Monday, October 11, 2010

The new Global Compact DIfferentiation Framework.

The Global Compact goes  GRI. Kind of. As of October 2010, the UNGC will stop recognizing Communications on Progress as "NOTABLE" (for adherence to the COP policy and representing illustrative and inspirational examples of communicating progress) and will introduce a three month trial period for the new Differentiation Framework.  

"The Global Compact Differentiation Framework seeks to give recognition to the unique contributions of companies of different sizes and experience and to facilitate better assessment of sustainability performance and transparency. The Framework provides companies at all stages of Global Compact implementation the opportunity to begin a process of continuous improvement and receive recognition for progress made. The Framework also aims to mainstream sustainability reporting and improve transparency and disclosure among the thousands of companies in the Global Compact." The Framework is designed to encourage compaines to improve performance and for the UNGC to evaluate progress along two axes: implementation of the Global Compact principles and transparency and disclosure including standard reporting guidelines (such as the GRI). There are three levels in the Framework:

Basic : This comes together with its own fill-in-the-blanks and tick-the-boxes template , remeniscent of the GRI "Let's Report C Level template"  and is targeted at "smaller and inexperienced" companies. It covers the four disclosure areas and asks for policies, implementation and outcomes against each area.

Intermediate: At this level, companies should use the standard COP process, cover all Global Compact principles, and communicate directly with stakeholders on progress made using accepted standards of disclosure and transparency such as the Global Reporting Initiative (GRI). In other words, a dedicated COP, reporting against all the principles, or a GRI Sustainability Report, as now.

Advanced: This level aims to create a "gold standard" for corporate sustainability performance and disclosure. It includes a set of  self-assessment questions covering strategy, governance, implementation of the UNGC Principles, value chain responsibility, stakeholder engagement, context, transparency and disclosure. "When submitting their annual COP, companies will have the option of participating in the programme by completing a self-assessment questionnaire covering the content of their COP and assessing their implementation of the Global Compact principles against global best practices. Results of the self-assessment will be made available to the public to encourage stakeholder engagement and protect the Global Compact’s integrity."   This is designed as a first step in the implementation of the Blueprint for Corporate Sustainability Leadership launched in June 2010.

So, as I understand it, preparation of COP's remains as now, with the addition of the lightweight template, and apportioning recognition for achieving the  (formerly "notable") "gold standard" is delegated to the communicating companies themselves, by way of the self-assessment. Pretty much like the GRI Reporting Application Levels which can be self-declared.

Another thing worthy of note on the UNGC website is the mention of Financial Markets: "The Global Compact is working closely with Bloomberg LP to make COPs available to the mainstream financial community in order to their use, mainstream the use of environmental, social and governance (ESG) information in financial analysis. It is expected that this will generate further incentives for companies to increase transparency and disclosure."

What do I think of all this?

Personally, I find it baffling. A large number of COP business communicators are bigger companies that produce their own Sustainability Reports (GRI-aligned or not) and submit this to the UNGC as their COP. More often than not, this is simply a cross-referenced table of GRI Indicators to UNGC Principles. The GRI has positioned itself as the gold standard of corporate sustainability disclosure and by and large has achieved this. I wonder how the UNGC, with a requirement for a COP ( which covers Human Rights, Labor Standards, Environment and Anti-Corruption, way below disclosure levels for the GRI) plus a self-assessment questionnaire of yes/no responses, can aspire to replace the GRI A Level with a new gold standard?  

Secondly, the beauty of the UNGC framework so far has been its equality and accessibility. All organizations were free to commit, join and communicate in their own way, with some very basic guidelines for COP submission. The really good ones got a pat on the back with a "notable" recognition awarded by the UNGC COP evaluators. This provided a great opportunity for everyone, large, small and sustainability-fledgling organizations to declare support and get their transparency toes wet. I know, of course, of all the criticisms of the UNGC as being wishy-washy, toothless, not focused on driving action etc, but I have tended to believe that the advantage of this loose framework offers precisely the entry catalyst for companies to develop their sustainability and transparency muscles in an easy and non-prescriptive way. The GRI is there for those who are able to do more. So now, instead of everyone being equal and commended for participating in the prestigious UNGC, companies will be assigned a basic, intermediate or advanced tag. For a company who is not ready to communicate at GRI level, but has made significant progress in CSR and delivered a first COP, instead of being commended, they are now labelled "Basic". I think that's going backwards. 

Thirdly, the self-assessment questionnaire is not really any great shakes. By responding "yes" to all the questions, companies can now  elevated themselves to "advanced" status. But all yes's were not created equal. And in responding to this self-assessment, I suspect there will be a temptation to expand the scope of what constitutes a "yes" in order to gain the coveted "advanced" tag. In the same way as a GRI "self-declared" reporting level is often found to be deficient, I suspect this self-assessment questionnaire may  not be a true reflection of performance accross the board.

Fourthly, the self-assessment will not be policed, apparently. However, the self-assessment does include a yes-no as to whether the COP has been externally assured or verified. Of course, the GRI doesn't do such a good job of this either, as I have pointed out several times in the past. Perhaps this paves the way for the next UNGC refinement which is Basic +, Intermediate + and Advanced +. Aarrggh!

Finally, I truly thought we were in the era of convergence. With the announcement of  UNGC and GRI closer collaboration in Amsterdam in May this year, I thought we would see a merge of the COP into the Sustainability Report, or at least, a full recognition that sustainability reporting meets the COP criteria. The diffrentiation framework does formalize the GRI-UNGC alliance a little, with Intermediate Level ultimately becoming the Sustainability Report, as is current practice for many companies. But why did the UNGC not go the whole way and align COP's to the GRI A,B,C,+,+,+ ? The self assessment provides, in theory, a way for the UNGC to see what companies are reporting on what, but so does the GRI Index. At Reporting Level A, companies are required to respond to all indicators. For the UNGC, completing the self-assessment questionnaire seems to be enough - I cannot tell that the quality of the responses makes any difference. As far as I understand it then, with the new UNGC Differentiation Framework, a company can produce an A+ GRI report and be tagged Intermediate. Similarly, a company can produce a C level report, respond to the self-assessment, and suddenly become Advanced. 

As I said, baffling.  What have I missed ? Perhaps someone  can enlighten me ?  

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  on Twitter or via my business website  (BeyondBusiness,  CSR consulting and Sustainability Reporting firm)

1 comment:

James Epstein-Reeves said...

Great analysis! Very interesting and I agree, baffling. Just seems unnecessary.

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