The proposed GRI G4 GHG Emissions draft - explained

The plot thickens. After presenting the G4 Exposure Draft available for comment between 25th June and 25th September, the GRI has now published what it's calling Thematic Revisions, for public comment between 14th August and 12th November. I think that's what they call eating the elephant in two easy slices. Of course, the CSR Reporting Blog is here and ready with our analysis of one of the two new Thematics  - Greenhouse Gas Emissions - to make your life a little easier.  The other one (Anti Corruption) will be the subject of my next post.

First, download the draft GHG Thematic document here. It's 55 pages. Get them all. You're gonna have your work cut out as you go through this document.

According to the draft, the proposed revisions align with the GHG Protocol, jointly released by the World Resources Institute and the World Business Council for Sustainable Development, and the ISO 14064 Standard. The proposed GHG Emissions Indicators are fully aligned with the GHG Protocol’s grouping of emissions into three subsets (Scopes 1, 2, and 3), as well as the ISO 14064 grouping. Energy Indicators have been modified to align with the GHG Emissions Indicators and intensity Indicators were added for both energy and GHG emissions. More about intensity later....

Specifically the draft contains:

• New disclosures and guidance for the Energy and Emissions Aspect (Environmental Category)
• Edits to Indicator EC2 (Economic Performance Aspect, Economic Category)
• Edits to Indicators EN3 – EN7 and Indicators EN16 – EN20 (Energy and Emissions Aspects, Environmental Category)
• New indicators under the Energy and Emissions Aspects, Environmental Category

Before discussing the changes in detail, it might be worth listing the new EC2, EN3-7 and EN16 -20 and new indicators proposed in this section. First point to note is that 11 indicators now becomes 13 indicators, and this includes two intensity measures, energy intensity and GHG emissions intensity. As promised, more about that later.

• CORE EC2: Financial implications and other risks and opportunities for the organization’s activities due to climate change
• CORE EN3 Direct energy consumption
• ADD EN4 Indirect energy consumption
• CORE G415 Energy intensity
• ADD EN5 Reduction of energy consumption
• ADD EN6 Reductions in energy requirements of products and services
• CORE EN16 Direct greenhouse gas (GHG) emissions
• CORE G416 Energy indirect greenhouse gas (GHG) emissions
• CORE EN17 Other indirect greenhouse gas (GHG) emissions
• CORE G417 Greenhouse gas (GHG) emissions intensity
• ADD EN18 Reduction of greenhouse gas (GHG) emissions
• CORE EN19 Emissions of ozone-depleting substances (ODS)
• CORE EN20 NOx, SOx, and other significant air emissions

So what's different? Intensity, as we've seen.  But more about that later.

GHG Protocol framework

A key difference is the clarification in definitions for energy and emissions reporting. The GRI has aligned itself with the leading carbon reporting standard - the GHG Protocol in which direct and indirect energy are classified into three scopes of emissions.

• Direct Energy > Scope 1 emissions
• Indirect Energy > Scope 2 emissions
• Other Energy > Scope 3 emissions

You probably already know this, but for those of us who are not environmental experts, it does take some getting your mind around. Scope is a classification of the organizational boundaries where GHG emissions occur.

• Direct (Scope 1) refers to emissions are created by sources owned or controlled by the organization. For instance, a coal-powered power plant which makes electricity.
• Indirect Energy (Scope 2) refers to emissions resulting from the generation of the electricity, heating, cooling, and  steam that is purchased by the organization. Scope 2 emissions occur at facilities which are owned or operated by other organizations. For example, using electricity purchased from the coal-fired power plant (probably via a national grid) is classified as Scope 2, because the emissions were generated in producing the electricity and not in your organization.
• Other Indirect  Energy (Scope 3) refers to emissions resulting from the organization’s activities, but are not created by the organization. This includes emissions from outsourced activities, such as the transportation of goods by haulage companies using vehicles that are not owned or controlled by the organization.

In other words, most companies report fuel and coal as direct energy sources and purchased electricity as an indirect energy source. In environmental reporting, the  energy source and what you do  with it is less important than where you do it. If the emissions occur in your factory, cue Scope 1. If they occur in someone else's factory, cue Scope 2 and if they happen on the bus to work or on a truck to China, cue Scope 3 (provided you don't own the bus or the truck).  

The John Lewis Partnership CSR Report for 2011 contains a good graphic that makes this all crystal clear:

Which emissions to account for: Control or Equity
The key to defining what to count is the precise scope of where emissions occur. On the face of things, it sounds straightforward, but in practice, there are two definitions are available: the equity or control method.

The control method calls for a company to account for the total GHG emissions from operations over which it has control, whether this be financial or operational control. It does not account for GHG emissions from operations in which it owns an interest but has no control. In other words, if you lease a factory, and you run it, and all the people working there are your employees, and all the materials used in the factory are sourced by you, and the final output is your products, then you have control.

