GRI Standards - the fun starts now

A while back I published an overview of the GRI Sustainability Reporting Standards Exposure Draft. Well, now, the Standards are no longer in draft form. They are in real-live-downloadable-usable-bloggable format. Get your free copy here on the GRI website. Not an awful lot has changed since the Exposure Draft. The main thing is GRIs optimism that this makes GRI a more welcome player at the high-stakes tables where governments, regulators and policy-makers play. As a guideline-maker, GRIs legitimacy was apparently not grounded enough to have equal voice. As a standard-setter, GRI has come of age and has the vote. For corporations who  transition to GRI Standards, though, the changes probably represent:

• an administrative headache - all the basic templates and formats developed for G4 will now have to change
• a change of language yet again - we all just got used to Aspects with a capital A - now it's back to topics
• a fear of greater scrutiny at some point in the future, possibly certification, that means a more robust approach to reporting will be required, rather than the sloppy use of G4 that we see by many reporters who declare use of the G4 but do not actually make the grade
• a fear that a price-tag will soon be placed on use of the Standards - GRI has to fund the GSSB somehow, right? 
• an opportunity to influence the Standards development - changes may now be quicker and easier with the modular Standard format, as only one piece needs to change or be added instead of the entire framework. The change from G3 to G3.1, for example, was confusing - the whole framework changed because a couple of new indicators were added. 

Billed with just a smattering of hype as the First Global Sustainability Reporting Standards Set to Transform Business, the Standards offer some advantages over G4, but it will take more than this to transform business. The move to Standards is not, and was not designed to be, an overhaul of G4 to deliver a new wow version. No bells and whistles. The move to Standards does not incorporate significant elements which will improve the quality or robustness of reporting, the comparability of reporting, the way companies define and prioritize material issues Aspects topics and how they determine what and what not to report, the use and credibility of assurance practices etc. While there has been some tidying up of the silly bits in G4, and some clarification of the ill-worded bits, nothing substantive beyond the wordsmithing and number sequencing has changed.

Look beyond the numbers
However, you cannot simply change the numbers and that's it. You have to check in with each Standard. For example, one of the disclosures that few reporters actually report fully: GRI 403, formerly Aspect Occupational Health and Safety, including former G4-LA4, G4-LA6, G4-LA7 and G4-LA8:

Disclosure 403-2 is the former G4-LA6.  See the difference in the wording:

The former relates to (1) total workforce and (2) independent contractors. The latter, 403-2, relates to (1) employees and (2) everybody else. This is much clearer in the new Standard but may require a change in the way some companies report. 


Beyond these incremental improvemental differences, GRI Standards come with one critical change and one new demand:

One critical change
G4's 46 Material Aspects have now been converted into 33 topic-specific Standards. That's two fewer than in the Exposure Draft. The material topics table would now look like this (except the new Standards do not include such a table):

That's a total of three universal standards and 33 topic-specific standards - one for each topic.

All the Standards are in BMW-style series with no subsets: 200 series for Economic, 300 series for Environment and 400 series for Social. All former Aspects relating to grievance mechanisms are moved to the Management Approach Standard, and are not identified as material topics in their own right.

For reporters, this means that if you retain the same material topics, you still might need to revise the indicators you report. For example, if Marketing Communications were a material topic, Core reporters would have selected one of two disclosures - G4-PR6 or G4-PR7. Now, the new Marketing and Labeling topic includes both Product and Service Labeling, which was associated with three indicators - G4-PR3, G4-PR4 and G4-PR5. The new Marketing and Labeling disclosure has been trimmed down to exclude some disclosures that are now General Disclosures, leaving three possible options in GRI Standard 417, only one of which was formerly Marketing Communications (417-3).

 

Therefore,  as a Core reporter, you now have three options where you had one previously, but as a Comprehensive reporter, you have three mandatory disclosures where previously you had five. This might sound a little confusing, and it is. But for most of the disclosures, all you need to do is switch the numbers. In some cases, companies might have to realign their material topics to the GRI Standards and revise the selection of topic-specific disclosures. 

