Is innovation a material issue ?

What are sustainability material issues? GRI says "Material Aspects are those that reflect the organization’s significant economic, environmental and social impacts; or that substantively influence the assessments and decisions of stakeholders." 

Author's note: For those who haven't yet got it, Aspects (capital A) is the GRI word for material issues, as distinct from topics, which are non GRI-listed material issues, as distinct from aspects (lower-case a) which are looks, appearances or positions. 

Where does innovation fit into all of this? Can innovation be described as a sustainability material issue? 

According to GRI, in the GRI G4 Implementation Manual, innovation is not listed as a material Aspect. In fact, in 266 pages of Implementation Manual, the word "innovation" appears only once. Isn't that surprising? Most companies would say that innovation is their life-blood, and that it's impossible to deliver sustainable growth without innovation. Many innovations today have far-reaching consequences for society and the environment. Some are totally transformative. Think of digital revolution, hi-tech, bio-tech and everything-tech, low carbon society, advances in medicine and more. Forbes lists the most innovative companies in the world and Fast Company does exactly the same thing (same idea, different companies). Many of the most innovative companies are also the most sustainable, according other ratings and rankings.

There are 10 types of innovation, as I learned from a neat presentation I found on Slideshare. This presentation even provides an example of innovation for sustainability from FedEx, demonstrating the close connection between both:

In the great report produced by Fronesys a while back, innovation ranked 14 out of 140 separate material issues analyzed from the materiality matrices of 31 reporting companies. There is even an Institute for Sustainability and Innovation in Melbourne Australia. 

So how come innovation is not a material issue Aspect in the GRI G4 framework? 

I guess that this comes back to one of the core challenges we find in using the G4 framework.

At one level, G4 is refreshingly non-prescriptive, enabling companies to make a free choice of which issues to report, provided the company demonstrates some degree of process in selecting those issues. 

At another level, any attempt to force-fit issues into a limited set of 6 Categories and 46 Aspects (and then select appropriate performance indicators) requires some mental acrobatics in order to adapt the G4 framework to the specific materiality messages of each company. Practically, having worked on several G4 reports so far (watch this space for publications this month :)) and having completed several G4-Ready analyses, I can say that this is one of the most difficult implementation steps of G4. And yet it is a critical step which governs the content of most of the G4 report.  

In G4's view of the world, everything appears to be framed in terms of impact. What is innovation if not a way to make an impact? Innovation, then, is a product, or a service or a new organizational process. It's the product or service or process that makes the impact, not the innovation itself or the innovation process. Therefore, in GRI terms, the material Aspect is about the product or service. Products and services fit neatly into the material Aspects framework. As it stands, innovation does not.  

This means that the G4 framework doesn't quite take into account the fact that innovation itself is a process and often seen as an issue in its own right. Innovation has a significant internal impact on the way people work, on organizational culture and on the sort of people you can hire and whether they stay. The G4 approach doesn't quite take into account that innovation is sometimes a multi-year process which may continue beyond the lifespan of a single sustainability report before it results in something that actually makes an external impact on society or the environment. In this case, investment in innovation and the innovation process may be equally as important as the product of innovation, as without this process, a company may not have a sustainable future. 

Disregarding innovation as a material issue Aspect may also not take into account the fact that a company's customers, and possibly shareholders, expect innovation. For them, the fact that a company innovates is possibly one of the most critical sustainability issues on their agenda. Innovation may "substantively influence" the decisions of stakeholders. The consequences of innovation, especially in branded products, may not always be net positive. Consider obsolescence. Consider consumerism. Consider brawls on Black Friday. Consider workers in China committing suicide. Consider effects on employment demographics through changes in technology. Innovation is a critical element of any company's sustainability impacts, both internal and external, both positive and negative, and therefore might merit a more prominent place in a company's material reporting. 

At present, if you define innovation as material for your business and/or your stakeholders, the only option you have in G4 is to force-fit innovation into an existing Category / Aspect.

GRI Implementation Manual Table of Aspects

Maybe innovation is part of the Economic Performance material aspect? The G4 performance indicators that support this Aspect include economic value generated, climate change risks, benefit plan obligations and financial assistance received from governments. None of these are indicators of innovation process or products.