The equity method calls for a company to account for GHG emissions from operations according to its share of equity in the operation. For example, if you have a 51% financial share in an operation, or even a lower financial share but full management control, you would report your emissions proportionately, according to the percentage share, and not full control.

This is an important distinction and must be applied consistently throughout the entire reporting spectrum. It could significantly change the level of emissions reported, so watch for the fine print when you are reading reports.

Alignment is Good
Closer alignment with the GHG Protocol (which is also used as the basis for CDP reporting) clearly makes sense, and hopefully will encourage greater comparability in energy and emissions reporting. At present, there are still wide variations but some do it well. ENEL, the energy company, for example, reports  for 2011 in classic textbook G4 style:

ENEL 2011 reporting EN3

ENEL 2011 reporting EN4

ENEL 2011 reporting EN16 Scope 1 Emissions

ENEL 2011 reporting EN16 Scope 2 emissions

ENEL 2011 reporting Scope 3 other emissions

Oh, did we mention intensity ?
G4 includes two new indicators relating to Energy Intensity (G415) and GHG Emissions Intensity (G417). This is a way of normalizing consumption and impacts to a common denominator which may be financial ($ of revenue), human (per person), physical (per square meter of factory or office space, or per vehicle) or per product (units sold, units produced) or, in fact, any other factor that you can imagine which is relevant to your business (or which makes your numbers look better than the absolute numbers). In most cases, my experience tells me, the intensity figures will always look better than the absolute figures - companies use more and more energy and generate more and more emissions, but on a per something basis, they proudly show a major reduction.  Take these examples:

Air China reports in the 2010 Corporate Responsibility Report on fuel consumption and carbon emissions by PTK (per ton/kilometer), stating that they have achieved "remarkable results" as they have reduced fuel consumption PTK by 6.6% in 2010 versus 2009. We do not know what the total fuel consumption was during this period.

Delhaize, the Belgian supermarket chain, shows fabulous energy intensity results per m2 sales in the company's 2011 CR Report. A 7.5% percent reduction over three years. (It is not clear whether this is all three Scopes, but I assume just Scope 1 and 2)

Delhaize 2011 reporting on emissions intensity

Delhaize does not disclose the total number of carbon emissions. Delhaize also reports to the Carbon Disclosure Project and you can access their report (after several clicks and registration on the CDP website) but you will find that the 2011 report covers 2010 data, and is therefore not comparable to the CSR Report 2011 period. After a quick calculation, I note that Delhaize absolute Scope 1 and 2 emissions increased by 3%, using 2008 as a baseline. Turning an increase into a decrease is the power of the intensity measure. This might have been achieved by increasing some prices, changing the sales mix or recording some currency adjustments and wow, suddenly the carbon emissions performance looks actually quite positive.

NH Hoteles 6th's CSR Report includes both absolute emissions and intensity rates per guest per night. Absolute emissions fell by 8.82% while intensity emissions fell by 11.9%.

What did NH Hoteles choose to highlight in its reporting narrative ? Intensity, of course.

 

 

CapitaLand's Sustainability Report for 2011 also shows a similar picture, in one handy graph.

Again, you can see that on an absolute basis, there is an increase of emissions by 39% since 2008 but intensity on a square meters basis reduces by 11.1% since 2008. CapitaLand's emissions target is an intensity target reduction of 20% by 2020, but there is no absolute target.

BT uses yet another model for calculation of emissions intensity and that is emissions per GBP million value added - which is EBITDA plus employee costs.  This formula is what BT has called its Climate Stabilization Intensity Target - a measure of carbon emissions in relation to its (financial) value added as a company and the contribution it makes to a country's GDP. Hmm. Make more profit, improve your carbon emission performance. BT's absolute emissions reduced 53% versus their 1997 baseline, and intensity improved by 61%.

What would be interesting to know is what specific factors contributed to this intensity improvement. BT report that they have improved energy efficiency, invested in renewable energy generation and purchased low-carbon energy. Wonder how much of what went into that 61%? And how much was a change in profit and employee costs?

Ericcson, on the other hand, report a different type of intensity. According to Ericcson's 2011 CSR Report, the carbon dioxide emissions associated with the lifetime operation of delivered products totaled approximately 24 Mtonnes in 2010. This is the measure used for carbon intensity. Don't worry about the fact that while carbon intensity was reducing every year, absolute emissions were increasing by 8% between 2008 and 2011.

Procter and Gamble have a lofty goal, stated in the P&G 2011 Sustainability Report: of powering their plants with 100% renewable energy. In the past few years, however, total carbon emissions (Scope 1 & 2, Scope 3 is off the radar) have increased  by 5% in 2 years. This doesn't prevent  P&G from proudly displaying the intensity figures:

As you can see, P&G refers to intensity per unit of production. Hmm. Now would that be a 5kg pack of washing powder, or a tube of Crest toothpaste, or a pack of Eukaneuba for dogs Denta Defense®, a type of micro-cleaning crystals that help reduce tartar by up to 55%?

