Wednesday, October 26, 2016

Trump versus Clinton or SASB versus GRI

Topical as ever on the CSR Reporting Blog, although usually not party-political, I was struck by some of the similarities in the current U.S. Presidential Election and the sustainability standards reporting landscape. In fact, we might liken the Trump-Clinton adversarial position to the SASB-GRI position, where the stakes have just been raised with the official publication of the GRI Standards.  

GRI was created as the voice of the people in 1999 to support the inevitable need of wide groups of stakeholders for increasing transparency about business practices and corporate accountability. Over the years, GRI has remained steadfastly true to its multi-stakeholder process (sometimes, sadly, at the expense of speed and flexibility) and continues to deliver the only broad set of globally applicable standards for sustainability reporting available today. With the vast majority of reporting companies using GRI guidelines, and, I expect, an equally vast majority planning to transition to the GRI Standards in the next reporting cycle, GRI's voice has been a dominant one on the sustainability landscape for many years. Unfazed by the absence of a CEO in this current period, the mission goes beyond individual interests, and the Standards promise to elevate GRI's position in the global debate - especially in the political arena where governments make decisions and regulators earn their bread. The voice of GRI is the voice of how business affects us. Often, the actions of business affect our bank accounts, but for most of us, they affect the quality of our environment, the values we hold dear and the way we live happy, productive lives. (Cue: violins).

SASB was created in 2011 with a different purpose. Distilled into one sentence, that purpose (as I interpret it) is to help people who have more money make more money with sustainability in mind. SASB states its vision and mission as: "The Sustainability Accounting Standards Board sets industry-specific standards for corporate sustainability disclosure, with a view towards ensuring that disclosure is material, comparable, and decision-useful for investors." This is how it's portrayed in a video screenshot on the SASB website:

Helping investors make more money in itself is nothing to be ashamed of. SASB's approach has been to split the business of corporations into different sectors, and develop a comprehensive range of standards, focusing on the mostly sector-specific sustainability-related issues that affect the financial valuations of companies for investors. SASB has had an amazing crazy-busy time, consulting with corporations and investors and pulling together sustainability accounting standards across 79 industries in 10 sectors. The full set was published in March 2016. It's been a mammoth job and the outputs are very clear.

At the center of SASB's raison d'être has always been that existing sustainability reporting is rubbish for investors. Sure, I don't recall SASB ever using the word rubbish, but that's how I understand it. For example, in a letter from SASB to the United States Securities and Exchange Commission in July 2016, SASB refers to Sustainability Reports as "glossy, attractive publications, often developed in consultation with a company’s marketing department or a public relations firm that describe a company’s achievements with respect to environmental, social, governance, and related matters" and "sustainability reports generally include information that is immaterial for purposes of investment decision-making. These reports tended to make the reporting company look as good as possible to stakeholders other than investors" and "Standalone sustainability reports are often prepared by corporate communications departments or public relations firms. They tend to be positively biased and do not provide investors with a true and fair representation of performance on material risks....This practice of producing a glowing sustainability report is known as “greenwashing”." No doubt then, that investors don't think much of sustainability reporting, according to SASB.

SASB goes further in its public comments to GRI during the Exposure Draft Period of the GRI Standards, submitting a 4-page letter, which includes the paragraph:

"Perhaps GRI is better placed in providing a forum for stakeholders to voice their concerns and ideas"? Seriously? After 17 years of driving the sustainability conversation by creating reporting frameworks that have been adopted and recognized as best practice by thousands of organizations globally, the suggestion is that GRI backs off and runs a chat-club while SASB's largely untried and untested Standards become the SEC endorsed/mandated reporting tool for a small pool of U.S. public corporations? That’s a bit off in my book. It made me think of the adversarial positions we are currently witnessing in the U.S. Presidential Election. In politics, for you to win, someone has to lose.

Portraying GRI as a virtually useless initiative that's encouraging companies to greenwash, and the thousands of sustainability reporters around the world as creators of imbalanced marketing blurb to make them look good is a distortion. SASB wants to be the recognized standard that the U.S. SEC endorses.  The above-mentioned letter to the SEC concludes: "Because of SASB’s approach, with its emphasis on due process and adherence to U.S. securities law, we believe it would be appropriate for the SEC to acknowledge SASB standards, once they become final, as an acceptable framework for companies to use in their mandatory filings to comply with Regulation S-K in a cost-effective and decision-useful manner." Now that GRI is a formal Standard, and not just a framework, SASB has real competition. 

