23 FSRs (Fabulous Sustainabilty Resources)

As sustainability reporters, we are always in learning mode. The fast-paced evolution of the sustainability field and the dynamic changes that happen all around us make it a challenge just to keep up with the latest thinking, recent research, new findings, leading insights etc. Stuff spins on and off our computer screens before we have time to know it's there and then, whoops, it's gone, and despite a mental note to take a look at it later, we never do. Familiar? Sure. The only thing you really have time to read is, of course, the CSR Reporting Blog. And as a big thank you, here is our new offering. FREE summaries and commentaries on 10 recent fabulous publications (some more fabulous than others) which will make you even better sustainability professionals, and provide you with interesting facts to tell at dinner parties. This is a one-time thing, so don't get your expectations up that we will be doing this on a regular basis. We are too busy trying to keep up with what's really going on out there.

Value of Sustainability Reporting

A study by Ernst & Young LLP and the Boston College Center for Corporate Citizenship

 

This is the report of a survey of 579 respondents from U.S. based companies of which more than half also have operations outside the U.S. 391 of the respondents work for organizations which publish a Sustainability Report, the rest don't. It's not clear whether respondents were executive, management or non-management level. The report provides a rather glossy picture of the state of reporting, and all of its wonderful benefits. It's a little short on new insight, and a little OTT on the total wonderfulness of reporting, but it's an interesting and up-beat round-up of the reasons to report, just in case your Board or CEO is not yet convinced.  The emphasis on the value of assurance can't be missed - in several places - in my opinion. See this:

Mainstream analysts and investors are paying attention to sustainability reporting? Really? Perhaps I missed the few that do when I blinked.

An interesting table in this survey is what motivates organizations to report.

Ahead of any other reason, the noble objective of being transparent with stakeholders is cited as the key motivation to report in all the sectors represented in the survey. Brand reputation  is hardly cited as a motivator (but then, the sectors involved are largely not consumer-facing brand organizations) and even stakeholder pressure scores very low. I wonder what this means? Apparently, CEO's just want to be transparent. Tell that to yours. 

 

 

Measuring socio-economic impact – A WBCSD guide for business

This is a fabulous document from the World Business council for Sustainability Development (WBCSD) which explains the  ins and outs of measuring social impact. Know the difference between impacts, outcomes and outputs? This guide will see you straight. Know what the key tools that are available today to help you calculate socio-economic impact? This guide will both define them and tell you what they are good for. The details include ten key tools:

This guide is of specific importance, now that G4 is moving in the direction of value chain impacts. In assessing material impacts, G4 requires you to consider whether these happen internally or externally. In addition, G4 asks for performance measures relating to these impacts. In general, this is one of the hardest things to measure and most companies manage to measure inputs (infrastructure investments, cash donated, volunteer hours, pro-bono services etc.) but few manage to measure outputs, outcomes or impacts. Which is quite a paradox. Billions of $$$ and time (which is $$$) invested into communities without anyone ever asking whether they made a difference and what that difference was, or whether the funds have been used where they can do the most good. Everyone wants a big return on their $, even if this return is calculated in currencies other than monetary, such as in social benefit of different kinds. This guide may not make you an expert but it certainly gives you resources you need in order to work your way up the sustainability professionals capability chain.  (Did you notice how everything is a chain these days - value chain, supply chain, food chain, ball and chain....?)

 

2013 six growing trends in corporate sustainability

An Ernst & Young survey in cooperation with GreenBiz Group

The report analyzes the results from 282 respondents who represented 17 sectors and are employed by companies with annual revenue greater than US$1 billion. Approximately 85% of these respondents are based in the United States.

 

And the six trends are: 1: The “tone from the top” is key to heightened awareness and preparedness for sustainability risks. 2: Governments and multilateral institutions aren’t playing a key role in corporate sustainability agendas. 3: Sustainability concerns now include increased risk and proximity of natural resource shortages. 4: Corporate risk response is not well paired to the scale of sustainability challenges. 5: Integrated reporting is slow to take hold. 6: Inquiries from investors and shareholders are on the rise.

Any surprises? Nah.

The Future of Corporate Giving
The Charities Trust and Corporate Citizenship

This is the first in a series of publications based on ongoing research into the way corporate philanthropy is changing. Research, comprised of a literature search, interviews with opinion leaders and an online survey of professionals, indicates that four key trends are changing the face of corporate giving:

Commercialization:
"The relationship between a company’s community involvement and its commercial activities has been growing for a number of years. In the future, this trend will accelerate. The boundary will blur further as companies seek more measurable coherence and long-term profits from their corporate giving. Softer benefits such as staff loyalty and enhanced reputation will no longer be enough to ‘claim’ – community initiatives will need to measurably contribute to driving company profitability. Social value and commercial value cannot be neatly separated. But all the interviewees we spoke to and 85% of survey respondents felt that there would be a greater focus on delivery of the business strategy through corporate community involvement in the future. Of all the trends we tested, practitioners rated this as the most significant."

This is a very important insight. Does it signal the end of philanthropy and mark the beginning of community investment as a business driver and not a values-based activity? The report says that finding the synergy between company and community will be the key skills for corporate community managers and community players and not-for-profit partners. 56% of respondents in the survey conducted said that corporate giving would no longer exist as a separate activity, but would be "driven as part of core business strategy". Emerging innovations in this area cited by the report include: Vodafone's M-PESA, Nestlé's Creating Shared Value Model, Hindustan Lever's Shakti model of women's entrepreneurship - none of which are particularly new, but the fact that we always come back to these when talking about new corporate philanthropy may mean that other examples are few and far between, so far.

The other three trends identified, which are currently being researched and which will, presumably, result in further publications are : Innovation Unleashed, Collaborative Coalitions and Cause-related Movements. All sound familiar. The implications of these trends for business are discussed:

"One thing that all four trends have in common is a blurring of boundaries. Distinctions are dissolving between motivations (commercial or societal?), responsibilities (government, not-for-profit or business?), and drivers (companies, suppliers, corporate customers or consumers?). Managers of the future will need to navigate this uncertainty, build coalitions, manage multiple partners and articulate the change they have created convincingly."

Interestingly, this report does not highlight impact measurement as a trend, or as an important factor in advancing community investment. Perhaps when charity becomes business strategy, adapted business models of return on investment may start to apply.
 

And here are four new reports from the Global Reporting Initiative, timed to coincide with the May 2013 Amsterdam GRI Conference:

Carrots and Sticks 2013
Global Reporting Initiative
 

This is the third publication in the Carrots and Sticks series of the GRI, and three other partners, and was launched ceremoniously at the Amsterdam conference by dynamo Teresa Fogelberg and a group of others. Carrots and Sticks is a look at the public policies and regulatory frameworks that are rapidly changing around the world. It's a self-proclaimed "global inventory of sustainability reporting policies and guidance" and includes: 1. Governmental or market regulatory requirements and voluntary initiatives for the public disclosure of sustainability information. 2. CSR initiatives requiring or providing guidance for sustainability reporting or other forms of public disclosure. 3. Requirements or recommendations covering a single topic (e.g., greenhouse gas emissions) or sector (e.g., mining), provided the disclosure has to be public. 4. Standards on sustainability assurance.

You will probably not be surprised to know that the trend is growing. See the table below for the number of initiatives over the past 6 years. More initiatives are becoming embedded in the laws of national governments.