Enough of intensity. By now you get the picture. Carbon emissions can be normalized to practically anything at all, depending on what a company wants to manage or what it wants to show to the world. In almost every single case you can find, intensity measures will always beat absolute measures. If only the planet would respond to intensity and become more sustainable. If every company were emitting carbon emissions relative to the number of expense claim-forms submitted, or the value of bottle-caps sold or the number of emails sent per hour, we might find carbon reporting much more interesting but it would hardly be saving the planet. If only we could become more sustainable by becoming less intense.

Why would the GRI choose to add two intensity measures to the G4 reporting framework? The GRI says this: "In combination with an organization’s absolute GHG emissions, disclosed with Indicators EN16, G416, and EN17, GHG emissions intensity helps to contextualize the organization’s efficiency, including in  relation to other organizations."
 
Normalizing energy consumption or carbon to financial values - turnover, sales or profit - or to other operational values - may be a way of comparing the performance of companies of different size in a similar sector. The carbon footprint of a cellphone is comparable whereas the manufacturers of cellphones may be very different in size and scope of operation. This might help investors (the ones who understand) to make decisions. Similarly, whatever the normalization factor, if a company consistently uses this to benchmark its own performance, it can be a management assessment and decision making tool. However, the trick is in the selected normalization factor. If such a factor has no direct relationship to whatever causes or influences the level of emissions, it may simply be a way to present good-news numbers. If my operations are the same size and my turnover increases because of a price-hike, or a change in currency exchange rates, I may still be generating equal or more carbon emissions but all of a sudden, my intensity plummets. We will have to be vigilant of the way that intensity measures are used in reporting, and ensure they are never  a replacement for absolute measures.

Some Less Intense General Points
The environmental disclosures as with, I think, all other disclosures in the proposed G4 framework are not time-specific. This means that the reporting company could report data only for the declared reporting period. I believe it would make sense to require organizations to present 5 years data on these critical data points. Of course, those who do not have 5 years data cannot do this. But of the many companies who have been producing sustainability reports over the years do have the data available (and several already include this). As we look at sustainability with a long-term lens, it is often frustrating when companies report only current and prior year data. We should require a little more perspective in G4.

Similarly, I believe that the G4 could be tightened up by requiring explanations of how performance has been achieved. For example, it would make sense, if energy consumption has decreased by 20%, to know what the organization has done to reduce this. The G4 proposals  in the updated EN5 (Reductions in energy consumption) and EN6 (Reduction of energy requirements in products and services) require listings of the reductions achieved but not a full explanation for HOW they were achieved. Adding such information would be helpful both for internal review and for external stakeholders. Companies who have made serious efforts to reduce carbon emissions should be able to say what actions caused the reduction. Unless it was all a lucky strike!

The Last Word (it's not intensity)
Overall the new GHG Reporting Thematic Revision tightens up environmental reporting and makes several aspects both clearer and less overlapping. G4 also ups the stakes a little (a lot). The G4 framework requires reporting on all three scopes of carbon emissions as core indicators (EN16, EN17, EN18). This is also the case in G3 (EN16 and EN17), but in G3, companies had the option to report at Application Level B or C, reporting Scope 1 and 2 emissions under EN16 and avoid Scope 3 emissions in EN17. With G4, every company which includes climate change as a material issue will be required to report all three Scopes in order to be In Accordance with the G4 framework. Sounds like there's gonna be a lotta scrambling around for data going on, and suppliers of goods and services to In Accordance reporters are going to feel the heat.

Whew! Glad that's covered. I hope  Anti-corruption is not so complicated. Watch this space.
   

 

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)

Part Two: Sustainability: What the Numbers Tell You

Since my recent Sustainability: What the Numbers Tell You post was so resoundingly successful, I have decided to maintain the momentum and  take a look at some more numbers. This time I am going to look at environmental metrics that were covered in the Sustainability Practices 2012 Edition, which I fairly glossed over in my previous (resoundingly successful) post. The Report covers a range of environmental metrics including those relating to: emissions, energy, water, waste, recycling, packaging, purchasing and spills and fines. Let's start with this number:

39%

of companies in the Bloomberg ESG 3000 Index report having a Climate Change Strategy. This compares with only 26% of the S&P 500 and 16% of the Russell 1000. (Just to remind you, the Bloomberg ESG 3000 covers a range of global companies while the S&P and Russell indices cover large-cap U.S. companies. So when the Bloomberg is higher than the S&P/Russell, it means that the world is doing better than the U.S.) In this case,  U.S. companies have not yet caught up on climate change as something they need to be making decisions about.