Maybe innovation is part of the Indirect Economic Impacts material Aspect? Here the performance indicators relate to infrastructure investments, and in G4-EC8, "significant identified positive and negative indirect economic impacts the organization has". This includes a range of possible examples from changing the productivity of organizations or society, to enhancing skills and knowledge, to the economic impact of the use of products and services. The output of innovation may bring some of these indirect economic impacts... but if the ability of a company to innovate is material, rather than the outcome of innovation, then this indicator would also be less relevant.

There does not appear to be another material Aspect in G4 which is a good home for innovation. Maybe innovation is in every process and should be part of the Disclosure on Management Approach for every single aspect reported. Innovation in the approach to Energy, Emissions, Supplier Assessment for Labor Practices etc?  That might result in a rather disjointed report about innovation, with half sentences here and there throughout the report, and no strategic treatment of innovation as a way of doing business which is integral and critical for sustainable success.

The option in G4, therefore, one of the non-prescriptive features, is to create your own material Aspect topic.
Author's note: A material topic is a material issue which is not one of the pre-defined material Aspects in G4. If you do-it-yourself, you call it a topic, not an Aspect.

Let's say a company, known as a leader in innovation, 3M, were to create a material topic in its next G4 report and call it Innovation. In doing so, 3M would have to create performance indicators relevant to this topic. The 3M 2013 Sustainability Report gives us an example of how this might look. 3M has a New Product Vitality Index (NPVI) which measures the percentage of net sales of products introduced within the last five years as compared to total net sales.

Starbucks, one of Forbes' most innovative companies, looks at innovation in another way. the external impact of encouraging an innovative approach in the community.

Cisco's 2013 CSR Report has a performance indicator for the number of employees engaged in innovation. Innovation is part of the Cisco culture and it is measured, among other things, by the number of employees who confirm they are encouraged to find new ways of doing things. 

The outcome of the above different examples of innovation practice may be both internal and external in terms of their impacts on the company and impacts on society. For each, a company would need to define this Aspect or topic Boundary in order to be in accordance with G4.

Therefore, in reporting with the G4 framework, you can see that there is enough flexibility to create a report around what is most material for your company, whether you apply the ready-made materiality content or create your own. I guess that means applying innovation to the use of the G4 framework. HaHa. See, it's working already. The key thing is to decide what's really critical for the sustainability of your business and your stakeholders, and apply the relevant approaches and measures consistently, and report them transparently.

A similar force-fit problem/opportunity applies to several other company sustainability issues. I have a list :). I'll come back to this now and again here on the CSR Reporting Blog, your global resource for CSR and Sustainability reporting info, insights, fun, headaches and references to ice-cream.

elaine cohen, CSR consultant, winning (CRRA'12) 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 www.twitter.com/elainecohen   or via my business website www.b-yond.biz   (Beyond Business Ltd, an inspired CSR consulting and Sustainability Reporting firm)

CSR Reporting Harmony

Earlier today, I read with interest the post from Nancy Mancilla and Alexandru Georgescu, two GRI certified training partners in the USA on Triple Pundit , entitled How Balanced are CSR Reports ?  As I read through the post, and the analysis of leading reports and how they "balance" the three categories of Economy, Social and Human Rights and Environment in their reporting, I noted that "Cisco and Qualcomm scored the best overall, while GAP and Symantec achieved poorer results than others" .  I fully agree with the authors that sustainability reporting should contain all elements of triple bottom line performance at least at a minimum common denominator level, as well as other aspects such as stakeholder engagement. This is important, as the authors, state, to ensure the report is a full representation of sustainability performance and not just a PR exercise. I wondered, though, if ranking the reports on the basis of balance of these factors, as though acheiving "balance" were a worthy objective is not a bit, well, unbalanced. It reminded me of a section I wrote for my forthcoming book on CSR and Human Resources (read about this on www.csrforhr.com)  where I wrote, in relation to the elusive aspiration to achieve work-life balance: 

"...what we are aiming for is harmony. Harmony between the different roles each of us chooses to perform in our lives, blending in with our work role in a way which energizes us to do and be all that we want. Given the predominant amount of time we spend at work, a stressful situation at work can have a singularly negative effect on everything else that we do in our lives.....We all need to consider each different facet of our lives and how things hang together. "  Harmony does not necessarily mean balance.

