Monday, December 21, 2020

Santa Claus Inc. 2020 ESGC Report

I am delighted to present a preview of Santa Claus Inc.’s ESGC (Environmental, Social, Governance and COVID) Report for the year 2020. As in past years, Santa has kindly allowed me to share her annual disclosure to all stakeholders, ESPECIALLY investors, and hopes that everyone, ESPECIALLY investors, will take a keen interest in how Santa has made a positive contribution to sustainable development; health and wellbeing; diversity, equity and inclusion; biodiversity; reducing water stress; economic prosperity and oh yes, what was that again, climate change. 

Dear Stakeholders, ESPECIALLY investors, 

2020 was a very challenging year. I am proud of what we have achieved so far, but there is much more to do. Oops. Scratch that. 2020 was the crappiest year ever, and the thought of sliding down chimneys in a face shield and splashing myself with sanitizer after every home visit continues to fill me with dread. In fact, I am so full of dread, anxiety and depression that that I have taken to consuming a snack before bedtime, in the hope that this will boost my sugar levels and regulate my hormones. Now, much more of me is full of dread as I have gained 130 lbs. in weight over the past year and I have needed to order Santa suits two sizes bigger. Due to mobility restrictions, I was not able to go to the fittings, so I had a team of elves take my measurements and send them to the Santa tailor. Unfortunately, the elves were already high with festive spirit and now it looks like I am wearing red swimsuits with furry white trim. 

Just as so many things moved to Zoom in 2020, I considered sending out all my Christmas Gifts via Zoom this year as well. However, I quickly realized this would not be possible as my Zoom account has been suspended on account of repeated offenses to their content policy. All I ever said was that I believe a harmonized ESG reporting system is not the Holy Grail that will save people and the planet, and boom, I was bumped from Zoom, LinkedIn and Facebook. Fortunately, I can still express my views on Instagram, where posting images of suckling reindeer babies, Sustainability Report covers with smiling children holding the globe and elves wrapping Christmas gifts are still allowed. Even if the elves are wearing Accountants will Not Save the Planet T-Shirts. 

Anyway, on to more positive things, as ESGC Reports must not be too depressing, or our entire financial system will collapse. Let’s start with our COVID-19 Response. 

COVID-19 Response 
Of course, no self-respecting ESGC Report can omit the obligatory COVID-19-we-are-the-greatest section. At Santa Claus Inc. we have maintained a business continuity plan for several thousand years, and in 2020, we dusted it off and put it into play. Of course, when the plan was written, there was no internet, no iPhone 12, not even an iPhone 1, no Tesla cherry-red Roadster for fast intergalactic travel and no electric reindeer. Of course, there were far fewer people on the planet needing gifts, so the overall workload was manageable. Our Business Continuity Plan (BCP) consisted of just two elements (1) Form a Task Force and (2) Make the Task Force continue the business. In 2020, we upgraded our BCP and it now includes three elements: (1) Form a Task Force and (2) Make the Task Force continue the business and (3) Make them wear masks. 

PPE: In 2020, we quickly converted our gift-wrapping factory to a PPE production station for the benefit of elves and their families all around the world. During this period, we donated to the Global Elf Association more than 2.3 million reusable face masks designed specially to fit typical elf facial features, including a special reinforced middle section to prevent piercing by those little elfy upturned noses. Unfortunately, this middle section also seriously hindered elf respiration, and to this day, we are not sure if the 34,763 elves who passed away were sick with COVID-19 or simply suffocated. We subsequently modified our design to ensure the masks are elf-safe and we even included a designer label. 
WFH: In March 2020, we instructed our elves to work from home. To facilitate this, we had to rehome many elf migrant workers who had no home to work from. This was a significant challenge but with help from Habitat for Elves, we were able to appropriate 342,202 elf homes. Unfortunately, this meant displacing the entire population of Iceland which has now moved to Mexico in the hope that the new Biden administration will reverse the immigration ban. In the meantime, we have equipped the new elf homes with all necessary PPE and conducted more than 300 Wrapping Gifts while Wearing Masks training sessions. In the early days we found many gifts that were wrapped with disposable masks while elves were seen with wrapping paper covering their mouths and noses. Oops. Another 26,458 elf fatalities. 
Social Distancing: During 2020, we practiced social distancing as guided by the WHO, the Centers for Disease Control and Prevention (CDC) and local Lapland regulation. This has been particularly hard for our reindeers, fun-loving beings who enjoy close relationships and work well in teams. Several reindeer suffered from hypertension and can now work only under sedation. Fortunately, we had enough foresight to stockpile Xanax before lockdowns started and were able to calm them all down. However, due to social distancing, our annual reindeer sleigh-pulling training was conducted virtually and was probably less effective than classroom training events. Once back at work, we planned a practice sleigh journey from Riisitunturi National Park to Pyhä-Nattanen. I think some of the reindeer were wearing masks over their eyes as we ended up in Finland, a reindeer migration destination that they can reach blindfold. All was not lost, however, as all the people of Finland received their gifts early, a large contributor, we believe, to Finland consistently being ranked as the happiest country in the world!
YOM: As you might expect, all our elf communications were conducted via Zoom starting in March 2020. We held a special all-elf mandatory unmuting training session because Santa got so sick of hearing You’re On Mute (YOM) that she wrote a special letter asking Zoom to remove the mute button from our Zoom Plan. Regrettably, Zoom was not able to do this, so we persevered. Today, I am pleased to report that we have how replaced YOM with a selection of phrases such as WCHY (We Can’t Hear You), UY (Unmute Yourself), Is your Microphone Working (IYMW) and Has the Cat Got your Tongue (HTCGYT), as well as some less publishable phrases. Now, we eventually get to hear all the elves, although, in fact, some of them should probably remain on mute their entire lifetime anyway. 