Many people probably don't know the difference between a climate change strategy and reducing energy consumption. In the Sustainability Practices Report, a climate change strategy is defined as: "a set of risk management procedures designed to mitigate the impact on business operations of climate change". Typically, as defined in the report, such a strategy will include: an assessment of the energy efficiency of the business, a commitment to capital investment in environmentally preferable technologies and a search for new sources of capital through commodity trading of GHG emissions or government subsidies for GHG emission reductions. 71% of big companies (over $100 billion revenues) have apparently given this some thought as they do have a climate change strategy. Only 22% of companies under $1 billion have done the leg-work in this area. The rest of them either they have a policy and are not disclosing (unlikely) or they don't have a policy and they are ostriching (likely). That's a shame, because "if you think mitigated climate change is expensive, try unmitigated climate change", (a quote from Dr Richard Gammon) .

And now for a little quiz: How many of the Bloomberg ESG 3000 actually report their total carbon  emissions?
A: 83%
B: 72%
C: 65%
D: 48%
E   34%
F:  21%

Yes, great, you were either wrong or right. The correct answer is:

 34%

That's it. Just over a third of the world's leading companies disclose their total carbon emissions. But this is not really the world's companies - it's Japan. In the Bloomberg 3000, there are 644 companies from Japan of which 80% disclose CO2 emissions, which is required by law. In the U.S., for example, only 8% of the 70 U.S. companies in the 3000 Index disclose CO2 emissions, which is the lowest rate of disclosure across a range of countries. The Netherlands and Sweden do better at 70% and 62% respectively, but France and the UK are lagging with 39% and 30%. This might be changing fairly soon in the UK with new legislation which will require large listed UK companies to disclose GHG emissions.  But disclosure is one thing and sustainable performance is another.  Think about this next number:

16,536,533

which is the average total CO2 emissions in tons from the 36 disclosing companies in the S&P 500 Index. This is a whopping 5 times higher than the total emissions from the 1,033 disclosing companies in the Bloomberg ESG 3000.  Utilities and energy companies reported the highest level of emissions, as you might expect. It takes energy to produce energy, apparently. Double whammy. When normalized per employee, we find that the utilities sector produces 1,473 tons of CO2 emissions per employee (median, not average). This is equivalent to emissions per employee resulting from powering 167 homes with electricity for a full year, or running 262 passenger cars for a full year. Wonder if all those employees think about that on their morning commute: "Hah, wonder how many cars on the road the carbon emissions resulting from my working today will equate to?" Perhaps this could be the next stage in sustainability-driven Employer Branding. It might work for the Financial Services Industry, where CO2 emissions are a mere 3 tons per year per employee (median). "Do you feel you have a personal responsibility for protecting our planet? Come and work for us. Your work will generate only 3 tons of carbon emissions per year, which is less than the equivalent of keeping one car on the road. You can manipulate interest rates with hardly any impact on the environment".  

But, enough of CO2, let's go deeper and look at energy efficiency. Consider these numbers:

 1,933  -  249  -  321

These are the actual numbers of companies in our three reference indices of 3,000, 500 and 1,000 companies which declare that they have an energy efficiency policy. 64%, 50% and 33%. I find that incredible. Forget sustainability, just think about energy costs. Heck, we even have an energy efficiency policy in our home! (Well, I admit, it's not a written policy, but if the kids leave the lights on in their bedrooms, they know there will be unpleasant consequences). Why wouldn't businesses have an energy efficiency policy? Ah, you might say, "companies which are primarily office based have more significant sustainability impacts to think about and more important cost considerations". Ah, I might say back to you, "and pigs can fly".  Even the financial sector, primarily office based as it may be, has a higher rate of energy-efficiency policy disclosure at 52% of companies than the energy sector itself at 46%. Energy efficiency is the second most material issue for companies everywhere, based on a study that was done last year on materiality issues. So how come so few have a policy? Possible they are just doing it because it's in their DNA. (A friendly reference to Oliver Balch, who tweeted "Please, one piece of advice to all companies: ban the phrase 'In our DNA' from your corporate lexicon"). Consider this number:

5%

which is the percentage of companies in the Bloomberg ESG 3000 which report using renewable energy. That's just 164 companies. For all the others, renewables are apparently not yet in their DNA.