Green represents initiatives for voluntary reporting
Orange are initiatives for mandatory reporting

The report notes that mandatory and voluntary approaches create "mutual traction" - one tends to advance the other. Mandatory disclosure is also increasing affecting state-owned enterprises. Carrots and Sticks provides a detailed update of the status of public policy and regulation on reporting in several countries and regions: Australia, Brazil, China, Colombia, Denmark, EU, France, India, Norway, South Africa and the USA. Which probably means that there is not too much to say about all the rest. Yet. Watch out for Carrots and Sticks 2020. I am sure that will present an entirely different picture. In the meantime, if you want a detailed look at sustainability reporting's regulatory status around the world, this is the best review out there.

Sustainability Topics for Sectors
Global Reporting Initiative

This 156 page report is the outcome of research among sustainability reporters and stakeholders, who submitted suggestions for sustainability topics by sector that could serve as a useful reference for identifying and prioritizing material issues in the sustainability management and reporting processes.  "In total, 194 organizations related to the different stakeholder groups either contributed directly or were researched as part of this effort. This research generated 2,812 topics which were related to 52 business activity groups. Over 600 documents support the 1,612 unique topics that have been identified through this process." The 1,612 topics are described in some detail and offer contextual information, aligned with GRI Material Aspects, so that in preparing your spanking new G4 report, you won't have to start from a blank page. The topics presented by 52 industry sectors. The sectors with the highest number of topics are:

 

Oil and Gas - 96 topics

Mining - 91 topics

Food and Beverage Processing - 78 topics

Electric Utilities - 71 topics

Construction and Home Building - 68 topics

Textile and Apparel - 59 topics

 

 

The tobacco sector has only 7 topics (!) - none of which relates to the degree to which their products kill people.

 

Sustainability Topics for the Tobacco Sector, page 64

 

In each sector, the high-level topic list is supported by detailed supplements which can be downloaded separately from the GRI's resource library. This is the link to the tobacco sector document, for example. Some sectors are more extensively covered than others.

 

This report is a very interesting collection of issues and certainly helpful. It is not exhaustive and in some cases, the list of issues is rather random. However, as input to any process which thinks about material issues, it's worth using. It would be good to see GRI continue this work. In fact, it's somewhat of a shame that more has not been done already. As G4 kicks in, this kind of thinking become more critical.  

 

The Sustainability Content of Integrated Reports - a survey  of pioneers
Global Reporting Initiative

The GRI sure was busy in the run-up to the Amsterdam conference, and this was one of the May 2013 suite of publications. This one, as the title suggests, is all about integrated. It looks at the integrated reports in the GRI database, aiming "to review the different ways in which self-declared ‘integrated reports’ are taking shape around the world", based on the feedback of 18 companies and contributions from a range of experts in this area. An interesting and not surprising conclusion: "The majority of companies find GRI reporting processes useful to their development of an integrated report, either because GRI helps them defining content at the start of their process, or informs their review of the report at the end of its development." In other words, sustainability first, integrated second.

Having said that, the report frankly states the issues with the concept of integrated reporting, and the fact that "at the time of writing, no globally accepted standards or practices exist with regard to what an integrated report should cover and how it should be constructed to meet the needs of its users. Neither is there clarity on who exactly integrated reports’ users are, or how such reports should ultimately be appraised for quality and substance." Spot on. Integrated reporting, despite the recent IIRC Exposure Draft, remains an enigma to most. But it sounds sexy, so I guess we'll see more of it. The survey of pioneers report (what are they pioneering exactly?) covers research (from the GRI database) on integrated reports broken down by type of companies,  sectors, countries and what these reports are called (annual reports, integrated reports, annual and sustainability reports etc.). Also the length. The average length of an integrated report is ....well, that number isn't provided.. but they are getting longer.

In 2010, 22% of reports were 200+ pages in length, while in 2012, 24% were that loooooooooooooooooooong. 40% of integrated reports in 2012 were more than 150 pages. Did anyone check the length of standalone sustainability reports? The report zooms in on South Africa and Australia in terms of integrated reporting practices, and most interesting is the perspectives of the practitioners themselves with interviews from people in reporting companies. This is an intriguing report and if integrated is on your radar, it's worth a look.
 

 

The External Assurance of Sustainability Reporting
Global Reporting Initiative

Another in the flurry of publications timed to coincide with the GRI Conference, this is a short look at the state of assurance from a GRI (and G4) perspective and based on a review of data in the GRI database. The report says: "In 2012, over 46% of reports listed on GRI’s Sustainability Disclosure Database indicated some form of external assurance. While notable differences exist between countries and sectors, the global trend is toward increased assurance of sustainability reports." Personally, I think this is misleading. Many of the assurance statements I read do far from assure sustainability reports, at best they sort-of assure some of the (typically carbon emission and energy consumption) data. At worst, they raise more questions than they resolve. I think assurance is a big mess (ooops, maybe that's not very PC) and needs hoisting out of the current paradigm. Yes, I have some ideas, and will post on this as soon as I can. In the meantime, this report summarizes current assurance frameworks and includes a checklist of what to look for when you are engaging an assurance provider. It's a good reference document, although, why the GRI should publish such a document when the GRI's approach to assurance has been lukewarm lip service at best is rather a puzzle.

Sustainia 100
Sustainia, Denmark

 

"Sustainia is an innovation platform where companies, NGOs, foundations and thought leaders come together to support and work with a tangible approach to sustainability. Sustainia100 is an annual guide to 100 innovative solutions from around the world that presents readily available projects, initiatives and technologies at the forefront of sustainable transformation." The Sustainia 100 guide is an interesting overview of different creative approaches to different issues, ranging from harnessing solar power in innovative ways connected to women's empowerment in Africa to community computing for the benefit of humanitarian research to smart irrigation and aerodynamic trucking. If you are lacking inspiration in your business, or simply want to see how the age of sustainabilitinnovation (there's a word that confounds blogger's spellcheck function) is still alive and kicking, take a look at this report. There are surely some ideas that are applicable to your business.

 

Growing into your Sustainability Commitments: A Roadmap for Impact and Value Creation

Accountability and United Nations Global Compact

(Thanks to CSRInternational's Research Digest for alerting me to this one)

The report presents the Sustainability Commitment Growth Curve (SCGC) which forms a roadmap for turning commitments into measurable value creation.

From adoption to implementation to advancement, this roadmap gives sound guidance on how to turn good intentions into good practice. Many of the concepts and approaches are familiar, but they are ordered here in a coherent and accessible way, with a host of interesting examples of practice from companies around the world. The roadmap is aligned with the UNGC principles, and shows how different companies have used the UNGC framework to align resources, structures and programs to deliver value-creating outcomes. This is a good source of inspiration and ideas for companies wanting do deepen their strategic approach to sustainable business.

But that's not all:

And as I was compiling this list above, I came across this other list:
 

13 HOT RESEARCH REPORTS by Sustainable Brands, compiled by Dimitar Vlahov.

 

This contains some more fabulous stuff, really interesting reports, and there is absolutely no overlap with my list, so, just by adding this link, the CSR Reporting Blog offers you a double-scoop of resources for absolutely no additional charge. Come on, admit it, how many other sustainability reporting blogs are this good to their readers?

