Monday, May 23, 2016

Comrades. It's all about jobs.

One of the most memorable moments in the 5th Global GRI Conference last week was when the Minister of State for International Development (United Kingdom), The Rt Hon Desmond Swayne TD MP took to the stage and opened with the greeting: Comrades! It's all about jobs. 

That woke us all up. Minister Swain continued to elaborate, loudly, deliberately and perhaps even a little flamboyantly, in the following way, more or less. (Apologies, I may have missed a sentence or two in my transcript below)

"Let me give you my take on the Sustainable Development Goals.. or as we must now learn to call them, the Global Goals. Fundamentally these will, of course, deliver the disappearance of absolute poverty by 2030, and in doing so, will have created a more prosperous more stable and safer world. But ultimately, these goals come down to one thing: It's all about jobs. It's all about jobs in the end. A livelihood, a job - being able to put a roof over your head, putting food on the table, educating children, providing healthcare, generating the tax revenue which governments require to provide social services - it's all about jobs and if you look at the world, you will see that people are going to enormous lengths to secure a livelihood, a job or a better job. 40,000 people a day are going to the extraordinary lengths of leaving everything they are familiar with, everything they know, leaving their homes in pursuit of a job. Even if we take those who are being driven primarily by conflict, just look at that behaviour.

"Let's take Zaatari, on the verge of becoming the world's largest refugee camp, look at the conditions - they're much better than in many cities around the world with security, safety, reasonable accommodation, sanitation, clean water, food which the World Food Program provides, UNICEF will educate the children. But these people will nevertheless leave because the one thing that it cannot offer is a job opportunity. For a job, these people will risk absolutely every penny they have. It's all about jobs in the end. The world needs 600 million new jobs over the next decade if we are going to avoid a growing army of frustrated, despairing and angry young people who are unemployed or underemployed - exactly the sort of raw material, the circumstances, that generate conflict and instability which is the enemy of any kind of employment. So it's all about jobs.

"Now, I confess as a young economic student to having been enthralled with a right-wing economics professor in my University and his catchphrase was: Well, after all, there's only one thing worse than being exploited by capitalists and that's not being exploited by capitalists. HaHa. He reinforced his ignorance with another of his catchphrases: After all, surely any job has to be better than the alternative, which is daytime television! showing his clear ignorance of circumstances in the real world. If only it were so. So it is not any job, comrades. What if your job literally enslaves as many jobs do in all sorts of different forms? What if your job is breaking your health, poisoning the air or water or the land in which your community lives? What if your job literally costs you your life?It's not any job. We require inclusive growth - those kinds of jobs are actually job destroyers because what they do is generate the very sense of grievance or injustice which is the raw material for conflict which is utterly destructive of any prospect of employment.

"So we need inclusive growth. From where is it going to come? Well, my ideological prejudice will tell you that it certainly won't come from governments. Governments create the circumstances in which there can be inclusive economic growth - by providing a relatively benign investment environment, the rule of law, contract law, light-touch regulation - all those things that are essential to Global Goal number 16 and the targets that underpin it. Equally, the greatest enemy of employment can be a government where there is no rule of law, where there is arbitrary and unpredictable taxation, where there is no creation of successful enterprise, where people get jobs because they are somebody's cousin rather than because they are efficient. Any number of things, I assure you, governments can screw up and drive jobs away.

"I only know of one engine that can release initiative, enterprise and hard work of ordinary people to generate jobs and that is private-sector-led investment - the only sustainable engine of inclusive economic growth. But how do we ensure that those enterprises spend as much time addressing the impact of their enterprise as they do maximizing profit? That is where organizations such as GRI come into being. I think it's a huge compliment, a huge achievement, that just recently the Japanese Stock Exchange has made the GRI standard a mandatory requirement of membership. A huge leap forward in this vitally important set of guidelines for promoting transparency and collaboration. That's why the Department of International Development is so passionate in our support for this kind of initiative.