What is harmony in CSR Reporting ? It is not necessarily ticking off all the GRI Reporting framework indicators and achieving absolute symmetry in the content split in the report, though the reporting framework is a good guide to inclusiveness. It's more about assessing where the most material issues are for the business and stakeholders, and reflecting this, assigning the appropriate amount of detail and space to each topic according to its material relevance, complexity and degree of relvant company performance.The material issues addressed by Gap Inc and Cisco are entirely different, and the degree of attention of their sustainability programs in the business will differ by virtue of this. Equally, with a Company such as Gap Inc, supply chain issues may be far greater a priority than environmental issues at a given point in time, whilst with Cisco, technology topics may dominate their report. Clearly, as mentioned, a certain coverage of all bases is required to qualify as a sustainability report, but a balance of these could be a dangerous objective, encouraging the company to force-fit their report in areas which, perhaps justifiably, are not on their top-level radar. A harmonious report would reflect a good sustainabilty infrastructure accross the board, and strong performance in some areas. Sort of like the approach developed by Marcus Buckingham in Now Discover your Strengths which transformed the way we think about performance development. We cannot all be best at everything. Companies cannot be best at everything. Reports should reflect that. 

I am best at reporting and eating Chunky Monkey. Very balanced.   

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  or contact elaine on www.twitter.com/elainecohen

The infinite possibilities of online sustainability reporting

Online sustainability reporting is evolving rapidly. No longer does  the plain ole downloadable PDF represent the state-of-the-art of transparent presentation of sustainability performance. No longer must we wait it out for the last megabyte to appear on our screen and we can start to read the CEO statement with glee (see Wainwright Bank's 2008 13 MB download report) . These days, we should expect to be enticed, attracted and engaged by more attractive presentation of metrics and people telling their sustainability stories. We are offered different ways to control the data such as DIY report builders (see Philips report for 2008) or nice ebooks to read as we curl up in an armchair with our laptops (see Deutsche Bank 2008 report or the spectacular SeventhGeneration 2008 report). We can see videos of Company Managers telling it as it is (hear Gap Inc CEO walk his talk in the 2008 Report), see a range of podcasts (see Bayer 2008),  or even take a tour on an interactive map to the hub of csr activitiy that the Company is engaged in at a specific location (see Cisco 2009 Report).  Some Companies offer only a summary report as a dowload (see Unilever 2008) whilst others offer a regular array of local  or localized reports (see Vodafone and Telefonica) or alternative language versions (See Fedex 2008) . Some Companies do more than just report on CSR, they move towards engagement and interaction using blogs (see the Intel CSR blog) or fully-fledged websites to host genuine dialogue ( see Voices of Challenge by Timberland on their 2007-2008 Report) or interactive polls so that we can demonstrate we are still awake as we read (see Adidas 2008 Report) (Adidas even asked the verrrrrrrrrry risky poll question "Are Sustainability Reports useful ?" and to date 85% of the responders said YES!! (Hah! Vindicated at last!I hope it wasn't just the report writer and consultant who voted!). Some reporters ask for feedback  (BMW 2008 Report ) and some make it worth your while by offering a PRIZE for providing feedback (see Beiersdorf 2008, who also got really caught up in the online sustainabilty fever and urge you to take their Sustainability Quiz - oops, no prizes for winning that - wonder why?!) ).  Nexxar.com, who we partner with on reporting, as they are the leading online reporting technology and presentation specialists in Europe, produce magnificent interactive charts that you can sit playing around with forever (see Royal Dutch Shell 2008).