Moving on to water consumption, consider this:

3.72

is the ratio of average water consumption in the U.S. based S&P 500 to the average in the Bloomberg ESG 3000. The average water consumption per S&P company in the U.S. sample (104 companies disclosing) is 3.72 times higher than the global sample (1,111 companies disclosing). Clearly, size does matter, as the bigger companies have higher water consumption.  Yet still only 74% of the companies in the $100 million revenue category disclose total water consumption, despite the fact that the median water consumption for this group is over 35 million cubic meters in comparison to a $1-10 million revenue company which uses 1.4 million cubic meters per year. With water scarcity becoming the number one resource issue globally, it seems incredible that disclosure for such large corporate users should not be mandatory, leaving 26% of the largest companies in the world to decide for themselves whether to manage water consumption transparently or not. But it gets worse. Consider this:

2%

is the number of companies which report that they use recycled water. 74 companies in a sample of 3000. But it gets worser. Waste is also one of the big drags on our economies and quality of life, not to mention sustainability. Here's another number:

31,739,944

is the average waste in tons generated by companies in the materials sector (which is made up of companies that manufacture chemicals, construction materials, containers and packaging, paper and forest products, extractives etc) which is more than the total average waste of all the other sectors added together, yet only 36% of companies in this sector report on the total levels of waste generated. Waste is cost. More often than not, it's unnecessary cost. How are investors using this information? Companies which are generating so much waste are also wasting investors' money.  Which brings us to the next number:

$997,299

which is the average amount that companies in the Bloomberg ESG 3000 spend on environmental fines each year. In the S&P 500 index, this becomes a whopping $2,224,831.

I could go on, but I won't. The Sustainability Practices 2012 Edition Report is an encyclopedia of data and comparative numbers. I have given you a jump start. You'll have to do the rest of the leg-work yourself :)  

By now, I think you get the picture. It's one of desperately poor levels of disclosure. Despite the growing momentum of voluntary disclosure and Sustainability Reporting, frameworks, measures, surveys, CEO commitments, investor pressures and all the hype that this brings with it, the picture on transparency is still bleak. Most of the largest companies in the world are barely disclosing most of the most important sustainability metrics. And this low level of disclosure gets proportionally lower and lower as company size decreases. In the U.S., performance is generally lower in comparison to the rest of the world. So it's fabulous that the U.S. is now leading the Medals League Table at London 2012 (39 Gold Medals as I write), but sooner or later, even that performance will not be sustainable without stronger and more transparent behavior by American corporations.

There is something about numbers. They clarify our reality. In this review of environmental sustainability and transparency-by-numbers, that reality is rather depressing, because there is a stark realization that, for all the talk, the results are pretty shameful and perhaps, voluntary disclosure is not all it's cracked up to be. Self-regulation is more self than regulation. When the authors of this Sustainability Practices benchmark report maintain that "there is significant room for improvement", I think we can safely agree that this is more than a mild understatement. With Paragraph 47 not promising to be massively instrumental in driving change in transparent disclosure, we have to wonder just what will propel corporations around the world into a different paradigm, before something else propels them out of ostrichland.

An eternal optimist, I believe change will happen. As a realist, I see it's painfully slow. As a pragmatist, I accept that we have to move on and, as the amazing Pema Chodron says, Start Where we Are. As an icecreamist, I know there is always comfort just around the corner.

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)

Sustainability: What the Numbers Tell You

Sustainability is not only about numbers. When all is said and done, sustainability is about people, community, society, collective responsibility and action, stories and interventions. But, sometimes, the numbers form a picture, and pictures can help us develop new insights and change our paradigms. And this can lead to new action. So,  when the The Conference Board, a non-profit organization which creates and disseminates knowledge about management and the marketplace to help executives make the right strategic decisions,  published a deep-dive study - perhaps the most comprehensive study available - of Sustainability Practices of thousands of companies around the world, containing more numbers about Sustainability Practices than I suspect you have ever seen in one place, you have to sit up and take notice. Ready?

The study is called Sustainability Practices 2012 Edition and is a 176 page epic, containing more data than anyone can absorb in one sitting and a wealth of relevant information for anyone interested in sustainability numbers, trends, areas of focus by sector and by subject, and opportunities to make a difference. The report was prepared in collaboration with Bloomberg, who runs one of the most extensive real-time financial and non-financial information networks to hundreds of thousands of subscribers, and with the GRI - no introduction necessary.

Sustainability Practices 2012 Edition is based on a global sample of 3000 business organizations tracked by Bloomberg's Environmental, Social, and Governance (ESG) database and covers 72 environmental and social practices including: atmospheric emissions, water consumption, biodiversity policies, labor standards, human rights practices, and charitable and political contributions. For benchmarking purposes, Bloomberg ESG data is compared with the S&P 500 (large capitalization U.S. companies) and the Russell 1000 (market cap-weighted index of U.S. companies), and further analyzed across 11 business sectors, using the CIGS code, and four revenue groups (under $1 billion, $10 billion, $100 billion and over $100 billion). The findings of the report are split into three broad areas: Disclosure Practices, Environment Practices and Social Practices.

Now for the numbers. Sitting up and taking notice?