Diversity, Equity and Inclusion 
In a year when the pandemic brought racial and social justice to the fore, and exposed the systemic inequities in our society, we at Santa Claus Inc. rose to the challenge of creating a world of reduced inequalities (SDG 10). To do this, we decided to establish a gift means test, and apply an inclusive equity formula. Therefore in 2020, everyone will receive a gift just like they always have done. Except some people will receive bigger gifts than others. Additionally, we upgraded our Plan for Elf Equity (PEE) to empower diverse elves. We formed several Elf Affinity Groups which have been a great success, including: 
Elf Out: For LGBTQIA elves 
Elf In: For elves who are not yet out 
ELF Self: For elves who are rather introvert 
ELF Healf: For elves who want to live a healthier lifestyle 
ELF Women: For elf women who want the same rights as elf men 
ELF Men: For elf men who do not want to share their rights with elf women 
ELF Shelf: For spinster elves 
ELFO: For Hispanic elves 
ELF Vets: For elves who have passed their veterinarian qualifications 

Finally, this year all elves were trained in unconscious bias, conscious inclusion, and subconscious consciousness. We can now affirm that 100% of elves are conscious. Although this was probably due to our ban on medical-grade cannabis, which, after it was legalized, became the staple elf diet. 

Climate Resilience 
As always, Santa Claus Inc. continues to endorse the Precautionary Principle, support climate change mitigation, and advance a circular economy. For the first time this year, we are publishing our disclosure in line with the Task Force on Climate-related Financial Disclosures (TCFD) framework. Here it is:
Governance: Our governance of climate risks is overseen by our Board of Directors which has assessed our key risk to be extreme weather patterns that destroy the world’s chimneys, making it impossible for Santa to continue her good work. In order to govern this effectively, the Board has established a Chimney Hole Integrity Mapping Program (CHIMP) to monitor chimneys affected by hurricanes, earthquakes, snow blockages and brick-melting high temperatures. The CHIMP Committee reports on the status of our climate resilience to the Board every year. 
Strategy: In order to effectively assess and develop our climate-risk strategy, we created 1.5, 2 and 2.5 degree scenarios based on guidance from the IPCC. In each scenario, the result was the same: the Santa Retirement Fund needs significant inputs in order to protect Santa’s heritage and long-term ice cream supply. You can donate to the Santa Retirement Fund by clicking on this link
Risks: As mentioned, our key risk is chimney integrity, and the CHIMP Committee ensures we have mitigation or alternative plans in place. For example, in China, we use hydraulic rising rickshaws to access homes. In Venice, we now access homes through underground water channels. In the U.S., we have engaged a Chimney Repair Service that is on call 24/7 over the holiday season, staffed by millions of people who lost their jobs during the pandemic. We have also patented our new Santa-safe climate-proof chimney, made from 100% post-consumer recycled organic waste, that was tested in Turkey, Mexico, Iran and Alaska during 2020 earthquakes in those countries. The chimney retained its form and function and was commercialized this year. Unfortunately, the new factory we built to manufacture the Santa-safe chimney was destroyed by an earthquake, so availability is currently restricted. 
Metrics: Chimney integrity is our key metric. In 2019, it was 98.8%, unaffected by climate change. The only issue we found in a small percentage of chimneys was a concentration of combustible deposits, meaning that when Santa slides down the chimney, her posterior may set alight. This is not such a problem for Santa, as it could help burn off those extra pounds gained during COVID-19. 

Transparency, Reporting, Disclosure and ESG Metrics 
In 2020, we have been watching on the sidelines in the Metrics Wars as the Big Galactical Powerhouse Forces of ESG Metrics wage battle against the Resistance for the Greater Good of Sustainability Impacts in the fight between, on the ESG side, double dynamic materiality, interoperability and an international governing authority for sustainability reporting that would aim to make disclosures consistent, comparable and decision-useful for investors, and on the Greater Good side, accountability for impacts on people and planet and delivering the SDGs. The apparent subordination of sustainability disclosures to value creation in the ESG Metrics camp, value that is intended to trickle through to all stakeholders (excuse me while I retrieve my eyeballs), does not sit well with those in the Greater Good camp. 
At Santa Claus Inc, we take a simple view. We believe that sustainability reporting is about people not about numbers. Well, it’s also about elves and reindeers. And it’s about the gifts we give to our billions of clients that make them superhappy every festive season. And it’s about the accountability we willingly accept as an organization to ensure we live up to our values and the principles of sustainable development. 
We conducted a little bit of stakeholder engagement on our own, to inform our next double triple single sustainability materiality assessment. We asked our reindeer if they believe that a consistent standard for investor-useful ESG metrics will ensure the biodiversity required to maintain their food supply for the next 50 years. We asked our elves if a more robust universal standard for ESG metrics would ensure they are paid a living wage so they can secure their grandkids’ future. We asked our clients if they felt that a better standard of ESG metrics would ensure they receive good quality gifts, not manufactured using child labor or unsafe working conditions and not using tons of excess packaging materials. And we asked reporting companies if they felt the proposal to create a new IFRS-led Sustainability Standards Board would continue to ensure global ice cream supplies for reporters everywhere. In all cases, the response was outstandingly "errrrrr duh". Then we asked our Board of Directors if they are prepared to disclose ESG metrics against a single new investor-useful reporting system. Their response was: What’s ESG metrics? 