"May I make three suggestions for ways that we can drive this agenda forward. Firstly, with respect to new technology - let us harness new technology to make those reporting standards ever more up-to-date, ever more relevant and drive that agenda forward. Secondly, let's find ways of ensuring that this agenda - the environment, human rights and these proper concerns of enterprise are brought into the main effort, the mainstream, the core of the enterprise and not tucked away in a compliance department or in a department that ticks the boxes to show that the enterprise is meeting all its requirements. Finally, and most importantly, how do we address and engage those who are not already in this room? The reality is I'm preaching to the converted, otherwise you wouldn't have come to this conference in the first place. How do we engage those enterprises and draw them into this initiative so they too can be transparent and accountable? I know our best brains are working on it."

The message is clear. It's all about jobs. Creating and maintaining jobs, I believe Minister Swain was saying, is the core of a corporation's social impact and therefore accountability. In G4, soon to be reborn as a standard, job creation is not identified as a core material Aspect. There are references to inclusive hiring - but that's about diversity (G4-LA1). There is a reference to jobs supported in the supply chain as part of an organization's indirect economic impacts (G4-EC8). But there is nothing about creating jobs, sustainable jobs, as a core objective for corporations. Should there be? Job creation is often the outcome of successful business, rather than the driver. Companies will tell you they do not do business to employ people but that they employ people to do business. There is nothing about layoffs in the GRI framework and most companies do not tend to report layoffs. Should this be a new performance indicator? In the U.S. in 2015, Forbes reports almost half a million job cuts. I recently heard a talk on a webinar by a Manager at social enterprise Greyston Bakery, whose mission is: "Greyston is a force for personal transformation and community economic renewal. We operate a profitable business, baking high quality products with a commitment to customer satisfaction. Grounded in a philosophy that we call PathMaking, we create jobs and provide integrated programs for individuals and their families to move forward on their path to self-sufficiency." Job creation is as central to Greyston's mission as baking cookies is central to their operation. 

In any event, I thought Minister Swain got his point across very effectively, while demonstrating a sound knowledge of the issues at stake and the global environment in which we live and work. Is it all about jobs? Maybe it is, and maybe it isn't. But I could add that it's not only all about jobs. It's also about an ecosystem that enables people to get to the jobs, develop and thrive, and, ultimately, enjoy an ice cream here and there. I'd like to thank Minister Swain for one of the most powerful speeches at the GRI Conference. IMHO.

elaine cohen, CSR consultant, Sustainability Reporter, HR Professional, Ice Cream Addict. Author of Understanding G4: the Concise Guide to Next Generation Sustainability Reporting  AND  Sustainability Reporting for SMEs: Competitive Advantage Through Transparency AND CSR for HR: A necessary partnership for advancing responsible business practices . Contact me via Twitter (@elainecohen)  or via my business website   (Beyond Business Ltd, an inspired CSR consulting and Sustainability Reporting firm).  Need help writing your first / next Sustainability Report? Contact elaine:  

Friday, May 13, 2016

The GRI STANDARDS Exposure Draft explained

It's official. G4 is now becoming a STANDARD. GRI is looking for input to the new Exposure Drafts for GRI Sustainability Reporting Standards (GRI Standards) in the Public Comment Period which is taking place NOW and will continue until 17th July. Of course, for all of you attending the 5th GRI Global Conference next week (come and say hi!) you will be hearing a LOT MORE about that, so you might want to hold off on your comments until after the event. In the meantime, I decided to translate the technobabble into a digestible version of the changes for those of you who want to know more about what it means, in addition to what it means, if you know what I mean.  

I also took the opportunity to have a chat with the two folks who are key to making this change happen - Chelsea Reinhardt, GRI's Deputy Director of the GRI Standards Division, and Bastian Buck, GRI's Director of the Standards Division - both of whom shared some fascinating insights. Chelsea has a strong background in standards, having led a full supply chain standards review for the Marine Stewardship Council in a previous role. She also has great taste in ice cream - cappuccino chocolate chip is her thing. Sounds good to me. Their insights are included through this post, which is LONG. So grab your Chunky Monkey and let's get started. 