Even before the GRI Standards were published, the GRI reporting guidelines (specifically G4) were used widely in both non-financial AND financial reporting. For example, using CaspianTM powered by DatamaranTM , eRevalue's brilliant corporate disclosure research tool, covering more than 44,000 corporate reports, it took me just a split second to discover that GRI was referenced 733 times in 2016 in financial reports and SEC filings, whereas, in this same period SASB was referenced just 18 times. That's in addition to the >800 non-financial (sustainability) reports that reference GRI, versus 51 non-financial reports that reference SASB. (Interestingly, SASB may be becoming a tool that's used more in non-financial reporting than for financial reporting. Oops!)  Of the 18 financial reports published in 2016 that reference SASB, only one actually reports against the sector indicators according to the relevant SASB Standard. All the others mention SASB once - in reference to the frameworks and guidance used in the preparation of a materiality matrix. Of these 18 financial reports, 14 include a full GRI G4 report with a Content Index, or refer to a standalone G4 report in addition to the financial report. The remaining four companies mention GRI as a guidance framework for the materiality assessment.  

Now, let's be clear. SASB has a very legitimate and useful agenda. Make sustainability disclosure more relevant and useful for the U.S. financial markets. Address the very specific information needs of investors. Help the financial markets enhance value creation. Efficiency. Comparability. Clarity. Focus. Sector-specific. It's all good. But as good as SASB is, SASB is not better by telling GRI to go and sulk in a corner because GRI has a different definition of materiality or because proper use of the GRI framework is evolving rather than perfect.

Sure, GRI-based reporting is fraught with issues of quality, good news rather than balanced news, and omissions. I have been a constant voice of the reporting quality mantra. It's true that some Sustainability Reports are glossy brochures. That's not to say the framework doesn't add value. GRI has been used tens of thousands of times over tens of years in hundreds of countries. How many times have the SASB standards been used in practice? How is the quality of adherence to the SASB Standards assessed? How many investors used SASB based disclosures and found them to be relevant to their investment decisions? What's the prognosis about how investors will actually use the information reported according to SASB Standards, if they are ever used by more than a couple of corporations?

In my work of more than 10 years as a sustainability reporting consultant, I know first-hand the tough deliberations that go into sustainability reporting and the processes companies go through to make quality and meaningful disclosure. I witness a genuine intent to present good and relevant information for stakeholders. I believe the reports of today are much more balanced than those of some years ago. But there is obviously still some way to go.

Marjella Alma, CEO and co-Founder of eRevalue, developer of a groundbreaking analytics platform for emerging ESG, regulatory and reputational risk assessment, is very much at home in this space. Marjella says: "The collective push for disclosure on sustainability issues is impressive. Irrespective of the specific framework, there is growing evidence that companies are including non-financial issues into all kinds of reports, including 10-K’s and Annual Reports. If you look at the issues, rather than the frameworks, you can see companies embracing the thought leadership and this push to more meaningful disclosure. GRI's work of the past 20 years is incredible; the global uptake including emerging markets, not just large multinationals, has made a big difference. The sector-specificity of SASB is a helpful addition. Ultimately, it's about helping companies understand 1. what issues are out there 2. manage them properly and 3. use the right metrics that reflect their business model. At eRevalue, we are making it much easier and much more efficient for companies to know what’s on the radar and do something about it."

What alarms me about the sustainability reporting landscape is this lack of respect and collaborative spirit. It may be that investors have different needs than non-financial stakeholders. It may be that materiality in sustainability reporting is used differently than materiality in a U.S. regulatory framework. But that doesn't mean that respectful, collaborative, constructive coexistence of these two approaches for maximum benefit would not be advantageous for financial markets. Both GRI and SASB organizations together are spending around $15 million per year to advance this - our - agenda. Perhaps that money could be used more efficiently with a greater degree of synergy. Instead of telling GRI to back off, maybe there should be a serious discussion about how to jointly provide guidance that meets the needs of SEC regulatory filings, investors and other stakeholders. I am sure this is possible. SASB has done amazing work in articulating sustainability priorities by sector. This is GRI's Achilles Heel. GRI has done amazing work in creating a strong framework that has put disclosure on the map around the world. There is surely something SASB can learn from that. Do we, as stakeholders, need to live with either/or? Can't we have both, in good spirit?