Unwilling to remain at the mercy of all those who think they can monetize sustainability and force-fit sustainable development into capital market competitiveness, we decided to be proactive. We have created a new blueprint sustainability reporting standard that we will publish in early January as a public good. We call it the Santa Claus Regenerative Enterprise Worldwide Interoperable Transparency standard (SCREWIT Standard) and it will be freely available to all in return for a small donation to the Santa Retirement Fund. The Standard contains 468 metrics covering every possible impact ever invented and embeds value creation metrics against the six capitals:
  • Elf Capital
  • Reindeer Capital
  • Santa Capital
  • Santa Capital
  • Santa Capital
  • Everything Else Capital 
It also includes sector standards, country standards and SME standards as well as an optional annex for companies who want to use SCREWIT for PR purposes only. We believe the SCREWIT Standard will usher in a new age of corporate transparency that will respond to investor demand for consistent, comparable, reliable sustainability information that will be entirely auditable by the Big Four and rankable by ISS, MSCI and Sustainalytics. In this way, SCREWIT supports SDG 8 by leading to the creation of thousands more jobs in the disclosure sector. 
SCREWIT will also provide a basis for engagement with regulators, activists and NGOs such as Greenpeace, Amnesty International and the Access to Ice Cream Foundation. The SCREWIT taxonomy will incorporate technical screening criteria for all sustainability metrics and will prioritize anything to do with Santa wellbeing (which is the ultimate public good). SCREWIT will be administered by the Global Overseer of SCREWIT Standards (GLOSS) which will be a multi-stakeholder body comprised of Santa Claus and allies. 

We are fully expecting all global reporters to adopt SCREWIT. In fact, the interoperability of SCREWIT makes it extremely compatible with other standards, if they survive. For example, you can also use other standards by including an appropriate content reference table, for example, SCREWIT SASB or SCREWIT GRI or even SCREWIT IIRC. The versatile, comprehensive SCREWIT Standard will revolutionize corporate sustainability reporting and finally deliver a tool that will enable us to save the planet and make more money. In this way, Santa Claus is taking the politics out of disclosure by putting it back into the public interest. To incentivize the unconvinced, all new early adopters of SCREWIT will receive a free prize: a coaching session with GRI on how to recruit CEOs. 

Feedback on this Report 
We will be happy to receive your feedback on this report, as long as it's positive. For those of you who are unable to create your own feedback, you can use this short poll: 

Please select the response you feel is most appropriate (multiple responses accepted) 

Isn’t this the best report you have ever read? 
  • Yes
  • Yes
  • Yes
  • Who reads reports?

So, until we Zoom again..... 

 We Wish You and Everyone in the World 
(especially INVESTORS) 
a Happy Holiday Season and a Happy New Year 


elaine cohen, CSR consultant, Sustainability Reporter, HR Professional, Ice Cream Addict. Owner/Manager of Beyond Business Ltdan inspired Sustainability Strategy and Reporting firm having supported 119 client reports to date; author of three books and several chapters on Sustainability Reporting and the Human Resources connection to CSR; frequent chair and speaker at sustainability events and judge in several sustainability awards programs each year. Contact me via Twitter , LinkedIn or via Beyond Business

Monday, September 28, 2020

The Enlightenment According to the Big Four. Not.

I wish I were an accountant. Clearly, I'd have so much time on my hands that all I would do is prepare new frameworks for sustainability metrics. I would spend my mornings dreaming up some new framework that looks just enough different from what's already out there to make it Big News, and spend my afternoons convincing everybody why it solves all their problems. Then I would make a ton of money when people are so bewildered and confused that they adopt my framework and ask me to check it over.

This was my first reaction to the new WEF publication: Measuring Stakeholder Capitalism: Towards Common Metrics and Consistent Reporting of Sustainable Value Creation which can't have helped escape your attention if you are on the sustainability circuit. (OK, I don't really wish I were an accountant. I don't think I could handle all the accountant jokes.) 

I can't tell you how many clients and colleagues have asked me what I think about the WEF metrics framework, meaning, is it good or is it bad? GRI has published a diplomatic response saying they "cautiously welcome" this approach but that it doesn't go far enough. Prof. Carol Adams has also weighed in: "Once upon a time there was a glimmer of hope that accountants could save the planet. The motivation for this report is unclear and expressed differently in different parts. But it is not going to save the planet and could well do more harm than good."  And no less a scathing reaction from Carlos Tornero at Responsible Investor: "As for reforming capitalism, I’m afraid the Big Four are not the best ambassadors for that."

For those who haven't yet studied the WEF paper, here's 96 pages distilled (followed by my commentary):

The proposal was developed as part of the WEF's International Business Council (IBC) and led by the Bank of America, who chairs the IBC, and the Big Four accounting firms: Deloitte, EY, PwC and KPMG. The IBC is a community of CEOs of around 140 companies, as far as I can gather, but I cannot find a list of the specific companies that are members of this group. 