Show your appreciation by tweeting, retweeting, mtweeting, facebooking, googleplussing and signing up for the CSR Reporting Blog directly to your email. Oh, and a scoop or two of Chunky Monkey next time we meet wouldn't go a miss either.




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)

What's your perspective on reporting?

What's your perspective on:

• The current state of sustainability reporting?
• The number of material issues that a company should report on?
• The quality of assurance processes?
• The credibility of sustainability reporting?
• The way reporting has evolved over the past few years?
• Voluntary versus mandatory reporting?
• Global versus local reporting?
• Whether the GRI is a good reporting framework?
• Whether G4 will make things better or worse?
• Integrated reporting?
• The target audience for sustainability reports?
• The frequency of reporting and ESG disclosure?
• Who should provide sustainability report assurance services?
• And more...

Have you got perspectives on all of the above? Because, if you haven't, the new global CR Perspectives survey brought to you by CorporateRegister.com will help you develop some. And not only that, after presentation of the survey at a big-splash event on 29th April in London, at which time the results of CRRA '13 will be announced, you will be able to  get a free copy of the entire survey results. And by that time, if you haven't developed some perspectives of your own, you can borrow someone else's!

CR Perspectives is a global survey about my favorite subject: sustainability reporting. And it's happening just at the right time, as sustainability reporting is in a state of flux and promises to be even more flux-ish during 2013. The survey is structured around three recurring themes of  the CorporateRegister.com approach: Content, Communications, Credibility.

The planned launch of the new generation GRI Framework "G4" in May has raised some heated debate, based on the exposure draft which was published last summer. There are those who say it's going to frighten off reporters. "Unfortunately, in our estimation, if the G4 Guidelines were implemented as currently drafted, undue complexity and reporting burden would be the order of the day." That's a quote from Aleksandra Dobkowski-Joy, a voice which counts in the world of sustainability. On the other hand, Dwayne Baraka, of the influential BITC in the UK, says, "I think that on balance the changes are a step in the right direction."   And summary discussions from G4 workshops in Australia gave the following perspective: "The overall impression was that the proposed changes to the reporting framework were ambitious, optimistic and a leadership challenge for organisations. It was also perceived that the changes represented considerable barriers for smaller organisations ...." With just two months to go until all is revealed, what's your perspective?

Integrated Reporting is also chugging along and is a concept which splits the reporting world.  You can provide your input to the IIRC Consultation Draft until mid July this year and take a look at some examples of how companies are approaching Integrated Reporting.  There are some who say it's all a big puff of hot air and it will make very little difference to the way we evaluate and respond to corporations. See this comment from Lorraine Smith of SustainAbility: "If the desired effect of reporting is to enable change, then, it would seem the jury is still out as to whether integrated reporting will accelerate change or merely rephrase the degree to which change has (or hasn’t) taken place." On the other hand, there are those who say integrated is the only way to go. Read this, from the Global Accounting Alliance. "When authentically implemented, integrated reporting offers measurable bottom line returns and ‘future-proofs’ companies."  Ahemmm. Please wait till I pick myself up from the floor. What's your perspective?

I believe the jury is still out on whether assurance has helped assure stakeholders of reporting credibility. First, the uptake of assurance is still low, and the quality of assurance varies. Many of the false claims in sustainability reports are actually found in reports that have been assured by an independent third party. Is it time to abandon assurance in favor of a new system? At UPS, they love assurance. But that's mainly for its internal benefits. Joss Tantram goes even further, saying: "I have tended to believe that a report without an independent assurance statement is not worth the paper that it is printed on." Ahemmmm. Picking myself up from the floor once again. Does assurance assure? I am not so convinced. What's your perspective?

Then there is the whole debate about single one-document reports (either printed or downloadable as a PDF) versus web-based reports which get updated more frequently than once a year. Should companies move to quarterly reporting a la Timberland? Or is more frequent reporting "inherently unsustainable" .. a "hamster wheel which never stops spinning"... at the prominent CSR commentator Mallen Baker argues. Well, I have a perspective on that. Hint. If sustainability is a long term thing, why would I get all excited about quarterly reporting? What's your perspective?

What is the best framework for Sustainability Reporting? ISO26000, although not a reporting framework, and not a certification standard, is now being adapted to provide structure for sustainability reports. BT indexes its Better Future Reporting against the ISO26000 framework. The UN Global Compact has been ramping up its Communication on Progress frameworks over the past few years, providing differentiation and proprietary criteria for reporting against the UNGC Leadership Blueprint.  While there are attempts at alignment, there are substantial differences in approach. What framework really offers best value for stakeholders? Or do we need to go back to the drawing board and, with the benefit of hindsight, start all over again? What's your perspective?

Anyway, that's just a taster. I am very interested to see everyone's perspectives, so I welcome this survey, which I have already completed, adding my perspective, and I hope there will be a massive response so that we get a collective perspective which may help influence how reporting continues to evolve.

Help create a balanced perspective. Add YOUR perspective! Complete the survey here.

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)

The Co-operative Group: Warts and All?

One company I have found particularly inspiring in the CSR landscape today is the UK's Co-operative Group, and not only because they are headquartered in my home town of Manchester. (They are currently in New Century House, a venue which remains embedded in my memory as New Century Hall because of a teen-idol Bay City Rollers concert I attended there at a very young age, amidst a massive crowd of swooning girls). Another reason to check out the Coop is that 2012 is the United Nations International Year of Cooperatives! Betcha didn't know that, right? There is even a Year of Cooperatives Blog. This initiative is "intended to raise public awareness of the invaluable contributions of cooperative enterprises to poverty reduction, employment generation and social integration. The Year will also highlight the strengths of the cooperative business model as an alternative means of doing business and furthering socioeconomic development." Who knew there was a Year devoted to a business model? I wonder if there will be an International Year of CSR Bloggers one day? Or even better, an International Year of Ice Cream! Anyhow, in the Year of the Co-op, it's fitting that we review the Co-op's report.

The Co-op recently released its latest in 15 years of Sustainability Reports, the 2011 Report, entitled "Inspiring Through Co-operation". Having admired the Co-op over the years for its thorough and award-winning sustainability practices, and robust, transparent and award-winning reporting , I thought it's about time to examine the latest report, and see how many cones the Co-op deserves.

The Co-op describes its report as "warts and all". The origin of this phrase is said to derive from Oliver Cromwell's instructions to the painter Sir Peter Lely, when commissioning a portrait - "Paint me as I am", he nobly demanded of the artist. The Co-op's reporting - warts and all - is therefore an invitation to scrutinize just how many warts the report actually contains. Oliver Cromwell did have quite a few warts -  check out that whopper under his lower lip. 

Oliver Cromwell by Sir Peter Ely, from spartacus.schoolnet.co.uk

The Co-operative Report, as a GRI A+ 116 page report, offers plenty of wart-scope.

The interests of this corporation, once known mainly for its corner-shop-style good value supermarkets, have sprawled into a diversified set of activities, making it the UK’s fifth biggest food retailer, the leading convenience store operator and a major financial services provider, operating The Co-operative Bank, Britannia and The Co-operative Insurance, with other specialist businesses including funeral services and Britain’s largest farming operation. This is interesting diversification for a business which operates only in one country.

