Monday, August 19, 2013

When is materiality not materiality?

Here's an issue that probably flies under everyone's materiality radar. The issue of "boredom rooms" in Japanese companies is disturbing. The story was reported in an article penned by Hiroko Tabuchi and published on 16th August in the New York Times.

Here's a short extract:

"Shusaku Tani is employed at the Sony plant here, but he doesn’t really work. For more than two years, he has come to a small room, taken a seat and then passed the time reading newspapers, browsing the Web and poring over engineering textbooks from his college days. He files a report on his activities at the end of each day. Sony, Mr. Tani’s employer of 32 years, consigned him to this room because they can’t get rid of him. Sony had eliminated his position at the Sony Sendai Technology Center, which in better times produced magnetic tapes for videos and cassettes. But Mr. Tani, 51, refused to take an early retirement offer from Sony in late 2010 — his prerogative under Japanese labor law. So there he sits in what is called the “chasing-out room.” He spends his days there, with about 40 other holdouts....... Sony said it was not doing anything wrong in placing employees in what it calls Career Design Rooms. Employees are given counseling to find new jobs in the Sony group, or at another company, it said. Sony also said that it offered workers early retirement packages that are generous by American standards: in 2010, it promised severance payments equivalent to as much as 54 months of pay. But the real point of the rooms is to make employees feel forgotten and worthless — and eventually so bored and shamed that they just quit, critics say."
Boredom rooms appear to be an issue which steps over the line of respecting human rights practices in the workplace.
Sony's 2012 CSR Report, entitled "For the Next Generation" is a 416 page giant of a report (website download), covering every possible policy and sustainability or CSR related practice. Well, almost. The report, which is GRI G3.1-indexed but not declared at any GRI reporting level,  does not contain a Materiality Matrix, so we don't know if human rights in the workplace is considered material for Sony or not. However, Sony does report on its approach to human rights (my highlights)
"Sony is committed to maintaining a dynamic workplace where human rights are respected and equal employment opportunities allow individuals to make the most of their capabilities. In light of the increasing diversity of human rights issues facing corporations, Sony believes a common awareness among employees is crucial to ensuring such issues are addressed appropriately. The Sony Group Code of Conduct, enacted in May 2003, contains articles related to respect for human rights and maps out policies that guide human rights-related rules and activities throughout the Sony Group. ........ These provisions are based on existing international standards, including the United Nations Universal Declaration of Human Rights."
Boredom rooms is an issue which only local stakeholders will be aware of. It's impossible to know about this practice at the Sony workplace unless you are an intuitive and talented investigative reporter, a local human rights employment-oriented NGO, a Trades Union employee association (about 24% of Sony employees are members of a labor union), or a Sony employee or relative of a Sony employee. It's only through genuine stakeholder engagement that this issue would surface. The questions is whether it would be prioritized by Sony as one of the most important material aspects as are required to be identified by a GRI G4 report, or whether it would be just one of a list of topics that doesn't make the materiality threshold. Either way, it sounds like it should be on the radar. 
This is one of the complexities of the materiality focus in G4 reporting. By selecting only the most material issues, a lot of stuff gets relegated to oblivion. An important topic raised through stakeholder feedback may not make it to the Sustainability Report, because of the materiality prioritization process. It's not too difficult to manipulate this process and carefully deselect topics which might be critically material to some but not material to all.  Is this what is needed to appease stakeholders, or is it shooting yourself in the foot? The fact that an issue doesn't make a G4 Sustainability Report doesn't mean it's not an issue.
We inevitably come back to the purpose and objective of the Sustainability Report. G4 talks about relevant transparency serving two purposes:  it enables stakeholders to make decisions about their relationship with the company, and it helps the business focus on potential sustainability risks and take appropriate safeguards. G4 is intended to be about good process which helps drive better sustainability impacts by addressing both these aspects. By casting a wide net in understanding sustainability topics, a company has a more robust tool to manage risk and increase stakeholder trust. The issue of restructuring in a labor environment which makes releasing employees almost impossible, so that "creative" solutions such as boredom rooms need to be devised, may not have been deemed material by Sony, if it ever made the list of relevant topics in the first place. But if this subject gains greater exposure, it might end up closer to the materiality threshold than Sony leadership might have envisaged. 
This issue also highlights the challenge posed by clarifying the Material Aspect Boundary required by G4. In Disclosure G4-20, the requirement is to define the entities of the organization for which an issue is material. As the article states, in Western countries, it is easier to release employees when jobs are no longer available. In Japan, apparently, the labor environment make this more difficult. Therefore, the materiality of this topic relates to the Japanese market, where Sony employs 37.5% of its workforce, but not to Western markets. A good G4 report would need to reflect this, if the issue is material. But, if the issue relates to only part of the workforce, maybe it will be seen as less important than other issues which relate to the entire workforce. Here we come back to the fact that materiality is defined in a relative way and this influences what a company chooses to disclose. It's not simple.
Materiality, as the basis for a G4 Report, may be the only sensible choice. Relevant transparency is what most of us want. But relevant is relative. Important is relative. Materiality is relative. Creating the right balance between what's relatively relevant and what's relatively irrelevant is no easy choice, and needs an analytical brain, an open and inclusive mindset and a rather large helping of integrity. Incidentally, for a fabulous analysis of the differences between materiality definitions and points of focus in three different reporting frameworks - IIRC, SASB and GRI - see a paper from BSR from Dunstan Hope and Guy Morgan >> Navigating the Materiality Muddle.
In many ways, one of the materiality tests we could apply is the three-part self-inquiry we often teach in ethics training:
  • If my kids (boss, husband, wife, Board of Directors, Greenpeace, anyone important) found out, would this be a problem?
  • If this story ran on CNN (or in the New York times), would this be a problem?
  • Can I sleep at night?

Would boredom rooms pass this test?

elaine cohen, CSR consultant, winning (CRRA'12) Sustainability Reporter, HR Professional, Ice Cream Addict. Author of Understanding G4: A concise guide to next generation sustainability reporting AND Sustainability Reporting for SMEs: Competitive Advantage Through Transparency AND CSR for HR: A necessary partnership for advancing responsible business practices Contact me via   or via my business website   (Beyond Business Ltd, an inspired CSR consulting and Sustainability Reporting firm)

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