The objective of developing this disclosure framework was "to identify a set of universal, material ESG metrics and recommended disclosures that could be reflected in the mainstream annual reports of companies on a consistent basis across industry sectors and countries. The metrics should be capable of verification and assurance, to enhance transparency and alignment among corporations, investors and all stakeholders."  

The hope is to encourage "IBC companies to begin reporting collectively on this basis in an effort to encourage greater cooperation and alignment among existing standards as well as to catalyse progress towards a systemic solution, such as a generally accepted international accounting standard in this respect."

And an important point: "This effort is not intended to diminish the value of the separate sustainability/ESG/impact reports, which often provide more comprehensive information at the industry- and company-specific levels, tailored to the interests of stakeholders beyond investors."

The proposed metrics are intended to be universal, industry agnostic ESG metrics/disclosures. There are two types:

Core Metrics: 21 metrics and reporting requirements. "These are primarily quantitative metrics for which information is already being reported by many firms (albeit often in different formats) or can be obtained with reasonable effort. They focus primarily on activities within an organization’s own boundaries." 

Expanded metrics: 34 metrics. "The expanded metrics and disclosures encourage companies to move from reporting outputs alone to capturing the impacts of their operations on nature and society across the full value chain, in more tangible, sophisticated ways, including the monetary value of impacts. These tend to be less well established in existing practice and standards...They represent a more advanced way of measuring and communicating sustainable value creation, and companies are encouraged to report against them as well, when material and appropriate."

Below is an overview of the metrics (reproduced from IAS PLUS )

Governance Core Metrics include: Company purpose statement, governance overview, material topics, anti-corruption, ethical reporting mechanisms and risk management. 

Expanded metrics include: 
  • How the company’s stated purpose is embedded in company strategies, policies and goals
  • Disclosure of the material strategic economic, environmental and social milestones
  • How performance criteria in the remuneration policies relate to the highest governance body’s and senior executives’ objectives for economic, environmental and social topic and details of Board and executive remuneration
  • The significant issues that are the focus of the company’s participation in public policy development and lobbying
  • Total amount of monetary losses as a result of legal proceedings associated with fraud, insider trading, anti-trust, anti-competitive behavior, market manipulation, malpractice or violations of other related industry laws or regulations
  • How the highest governance body considers economic, environmental and social issues when overseeing major capital allocation decisions, such as expenditures, acquisitions and divestments
Planet Core Metrics include: GHG emissions, TCFD implementation, land use, water consumption in water stressed areas.

Expanded metrics include:
  • Paris-aligned GHG emissions targets  (science-based)
  • Impact of GHG emissions - the estimate of the societal cost of carbon used
  • Land use and ecological sensitivity 
  • Impact of land use and conversion 
  • Impact of freshwater consumption and withdrawal
  • Air pollution and impact of air pollution 
  • Water pollution and impact of water pollution
  • Single-use plastics 
  • Impact of solid waste disposal
  • Resource circularity - potential metrics include (but are not limited to) the Circular Transition Indicators (WBCSD), indicators developed by the Ellen MacArthur Foundation and company developed metrics.
People Core Metrics include: Diversity and inclusion, pay equality, pay levels, risks of child, forced and compulsory labor, health and safety, training

Expanded metrics include:
  • Mean pay gap of basic salary and remuneration of full-time relevant employees based on gender (women to men) and indicators of diversity (e.g. BAME to non-BAME) at a company level or by significant location of operation
  • Ratio of the annual total compensation for the organization’s highest-paid individual in each country of significant operations to the median annual total compensation for all employees
  • Discrimination and harassment incidents (#) and the total amount of monetary losses ($)
  • Freedom of association and collective bargaining at risk (%) 
  • Human rights review, grievance impact & modern slavery (#, %)  - total number and percentage of operations that have been subject to human rights reviews or human rights impact assessments, by country.
  • Living wage (%) - current wages against the living wage for employees and contractors in states and localities where the company is operating. 
  • Monetized impacts of work-related incidents on organization (#, $) 
  • Employee well-being (#, %) - the number of fatalities as a result of work-related ill-health, recordable work-related ill-health injuries, and the main types of work-related ill-health for all employees and workers, and percentage of employees participating in “best practice” health and well-being programmes, and Absentee rate (AR) of all employees.
  • Number of unfilled skilled positions (#, %) 
  • Monetized impacts of training – increased earning capacity as a result of training intervention (%, $) - investment in training as a percentage (%) of payroll and effectiveness of the training and development through increased revenue, productivity gains, employee engagement and/or internal hire rates
Prosperity Core Metrics include: Employment, economic contribution, financial investments, R&D expenditure, tax payments 

Expanded metrics include:
  • Infrastructure investments and services supported 
  • Significant indirect economic impacts - examples of significant identified indirect economic impacts of the organization, including positive and negative impacts.
  • Social value generated (%)  - percentage of revenue from products and services designed to deliver specific social benefits or to address specific sustainability challenges
  • Vitality Index  - percentage of gross revenue from product lines added in last three (or five) years calculated as the sales from products that have been launched in the past three (or five) years divided by total sales, supported by narrative that describes how the company innovates to address specific sustainability challenges.
  • Total Social Investment ($) -  Total Social Investment (TSI) sums up a company’s resources used for “S” in ESG efforts defined by CECP Valuation Guidance.
  • Additional tax remitted - total additional global tax collected by the company on behalf of other taxpayers, including VAT and employee-related taxes that are remitted by the company on behalf of customers or employees, by category of taxes
  • Total tax paid by country for significant locations