Which brings me back to the election. Only one candidate will win. One wins, one loses. It doesn’t have to be that way in sustainability. But then, I never was a politician but will always be an optimist.


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: 

Monday, October 24, 2016

GRI Standards - the fun starts now

A while back I published an overview of the GRI Sustainability Reporting Standards Exposure Draft. Well, now, the Standards are no longer in draft form. They are in real-live-downloadable-usable-bloggable format. Get your free copy here on the GRI website. Not an awful lot has changed since the Exposure Draft. The main thing is GRIs optimism that this makes GRI a more welcome player at the high-stakes tables where governments, regulators and policy-makers play. As a guideline-maker, GRIs legitimacy was apparently not grounded enough to have equal voice. As a standard-setter, GRI has come of age and has the vote. For corporations who  transition to GRI Standards, though, the changes probably represent:
  • an administrative headache - all the basic templates and formats developed for G4 will now have to change
  • a change of language yet again - we all just got used to Aspects with a capital A - now it's back to topics
  • a fear of greater scrutiny at some point in the future, possibly certification, that means a more robust approach to reporting will be required, rather than the sloppy use of G4 that we see by many reporters who declare use of the G4 but do not actually make the grade
  • a fear that a price-tag will soon be placed on use of the Standards - GRI has to fund the GSSB somehow, right? 
  • an opportunity to influence the Standards development - changes may now be quicker and easier with the modular Standard format, as only one piece needs to change or be added instead of the entire framework. The change from G3 to G3.1, for example, was confusing - the whole framework changed because a couple of new indicators were added. 
Billed with just a smattering of hype as the First Global Sustainability Reporting Standards Set to Transform Business, the Standards offer some advantages over G4, but it will take more than this to transform business. The move to Standards is not, and was not designed to be, an overhaul of G4 to deliver a new wow version. No bells and whistles. The move to Standards does not incorporate significant elements which will improve the quality or robustness of reporting, the comparability of reporting, the way companies define and prioritize material issues Aspects topics and how they determine what and what not to report, the use and credibility of assurance practices etc. While there has been some tidying up of the silly bits in G4, and some clarification of the ill-worded bits, nothing substantive beyond the wordsmithing and number sequencing has changed.

Look beyond the numbers
However, you cannot simply change the numbers and that's it. You have to check in with each Standard. For example, one of the disclosures that few reporters actually report fully: GRI 403, formerly Aspect Occupational Health and Safety, including former G4-LA4, G4-LA6, G4-LA7 and G4-LA8:

Disclosure 403-2 is the former G4-LA6.  See the difference in the wording:

The former relates to (1) total workforce and (2) independent contractors. The latter, 403-2, relates to (1) employees and (2) everybody else. This is much clearer in the new Standard but may require a change in the way some companies report. 

Beyond these incremental improvemental differences, GRI Standards come with one critical change and one new demand:

One critical change
G4's 46 Material Aspects have now been converted into 33 topic-specific Standards. That's two fewer than in the Exposure Draft. The material topics table would now look like this (except the new Standards do not include such a table):

That's a total of three universal standards and 33 topic-specific standards - one for each topic.

All the Standards are in BMW-style series with no subsets: 200 series for Economic, 300 series for Environment and 400 series for Social. All former Aspects relating to grievance mechanisms are moved to the Management Approach Standard, and are not identified as material topics in their own right.

For reporters, this means that if you retain the same material topics, you still might need to revise the indicators you report. For example, if Marketing Communications were a material topic, Core reporters would have selected one of two disclosures - G4-PR6 or G4-PR7. Now, the new Marketing and Labeling topic includes both Product and Service Labeling, which was associated with three indicators - G4-PR3, G4-PR4 and G4-PR5. The new Marketing and Labeling disclosure has been trimmed down to exclude some disclosures that are now General Disclosures, leaving three possible options in GRI Standard 417, only one of which was formerly Marketing Communications (417-3).

Therefore,  as a Core reporter, you now have three options where you had one previously, but as a Comprehensive reporter, you have three mandatory disclosures where previously you had five. This might sound a little confusing, and it is. But for most of the disclosures, all you need to do is switch the numbers. In some cases, companies might have to realign their material topics to the GRI Standards and revise the selection of topic-specific disclosures. 

Another point to make here is that the GRI Standards now make it quite explicit that it's just fine to use a different indicator than the ones included in the 33 topic-specific Standards. Standard 101-2.5.3 includes the possibility to report "other appropriate disclosures" if there is no appropriate GRI Standard.