The Group operates 4,800 retail trading outlets, employs more than 106,000 people and has an annual turnover of more than £13bn. The fascinating thing about the Co-op, of course, is its business model and governance structure: it is owned by its members - over 7 million individuals and 80 or so Independent Co-operative Societies. It's a sort of business democracy, founded on values of equality and community solidarity which align well with the themes of socially responsible business. Transparency, as a way of doing business, is also something which this type of business model demands, so perhaps it is not surprising that the Co-operative should be getting pretty good at that. The report has a three-part structure: Social Responsibility, Ecological Sustainability and Delivering Value. But first, I started with the end.

79%  Achievement against Targets

Page 113 of the report contains a 2011 Target Overview of the 104 long-term targets set in the Cooperative Group 2012-2014 Ethical Plan. Of these 104 targets, 62 have been achieved and 20 are on track. That's a 79% success rate. The rest are either close to target, behind target, not achieved or dropped. 79% is certainly an achievement and generally, 70%+ scores in most education systems are pretty good, and in some cases, represent the highest ranking available. So the Co-op should get a cone for achieving 79% against a very ambitious program. Clearly much is being done.

The CEO Statement

Some CEO statements are boring, some are insightful. Some contain meaningful previews of report content, some are just full of cliches. Some use the same old language to say the same old things. Often reporters approach the CEO statement as one of those irritable but necessary pieces of content which the GRI mandates that every report worth its salt should contain. They string together a list of waffly air-bubbles in last year's language and hope it flies. Others take the CEO message as a more serious affair altogether, using it to introduce the real news in the report, highlight areas of both achievement and sensitivity and, perhaps, warts, and create a more convincing representation of the highest level commitment in the company to sustainability. In the Co-op report, CEO Peter Marks's message is one of the better kinds. It's relevant, upbeat, proud without being smug, and picks out just enough highlights to give you the impression that the CEO really does know what sustainability and reporting is all about. Peter Marks says: "This Report charts how we have managed to achieve ... growth with a sustainability performance that I would contest is second to none." Sounds like a guy who doesn't mince words. I give Mr Marks a cone for his opening message. It's inspiring and makes you want to read the report.

The Executive Summary

The Co-op report contains a two-page summary of the rest of the 114 pages. If you have 5 minutes and this is all you have time to read, you end up with a good summary of the report highlights - without any warts, though. It's mainly about inputs rather than impacts, but I don't want to nitpick. I'll give the Co-op a cone for this summary. It's a useful inclusion for busy people (who isn't?) and makes the key messages more accessible.

Performance Benchmarks

Throughout the report, the Co-op provides benchmarks which help to put their performance data into perspective. For example, "In 2011, the Group’s absence rates remained stable at 4% for both the Trading Group and Banking Group (2010: 4%). The 2011 average UK absence rate was 3% and the industry average absence rate in the finance, insurance and real estate sector was 4%." Another example is : "At The Co-operative Bank and Insurance, 91% and 95% of customer complaints respectively were resolved within eight weeks, compared to an average of 86% across the financial

services industry." These benchmarks are rather selective, reflecting, I expect, only those benchmarks which create a positive score for the Co-op, but nonetheless, providing benchmarks and context is a cone-worthy reporting practice.

The War on Waste

A particularly interesting section of the Co-op report relates to waste, where incredible progress has been made. Food retailers are  major players in the food value chain and have considerable influence over upstream and downstream waste in the system. Considering that in the UK alone, it is estimated that 15 million tonnes of food gets thrown away every year, this is something the Co-op, and other retailers, have to take seriously. The Co-op reports continuing reductions in waste generated and waste disposed as well as reductions in primary packaging and increase in recycling. This includes making consumers aware of best food storage methods as well as maintaining the drive against single-use carrier bags. They are making tangible progress.

I couldn't help laughing when I read that the Co-op's own brand toilet tissue is made from waste paper from the Co-op head office. Just think how many people are wiping their bums with what were once important memos from the CEO or financial documents with profit calculations and forecasts. I have to give a cone for the Co-op own-brand recycled-office-docs toilet tissue. I just hope they remember to bleach it in the recycling process, so that the numbers don't stick to our private parts :)

Where Are the Warts?

As mentioned above, the Co-operative Group Report includes intensive detail about everything the Co-op is doing within the vast scope of their diverse business units in the vast range of their business. But, try as hard as I could, I really couldn't find all that many warts. There were seven missed targets out of a total of 104, which, arguably, is not so disastrous, but you have to work hard to find these in this report. There is no detailed summary (only a topline overview) of all the targets and their status,   which would make it easier to assess the actual status of performance at a glance. Instead, the target summaries are located in the various sections throughout the report. This is a de-cone.

What's more,  detailed explanations for missing targets are not always provided, and future plans to revive performance do not include what actions the Co-op will take to drive a change. For example, one target relates to finalizing a new strategy for Public Policy Engagement: This target was not progressed in 2011. Why not?  Don't know. The Co-op says: "Our Political Strategy Working Group met in November 2010 to consider the purpose and define goals, transparency of process and ownership of a strategic political engagement policy. No further progress was made in 2011." Failure to achieve a Trading Group Return on Capital Employed (ROCE) of 12.6% (10.5% achieved) is explained by "difficult economic conditions". Err. What's new? Similarly, a target to Achieve FSC certification for The Co-operative Food’s greaseproof paper by 2011 was not achieved, "despite work with suppliers", and this is rolled into 2012. I think a de-cone is in order for lack of accountable explanations for missed and behind-plan targets.

Coming back to the warts, here's one: Pesticides. While the Co-op has been named as one of the two UK Retailers doing the most to address pesticide use and contamination of food, the fact is that the Co-op allowed the use of prohibited pesticides in 173 cases, more than in 2010. This is explained in the report and action is underway to continue to resolve issues but this sounds like a really important wart to me. I'll give a cone for this.

While there is clear and honest reporting about the status of performance against plan, I couldn't find any other significant warts. This, I suppose, is a good thing. The Co-op is doing everything right. Right ? Or is it a bad thing because they just forgot to add the warts? Overall, the performance of this democratic collective is impressive and their report is certainly a model of transparent performance reporting for many.  But it's generally about positive performance and performance in a positive light. No whopper-wart like Oliver Cromwell's. Perhaps the Co-op should play down the warts thing in the next report. If ya ain't go no warts, why brag about them?

Outcomes are Worth More than Warts
More important than warts, are outcomes. The Co-operative Report is an action summary. It's about what the Group has done, is doing and plans to do. What's wrong with that ? It's not enough. Sustainability is not only about doing things. It's about achieving outcomes. Sustainability is the outcome, not the action. All the Co-op targets are expressed in terms of inputs. Intuitively, we know that many of these inputs lead to desired outcomes, but the Co-op neither articulates desired outcomes nor describes actual outcomes. For example, community investment reporting shows achievement of targets with 10,000 community initiatives supported, profits deployed to address UK poverty and over GBP 7 million  raised for charities Mencap and ENABLE Scotland Partnership. Over 13,000 employees volunteered in the community to a value of over 27,000 days. In total, the Co-op invested GBP 18.9 million in the community. What difference did it make? To whom? What changes in society did this massive investment (benchmarked as almost 7 times higher than other large businesses) achieve or is on track to achieve? I am not suggesting that the Co-op adopt a sophisticated Community SROI measure - these are unsatisfactory in most cases - but some examples of the outcomes of programs which, for example, "help school children improve their numeracy, financial literacy and employability skills" would be worthwhile noting. At some point, the Co-op members should be demanding to know whether the millions invested in the community are effective and not just available. I won't take away a cone for this, as very few companies understand this concept. Investing in the community, for a business, may not be evaluated using the same tools as a financial investment (where ROCE is clearly monitored and reported), but the Co-op and its stakeholders should have some indication of whether this money is being used effectively and how.   