So, take a deep breath, and let's summarize: 
First, the accountants have decided (with input via a survey from some of the IBC companies) what represents a set of universal core metrics that every company should report on - whatever their shape or size. These metrics reflect largely DIRECT IMPACTS which each company can measure, control, and improve. 
Second, the framework offers an additional set of metrics that represent mainly INDIRECT IMPACTS - the ways in which the company impacts the world through its value chain. 
Third, it uses metrics that largely already exist in different frameworks.. a pick'n'mix from well known and lesser known frameworks, heavily leaning on GRI and to a lesser extent on SASB. Interestingly, although CDP is cited, none of the metrics are directly taken from the CDP questionnaires. 
Fourth, it incorporates some new concepts such as living wage (not new but not covered by existing frameworks), inclusion of corporate purpose (the new sexy), "vitality index" (heard of that one?), WCBSD Circular Transition Indicators, monetized impacts of training and others.  Two new metrics have been invented - one for single use plastics and one for land use.

What do I think?
Although the WEF metrics-team may have tried not to reinvent the wheel, they have actually reinvented the bicycle. The proposal moves away from the GRI approach of materiality by applying a common measurement system to all companies at a fundamental level - the things any company anywhere should be taking into account in the management of its own operations. The second set of (expanded) metrics also ignores the materiality approach and prescribes a range of measurements reflecting what the WEF team feel are the most relevant universal social and environmental issues - linking their selection to SDGs. After companies have done all of this, they have the option of applying a materiality lens and adding whatever crumbs are relevant for their "other" stakeholders, i.e. not investors.  

Actually, this approach has some elements of something I have been advocating for years - see my post from 2017: Materiality - from meaningless to differentiating  in which I wrote:
  • There should be a harmonized standard baseline of disclosures that are relevant to all companies - some will be more critical than others for different companies - but they are relevant - and material - for all. I call this Operational Materiality. 
  • Then we should have materiality that is precise enough to differentiate - focusing on the specific aspects of a company's impacts that are a directly relevant to its business, the locations it operates in and the influence it has on society. Let's call that Precision Materiality. 
The WEF metrics partly go this route. WEF Core Metrics represent operational ESG performance. Expanded Metrics represent  broader impacts - but remain any industry, and not specifically relative to what might be considered material for a specific company. 

So back to the question, is it good or is it bad? 
Coming just on the heels of the "standard setters' " proud declaration of how well they all fit in with each other and that no-one needs to be confused any more (and that's another (long) story 😜), here is yet another framework for ESG disclosure. I have to say that I rolled my eyes so hard that they almost stuck to my skull when I read the Press Release: “This is a unique moment in history to walk the talk and to make stakeholder capitalism measurable,” says Klaus Schwab, Founder and Executive Chairman, World Economic Forum. “Having companies accepting, not only to measure but also to report on, their environmental and social responsibility will represent a sea change in economic history.”  Seriously? A unique moment in history? A sea change? Excuse me... with all due respect, where has Mr Schwab been for the past 25 years? This is not a unique moment, it's one of hundreds and hundreds (arguably regrettably) similar moments that have occurred in the past several years, with the publication of every new sustainability disclosure framework, and having companies report on their environmental and social responsibility is actually current practice for most of the large companies in the world - there may be inconsistencies, there may be gaps, but it is happening, and it has consistently been getting better. 

I also had a bit of a laugh at the visual in the WEF report's final section... rainbows galore!

The conclusion is also a Call to Action to IBC members. "Given the urgency of this agenda, we invite all IBC members to declare their intention to report on these metrics and disclosures; collectively, we will present a timeline for that process at the IBC’s Winter Meeting in January 2021. Finally, we encourage the wider corporate community to join us in this collective endeavour." Watch this space, apparently. But you have time for a quick nap before January 2021.

My answer to the question, then, is that the wheels are good but the bicycle is bad.  
I'll explain.

I agree with the concept of having a set of metrics that are relevant for all companies, as I have said. And the core metrics are a reasonable selection (with some exceptions - see below). BUT, why on earth did the accountants think they needed to create yet another framework? As I have said several times, we do not need new frameworks, we need consistent implementation of existing frameworks. Take materiality as a case in point. Everyone is now swooning over the new concept of dynamic materiality - which in my view is a poor compromise to enable everyone to have a seat at the table without resolving underlying issues of how materiality is determined. Instead of creating yet another way to describe what materiality is, why has no-one one come up with a fool-proof comparable auditable methodology to help companies determine what represents material impacts from a sustainability standpoint? The new iteration of the GRI Standards, that has recently been in Exposure Draft did not do this, and GRI has never done this. "GRI is the disclosure tool, we do not prescribe the methodology" said GRI. But heck, if your entire disclosure concept is based on materiality, why wouldn't you offer a methodology for how to create it?  And this, in my view, has been the single biggest gap in sustainability reporting standards to date, and is the reason that so many other standards have sprung up. By asking companies to disclose material topics, without understanding or being able to reasonably audit what those material impacts are, comparability and rigor in sustainability disclosure were effectively destroyed. SASB stepped in and said, hey, we can do it. And they spent millions of hours and dollars creating sets of prescriptive metrics for different sectors, but even that doesn't do the job, as companies still select from SASB metrics based on their own, possibly arbitrary, definition of material topics. 