For example, you are a Food and Beverage Manufacturer and have selected Community Investment and Philanthropy as a material topic. Interestingly, philanthropy has never been identified as possibly ever "material" by GRI - this is rather odd, as strategic philanthropy can be a critical part of a corporation's impact on society - and most companies just LOVE to report on this. 

Funnily enough, this is exactly one of the material topics selected by PepsiCo in its very recently published 2015 Performance with Purpose Report, which I was just reading. PepsiCo deals with this in an interesting way. Instead of including an indicator in the GRI Content Index, PepsiCo explains: "At this time there are no relevant GRI indicators that directly correspond with PepsiCo’s material aspect of Global Citizenship. PepsiCo monitors and reports on this aspect through the KPIs discussed in the Global Citizenship section." 

Now, with GRI Standards, PepsiCo can define its own disclosure of measurement of progress against this material topic, provided these disclosures are subject to the "same technical rigor" as the GRI Standards. In fact, this was also an option under G4, but it was a sort of secret option that no-one knew about unless they asked. Now it's more explicit, and enables companies to select more meaningful performance indicators to reflect progress being made in different areas. 

One of the most perplexing aspects of G4 always was the limited flexibility to reflect the diversity of material topics. If your material topic was, for example, Alcohol Related Harm, as it is in the Diageo 2015 GRI Report,  you wouldn't find a related Aspect among the GRI pre-paid lists. What to do? One catch-all option in G4 was to use G4-EC8 - "examples of the significant identified positive and negative indirect economic impacts" for anything that was not covered by another indicator. I have pretty much used G4-EC8 to death over the years. Another option is to use a combo  of existing Aspects. This is what Diageo does:

However, this is not entirely satisfactory, as none of the Performance Indicators that Diageo reports under any of these aspects relate to alcohol in society - they all relate to safety of products manufactured, quality control and labeling requirements. None of these indicators actually address the material issue. Therefore, the only real option for Diageo under these circumstances is to do what we discussed above  - disclose the Management Approach and use a proprietary non-GRI topic and indicator. As it happens, Diageo does have a perfectly fabulous disclosure on this: 

It's a clear strategy statement and targets. This can be used with  G4 to disclose against this material issue. With GRI Standards, the fact that this is now explicit (Standard 101-2.5.3) might make the use of the Standards easier and more relevant for many reporters who suffered from Aspect perplexy.

One new demand

In the GRI Standards,the GSSB has snuck in something else:

Standard 101 - 3.4. If you refer to the GRI Standards in any way in your report (and there are a set of prescribed statements in the Standards that define how to say you did the GRI thing), then you are obliged to notify GRI - either by sending GRI a copy of the report or by registering the report with GRI on the Standards page. Except that at present, there is no link or form to use to notify on that page. I wonder what GRI will do will all these thousands of notifications ... let's assume 8,000 reports reference the GRI Standards in any given year, that's 30 notifications every working day. And who will know if reporters do not notify GRI? I can understand that GRI wants to keep tabs on use of the Standards, but this is likely to happen only when GRI charge money for certification or use of the Standards logo... forgive me for being skeptical that this is on the cards at some point. 

18 months to get ready and steady
In the meantime, GRI Standards will be free and effective for sustainability reports published on or after 1 July 2018. So you have plenty of time to get your disclosures in order. Early adopters gain the advantage of being early adopters. That is, you get first rations of paracetamol. Overall, the language is clearer, the repetition is less and the direction is more logical. You can download all the Standards in one consolidated set at the GRI Standards download center. Whew, that's a relief. And only 443 pages as well.

I am sure that we will see many GRI Standards-based reports published in 2017, ahead of the 2018 cut-off date. The fun is about to start.....

Ahem.. needless to say, I will be very happy to offer the expertise and incredible service of me and my company, Beyond Business,  to help YOUR company transition to GRI Standards and become an early adopter. Paracetamol included free with this service. Contact elaine NOW before stocks run out.

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: 

Wednesday, October 19, 2016

First Report Trust Factor: Arby's

This is one for the First Report Trust Factor Series. It's all about sandwiches in the U.S. For an overview of the ten Trust Factors, see this post. 

Food and Beverage - U.S. - Not GRI- 44 pages

Arby’s is a nationally franchised sandwich restaurant brand, with more than 3,300 restaurants, founded in 1964. Headquartered in Atlanta, GA, Arby's has company-owned and franchise restaurants across the United States. Arby's employs 60,000+ people. 