Another point to make here is that the GRI Standards now make it quite explicit that it's just fine to use a different indicator than the ones included in the 33 topic-specific Standards. Standard 101-2.5.3 includes the possibility to report "other appropriate disclosures" if there is no appropriate GRI Standard.

For example, you are a Food and Beverage Manufacturer and have selected Community Investment and Philanthropy as a material topic. Interestingly, philanthropy has never been identified as possibly ever "material" by GRI - this is rather odd, as strategic philanthropy can be a critical part of a corporation's impact on society - and most companies just LOVE to report on this. 

Funnily enough, this is exactly one of the material topics selected by PepsiCo in its very recently published 2015 Performance with Purpose Report, which I was just reading. PepsiCo deals with this in an interesting way. Instead of including an indicator in the GRI Content Index, PepsiCo explains: "At this time there are no relevant GRI indicators that directly correspond with PepsiCo’s material aspect of Global Citizenship. PepsiCo monitors and reports on this aspect through the KPIs discussed in the Global Citizenship section." 

Now, with GRI Standards, PepsiCo can define its own disclosure of measurement of progress against this material topic, provided these disclosures are subject to the "same technical rigor" as the GRI Standards. In fact, this was also an option under G4, but it was a sort of secret option that no-one knew about unless they asked. Now it's more explicit, and enables companies to select more meaningful performance indicators to reflect progress being made in different areas. 

One of the most perplexing aspects of G4 always was the limited flexibility to reflect the diversity of material topics. If your material topic was, for example, Alcohol Related Harm, as it is in the Diageo 2015 GRI Report,  you wouldn't find a related Aspect among the GRI pre-paid lists. What to do? One catch-all option in G4 was to use G4-EC8 - "examples of the significant identified positive and negative indirect economic impacts" for anything that was not covered by another indicator. I have pretty much used G4-EC8 to death over the years. Another option is to use a combo  of existing Aspects. This is what Diageo does:

 

However, this is not entirely satisfactory, as none of the Performance Indicators that Diageo reports under any of these aspects relate to alcohol in society - they all relate to safety of products manufactured, quality control and labeling requirements. None of these indicators actually address the material issue. Therefore, the only real option for Diageo under these circumstances is to do what we discussed above  - disclose the Management Approach and use a proprietary non-GRI topic and indicator. As it happens, Diageo does have a perfectly fabulous disclosure on this: 

It's a clear strategy statement and targets. This can be used with  G4 to disclose against this material issue. With GRI Standards, the fact that this is now explicit (Standard 101-2.5.3) might make the use of the Standards easier and more relevant for many reporters who suffered from Aspect perplexy.

One new demand

In the GRI Standards,the GSSB has snuck in something else:

Standard 101 - 3.4. If you refer to the GRI Standards in any way in your report (and there are a set of prescribed statements in the Standards that define how to say you did the GRI thing), then you are obliged to notify GRI - either by sending GRI a copy of the report or by registering the report with GRI on the Standards page. Except that at present, there is no link or form to use to notify on that page. I wonder what GRI will do will all these thousands of notifications ... let's assume 8,000 reports reference the GRI Standards in any given year, that's 30 notifications every working day. And who will know if reporters do not notify GRI? I can understand that GRI wants to keep tabs on use of the Standards, but this is likely to happen only when GRI charge money for certification or use of the Standards logo... forgive me for being skeptical that this is on the cards at some point. 


18 months to get ready and steady
In the meantime, GRI Standards will be free and effective for sustainability reports published on or after 1 July 2018. So you have plenty of time to get your disclosures in order. Early adopters gain the advantage of being early adopters. That is, you get first rations of paracetamol. Overall, the language is clearer, the repetition is less and the direction is more logical. You can download all the Standards in one consolidated set at the GRI Standards download center. Whew, that's a relief. And only 443 pages as well.



I am sure that we will see many GRI Standards-based reports published in 2017, ahead of the 2018 cut-off date. The fun is about to start.....