A GRI Standard - how scary is that?
I suspect that for most of us, hearing the word STANDARD brings a sense of almost regulatory-like scary officialdom to sustainability reporting - after all, what we have had so far from GRI is a periodically-updated set of guidelines in the form of a framework - and that doesn't sound particularly threatening. It's a credit to GRI that the voluntary uptake of this framework has been so widespread by so many companies around the world - although the cynics (or realists) among us might suggest that because the application of the framework has been so pick'n'mix-ish, it's been easy for many reporters to claim adherence to the framework without actually investing the rigor that adherence requires and without actually adhering. Adherence without adherence has been a major blow to the credibility of Sustainability Reporting over the years. As the CSR Reporting Blog has often pointed out. 

Now, with G4 becoming a STANDARD, is all that going to change? Are we going to enter the era of ISO G4 that requires an administrative army, a battalion of auditors, a paper trail to Antarctica and a list of corrective actions as long as the Great Wall of China in order to report GRI? Is reporting going to become a headache, rather than the FUN we all have today? (What? Not fun? Then you are not doing it right!) Well, you know what, I am not going to say it's not a little scary as I think there is a little more to the transition to Standards than we might believe at first glance. It's positioned as G4 same but better... but when you read the small print.. it's actually G4 with many new twists. We'll still be in the same ball park but the ball will be a little different. Stay tuned.

Insight from Chelsea
"One of the main challenges in transitioning the standards has been the size of the task. Going through more than 300 pages of very dense content in the G4 guidelines, the Implementation Manual and the FAQ document. We have been sifting through line by line, under the oversight of the GSSB, tying to make decisions on which content rightfully belongs as a requirement in the new Standards and what should be rightfully positioned as guidance or recommendations. We are really trying to bring it all together in one place and this often involves considering the historical context in which the content was developed and going back to the output of the G4 working groups as well."

Insight from Bastian
"The discussion about adherence to the Standards and quality of reporting has come up frequently. One of the main struggles for GRI is that the Standards are voluntary and adherence in the current context is first and foremost a claim that a reporting organization makes. There are probably a range of mechanisms needed to introduce rigor. Certainly GRI should be more proactive about bringing the users of reported information into this discussion. But the priority right now is the Standards with a very clear signal from the Standards Board that credibility is something to look at and that is high on the agenda."

Materiality still center stage
The new Standards retain the principle of materiality as a core element to shape the entire disclosure, in the same way as in G4. We have seen in many G4 reports, however, that materiality can be whatever you want it to be - and the detail of how companies convert stakeholder input into a dot on the matrix is often non-existent. I had wondered if the transition to GRI Standards might not have taken the opportunity to add some requirements for more disclosure about how materiality is determined.

Insight from Chelsea
"The process for prioritization of material issues in the Standards has not changed fundamentally. The principle has not changed but we have strengthened the guidance to give more specificity about what we expect to see reported against the materiality principle. We are currently preparing a guidance document that will be released with the Standards about identifying and prioritizing material topics and applying the reporting principles. In some cases, we have seen that the materiality matrix has been misinterpreted and we are trying to improve the consistency of reporting materiality in the new Standards."

The skinny
Here is the short version of what's going to change. Instead of G4 being two documents - the Principles Manual and the Implementation Manual - there will now be to be a set of multiple modular Standards:

The first three - SRS 101, 201 and 301 - are what we today know as the Reporting Principles / In Accordance criteria, General Standard Disclosures and Disclosures on Management Approach (DMA). The remaining standards each cover an individual topic, based on the G4 Aspects, and include all the Performance Indicators we love so well. Sector Disclosures still exist, but in the new Standards they are referenced as guidance, not as a requirement.

The In Accordance options remain the same in this new setup - you need to report against SRS 101, 201 and 301 and one disclosure for each material topic for CORE and every disclosure for each material topic for COMPREHENSIVE, just as now in the G4 framework. 

Selection of standards from the 400, 500 and 600 series are determined by the selection of your material impacts - just as now. If you don't want to go the full monty, you can use one of the Standards - say SRS 505 for reporting emissions - and reference that in isolation - just as in the current setup, you can include "disclosures from G4" without claiming In Accordance with the entire sustainability reporting framework. Note that all the Standards now have their own numbering, so Disclosure 403-2 in the SRS 400 series is the new version of G4-EC8 in the Indirect Economic Impacts of the Economic category. There are several changes in the order of the different disclosures so in making the transition, some application will be required to work out what's moved and where it's moved to.