Materializing Materiality

This is another aspect of the Co-op's reporting which would be worthwhile to reconsider in the future. The Co-op report does not contain a materiality analysis or matrix. The Ethical Plan does not explain the process for defining the impressive set of targets that the Co-op is currently advancing. While the Assurance Statement confirms that "nothing came to our attention to suggest that the Report does not properly describe The Co-operative’s adherence to the Principles or its performance" (which include Materiality), material issues that reflect stakeholder concerns are not defined and the report does not differentiate between the more important issues and the less important issues. Instead, each chapter is headed by a section called "Materiality and Strategy" which gives some general background context, but does not define specific Co-op relevant material issues. If the GRI G4 kicks in in 2013 as it is proposed in the current Exposure Draft, the Co-op is going to have to make a comprehensive reassessment of the way it reports, if it wants to remain GRI compliant, by engaging in greater process for defining and reporting on material issues.

No Stories

I might also mention that the Co-op's reporting contains no stories, no case studies and no people. No stakeholder voices, as I call them. Except for a complimentary "expert commentary" from Jonathon Porritt, who, obviously, doesn't focus on warts, only on what the Co-op is doing well. I do believe reporting comes alive with stories and people. It would be nice to see the more personal side of the Co-operative organization and the way people are empowered and energized by this sustainable model  as well as some more balanced stakeholder input. This could lend a little more credibility to this informative (but not entertaining) report.  

Overall, then, The Co-operative gets 6 cones and 2 de-cones, leaving a balance of 4 net cones. That's pretty good in the emerging Cone Award League Table. Next time I go shopping in a Co-op, I will be sure to buy their own brand toilet-tissue. Maybe I will get the batch that was made from all the discarded drafts of the 2011 Sustainability Report :) 

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 www.twitter.com/elainecohen   on Twitter or via my business website www.b-yond.biz  (Beyond Business Ltd, an inspired CSR consulting and Sustainability Reporting firm)

The GRI G4 Exposure Draft explained

So, you download the GRI G4 Exposure Draft, billed as the most significant upgrade of the GRI Reporting Framework since the last upgrade :) which aspires to solve all, or many, or most, or even a lot of the issues that reporting companies and other stakeholders have expressed regarding the current GRI Framework.

You may find, as I did, that new GRI G4 Exposure Draft is evidence of a major piece of thinking about Sustainability Reporting and contains many insightful changes which will, if approved and implemented by reporting companies, change the landscape of reporting in a meaningful way.

It takes some time to navigate the Exposure Draft, especially for those not intimately familiar with the existing G3 Framework. My initial reaction after having spent some time studying the draft is: Kudos! There has been some serious thinking going on. It's not simply G3+. It's quite a step-change for reporting. People had better sit up and notice.

Let's remind ourselves of the GRI G4 promise:

• To offer guidance in a user-friendly way, so that new reporters can easily understand and use the Guidelines.
• To improve the technical quality of the Guidelines’ content in order to eliminate ambiguities and differing interpretations – for the benefit of reporters and information users alike.
• To harmonize as much as possible with other internationally accepted standards.
• To improve guidance on identifying ‘material’ issues – from different stakeholders’ perspective – to be included in the sustainability reports
• To offer guidance on how to link the sustainability reporting process to the preparation of an Integrated Report aligned with the guidance to be developed by the International Integrated Reporting Council (IIRC)
• To provide support for data searching (XBRL) to provide a taxonomy which captures all the guidelines in XBRL form

"More Reports - Better Reports -we want to see more organizations joining in." said Bastian Buck, in the GRI webinar on 4th July. "Better reports for us means improving technical quality and aligning more with other technical frameworks, but also offering guidance which helps reporters focus on material issues - strengthening the materiality concept is one of the key ideas of G4." Adrian Henriques, an insightful CSR commentator, has already pronounced on G4, saying it represents a step change in reporting and it would be childish to oppose it. Dwayne Baraka, another great CSR protagonist, has given G4 "big ticks"!.

Exposure to G4 - A Range of Options for Review

The first thing you notice about the full Exposure Draft is that it is 325 pages. Oh, but it includes the entire current GRI Framework including all the bits that have not changed. So don't worry, you don't need to read it all. In fact, you can download a just-the-changes-only document which, at only 131 pages, is a real doddle. But if you find that also to be a little daunting then the four page overview is for you. If that, too, is overload, read on! This post is far from an elevator pitch, but I have tried to bring out the main points.

Giving Feedback

Before we go any further, the way to give feedback on the G4 Exposure Draft is by way of the GRI Consultation Platform.  It takes a second to register and answer as few or as many of the questions as you wish, or provide open comments. I think this is important. Please do it.

The feedback will be reviewed by the GRI bespoke G4 Working Groups and the Technical Advisory Council, and then the new full draft will be approved by GRI Governance Bodies.  The public comment period on this Exposure Draft is open until 25th September. The launch is planned in May 2013, at the GRI Conference in Amsterdam - an event not to be missed! Two additional G4 working groups will meet in July and develop revised content on anti-corruption and GHG emissions - with output for comment around mid August 2012.

The Key Changes

These are the keep-your-finger-on-the-pulse aspects of the change to G4:

• Application Levels:  Applications Levels are proposed to be abandoned due to concerns "that the Application Levels are wrongly understood by some report users to be an opinion on the quality of the report, or even a reflection of the sustainability performance of the organization." Yes, no more A, B, C! Instead, every reporter must meet a minimum threshold to qualify as a GRI Report, with a two-report grace period for first time reporters to get used to the new stuff. 
• Boundary: G4 gives clearer guidance on how to select what to report, shifting the goal posts from the where a company works to how a company impacts through its total Value Chain.  
• Disclosure on Management Approach: Reporting on management approach should now be driven by identified material aspects. G4 includes new screening, assessment and remediation reporting indicators.
• Governance and Remuneration: More disclosures to strengthen the link between governance and sustainability performance and the way remuneration is determined.
• Supply Chain: More thorough definitions and much more detailed reporting requirements.
• Structure and Format: Changes in the way the content is presented to make it easier for people to understand.

Now to the Deep Dive: (brace yourself)

Exit Application Levels. Enter Materiality.
The new go-no-go, pass-fail, either-or proposal in G4 means that, to claim "in accordance with GRI Guidelines", all reporters will be required to include the following:

• All of the Profile Disclosure Items.
• Disclosures on Management Approach and Core Indicators related to all of the Material Aspects identified by applying the Technical Protocol: Defining Report Content and Boundaries. 
• All disclosures identified in any applicable GRI Sector Supplement(s). 
• A GRI Content Index as specified in the GRI Guidelines. 
• A statement, signed by the highest governance body or Chief Executive Officer (CEO), that the report has been prepared in accordance with the GRI Guidelines and that it is a balanced and  reasonable presentation of the organization’s economic, environmental and social impacts.

What does this mean?