There have been some reviews of online report presentation - by Radley Yeldar in April 2009,  Nexxar.com  in July 2009, and more recently by AltaTerra Research in a report called "Greening the Company Website: A new Era in Sustainability Reporting" . This last review covers more than just presentation - it provides an evaluation of the substance, accessibility and navigation capabilities of 60 leading Companies and their online reports (though the focus is mainly on environmental information). Timberland scored highest, with a group of others including Alcoa, BASF, Centrica, Kingfisher, TNT and BT coming up close behind. Not surprisingly, perhaps, the highest scoring attributes for online presentation was navigationability (my new word for 2010) , whilst the provision of data substance and timeliness scored lowest. The research also reviews the degree of assurance of online data (something we have tended to expect only from printed reports). Another interesting insight from this research is that the Companies who tend to rank high in other sustainability indices are not necessarily the ones who present their reports best online. This is not dissimilar to what we found last year when we produced the Transparency Index - an evaluation of the sustainability transparency of the leading Companies quoted on the Tel Aviv Stock Exchange.

So, what this all about? What's the deal with reporting formats and online creativity? Does this really make a Company more sustainable? Do all these formats really make reading reports easier, better, orgasmic? What are the factors that lead us to select a certain format over another format? And what does the Reporting Blog like to see? 

Well, it's all about which wall your ladder is standing against, to paraphrase the Seven Habits guru, Dr Stephen Covey. It's wonderful to have a magnificently navigable report, but if my ladder is against a wall that requires data (positive and less positive), on time, in context and with appropriate commentary, then the most creative online extravaganza won't be effective for me, even if I climb to the top rung.

As far as online is concerned, I want to see the material issues prominently presented, and I want to navigate the website seamlessly without having to open up link after link in new windows that ultimately crash my mind, not to mention my PC. I want data against the most important indicators, GRI or otherwise. I want the ability to ask questions and provide feedback ... and get answers, not just push a questionnaire into a black hole (as I did with the Avon Report some time ago and never got any form of acknowledgement or response). I want to be able to download something, perhaps just a summary, so that I can use the report as a reference without being online, or so that I can annotate and bookmark the PDF, one of my numerous report-reading habits. I would be happy to engage in open dialogue provided I can see the dialogue of others as well, which is a true tribute to transparency and bold engagement - but I would also like to see Company employees engaging in this dialogue with external readers - no one I know does really well  yet (I think Intel is the closest).

In other words (well, in the same words, but shorter), I want to see online reporting leading us to a level of true substantive material transparent reporting, and true engagement and dialogue. Online  presentation is a TOOL to help achieve this, not an objective in itself. Professional presentation can undoubledly attract readership and make the report more palatable, even attractive, but let's not forget that the horse pulls the cart and the wall holds up the ladder.  Haha. I was tempted to write : The Monkey rules the Chunky, but i thought that might be a bit obscure for all of  you who are vanilla-only consumers.

 elaine cohen is the joint CEO of BeyondBusiness, a leading reporting and social-environmental consulting firm based in Israel. Visit our website at: www.b-yond.biz/en

Cisco and New Models of Social Responsibility

I am still really looking forward to the upcoming Global Virtual Summit (November 5th and 9th , 2009) entitled New Models of Social Responsibility, presented by Communitelligence and Cisco. The summit boasts a truly impressive line-up of speakers. As my Company, BeyondBusiness , is one of the Media Sponsors for the summit, I was privileged to have the opportunity to interview some of the speakers. You can read my interview with Cecily Joseph, CR Director of Symantec here. This post is all about another impressive woman on the sustainabilty scene - Kathy Mulvany, Director of Marketing and Sustainable Business Practices for Corporate Affairs at Cisco. Kathy will be making opening remarks on Day One of the Summit.