Insight from Chelsea
"There were many compelling arguments to take away the (Economic, Environmental, and Social) categories altogether, as so many issues are cross-cutting and have both social and environmental implications. But on the other hand, there’s a benefit in having categories to help users navigate and understand the new structure. Ultimately we took away the sub-categories – but this is subject to change with feedback we may receive."

Insight from Bastian
"With regard to the Sector Disclosures, what we have learned over time is that one of the big struggles is grouping – companies’ activities often cut across different industries and are not directly comparable. The other thing is we don’t want to establish several levels of the Standards going forward, the vision is to be global, comprehensive across the board of potential sustainability impacts of corporations. What we have on the horizon is guidance around issues that you might want to consider if you have a certain business activity… and that would work in the new structure going forward. Having been around in these discussions for so many years, I am still hopeful that we can build that out. It is a big stretch and requires more resources but our priority today is to get the Standards in place. Reporters can also of course make use of the sector guidance from other sources in conjunction with the GRI Standards - they have been written to allow this."

Insight from Chelsea
"The options of core and comprehensive are definitely a point of discussion and continued debate. The decision was made at this point in time to maintain both options as consistent as possible throughout the transition to Standards. There is already going to be some transition work for companies but it is one of the priorities for future review. We will be consulting on this, probably later this summer. There is no consensus here that these are perfect options but once we see how companies are using the Standards, we will be able to consider that what changes might be best for a review and redesign. These will be really exciting conversations for us to consider."

Insight from Bastian
"Looking at the GRI Standards, going forward, they will be more appropriate for use by policymakers. Take the EU Directive for instance. GRI Standards are aimed to attract a new audience not just retain the ones we have. There may be specific requirements in different jurisdictions for companies to report on ESG issues that can be fulfilled by individual GRI Standards or sections of GRI Standards not necessarily against the entire set of standard relating to specific core or comprehensive options."

What's in the box? 
The Exposure Drafts of these documents are here and the party pack includes: 
  • The first part of each of the three universal standard proposals SRS 101, 201, 301
  • One example topic-specific Standard in the Economic, Environmental, and Social categories
  • A revised Glossary of Terms
There is also a 77-page background document which you can find here which provides a blow-by-blow account of all the changes. 

All in all, you have 207 pages of documentation and 77 pages of explanation. Time to order more Chunky Monkey.

Insight from Chelsea
"There were some definite debates among members of our Standards Board about the nature of the content and the outcome we are trying to get to with these specific disclosures. There is actually a public record of all these conversations and outcomes on our GSSB website. There were also some structural debates – members had different opinions about the structure of the content, for example, do we create a structure of one standalone standard or should that be five separate standards. In the end, we settled with one standard but that was not necessarily a unanimous vote. This might be revised further depending on stakeholder viewpoints."

Learn the new language
GRI is known for creating its own language and the lingo associated with G4's introduction was somewhat unwieldy to say the least. All of a sudden we had to get used to Specific Standard Disclosures, Aspects, Aspect Boundaries, In Accordance and a whole lot more. In the transition to the GRI Standards, we will have to adjust once again. First, each is standard is now an SRS. We can handle that. But just as we had got used to calling everything Aspects, the new proposal kicks that out and replaces that with the term, "topic", no longer making the distinction between a GRI prefab material impact (Aspect) and any old material impact (topic). In addition, the GRI Standards adopt the aceptable lingo for standard-setting practice - we now need to understand the nuance between what we shall report, what we should report and what we can report. If the disclosure says you shall disclose, then it's required in order to be In Accordance. If the disclosure says you should disclose, or you can disclose - then this is not required - it's a recommendation or guidance. The new Standards are full of shalls, shoulds and cans.. You too should, shall, can adapt to the new language of the GRI Standards when you prepare your reports in the future.  

When is an Aspect not an Aspect?
When it becomes a STANDARD of course. In the new era of SRSs, Aspects have no home. They have become topics. Just like any other topics. You all have this table of Aspects committed to memory.