Back to square one. Cue the accountants. Forget materiality. Everyone should be accountable for certain things in the same way. Let's cut and paste from as many existing frameworks as we can find, and call it The Enlightenment. So I think that's bad. I think it's a perpetuation of all that's wrong in the current sustainability disclosure landscape where every player is focused more on differentiating their own approach than on taking the higher view of how we can work together and build on what is and agree to make real change for the greater good. The WEFers may have pick'n'mixed from GRI, SASB, and all the rest. So what. The bicycle is new. Companies will have to learn how to ride it. Just when they were getting used to riding their current model. All we need now is for Larry Fink to send a letter to all the CEOs of companies in Blackrock's portfolio saying they must report disclose using SASB, TCFD AND the WEF metrics. Won't that be fun? So much for alignment, harmonization, simplification. 

And as for the core metrics, well, they are almost all based on GRI General or Topic-specific Disclosures. Why just not direct IBC members to report those GRI metrics? What was the point of creating an entirely new framework that just recycles the current best practice? Also, why some metrics were selected and others omitted is not so clear. Waste, for example, is not included in the Planet Core Metrics. But I would have thought that waste is absolutely core for most companies. And some metrics are rather useless. For example, in the People category, under "Skills for the Future", the metrics are average number of training hours and training expenditure. This is so old school. The number of training hours or the amount you spend on training is hardly an indicator of whether you are building skills for the future. In any event, many companies are moving away from formal traditional training programs in favor of other types of personal and professional development, so training hours is becoming an increasingly incomplete measure. So, by picking and mixing, the accountants may have come up with a set of core metrics that are comparable and auditable up to a point, but, frankly, what's the value add here? Not much.

And what are metrics? Hint: Only a part of the story of a company's impacts and overall role in society. The context, the journey, the strategy, the targets, the process, the culture, the examples of practice, the insight, the accountability, the people  .... all these are important in sustainability disclosure. This framework is an accounting tick-box by accountants for accountants. Something that makes sense to them because it can be quantified, stuck into categories, computed and converted into theoretical evaluations and risk assessments that may help investors know how rich they can get. Is this what sustainable development has become? A set of monetizable compartmentalized scores? This may be the story of sustainability disclosure promoting itself into obsolescence. Precisely because sustainability has been so successfully (yes, not perfectly) addressed and disclosed over the years, the money markets woke up. Now, they are trying to reframe it in ways that fit with what they know. Like the country farmer who visited the Empire State Building and asked: how many sheep does it hold? Well, not everything that glitters is gold and not everything that's a number is meaningful. 
My assessment is that the WEF framework will not go mainstream as such, beyond the IBC members, if they even bother to apply it, even though the accountants will hype it. Companies that already disclose GRI, SASB, CDP and TCFD may well find themselves hitting many of the WEF metrics in any case, so they will sort of deliver the WEF indicators by default. If Larry Fink suddenly decides that this is the new Holy Grail, then he can probably get it without companies adding too much in the way of new disclosures. Some eager-beavers may start including a WEF index alongside all their other indices that support their reporting. What's another download, anyway? And let's not get started on the competitive scramble around Core and Expanded....can't you just see the Press Releases? "XXX company demonstrates global leadership in radical transparency in its new Sustainability / Annual Report by meeting all the requirements of the Expanded Metrics of the WEF ESG disclosure framework." Wowee.
If only the humanity could be saved by the proliferation of reporting frameworks…. 😂🤣😂 … we would all be able to spend more time trying out new ice cream flavors and enjoying days on the beach, wearing an "SDG Been There Done That" T-shirt.

Note: October 2, 2020: This post originally stated in error that there were 22 core indicators - there are 21. This has been corrected.

elaine cohen, CSR consultant, Sustainability Reporter, HR Professional, Ice Cream Addict. Owner/Manager of Beyond Business Ltdan inspired Sustainability Strategy and Reporting firm having supported 107 client reports to date; author of three books and several chapters on Sustainability Reporting and the Human Resources connection to CSR; frequent chair and speaker at sustainability events and judge in several sustainability awards programs each year. Contact me via Twitter , LinkedIn or via Beyond Business


Monday, August 24, 2020

Reporting is fun with Virgin Media

I have long been an admirer of Virgin Media's approach to responsible business, sustainability practice and reporting. It's smacks of personality, completely fits the brand presence and uses plain language and a range of creative mechanisms to get the message through, equally targeting the internal employee population and the customers who use Virgin Media's services, as well as others who are interested, including me, a reporting geek. (I'll disclose that I have worked with Liberty Global, Virgin Media's parent company, on Liberty Global's global reports over many years, but I have not worked directly with Virgin Media.)

This year, Virgin Media's Sustainability Performance Report for 2019 is a wrap-up of five years of consistent implementation of the strategy the company set for itself in 2015, based on a concept of five goals in five years. 