In G3, as most of you probably know, there is a modular approach to transparency which the Application Levels are designed to reflect. "A" for total transparency (report on everything), "B" for middle transparency and "C" for lower level transparency, requiring disclosure on certain Profile Disclosures, no Management Disclosures and a selection of 10 Performance Indicators (Core or Non-Core). At Application Level A, Sector Supplements, where available, must also be included.

So far, of the 587 reports published in 2012 and logged in the GRI Database, 21% report at Application Level A, 24% at Level B, 16% at Level C and 9% at an undeclared level. 27% use Sector Supplements.

The big change here, then, is that, in order to be in accordance with the GRI, a reporting organization must first decide on the topics which are material to its business (after due input from stakeholders of course) and then report as a minimum on those material topics – both in terms of Management Disclosures and Core Indicators. It's a sort of self-service GRI. Take a look at the menu, decide what you want and report on it.

If a company decides that six  Management Approach Aspects are material to its business, G4 requires disclosure only on those aspects. If environmental impacts are not material, then, in theory, a company can produce an in-accordance Sustainability Report without disclosing any aspect of its environmental impacts. In response to this, the GRI says that materiality is determined by stakeholders, and if stakeholders do not think this is important, then this is ok. In practice, it is unlikely that any large company will not have environmental aspects as part of its materiality radar.

But materiality is a relative thing. How many material aspects are most important in any business ? As we have seen in the vast range of materiality matrixes that are published in current reports. A company typically has anything between 8 and 65 most material issues, with 27 issues being the rough average.

The G4 Framework proposes that each organization should decide for itself, after due stakeholder consultation, what is material and therefore which Indicators it should report on. Clearly, this presuposes that organizations are able to engage in meaningful consultation with stakeholders and reflect their input into the selection of Material Aspects, something which I believe does not happen widely today. For the more seasoned reporters, however, where materiality analysis has been part of their reporting process and disclosure, selecting the Material Aspects may not be such a stretch (although the Boundary is wider - see below.).

The new G4 offers a broader choice of disclosures. There are 73 Profile Disclosures, 6 Management Disclosure Categories with 44 Aspects, and 95 Indicators, of which 66 are Core Indicators. This is far more extensive in terms of Profile Disclosures (only 42 in G3) and Core Indicators (49 in G3). The Profile Disclosures are now non-negotiable (Application Level C reporters have some discounts in this area in the current system) but in terms of Core Performance Indicators, there is more comprehensive coverage which reporters can select from.

What's good about this?

This focuses Sustainability Reporting squarely in the materiality camp. It's no longer a shopping list of anything and everything an organization does, it's about material issues. Of course, companies can disclose as much as they want beyond the minimum requirements and even if, say, Procurement Practices are not deemed most material, a company may choose to report on these. But the minumum requirement is now not about transparency. It's about material transparency. This is good because it cuts through the chaff, ensures companies are focusing both in their thinking and in their disclosure on the areas in which they make the most impacts in their Value Chain. 

The other good thing about this is that it gives companies some control over what they disclose on. GRI becomes less of an imposition, no longer requiring companies to make excuses for not reporting on biodiversity, when they have absolutely no impact on biodiversity, or to grapple with details of indicators which are not relevant to their business. Instead, companies can invest their energy in reporting on what is most relevant for them and their stakeholders, and doing a better job.   

SME reporters may have an easier time as their matierial impacts may be less complex and therefore the reporting requirement could be more modest.

Overall, this is a bold proposition. It says go-no-go transparency. G4 proposes that you cannot be half-transparent any more. Now you have to be fully transparent, in a material sense. Companies which want the reputational value of being a GRI Reporter will need to pull up their socks and do their material stuff. The G4 Message:  "Don't mess with Materiality". That's good.

What could be problematic about this ?

The range of Profile Disclosures is very extensive, much more than in G3. This includes new disclosures about Supply Chain and all the detail referred to above relating to materiality. Typically, materiality has been the issue that many small, first-time or inexperienced reporters have chosen to omit. The Profile Disclosures also contain very detailed governance and remuneration disclosures (see below) which may be tougher for some companies, especially private companies, to disclose in full. The high Profile Disclosure requirement may deter many reporters.

As it is currently phrased, first-time reporters are allowed a "grace period" of two reports to build up to full disclosure. Level C and Level B reporters are not entitled to the "Grace Period" of two reports. This means that every company which has ever reported at Application Level A or B must now ship up or shape out in terms of all the Profile Disclosures. This may be too big a stretch for some companies and may cause them to stop using the GRI guidelines after the transition period has phased out. It may completely frighten off first time reporters who may not be able to state with certainty that they will be able to report in full within two reporting cycles, if ever. Any company contemplating writing a first report now, may choose to wait until G4 kicks in so that they can gain the "grace period" advantage.

The choice of reporting only on material indicators also leaves a lot of scope for avoidance. By selecting only 5 Material Aspects, for example, and not the average 27 that companies currently select, companies can elect to report at a much lower level of transparency than the current B or A level Report requries today. Unless there is a strict process of assurance, no-one checks to what extent a company has consulted its stakeholders about material issues. If a company selects 5 material issues, who will say they are wrong? We could find that many companies do not report on things we would like to know, thereby reducing the overall level of comparability between reports and companies.  

The inclusion of Sector Supplements as a minimum reporting requirement in material aspects discriminates against those sectors which have a supplement available (7 sectors at present, excluding NGO's, out of  a possible forty or more sectors, depending on which way your cut up the market). This disadvantages those sectors who now have to report in more detail to achieve the  "in accordance" label. 

My first thoughts

On the whole, I like this approach. I like the Profile Disclosure requirement. I believe that companies should be able to make this stretch. I think the new additional disclosures are broadly well placed. Where I have a different view is about the question of reporting on only Material Aspect Performance Indicators. I believe there is a base set of around 25 or 30 indicators that every single company should report on. While I agree that materiality is important, I think it is inconceivable that a company may report and omit to disclose energy consumption, carbon emissions, safety data, key employee demographics such as gender diversity etc. In all probablility, many companies will report these items even if they are not identified as material, but this should not be left to chance.

A possible solution would be to revise the two categories of performance indicators. Core Indicators should be mandatory and required by all companies as part of the "in-accordance" deal. I would suggest this is probably 20 - 25  indicators. The rest should be Material Aspect Indicators, which relate to the selected material aspects, as proposed in G4. I don't find much relevance in the split between Core and Additional indicators today. If the focus is changing to materiality, and a company has selected a material issue, then reporting on all the indicators in that category should be manageable.

I think the GRI should also step up the number of Sector Supplements available, to cover off a fuller set of sectors, and level the playing field a little. 

 

Exit Legal Structure Boundary. Enter Value Chain

This is described by the GRI as the most significant content contribution which has conceptually changed the definition of and approach to defining boundaries for the Sustainability Report. The new definition is:

‘Boundary’ refers to the range of value chain elements or areas covered in the report for each material topic. In setting the boundaries for material topics, an organization should consider impacts throughout its entire value chain, regardless of whether it exercises control or influence over the elements in its value chain. Boundaries vary based on the topic being reported.

Get that? Value Chain is the operative phrase here. Companies are now asked to report not only on what they are doing, but the impacts of what they are doing throughout the entire Value Chain of which they, their products and services, are a part. A G4 report is no longer about legal ownership or direct control of a manufacturing plant, a fleet of vehicles or a nice new LEED-certified building. It's about how a company affects its social and environmental stakeholders. G4 provides guidance through the updated Technical Protocol, showing how Mapping the Value Chain is now the first step in determining the Boundary of your spanking new Sustainability Report.