 Now it looks like this: 

GRI has whittled down the total number of Aspects ..errr topics.... from 46 to 35 and, as you can see, things have moved around a little lot - anti-corruption and anti-competitive behavior are now in the category of economic topics rather than social topics, for example, and many Aspects which had been duplicated in G4 - such as three different supplier assessments for labor, human rights and society have been boxed into one Supplier Social Assessment topic. All the grievance mechanism Aspects that were introduced in G4 have not been continued as individual GRI Standards - they are now to be part of the DMA and only disclosed if material. Another big change here is that there are no sub-categories for social topics.  

In many ways, this change to the Aspect-topic table makes a lot of sense - it's almost as though GRI is correcting the mistakes of G4 by tidying up the set of predetermined topics we can choose from. Some of them were indeed rather awkward. On the other hand, this list of 35 is not extensive enough and we might have expected GRI to dig a little deeper at this stage and develop a more comprehensive list of topics that help align the language and performance reporting around similar issues. If this list were broader (and I understand it can never be exhaustive), companies would be more easily able to match issues that are material to their business to the list of available topics. This would encourage more consistent reporting around more issues. As it stands, social issues such as access to products and services, animal welfare, digital inclusion and many many more are left to the vagaries of SRS 403-2 (G4-EC8 in a former life) - significant indirect economic impacts -  a sort of catch-all disclosure where nothing quite fits exactly but it's used because it's the nearest thing when you want to align your materiality within the G4 framework and you have topics that do not fit anywhere else. SRS 403-2 has more guidance clauses than Liberace had sequins. Guidance, that means, can, not should or shall. 

In essence, this goes right to one of the core weaknesses of G4. The framework should be about reporting impacts, but in fact, many of the topics and performance indicators are about reporting actions. Almost every company that uses the framework has indirect impacts far far greater than all of its direct impacts added together. Yet, in G4, so little space is given to these type of impacts that it drags reporters back to "what we did" rather than "where we made a difference to people's lives". Significantly enhancing the table of topics and providing guidance for disclosing on these would make the GRI Standards more robust and relevant to more reporters and report-users than the current proposal. I understand that one of the great benefits of the new Standards structure is that new topics can be more easily added in the future, and that this will be a priority for GRI once the Standards are in place.

When is a Boundary not a Boundary?
When it becomes a STANDARD of course. In G4, one of the most difficult things we had to get our mind around was the requirement to state Aspect Boundaries. The Boundaries, we were told, were where impacts occur.

From G4 Framework Glossary

The G4 framework requires reporters to describe where an impact occurs, including the geographical location, whether this is either within your organization or outside your organization, and then define who it affects. For example, child labor may be a problem in certain geographies and the impact maybe outside your organization because the child labor occurs at your supplier locations and not in your own factories. So, the material issue is child labor, but the Aspect Boundary might be external in country X. You might be tempted to think that it's material for you, but that, because it's external, you are not accountable. 

In the new Standard it has been clarified that the Boundary relates to the entities which cause the impact, wherever the impact occurs. Child labor may be the issue, and even if the impact occurs at your supplier's factory, you are still the cause of that impact insofar as you hired the supplier to do the work. No question here about accountability. Your supplier, your problem. In the proposed GRI Standards you are required to disclose which of the entities inside or outside of your organization are causing the material impact - no geography required (SRS 301-1). However, the new Standards do give you a little room for maneuver with some guidance: "If the Boundary for the material topic is defined as outside the reporting organization, it can be difficult to report the topic-specific disclosures. This can happen if, for example, the Boundary for a topic includes part of the supply chain, and the organization does not have access to supplier information to report the topic disclosures. In these cases the organization is still required to report its management approach for the topic, in order to claim that the report is in accordance with the GRI Standards."

This is all rather tiresome, somewhat confusing and probably not even all that relevant. The entire concept of Boundaries is a little off-putting. In my view, the simpler version would be to require (shall) companies to disclose material impacts using their entire value chain from sourcing to market as a start-point and leave out Boundaries altogether.