19%

This is the overall social and environmental disclosure rate for companies in the global Bloomberg ESG 3000 Index, which is made up of largely non-U.S. companies. Does that surprise you? Only 574 companies out of a total 3,000 disclose on the full spectrum of 72 sustainability practices analyzed. This compares with 15% in the S&P 500 and 10% in the Russell 1000, showing that U.S. companies are lagging when it comes to overall sustainability disclosure. Match this with the next number:

25%

This is the number of companies in the Bloomberg ESG 3000 Index which released Sustainability Reports - 747 companies. More companies are reporting than disclosing. What does that tell us? That Sustainability Reporting is not delivering full transparency. In other words, just because it's called a Sustainability Report doesn't mean that it's transparent. By comparison, in the U.S., 45%  of the S&P 500 and 24% of the Russell 1000 publish reports. However, these indices are smaller and include large-cap, often global, companies, headquartered in the U.S., versus the Bloomberg Index which includes only 510 U.S. companies, 17% of the total 3000 sample. Overall the Bloomberg 3000 is weighted towards Japanese companies who have 27% of the sample, and with strong representation from India, China and the UK, and a host of other countries.  So Sustainability Reporting is more widespread globally than it is in the U.S. But that's not news. Match this with this next number:

80%

This is the rate of Sustainability Reporting for companies with more than $100 billion in annual revenues. Not surprising, perhaps, that this is a high figure. The larger the company, the greater its impacts, the more extensive its resources, the greater its risk exposure, the higher the expectations from stakeholders. However, 20% of these mega-corps are still resisting the reporting opportunity. The rate of Sustainability Reporting drops to 63% for companies over $10 billion, 25% for companies below $10 billion and only 4% for companies below $1 billion. $1 billion is still a heck of a company size and has potential for some serious impact. Who is chasing the other 96%? Match this with this next number:

46%

This is the rate of companies in the telecommunications services sector which publish Sustainability Reports. This is the highest reporting sector in the Bloomberg 3000. Contrary to the long-held view (and data) that financial services companies and energy companies have been leading the fray in sustainability reporting, only 20% and 25% respectively in these two sectors are publishing reports at a global level.

 Great work by telcos. What's driving this industry's reporting prowess? Match that with this number:

48%

This is the rate of telcos which use the GRI guidelines to report. Again, this is the highest rate of all sectors, with an overall average being 30%, generally lower than the hype would suggest. Consumer Discretionary and Information Technology companies have the lowest uptake rate of the GRI guidelines, at 27%.  Again, we find that the highest revenue companies are more likely to use GRI guidelines (66% - 23 companies) versus the lowest revenue companies (10% - 109 companies). The picture in the telecommunications sector is both of high disclosure and high use of the GRI guidelines. Telcos also have the highest rate of report verification and assurance at 26% (versus an overall average of 13%).  Match that with this number:

24%

telcos. No wonder it's so expensive to connect.  But take a look at these numbers:

54% - 43%

The numbers of women employed in the workforce and the numbers of women in management in the telco sector. Hah! One of my favorite indicators.  Not so rosy in the IT sector, where women make up 13% of the workforce and only 9% of management. Across all sectors, the lowest revenue group of companies has the highest proportion of women in management - 24%. Telcos stand out for positive diversity in other respects too - with 26% disabled employees, and 7% of minorities in management. Apparently, if you are a disabled woman from a minority group,  you stand the best chances of advancing your career in a telco. If you are a man, the materials sector is for you. A median 86% of managers are male, and 85% of the total workforce. Match that with this number:

7%

This is the proportion of companies reporting employee fatalities in the Bloomberg 3000. Only 197 companies out of 3000 disclose this figure (even less in the U.S. large company Russell 1000, where only 36 companies disclose). The average rate of fatalities across all those companies reporting is 2, but the Information Technology Sector inflates this average with a total of 6 fatalities. Conclusion: don't go into IT if you value your life. Match that with this number:

59%

This is the proportion of companies that disclose their Health and Safety Policy. This includes 58% of Information Technology companies where six people died. Just think how things might improve if 100% of companies had a Health and Safety Policy. Would things get worse, or better? Match that with this number:

1,367

This is the average number of workforce accidents reported by the 12% (364) companies who disclose this information. I calculate this to be a total of  almost half a million accidents in this small sample. Only 5% of companies report how many lost workhours result from these accidents, reporting an average 56,111 lost hours across only 137 companies, but this is much higher than the average in large U.S. companies, which report an average of 36,121 hours (13 companies) in the Russell 1000. This might indicate that it is safer to work in the U.S.  Or that you have your accident, and get back to work pronto. Even so, the Russell 1000 indicates the lost-time equivalent of 18 employees per year per company that do not come to work as a result of an accident. Rather shocking, don't you think? The impact on families and communities of such safety issues can be quite significant. Match that with this number:

36%

This is the proportion of companies which disclose their charitable giving. I would have expected this number to be higher. Companies like to tell their good news. Match that with this number:

