's not advance this kind of thinking.

Instead, what will be more helpful, with the upcoming introduction of the GRI G4 guidelines, will be  the abandonment of a transparency "rating" for sustainability reports and the adoption of a more objective descriptor of  report transparency. For example: if there are core indicators, sector indicators and optional indicators, a report could be classified in terms of the percentage of disclosures and indicators it responds to in full.

In the case of the ATOS report, with whom we started out in this post, this is the situation:
  • The report is written in accordance with the G3 framework (not 3.1)
  • All Profile Disclosures are disclosed in full  with one exception.
  • Management Approach Disclosures are all partial, except for Product Responsibility.
  • The report does not disclose in full against 59 of the 79 performance indicators (75%).
  • The report does not disclose in full against 36 of the 52 CORE indicators (70%).
  • There are zero full disclosures in the Social (SO) category of indicators.
  • One indicator (PR9) is not disclosed because it is "proprietary information.
  • 27 indicators are not disclosed because the information is "not available".
  • 18 indicators are not disclosed because they are "not material".
  • EN29 and EN30 are not even included in the GRI Index - which is a clear error.
  • ATOS adds 13 indicators under the heading AO. This is not explained - and I assume it is Atos own-generated indicators ? - it doesn't match the GRI Airport Operators Sector Supplement which has  AO prefixed indicators.
  • The GRI Index in the report does not contain page numbers, only section headings, making it difficult to locate responses to indicators.

As you can see, it is possible to get this highest A+ "accolade" without actually disclosing much of the information required in the GRI Framework, and without necessarily making a stretching step-change in performance. 

So let's stop this "strive for an A" hype and concentrate on advancing sustainable business and a fair, balanced, material and transparent reflection of performance.

Apologies to ATOS for picking on this report to make my point, as, in other respects, the report appears to have been prepared with a high level of rigor and evidence of good process. Also, this post should not be construed as a criticism of the CSRHub data aggregation - just that in this specific case, I was not convinced of the conclusions drawn in relation to Reporting Levels as a predictor of sustainability performance or leadership.


elaine cohen, CSR consultant, winning (CRRA'12) Sustainability Reporter, HR Professional, Ice Cream Addict. Author of CSR for HR: A necessary partnership for advancing responsible business practices  Contact me via   on Twitter or via my business website  (Beyond Business Ltd, an inspired CSR consulting and Sustainability Reporting firm)


Judy Kuszewski said...

I couldn't agree more: sloppy, self-serving PR, and what's more, it threatens GRI's reputation. The application levels need a major overhaul in the G4 revisions ongoing now, but in the meantime, reporters should know better than to mislead and misuse the guidelines in this way.

Máster en nubes said...

From Spain ... I highly agree with your post. Something is happening when so many companies "get" the A+.... In Spain it is incredible how many companies who made their FIRST CSR report... "got" an A ... and they exaclty announced that A as something as a price or reward for their behaviour...

elaine said...

Hi Judy, thanks so much for your comments. I see we are in agreement :)
Best, elaine

elaine said...

Hello Aurora, thank you for reading and for your comment. Yes, there are many first reports which get an A. Thats ok - after all, it's the GRI system, whether we like it or not. The issue is that we all need to be clear that A does not always mean leading sustainability performance or as you say, a "reward" ...
best, elaine

Marjolein Baghuis said...

Hi Elaine (and all readers),

Thanks for your passionate blog about this. Yes, the application levels get abused, by newcomers in the field, and by companies that should really know better!

On June 20, the exposure draft for G4 - the next generation of the GRI guidelines - will be out for public consultation. G4 does propose changes regarding the applications levels - so please provide feedback through the online mechanism. Links will be available as of June 20, 2012 on the GRI website.

Marjolein Baghuis
Global Reporting Initiative

elaine said...

Hi there Marjolein... thanks for joining the conversation and for the heads up about the exposure draft for G4. This is great news! Very much looking forward to seeing that. I will plan in some blogging time :) Thanks, elaine

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