The CEO Statement: 
Sometimes, in a first report, you just have to understand that any progress is progress and that companies have a right to be proud of any achievement. Arby's CEO confirms he is proud of what Arby's has achieved, one of the blurby statements I love to hate, but that's not what affects the Trust Factor most in this opener. What I am missing is a little depth. The CEO talks about employee giving, community projects and a water-saving irrigation program. These are good. But I'd like to have seen some reference to the impact of Arby's core business - how the business is changing peoples lives, not just through charity and eco-efficiency.  TF= 

Material focus: 
Arby's has identified four material (though not called material) areas of focus under a branded proprietary CSR program called PurposeFULL®. This includes: YouthFULL® - empowering youth,  SkillFULL® -  a winning culture, ResourceFULL® - good stewards of the environment and FlavorFULL® - adopting the highest standards in the food industry. This is evidence of thought about the approach to CSR at Arby's and these headlines frame the report. It's not quite a list of material impacts but it comes close.  TF+

Adherence to GRI: 
Nope. Not GRI. No indicators, no numbers, no Index. TF-

Transparency maturity: 
This report could be so much more impactful (and credible) if it contained some data. About the only place in this report where there are a few numbers is in the environmental section and these are mostly expressed in relative improvements rather than absolute performance data and impacts. In future reports, Arby's should find a way to disclose key performance metrics across the range of material topics in Arby's CSR program. TF-

Barely a hint of challenges or obstacles to overcome in this report. The only reference to any sort of challenge that I found was the fact that customers are confused about which elements of packaging to recycle at franchised outlets. TF-

Examples of practice: 
Arby's doesn't present "case studies" in a structured sense, but the report describes examples of activities in the reporting year. While there is evidence of a range of positive actions, the report lacks solid data that tells us these initiatives are making a difference. For  example, in 2015, Arby’s joined forces with Bellevue University in Nebraska to develop a custom learning program exclusively for Arby’s team members. Participants can earn a certificate of completion that is worth 36 college credits. But we are not told how many employees joined the program nor how they progressed. On the other hand, in another example relating to the environment, Arby's shares results of an irrigation project: "In 2015, through a six month pilot that spanned 85 restaurants, we saved 7.4 million gallons of water." TF+

Stakeholder voices: 
The report contains quotations from several senior Arby's execs and franchisees. The quotes add credibility, especially those from franchisees that give a flavor of how Arby's is helping them achieve economic growth and business development. The report also includes a perspective from the U.S. Department of Energy in relation to Arby's participation in its Better Buildings Challenge in 2015 - Arby's surpassed the BBC goal by improving energy performance 24% from a 2011 baseline. TF+

Contact person: 
No contact person and no generic email dump box. TF- 

Clarity of presentation:  
This is an easy read. Too easy. It's all narrative and photos, no numbers or charts or diagrams. TF= 

Design friendliness:  
It's a plain PDF, no hyperlinks, no fancy graphics. Well-laid out narrative and imagery. This images are real - not stock anonymous.  TF+

Trust Factor conclusion: 4xTF+   4xTF-  2xTF=
Overall, this report is a positive start and reflects a consciousness at Arby's of different aspects of contribution to society and communities. The basics are there: supporting employees, supporting communities, maintaining high standards of food preparation, stewarding the environment. The environmental section is a little more detailed and contains results of a range of eco-efficiency and resource improvement projects.

The word "proud" appears 12 times in this short report. For a first disclosure, there are some elements of this report that this company can be proud of - twelve times over. However, the  report disappoints in its lack of depth and lack of transparency.  Arby's is proud of its accomplishments and that's a good thing. On the other hand, such a large organization, employing more than 60,000 people, with an important impact on our relationship to food and on the food supply chain, we would hope that, in the future, this pride would translate into greater transparency with a focus on outcomes not actions. Otherwise, it looks like the main purpose of this PurposeFULL® report is PR-FULL®. If Arby's is serious about CSR, there needs to be another couple of FULLS: TransparentFULL® and AccountableFULL® in future reports. Perhaps even a little DataFULL®.

Arby's seems to have this in hand: "Throughout 2016 and into next year, we will develop a roadmap that will more robustly steer our PurposeFULL path forward including a strategy for each of our pillars, short and long-term goals as well as opportunities for deeper collaboration and impact."

This is a positive statement and hopeFULLy, we will see the fruits of these efforts reflected in the next report.  

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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