Kathy has been with Cisco for 13 years, and has led Sustainable Business Practices for the past 15 months. She wears two connected hats.  "Marketing and Sustainable Business Practices are two separate groups that I manage within Corporate Affairs though they both involve communications. My marketing role is focused on building awareness of and engagement in the work we do in Corporate Affairs, specifically our social investments. My sustainable business practice role is focused on overall CSR reporting for Cisco (environment, society, employees and governance), stakeholder engagement and analysis so that we can better inform the business of emerging CSR issues, helping to prioritize CSR issues for which the business functions then set goals, implement programs and measure performance. "
As always, this kind of role has personal relevance and Kathy says  "I get great satisfaction from helping Cisco have a positive and lasting impact on the world through our corporate social responsibility (CSR) initiatives. I also have the opportunity to work with a great team of people who are passionate and committed to the CSR work they do. And I enjoy finding new, creative ways to tell our human impact story."
Cisco is now a seasoned CSR reporter after having produced 4 CSR reports. It is always interesting to me to see how Companies evolve their CSR reporting as each reporting cycle brings tremendous learning opportunities. Kathy explains how it happened so far at Cisco: "Our report has evolved considerably over the last 5 years in terms of breadth, depth, level of transparency and delivery methods. As with many early reporters, our first CSR report in 2005 was an inventory of responses to the Global Reporting Initiative (GRI) framework. This first report set the outlined our overall approach to CSR, our programs and strategies. As our reporting matured we began to focus our reporting on issues that are most material to our sustainability as a business and have continued to deepen the level of disclosure, diligence and measurement in each successive annual CSR report. In the past few years we’ve put particular emphasis on enhancing the readability and user experience of the dense CSR content. In examining stakeholder needs for CSR data, we’ve found new and innovative ways of reporting our progress. We’ve introduced an interactive overview of our global CSR activities to provide a regional context for our CSR performance. We’ve incorporated videos that provide 1st person perspectives. We are also exploring ways in which social media (Web 2.0) might help us improve the dialogue between our stakeholders and business owners" .
One of the commendable things about Cisco's reporting is the focus on internal CSR processes and engagement of employees - 31 pages in the 2008 report. Kathy says about internal employee communication and engagement processes "We use a number of internal channels to drive awareness and engagement amongst our employees including newsletters, articles on our company intranet, executive briefs on our CSR engagements, employee meetings at the company and departmental level, CSR showcases during our virtual strategic leadership summit and global sales meeting, informational fairs, etc. In addition, we use a number of Web 2.0 technologies to bring our CSR story to life including videos, blogs, RSS feeds as well as WebEx and TelePresence sessions." 
My regular readers will know that i am a fan of localization in reporting - i.e. the practice of reporting a local level by global companies, in addition to global reports which have less relevance for  local stakeholders. Cisco have an interesting approach with  regional and country updates on in an interactive presentation on the Cisco CSR report website. Kathy says: "Cisco's CSR report is intended for external and internal parties who want current and historical information about Cisco’s performance on CSR issues. Our audience includes financial and industry analysts, investors, customers, NGOs, employees, academia, government, and the media. A topic of very active discussion is how to balance the detail needed by analysts and the readability desired by those wanting a general overview. Because we respond to hundreds of stakeholder CSR inquiries and surveys throughout the year, it is advantageous to publish a complete reference to support such interest and inquiries. Conversely, we also receive feedback to make the reporting shorter and more accessible. As such we introduced the regional interactive overview for those who wanted a high level snapshot of our CSR work around the globe. We continue to research web-based tools that satisfy both audiences in a scalable and cost effective manner."
Whither Cisco CSR in the coming years? "We continue to develop best practices for our CSR programs through benchmarking, IT sector engagement and dialogue with multiple stakeholder groups. For the longer term, however, we are focusing on enhancements to our governance structure and driving CSR innovation across multiple organizations. We have started this process by engaging in Cisco’s new Collaborative Management Model and reporting into Cisco’s Connected Business Operations Council. We feel this is the most efficient approach for reporting up into cross functional senior leadership. We also actively engage with our boards and councils as needed. More information on this will be included in our FY09 CSR Report."

If you want to know more about network enabled sustainability and Cisco's leadership in this field, take a look at their report and website. If you want to hear more from Kathy Mulvany and other Cisco colleagues, come to the Global Virtual Summit on New Models of Social Responsibility . I am sure that we will hear more from Cisco that will insprie us.

Thanks to Kathy Mulvany for generously sharing insights, thanks to John Gerstner, visionary founder and president of Communitelligence.
And i still haven't worked out - how do they get the Chunky Monkey to you in a Virtual Summit ... hmmmm .... I am stockpiling tubs in my office just in case ...


elaine cohen is the joint CEO of BeyondBusiness, a leading reporting and social-environmental consulting firm . Visit our website at: www.b-yond.biz/en