Mapped your Value Chain? No? Oops. Don't report!

This means that the Boundary of the G4 Sustainability Report is drawn around the (material) elements in the Value Chain and where they occur, and not where a company's operations are conducted. But beware! G4 says: "Inevitably, the process for defining report content scope and boundaries requires subjective judgments. The reporting organization should be transparent about its judgments. This will enable internal and external stakeholders to understand the process for defining report scope and boundaries."

What's a Value Chain ?
All upstream and downstream elements linked to your organization's activity.

What's good about this?
This is a major step forward in reporting relevance. Far too many reports are focused on "what we do" with almost no regard for the "impacts of what we do". And why do we read reports? Because we want to know about how it all affects us and our great-great-grandchildren in our daily lives. By mapping the Value Chain, companies will be required to think well beyond their breakfast. Indeed, this could become a central process in companies which will add necessary meaning  to the way in which reports are developed and how materiality is determined. We will see a new type of 3D materiality matrix: what's important to our business, what's important to our stakeholders, and where does this fit in our Value Chain. Two new Profile Disclosures (DI18: Describe the organization's value chain and DI19: Place Material Aspects (or other material topics) in the Value Chain) specifically require companies to address this in their report. Bravo to G4 for this proposal!

What's problematic about this?
The real question here is the scope of the Value Chain mapping itself. Taken to its ultimate conclusion, a large organization's Value Chain can contain hundreds of impacts, multiplied by the countries and sectors in which the organization operates. Some companies may have several individual Value Chains, for example, those which operate across sectors in different markets - consumer, institutional and more. Including all these Value Chains in the report could make for a rather confusing and lengthy document. Leaving some out could make the report misleading.

The other issue is the methodology used for mapping the Value Chain. Does it count if the CSO jots down the Value Chain connections on the back of an envelope? Does the Value Chain need to be approved at Board Level? Should the Value Chain be determined with the input of external stakeholders? A list of high level generic Value Chain impacts - as we see with some Materiality Assessments today - may be inadequate. Mapping the Value Chain requires process and G4 includes a Disclosure (DI24) which requires companies to report how the Value Chain was determined. The real question is to what extent companies will be able to rise to this challenge.

My first thoughts 

Give it a go. It's a good discipline. It broadens the corporate radar on sustainability.

Exit Aspects. Enter Material Aspects.
Disclosures on Management Approach (DMA) provide narrative information on how an organization analyzes and responds to its actual and potential material economic, environmental, and social impacts. DMA also provide context for the performance reported by an organization, including Indicators if applicable and required an organization to make explicit: 1. What the material topic is 2. Why the topic is material 3. How the topic is managed and 4. How the management approach is monitored, evaluated, and adjusted.

One of the most frustrating things about G3 has been the requirement to report on Management Approach Disclosure Aspects, even though the organization has no relevant connection to a specific aspect. Biodiversity has always been a good example. If you are an office-based business,  with no operations situated in areas of biodiversity risk, then it doesn't make sense to have a detailed Management Policy about Biodiversity. In G3, reporters at B and A level are required to disclose their approach on all Management Disclosure Aspects.

In G4, reporters are encouraged to disclose the Management Approach for Material Aspects only. The list of DMA Categories and Aspects now looks like this:

There are now 44 Aspects in G4 (34 in  G3). The changes are the inclusion of Procurement Practices in the EC Category, the inclusion of Equal Remuneration for Women and Men in the LA Category, and the inclusion of two Aspects : Screening and Assessment, and Remediation, in four Categories (EN, LA, HR and SO).

Screening refers to a formal or documented process that applies a set of performance criteria as one of the factors in determining whether to proceed with a relationship with a supplier or other business partner.
Assessments refer to evaluation of agreed performance expectations which were set and communicated prior to the assessment and may include include audits, contractual reviews, two-way engagement, and grievance and complaint mechanisms.
Remediation refers to the extent to which actual adverse impacts are compensated or rectified and may include grievance and complaint mechanisms, apologies, restitution, rehabilitation, compensation, or guarantees of non-repetition.

In G4, the requirements for disclosure on these DMA Aspects are very prescriptive. For example, new Supply Chain indicators G4 12, G4 13 and G4 14 include specific requirements to report on the percentage of new suppliers and other business partners screened for society-related performance, and actions taken, the percentage of existing suppliers and other business partners identified as having actual and potential adverse impacts on society assessed on society-related performance, and actions taken, and the number of grievances about society-related impacts filed, addressed, and resolved through formal grievance mechanisms.

The new DMA reporting requirements are a response to consistent feedback that GRI had received about the lack of guidance in reporting Management Approach Disclosures. G4 goes into great detail with a clear set of items to report in each of the DMA Categories.

What's good about this ?

G4 offers greater clarity and expectations about reporting in the DMA area. This might lead to fewer generic "employees are our greatest asset" or "we make significant efforts to improve our impacts on the environment" statements, and encourage meaningful responses which actually link Management Approach to Management Action.  Also, the focus on material issues will mean that companies are not forced to regurgitate generic platitudes if there really have no connection to the Material Aspect.

What's problematic about this ?

The level of detail required may be off-putting for companies. Given that DMA is now a minimum requirement for reporting in-accordance with the GRI, this may represent a blocker for some companies, particularly smaller companies. Additionally, reporting only on Material Aspects may leave great gaps in our knoweldge about a company's basic operational approach. G4 enables non-disclosure of anything that's not material. A responsible workplace may not be identified as a most material issue - but still, we would probably want to see in the Sustainability Report some declaration and disclosure of the way an organization creates a responsible workplace.  

My first thoughts
Green light. Companies should make to effort to define their Management Approach because Approach precedes and guides Action. The advantages here outweight the negatives.

Exit Blind Eye. Enter Board Accountability.
The G4 Governance Disclosures have undergone a complete overhaul and have been entirely replaced and augmented. The requirement  increases from 17 Disclosures to 41 Disclosures - yes a whopping 41 Disclosures on Governance, split into seven new subsections. These are:

1. Highest governance body’s role in setting purpose, values, and strategy (DI 32 - 34)
2. Governance structure and composition (DI 35-43)
3. Highest governance body’s competencies and performance evaluation (DI 44-47)
4. Highest governance body’s role in risk management (DI 48 - 51)
5. Highest governance body’s role in sustainability reporting (DI 52-53)
6. Highest governance body’s role in evaluating economic, environmental, and social performance (DI 54-57)
7. Remuneration and incentives (DI 58 to 68)

The idea is not to duplicate information on governance and remuneration which is typically provided in an annual report, but to ensure the addition of information that relates to the way governance of sustainability and remuneration and sustainability are interlinked. New disclosures are far-reaching.

For example, two new Disclosures (DI 52 and DI 53) require an organization to report whether the highest governance body (the Board of Directors, usually) formally reviews and approves the organization’s Sustainability Report and ensures that all Material Aspects are covered, and the highest governance body’s role in commissioning assurance of the Sustainability Report. This places the publication of the Sustainability Report on the desk of the Board Members, or, for those who are less disciplined about attending Board meetings, in their inbox or on their iPad App. In most companies, I suspect that most Board Members barely know of the existence of their company's Sustainability Report and that many don't read it, let alone approve it and discuss its assurance.