Today, in 2020, Virgin Media has achieved four of the five goals, and made important progress on the fifth. Let's have a quick look at some of the milestones on this journey.


I took the opportunity to pose a few short questions to Katie Buchanan, Virgin Media's Head of Sustainability and the mastermind of the five year strategy and implementation. 

ME: Remind me how you developed your 2015-2020 strategy. You describe it as focusing “on where we should and can have the most impact”. 
KATIE:  Before we developed our 2015-2020 strategy and our 5-in-5 goals, we had relationships with 31 charities and 25 sustainability targets. It meant our work wasn’t focused and we weren’t able to make a significant impact – both inside our business or with the communities we operate in. That’s why I took the decision to simplify to achieve a more significant social impact. I knew that if we achieved these big goals we would transform our business and people’s lives. And by having a more targeted approach, it gave us the head-room to focus on creating lasting impact, and I’m really proud to say we’ve done that.
ME: How did you determine what “the most impact” is? How was this strategy developed?
KATIE: When setting our 5-in-5 goals, I went through a lengthy process to determine the right areas of focus. This involved listening to our customers, people and experts to identify what was most material to our business. The idea of exploring digital as an enabler became our vision (‘digital that makes good things happen’) and ‘independence’ emerged as the top theme to address. We then identified disabled people as the audience who could benefit from this combined focus. Importantly, we also looked at how we could have the greatest impact with our brand, connectivity and UK-wide footprint: our strategy had to have our core capabilities at its heart and be authentic to our brand. 

ME: What has been the impact for the disabled communities you have supported?
KATIE: Five years on, with our Transforming Lives goal, I’m proud that we are on track with our charity partner, Scope, to support 1 million disabled people with the skills and confidence to get into and stay in work by the end of 2020. We’ve also taken steps to become a better employer of disabled people, such as offering dedicated training for our line-managers so they can better support disabled colleagues and, via our #WorkWithMe programme, we’re supporting businesses across the UK to become better employers of disabled people too - creating an online community where peers can learn disability employment best practice from each other. This goal has helped us achieve positive social change for disabled people across the UK – whether they're looking for employment or are employed via Virgin Media or other brands.

ME: Well done on nailing four out of your five 2020 goals. Which of these gives you the greatest satisfaction and why? 
KATIE: There has been a lot of work over the past five years that I’m really proud of. One of the biggest highlights has been how we’ve taken Virgin Media’s sustainability programmes mainstream, from donating our shirt-sponsorship of Southampton FC to Scope for two Premier League matches, to seeing our Chief Operating Officer, Jeff Dodds, take to the stage at One Young World conference. I am also proud of how we’ve engaged and supported our people. For example, we have created a unique product scorecard which is a practical guide for enabling teams across our business on how to make each of our products more sustainable than the last. For our example, our Hub 4 router is 39% more power efficient than our previous hub when in use (when adjusted for functionality), and it uses 36% less plastic. In addition, our ‘squad selector’ tool – which we created in 2018 - helped our employees to understand how they can get involved in sustainability in their everyday roles. We’re a small but mighty team whose work is having an impact across our business – from our Board to our engineers. 

ME: The one goal you did not fully achieve was being more inclusive, focusing on gender and disability. What’s the learning from this as you move forward into the next phase? 
KATIE:  Although we didn’t quite achieve our ‘inclusion’ goal, we actually had a greater impact on driving positive change in this area thanks to our work with Scope, which took us in a more focused direction. Our #WorkWithMe programme – launched two years after we set our inclusion goal – has helped transform the lives of disabled people, and improved the way Virgin Media and other big businesses employ and support disabled people. Ironically, it’s the one goal we didn’t achieve that has perhaps given me the greatest satisfaction. Under this goal we’ve driven lasting positive change both inside and outside of our business despite not quite hitting the mark. In terms of moving forward, here is the learning I’ll carry forward: 
# Partnerships power change: We’ve made huge progress on transforming our business for disabled employees and customers. While there is more to do, a lot of this success is down to our partnership with Scope. I think we have achieved this by leveraging their skills, so I think our future inclusion strategy will include partners who can help guide us and hold us to account as deep subject matter experts 
# Long term focus: We need teams that have difference and togetherness, this is not only the right thing to do but it helps us to drive business growth. But it takes time. Setting goals that give you the ability and time to get underneath an issue is important. Significant change does not happen overnight especially when a culture change is required. 
# Make it part of your everyday: The way we talk about sustainability or inclusion matters. We’ve worked hard to make it something everyone can understand and get behind (i.e. no jargon). It’s not something that the People team or Sustainability team is responsible for – enabling your people to know how to get involved and take part is important. The same goes for finding opportunities to talk about our work – we took disability to the Premier League through our Shirt Swap donation activation. Going forward we will continue to find ways to make these thorny issues part of the everyday. 

ME: You deliberately deliver a report that is fun, creative, uses everyday language... one that can appeal to your employees and consumer base, as well as other stakeholders. In developing your 2020 strategy, did you also have a reporting strategy? If so, what were the objectives for that and how did you do?
KATIE: We have consistently evolved our reporting – we’ve gone from disclosure, to engagement and now enablement. We want to make sustainability accessible for everyone – our people, customers or other industry professionals. That’s why we introduced the world’s first 360° corporate sustainability experience, had a football-themed report, and have used funny cat GIFS. Our reports not only focus on the "what" we’ve done’ but also the "how we’ve done it" as we want to show that sustainability storytelling can be engaging, insightful and fun. 

