Tuesday, April 2, 2013

HENKEL: G4: good-to-go?

Henkel is an early 2013 reporter, and with a GRI B (self-declared report), is now my next guinea pig in the G4 good-to-go test. As you will have seen from my first post in this series, covering the Clorox report, getting to G4 is more of a marathon than a short stroll (if G4, when launched, is fairly close to the current exposure draft).

In this analysis, I focus on just a few significant changes in G4, and these are just four Profile Disclosures and their corresponding Management Disclosures and Performance Indicators.

These are the new disclosures: (for more background see my Clorox post)
DI 12: Describe the organization's supply chain (number, type, location of suppliers, value of materials purchased etc)
DI 17: List the identified material Aspects (and other material topics).
DI 18: Describe the organization’s value chain.
DI 19: Place material Aspects (or other material topics) in the value chain.

Quick Overview of the Report
Henkel is headquartered in Dusseldorf, Germany, and employs 47,000 people and generates revenues of 16.5 billion Euros, manufacturing household care and personal care products. 

Henkel 2012 Sustainability Report GRI Application Level B - self-declared, 52 pages
The printed report is linked to the web-based report using reference codes, enabling you to find additional content by inputting a code - a nice touch. Henkel states a clear strategy for 2030 - a long-term goal to triple the value created by the company's footprint (i.e. become three times more efficient), supported by quantified five-year targets to 2015 in six focal areas - for example, reducing waste, water consumption and energy by 15% per production unit by 2015. Much of Henkel's report is focused on resource efficiency in product manufacturing and development. The company has developed a "Sustainability#Master" matrix approach which identifies the "hot spot" areas for improvement in value development and environmental efficiency for its products, and applies this system for evaluating and implementing improvements.

Sustainability#Master Matrix for adhesive product Loctite Max 2

Profile Disclosures
Henkel's supply chain disclosure includes a section related to suppliers, and there is reference to the supplier base in 125 countries and the fact that more than 70% of purchased volume comes from OECD countries. Supplier selection criteria include sustainability performance and adherence to responsible business practice principles, and Henkel has a risk assessment process which requires suppliers to complete a self-assessment on sustainability issues and participate in audits of their operations.

However, Henkel does not disclose the number of suppliers it works with, nor the number of results of audits conducted. Henkel does not make any reference to the types of suppliers as required by disclosure D12, for example, whether the supplier base includes ingredient suppliers or contract manufacturers (though later in the report we can read that around 10% of Henkel's volume of over  7 million tons of output is produced by contract manufacturers).

DI 12 also requires disclosure of the "total monetary value and/or volume of materials purchased from suppliers broken down by types of materials, types of suppliers and location of suppliers" (although I fail to see why this disclosure is an essential basic profile disclosure) and Henkel does not really provide information which meets this request. DI 12 Henkel G4 good-to-go? No.

I couldn't find a Value Chain description in Henkel's report, though there is evidence of value chain thinking in the Hot Spot analyses, as in the example provided above, as these take into account the upstream and downstream effects of product development, manufacture and use. However, these descriptors are individual for selected products, and are limited to the impacts of products and not the entire organization and the entities it impacts. Additionally, the detailed impacts in these analyses are not fully disclosed - only the areas in which product improvements are identified and the progress of these improvements are noted. Therefore, mapping the Value Chain disclosure - DI 18 Henkel G4 good-to-go? NO.

Henkel has a long list of material issues, which could expand this 56 page report into something much longer in G4. I believe this complies with the requirement for listing the material issues and aspects as required by G4. DI 17 Henkel G4 good-to-go? YES

These material issues translate into 19 material Aspects in the new G4 line-up, according to my calculations. I can't examine ALL of these, but let's take a couple.

Occupational Health and Safety is a material Aspect in the Social sub-category of labor practices and decent work. There are four performance indicators here: LA 6, 7, 8 and 9, of which 8 and 9 are core. LA7 refers to "rates of injury, occupational diseases, lost days, and absenteeism, and total number of work-related fatalities, by region and by gender" and LA8 refers to education and programs to assist with serious diseases. These are unchanged in G4 and Henkel includes these indicators as fully reported. However, Henkel's reporting against LA7 in this self-declared GRI B level report does not meet the indicator requirements. Rates of injury and total fatalities are disclosed but not lost days, absenteeism and this is not split by region and gender.

LA8 relates to serious diseases.  The Indicator Protocols define this as "Occupational or non-occupational related impairment of health with serious consequences for employees, their families, and communities, such as HIV/AIDS, diabetes, RSI, and stress." I could find no disclosure relating to such diseases in Henkel's reporting, although some of the health and safety training activities listed also include, for example, "back strengthening exercises and tips on nutrition". Therefore, in this material Aspect, not only does Henkel not meet the requirements for G4, it does not meet the requirements for G3. G4 good-to-go? NO  
Renewable raw materials is one of Henkel's stated material issues. This fits into the Materials Aspect in the Environment category. There are two core indicators here: EN1 (materials used by weight or volume, split by renewable and non-renewable) and EN2 (percentage of recycled input materials). Henkel indicates full reporting against both indicators. Regarding materials used, Henkel reports in general on the different types of raw materials in key product categories, and notes the approximate percentage of renewables. However, no data is provided on the weight or volume of key raw materials, including sustainable palm oil, which Henkel notes as a separate issue in its own right. Henkel confirms commitment to participation in the Roundtable on Sustainable Palm Oil and to purchasing of RSPO certified palm oil, but does not disclose how much palm oil the company actually uses. Henkel also mentions various initiatives to improve the sustainability of packaging, but apart from providing the total weight of packaging, does not identify how much is from recycled materials. Therefore, in these two indicators, Henkel does  show a good approach and several positive initiatives, but does not meet G4 requirements and not even G3. G4 good-to-go? NO
At this point, we know that Henkel's current reporting does not meet the G4 Exposure draft standards, based on, once again, a very limited analysis of just a small sample of G4 disclosure requirements. This is not surprising, as this report was not written with G4 in mind. It does however demonstrate the step change required to meet G4, as we saw with the previous Clorox example. In other words, Henkel has some significant changes to make before it can claim "In Accordance" with G4, if the company decides to become G4 compliant.
In my next post, I will share some further thoughts about the applicability, relevance, complexity, benefits and uptake likelihood of G4. Watch this space.

elaine cohen, CSR consultant, winning (CRRA'12) Sustainability Reporter, HR Professional, Ice Cream Addict. Author of Sustainability Reporting for SMEs: Competitive Advantage Through Transparency AND CSR for HR: A necessary partnership for advancing responsible business practices Contact me via www.twitter.com/elainecohen   or via my business website www.b-yond.biz   (Beyond Business Ltd, an inspired CSR consulting and Sustainability Reporting firm)

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