Ahem.. needless to say, I will be very happy to offer the expertise and incredible service of me and my company, Beyond Business,  to help YOUR company transition to GRI Standards and become an early adopter. Paracetamol included free with this service. Contact elaine NOW before stocks run out.

 

elaine cohen, CSR consultant, Sustainability Reporter, HR Professional, Ice Cream Addict. Author of Understanding G4: the 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 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 

I published a review of PepsiCo's report - guess what happened next ....

Over the years I have written many reviews of Sustainability Reports for different publications, in addition to the comments and observations I make here on my blog. My most recent report review was published in the October edition of Ethical Corporation Magazine and it was all about food and bev giant PepsiCo's 2014 Performance with Purpose Report. As Ethical Corp. is a subscription-based publication, I won't share the entire review here. However, I will share two interesting things, one insight that particularly impressed me in the Performance with Purpose Report, and one after the review was published. 

The insight

I'll reproduce a short section from the published review:

"A very positive feature of PepsiCo’s reporting is the linkage between sustainability performance to business growth and profitability. Most companies keep financial and non-financial messaging conveniently separate and it is rare to find an economic expression of sustainability benefits in standalone sustainability reports. PepsiCo’s press release leads with a highlight of financial benefits: “Environmental sustainability programs, including efforts to use less packaging and energy, have saved the company more than $375m since 2010.” 

Throughout the report, these references are specific: in 2014, PepsiCo recycled and reused 90% of waste with estimated savings of $3.5m compared with 2009; decreased absolute water use by one billion liters, generating $17m in cost savings; removed over 89m pounds of packaging materials resulting in $48m of cost savings and improved energy efficiency delivering energy cost savings of more than $83m. This is good for the financial community who use sustainability reports, and for PepsiCo stakeholders who are interested in impacts on society, and it also serves as an encouragement to other companies, demonstrating that sustainable practice can also be profitable practice. 

In other areas, PepsiCo incudes outcome-type statements that show the impacts of performance which are less easily quantifiable in money terms. For example, in 2014, PepsiCo India supported water-saving programmes that benefited more than 50,000 people."

I think you get the picture. Sustainability helps a business make a positive contribution to society AND do business. While it's great to declare how we are doing on energy savings and other sustainability-type metrics because we value our future on the planet, positive economic value realized from sustainability activities is nothing to be ashamed of. The opportunity to link sustainability impacts in the business to the sustainability impacts of the business is still not considered deeply by most companies. Just because a report is a Sustainability Report doesn't mean it cannot mention money. In fact, it should. Only a handful of companies get this. Marks and Spencer has for years demonstrated the economic contribution of Plan A in a clever way.

BT also makes an explicit link between business and economic benefits of sustainble practice. In BT's Better Future Report for 2015, the company confirms that global portfolio revenue from products and services contributing towards BT's goal to help customers reduce carbon emissions by three times more than the carbon impact of BT's business was GBP 3.4 billion in 2014-5 FY.  And there is of course the Kering Environmental Profit and Loss model that turns everything into money to the point where just reading the report may well generate economic impact. UPS also makes an impressive connection between environmental and economic efficiencies in UPS's 2014 Sustainability Report.

The more we accept that it's OK - in fact, it's imperative - that sustainability benefits equal business benefits as well as social and environmental benefits, the more we will see these sort of linkages in Sustainability Reports and also in Annual Reports. I have often said that you should write a Sustainability Report with a financial hat on and you should write an Annual Report with a sustainability hat on. That's assuming you wear a hat when you're writing. PepsiCo, in the 2014 report, has made great progress in making this connection.

What happened next 

No less interesting than the linkage of integrated sustainability to business performance is what happened after my review was published in Ethical Corporation. I received an email from Camille Aylmer, Sustainability Communications Director at PepsiCo, who wrote: "......we really appreciate the careful attention you gave to reading through our materials....There was some great feedback in the article that has created a lively discussion internally. I’d love to grab 15 minutes with you by phone to discuss some of these items....." 