$161,522,597

This is the average community spending reported in the energy sector in the Bloomberg 3000. This is by far the highest rate of charitable giving, comparing with an average across all companies which disclosed of almost $28 million. The healthcare sector is the second largest giver with an average of $98 million reported by 47 companies. Industrial sector companies have not been bitten by the bug to this extent, apparently, with the giving average at a mere $10 million reported by 232 companies. Match that with this number:

$66,800,000

This is the median total corporate giving reported for 21 companies with in the highest revenue group - over $100 billion. If ya got it, share it. Seems to work for them. Companies with under $1 billion revenues give a median of $88,552. Yes, that's thousands, not millions. Match that with this number:

$1,000,353

This is the average utilities sector spend on political lobbying, more than double that of any other sector in this study. Overall, in the Bloomberg 3000, the average amount spent on lobbying is $226,065 per company (though only 14% of companies disclose this information). Interestingly, in the U.S. alone, the amount spent is three times that much. The politicization of business in the U.S. is quite some investment, it seems, if you are a utilities company. Wonder if it's worth it?

I am going to stop here for now, while I continue to study this report. You can read a great review of key findings and  broader conclusions of this report  in the Conference Board's Press Release. Or you can wait for my next post, as I will definitely have more to say about this in the coming week, after getting to the rest of the numbers that I have not looked at yet in detail. 

In the meantime, you might now like a little light relief, by watching the Sustainability Practices 2012 Edition authors, Matteo Tonello, Director of Corporate Leadership at the Conference Board and  Thomas Singer, Conference Board Research Associate, talk about the importance and relevance of this study and what this means. It's short and to the point and contains no numbers.

Thomas Singer rounds off with this perspective: "To a large extent, sustainability is about long-term risk management. It's about making sure that, if you are a company that is dependent on finite resources, you make sure that those resources are available, that they are clean and that you have access to them in the long haul. However there is a very important second part to sustainability which is ensuring innovation and new products, new markets. It is those companies that actually go beyond seeing sustainability as a risk strategy and more of an innovation strategy, those are the companies that really become sustainability leaders in the long term"

Final Tip: ice cream is a great remedy, if your eyes are getting a little fatigued from figures and percentages. Any flavor will do.

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)

Making Reporting Relevant: Two sustainability databases

As businesses become more transparent, so databases populated with the information that businesses now disclose are becoming more sophisticated and opening up wondrous possibilities for discovery, comparison, benchmarking and all sorts of interesting facts and figures compilations. Hot off the press is the new GRI Database of Sustainability Reports, which is a repository of over 7,600 sustainability and integrated reports (GRI-based and non-GRI-based) which is searchable and offers possibilities for interesting benchmarking options. Another fascinating data base which drills right down to source ESG data, sector by sector, is the new Justmeans Insights platform which is a data visualization and performance dashboard. (see the Press Release here). 

The new GRI Sustainability Report Database is the product of several years work and broad collaboration with the GRI Data Consortium  (my company, Beyond Business is the Data Consortium Partner for Israel). It is still in pilot phase, but is looking pretty good. The Database site was launched officially this week with a press release  and a launch webinar which you can view here (Webex recording). Many bloggers have already rushed to report on the key features of this new database, such as Raz Godelnik on Triple Pundit, and Environmental Leader and Sustainable Planet. Here is an extract from the GRI Press release:

"The new Sustainability Disclosure Database includes data on the sustainability and environmental, social and governance (ESG) transparency of over three thousand companies worldwide. Sustainability performance data is increasingly important to markets worldwide. In 1975, on average 80 percent of a company’s value came from tangible capital – finances and assets. Today, on average 80 percent of a company’s value is intangible – for example customer trust, brand value and stakeholder relations. The database is a hub for sustainability disclosure, featuring sustainability reports that use the GRI Guidelines and those that follow other guidance. The database includes references to sustainability guidance from different organizations, including the Carbon Disclosure Project, ISO, the OECD and the UN Global Compact. GRI plans to expand the scope and depth of its data collection and analytical functionality over time."

The GRI Reports Database

Here is an example of what you can do with the GRI database:

First, you can take an interest in the latest published reports or those which have been featured in the GRI communications service

Alternatively, using the search function, you can search for any report by organization name, report type, publication year, sector, region or country. Each organization and each report has its own profile page. This is currently still being populated (largely dependent on reporting companies completing their own data via own access), but most of the reports are already available to view. However, the benchmarking is where it has the potential to get most interesting ... so far, in the benchmark, only reports published since Jan 1st, 2011 AND which have been checked by the GRI as conforming with the GRI Application levels are included in the benchmark option - that's around 100 reports to date .. so a meaningful benchmark is still a little premature. However, as more reports are included, this could become quite useful. To give you an idea, I looked at 2 sectors which have a more than just a couple of reports : the Chemicals sector (5 reports) and the Energy sector (10 reports).