The other big, big change in disclosure relates to Remuneration. Ten very detailed disclosure requirements are included ranging from provision of details about remuneration policies for Board Members and Executives,  to reporting details of all retirement benefits provided by the organization, to a requirement to report on the ratio of the annual total compensation for the organization’s highest-paid individual in each country of significant operations to total, average and median compensation for all employees in the same country. 

Clearly, stakeholder focus on executive compensation that we have seen in the last couple of years has made an impact. Similarly, the general tendency to blame lack of rigorous governance for the failures of the economic system and the Great Financial Crisis are now reflected in much more detailed governance disclosures in G4.

What's good about this?

Board Members will have to wake up and become accountable. G4 may lead to a mass awakening of a largely dormant but important group that provides the sustainability checks, controls and balances in any organization. No more zzzzzzsustainabilityzzzzzzzzzz  in the Board Room. No more acceptance of Sustainability Reporting as a low-key sideline. Sustainability, and the way it is reported, is now a Board Agenda Item in G4. This is good. In addition, the requirement to analyse and report may lead to deep review of compensation policies and ratios in many companies. This may result in a more "reasonable" approach to remuneration, though the definition of "reasonable" remains to be agreed.

What's problematic about this?

The reporting requirement increases significantly, and goes into a level of detail which many companies may find hard to address. Most companies are simply not at this level of sophistication in terms of relating governance and remuneration to sustainability and getting there may take time. G4 penalises these organizations. Given that all these are mandatory Profile Disclosures, there is no picking and choosing - all companies must report on all 41 Disclosures in order to be in-accordance with the G4 guidelines.  I expect this will add a very significant level of reporting activity for many companies, especially the larger and more complex organizations.

My first thoughts

I like some aspects of this new section and agree that a strong, involved and competent Board of Directors is a necessity for sustainable companies. I wonder if the remuneration reporting requirements are a little too invasive - do we really need to know the detailed remuneration packages of managers in every significant country of operation? Is this really what sustainability is all about. I think we could ease up a little here. Disclosure could probably be restricted to the Executive Committee packages.

Exit the Black Hole. Enter the Supply Chain
G4 makes the Supply Chain one of the new stars of the show. There is a new definition of Supply Chain and a new definition of Suppliers.

Supply Chain: The part of the value chain which consists of the sequence of suppliers and activities that provides materials, products or services to an organization.

Supplier: An organization or person that provides materials, products or services directly or indirectly to another  organization. This includes brokers, contractors, consultants, distributors, home workers, independent contractors, primary producers, wholesalers and sub-contractors - each of which has it's own sub-definition.

Disclosure D1 12 requires a detailed description of the supply chain including numbers of suppliers and their locations by country and region, materials sourced,  and the new Aspect of Procurement Practices requires reporting on the number of suppliers with long-term agreements,  suppliers who have been engaged for the first time during the reporting period, the time taken to pay suppliers and a whole lot more. This is new territory for Sustainability Reporting.

What's good about this?

Clearly, the Supply Chain is an important part of the total Value Chain and many companies export their problems to the Supply Chain and forget about them, let alone report on them. Many companies have abusive, non-inclusive or even discriminatory Supply Chain practices which generate negative overall impacts in the Value Chain. Calling companies to account on how they manage their Supply Chains is a good thing, and may lead to improved practices overall.

What's problematic about this?

As with the changes on governance and remuneration, this is a massive new reporting requirement in an area in which most companies have not yet assigned in-depth focus. The detail of disclosure required means lots more work for reporters, and many may decide it's just not worth the effort. The link to the overall sustainability of an organization and some of the new Performance Indicator disclosures is tenuous.

My first thoughts

It's a great plan - it covers off the aspects of Supply Chain which companies ought to be accountable for. In practice, however, the number of reporting companies which will be able and willing to disclose at this level may not be aligned with the G4 aspiration to encourage more companies to report. A little trimming of this section might be more helpful. They can always be added back in with G5.

Exit Fuzzy. Enter Clarity.

G4 has reorganized its content to provide greater clarity on what to report, why it's important and provide guidance on how to report. The draft seems clear enough to me, though, I admit, it's no piece of cake. I won't linger on issues of format and friendliness here. You judge for yourself.

What's NOT in G4?

The main omission, which was part of the GRI promise, is the guidance for Integrated Reporting. GRI says: "The G4 exposure draft does not include such guidance at this time, as it was not possible to do so due to the differing timelines between the development process of G4 and that of the IIRC’s Integrated Reporting Framework. However, GRI remains committed to provide such guidance in due course." I guess that should not come as any surprise. I am not even sure it's the right objective. More about that in the future. Sometime.

Another omission is a revision of the G4 guidance and reporting requirements relating to Assurance. This has not been touched. This means that all these new super-duper-in-accordance with the GRI G4 Reports may not have been assured at all or may have been only partially assured or verified. I believe G4 should have come down more clearly on the need for more thorough and rigorous assurance practices.

Differentiation between organizations might have been addressed. GRI says it will issue more guidance for SME's. At this point, G4 looks a little beyond the reach of SME's and may simply preclude them from GRI Reporting in future. Unless there is a future GRI G4 SME "light" version, SME's may opt out. The same may apply to non-business organizations who have bravely started to report - NGO's, Academic Institutions, Government Organizations.

I am not clear how G4 responds to the objective of harmonization with other reporting standards and requirements. No references are made to other frameworks and the new materiality focus may actually de-harmonize and distance the GRI from other more comprehensive reporting requirements. But again, this should come as no surprise. Attempting to turn G4 into a catch-all reporting panacea was probably a little over-ambitious anyway.

Next Steps

GRI expects to approve the G4 and launch it in May 2013. However, I think there might be merit in a test run for some reporters - global, larger and smaller. I would welcome some assessment of what additional resource and effort will be required of both seasoned and new reporters to meet the new and highly challenging level of minimum disclosure. It would be nice to see what kind of report G4 might produce before it gets rubber stamped. Between now and the May launch, there may be time for a few guinea pigs to test G4 out. I think the challenge is as much in the way of thinking about reporting as it is in gathering and presenting information and data. Right now, a report is everything that we do that is good. In future, it should be everything that we do that has a Material Impact in our Value Chain. That's a paradigm shift in most companies' approach to Sustainability Reporting. It would be nice to prove it can be done.

To date, GRI has been synonymous with Sustainability Reporting. I hope that G4 will be seen as a positive challenge and opportunity for companies and not an impossible burden.

My First Thoughts

This post is my first thoughts, no more. I wrote this post to help me distil my understanding of the changes proposed by G4 and to help my blog readers get a quick appreciation of the Exposure Draft, in plain language. I will probably review the Exposure Draft several times more before I submit my feedback to the GRI. I may change my mind, or realize that I missed, or mis-assessed something. I hope this is helpful to readers - it was certainly helpful for me - but please accept my ponderings as an interim commentary on everything mentioned above. I encourage you to review it for yourself and form your own conclusions. I look forward to hearing what other people have to say as well.

In the meantime, congrats to the GRI for a mammoth undertaking. I am sure there will be many debates as we go forward. Better stock up on Cherry Garcia.

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 www.twitter.com/elainecohen   on Twitter or via my business website www.b-yond.biz  (Beyond Business Ltd, an inspired CSR consulting and Sustainability Reporting firm)