Now, while my review included praise for PepsiCo's best practice in creating aforementioned linkage, it also included a few criticisms and recommendations. (So you all know me by now, it's rare that I don't have something challenging to say)  (even though my intentions are positive!). Yesterday, I chatted with Camille and was impressed by her questions. She wanted to know about my approach in reviewing the report, whether I had looked at prior reports, what stood out for me as I reviewed the report, why I had highlighted certain aspects. I genuinely felt she wanted to learn about what was important to me, and that this might help PepsiCo in developing strategy and reporting going forward.

I am one of mbillions of PepsiCo stakeholders and my teeny weeny voice is hardly the loudest, coherentest, intelligentest or importantest among all the experts that I imagine PepsiCo engages with on sustainability matters. But the fact that Camille took the time to track me down (ok, that's not hard), and have a really positive conversation with me (that's harder) earns her and PepsiCo top marks (and ice cream) from me.

I was happy to respond to Camille and share my thinking. I was delighted to know that someone actually reads my report reviews (apart from the Ethical Corporation editor) and that maybe they do a little good. Kudos to PepsiCo for reporting and for not being too big to take note.

Oh, and while you're here, take a look at PepsiCo's 2014 Report. Give feedback. They listen. 

elaine cohen, CSR consultant, Sustainability Reporter, HR Professional, Ice Cream Addict. Author of Understanding G4: the 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 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  

Inhance Sustainability

Occasionally, on CorporateRegister.com, I come across a report that doesn't quite fit the standard categorization of CSR or sustainability report. This is why the report from Inhance Investment caught my eye. It is called Stakeholder Engagement Report, Dialogue to Deeds, 2010. Inhance is a Canadian mutual fund company with approximately $75 million of mutual fund assets under management, active in socially Responsible Investment (SRI). Founded in 2001, Inhance is based in Vancouver and is owned by Vancity, one of Canada’s largest credit unions.

The report, 13 pages short, opens with "Over 2009 we engaged 23 companies on emerging ESG risk. Key areas of engagement include: climate change, product safety, ecosystem integrity, community relations and diversity. In early 2009 we also negotiated withdrawals on six shareholder resolutions filed in 2008 for 2009 annual general meetings."

In the area of climate change, Inhance contacted 8 companies who had declined to report to the Carbon Disclosure Project. "In particular we focused on the need for company boards to be aware of the evolving regulatory regime for climate change, and the opportunities in renewable energy, conservation and efficiency improvements." Inhance names the companies, but fails to report on whether there was any response to their contact, which is a shame. On hydraulic fracturing, the process used to release reserves of natural gas using high pressure water pumps, Inhance contacted six companies about their practice in this area, and received responses from three.

Similarly, Inhance was active in the food area, contacting General Mills about misleading claims of reduced calorie breakfast cereals which were the result of playing around with portion size and not product modifications! Also, Inhance has taken up the use of BPA in packaging at General Mills and Pepsico. On diversity, Inhance engaged with five companies lacking in either gender or visible minority diversity at the board level.

There are two points to make here, one good, one could-be-better.

The good is that this sort of activity from Investment Houses and mutual funds is highly welcome. Inhance's proactive stance and reachout to companies is exactly what more investment companies and investors and analysts should be doing, as most public conpanies will "voluntarily" change only when they are given a little encouragement on behalf of people who want to invest in them. This is a critical route to more sustainable practices and I am happy to see Inhance reporting on this. It's the vigilante work of the CSR community.

The could-be-better is that, having decided to produce a nice shiny report, couldn't Insight have gone the extra mile and reported on outcomes of engagement rather than just initiation? Wouldn't it be nice to know that all their hard work in talking to companies had actually yielded some benefit ? (assuming it did).  

Anyway, their report is a 13 page document which takes 5 minutes to read, but it's worth it. The principle of identifiying issues you feel strongly about and making sure companies know it is a golden rule of stepping up sustainability. Give feedback. Ask questions. Request change.  

elaine cohen is co-founder and co-CEO of Beyond Business, a leading social and environmental consulting and reporting firm. Visit our website at www.b-yond.biz/en