This chart shows that the Chemicals Sector reports are way ahead in reporting against more performance indicators. To make this clearer, 80% or more of companies report against 78% of the EC indicators, 73% of the EN indicators and only 21% of the LA indicators and so on. In the Energy Sector, overall reporting by most companies is much lower, showing that 80% or more of companies report against 22% of EC indicators, 23% of EN indicators but much more against LA indicators with 43%. What is it about the Chemical Sector that causes a dip in Labor Indicators, and the Energy Sector which makes that set of indicators more relevant? The GRI Database won't tell us that but it does allow reporters and report-readers to gain new insights and consider interesting questionsabout how companies report.

This basic analysis of just a small sample of the database took quite a lot of manual calculation. The data cannot be exported so analysis is manual. However, for companies looking to benchmark their sector, or country or region to see who is reporting what, the database could provide a very useful guide (once it is more fully populated). Companies wishing to do a deep-dive analysis can go back to the source reports for each indicator and check on who said what. 

Useful Now but More Useful in the Future

The benchmarking database does have its limitations. It doesn't show actual performance data nor assess the quality of the disclosures against any indicator and despite the GRI Application Level Check, there remain great discrepancies in reporting quality, as we all know. The linkage of the benchmark data doesn't easily hook back to the level of the reports themselves - to know if the benchmarked group reported at GRI Level A, B or C requires going back to each of the individual report profiles in the benchmark and checking that out individually.  

Therefore, in the initial stages, until more functionality is added, the main advantage of the database is the growing collection of reports in one place and a basic overview of what companies are reporting on most frequently. This has been a massive undertaking and congrats! to the GRI for coming so far. This is a database to watch in the coming months. I am sure it will become more relevant as it matures.

Justmeans Insights Platform - Another Layer of Transparency

The other database that is worth watching takes transparency a step further. Data Visualization from the Justmeans platform is quite spectacular. Take a look at this blog post by Harry Stevens to get an impression of what the platform can do. The Insights platform uses data collected by the CRD Analytics Global 1000 Smartview (R) 360 methodology (which powers the Nasdaq OMX Sustainability Index) for sustainability reporting companies with market capitalization of at least $1 billion. Insights makes a wide range of performance data available sector by sector, in comparable form with instant graphic visualization. So far, three sectors are available (Pharma, Computers and Peripherals and Semiconductors) and over time, more sectors will be added. This presupposes that analysis by sector is the way to go and there is some merit in comparing apples with apples, or in the case of the Pharma industry, drugs with drugs.

How Do Pharma Companies Compare?

There are 24 companies in the Pharma database, with Allergen shooting up to first place from seventh place in 2009, edging out Novartis from the top spot (now ranked 6).

Looking at the indirect energy consumption of 4 companies in this database, the figures show that in 2010, Merck actually used more total indirect energy that the other benchmarked companies, overtaking GlaxoSmithKline by a short measure.

Converting this to an intensity measure, gigajoules per $US million revenue, we get different picture. Merck and Glaxo are about equal in indirect energy intensity, while Allergen, who ranks number one overall in ESG performance, shows much higher in energy intensity, exceeding the much larger company, Roche.

Roche, Glaxo and Merck are all similar in terms of revenue size ($40-50 billion) while Allergen is much smaller with $US 5 billion.

Instant Relevant Benchmarking

This is a fascinating and instantly useful compilation of ESG data in a way which enables the perspective and context of relative performance accross different companies. Absolute energy consumption is affected by so many things beyond internal processes - size of production facilities, acquisitions, growth in production etc. - though ultimately, it's absolute measures which make a difference to the sustainability of the planet. By looking at absolute figures, you can see how companies' impacts have changed over time. In the first chart above, for example, data shows that Glaxo has been slightly reducing consumption year on year while Merck took a big jump from 2008 to 2010 (probably due to acquisition of Schering Plough). The other data you can pick up is which companies are not reporting on certain ESG indicators- which also tells a story.  The intensity comparison gives the picture of where companies are in their peer group - I selected to include only 4 companies in the charts above - but it is possible to benchmark all or any selection of the 24 companies in the sector for every single performance indicator. ESG areas covered include environmental, social (workforce, human rights etc.) and governance data. 

Making Reporting Relevant

Taken together, the GRI Reporting Database (free) and the Justmeans Insights Dashboard (subscription) are a major step forward in our ability to make sense of the much broader sustainability transparency that we are experiencing these days. The KPMG 2011 Reporting Survey, published to coincide with the database release,  confirms that sustainability reporting has become  the "de facto law" with 95% of the G250 now reporting. Reporting quality aside, GRI and Justmeans are now offering tools to help us make sense of it all. And when it makes sense, it will be much, much more relevant.

elaine cohen, CSR consultant, Sustainabilty 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/en  (BeyondBusiness, an inspired CSR consulting and Sustainability Reporting firm)