Insight from Chelsea
"The Boundary change is one of the things we want to be communicating about during this consultation period. The clarification around the definition of Boundary is very consistent with the intent of the definition in G4 and with the outcomes of the original working group that developed that content. One of the main references are the UN Guiding Principles on Business and Human Rights and this together with the OECD Guidelines established this concept that companies should take responsibility for the impacts they link into not just their own direct impacts. We didn’t provide enough explanation in the G4 text to help companies interpret that consistently. We have had many reporters who asked for clarification. Fundamentally the STANDARD offers a clarification which is not in contradiction with G4, but we probably didn’t do a complete enough job in explaining it in the first place. The other misconception was the geographic interpretation of this, that’s not really a real issue for this particular disclosure."

And now to the fine print
The remaining changes in the transition to Standards are largely about terminology, improved consistency and clarity, and by and large, this works. More to follow on this as I scrutinize the fine print, but in general, the changes seem positive, for example a slightly clearer version of the "describe your supply chain" disclosure and more.

Insight from Chelsea
"There are a number of more subtle but important changes and our job is to call them out in a way which is clear and digestible. For example, the content index will be more outcome based and we no longer prescribe the use of a specific table format. The intent is that it will make it easier for reporting companies. I would say for companies that were previously working off the guidelines and not consulting the Implementation Manual, there is a lot of additional guidance and this is a good thing for them to dig into and understand. This may look new to some organizations who have not used the Implementation Manual thoroughly, but we think it will be very helpful."

More insight from Chelsea
"Comparability is of course harder across companies with the concept of materiality. I think you will see some improvement in the Standards that leads to greater comparability with improved clarity. In some parts of the Standards we have more specific information about what should be reported where in the past it was less clear. We believe that companies want to do the right thing and report fully and correctly. The Standards make a clear distinction between what is mandated to report and the guidance and coaching that can help you to get there."

GRI STANDARDS: Good, bad or indifferent?
The main challenge with the GRI Standards, targeted for implementation for reports published in 2018, is that it comes so close on the heels of the G4 introduction. Most reporters are just getting their minds wrapped around G4, and whoosh, in comes STANDARDS with SRSs, topics, shalls, shoulds and cans and a different look and feel. I doubt it will be a very easy transition. GRI says the Standards are more user-friendly - they weren't all that user-friendly in the first place - but there are some welcome changes and clarifications. The big advantage will be that GRI can play around with the individual standards without having to revamp the entire standards suite which will enable updates, revisions and the addition of new topics more quickly, efficiently and effectively. Of course, I still suspect that the main motivator for GRI was not to improve G4 but to convert it into the currency of the leaders. Self-respecting organizations in this space have to have a standard. But if that makes reporting clearer, easier and better, it's progress. Time will tell if GRI Standards will have such an effect - in the meantime, we can be cautiously optimistic. 

Insight from Chelsea
"Everybody in our Standards Division and our Board would agree that it is complicated. It is harder to transition content into a new structure than we perhaps originally anticipated. The positive is that it will be a better product – we have done a lot of clean-up work and editing along the way. For reporters, almost all of the fundamental concepts of G4 carry through – there are no major shifts in the reporting process or additional work needed to report in the standards. What will be required is some time invested to understand the nuances of the changes and which changes impact different companies. We will be developing some detailed mapping documents showing exactly what has changed as well as a new training module. A guidance document is in development and we are going to create an ecosystem of resources to help companies manage this change. But we believe the overall impact on the reporting process will be fairly minor."

And on that positive note.... see you in Amsterdam for lots of interesting standard-type debates!

elaine cohen, CSR consultant, Sustainability Reporter, HR Professional, Ice Cream Addict. Author of Understanding G4: the Concise Guide to Next Generation Sustainability Reporting  AND  Sustainability Reporting for SMEs: Competitive Advantage Through Transparency AND CSR for HR: A necessary partnership for advancing responsible business practices . Contact me via Twitter (@elainecohen)  or via my business website   (Beyond Business Ltd, an inspired CSR consulting and Sustainability Reporting firm).  Need help writing your first / next Sustainability Report? Contact elaine:  
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