ME: And digital is a big part of your reporting strategy, right?
KATIE: Yes, absolutely! Over the past decade, we have embraced digital storytelling so the reporting of our performance is accessible. It’s my vision that we use our reporting as an opportunity to engage with all of our people in order to bring them along with us, as of course, everyone has a role to play in ensuring we operate as a responsible business. In addition, we want the report to engage AND enable our industry colleagues so they can take our learning and make a positive difference in their organisations, too. With this 2019 report, we’ve incorporated our team’s reflection on our performance as we want to share our learning with other industry colleagues. We’re encouraging other sustainability professionals to learn from our tips and slip-ups so they can apply them in the delivery of their own sustainability strategy, or consider them as part of their own strategy setting exercise. Also, we make a real effort to ensure our reports are clear and understandable as sustainability should open to everyone. We don’t want our report to passively live on a webpage – we want to use it as a tool to connect with our audiences, and drive environmental and social impact in the same way our core strategic programmes do. Ultimately, nobody wants to read an 80-page document, and we as sustainability professionals have a role to play in engaging and enabling our key stakeholders – whether they are employees or customers. People are increasingly becoming in tune to sustainability issues – from protecting the environment to how you treat your employees. Therefore, we aim to enable people to engage, understand, learn and act from our reporting.

ME: Can you explain your choice not to follow a widely-used reporting standard such as GRI? 
KATIE: We follow the principles of GRI reporting – for example transparency and a clear governance framework is incredibly important for underpinning our strategy. Our parent company Liberty Global takes responsibility for standards such as GRI, DJSI and CDP etc. We work very closely with them – for example they lead the data collection and assurance approach with KPMG. Our efforts (and budget) at Virgin Media go towards engaging and bringing to life our story for our people and our customers. I have a small (but mighty) team and know that this combination is powerful – we have the best of both worlds! 

ME: And the question everyone is asking right now, the COVID-19 differential. How do you think the COVID19 experience will influence your sustainability strategy going forward?  
KATIE: As a company we’ve been working really hard during the pandemic to provide the best connectivity – whether that’s to support NHS workers on the front line or to help our customers stay connected to the people they love – which is more vital now than ever. We’re in the process of setting our next five year sustainability strategy and connectivity is at the heart of it. We are looking at how we can use our connectivity to connect communities across the UK. The past few months have been horrific for many, yet, we’ve seen communities come together and people looking out for one another – something that we’ve not experienced for decades. So we’re assessing how we can harness that as we know that life will be different once the pandemic ends and communities will need businesses to play a role in supporting them. We want to be in that space and it’s a really interesting time for my team and I as we develop our plans. Stay tuned! And when it came to reporting, there was never a question in our mind about delaying reporting this year. It’s business as usual, perhaps more so than ever for Virgin Media, as we work really hard to keep communities connected. Working virtually hasn’t changed our ability to wrap-up our five year strategy in a way that our people can particularly be proud of. But we have made some adjustments, for example, our videos and GIFs have been filmed at home – rather than out and about – in order to keep people safe. 
ME: Finally, your top three tips for people writing sustainability reports? 
# The ‘how’ as well as the ‘what’: As mentioned earlier, we have embraced digital storytelling for a more than a decade. From hand-held video cam recordings (before smart phones were around), to the world’s first 360° corporate sustainability experience, a tool to show our people their role in helping us to operate a responsible business, to sharing funny GIFS - we want to make our reporting is accessible and enjoyable for everyone. Therefore, it’s equally important to think about the ‘how’ when highlighting your performance, as well as ‘what’ you have done. 
# Sustainability for all: Reporting your performance should be engaging, insightful and fun. Ultimately, nobody will read an 80 page PDF – so really focus on the design, language and length of the report. Reports should be aimed at your customers, employees, and as a tool for your peers to take learning. As sustainability professionals, we are all striving to create an impact with our work and we should be proactive and proud to learn from each other – which ultimately will have a positive effect on where we work and the communities we serve. 
#  Think about your audience: Establish the principles which are unique or fundamental to your brand (I call them your consistency compass). Ensure your communications are authentic and engaging. Understand who your key stakeholders are and how they want to consume information.


These are amazing insights from Katie and both strong performance and commitment to transparency with the delivery of the five in five strategy. As you will have read, Katie stresses that reporting should be engaging, insightful and fun. And, I fully agree. Sustainability information should be accessible, in language that people can relate to and it has value in teaching others in the industry about what can be done. I always talk about reporting as an empowering experience, and I think Katie demonstrates how this can work optimally. 

And there's another insight here that's so important. As a part of a global organization which takes care of the more formal disclosure elements of transparency (reporting to GRI Standards, CDP submissions, engaging with sustainability indices such as DJSI and rankers and raters), the local business can focus on making it happen in its own unique way in its own unique context. This is a wonderful example of how a global organization can be super-relevant and less constrained by formal frameworks and language at the local level while managing resources efficiently across the enterprise. This is a model that any global business can apply, and some do so very well. I have always loved, for example, Heineken's Message in a Bottle, and Intel Israel has for years published a local report with a similar approach of local relevance backed up by the formal disclosures of the global parent company (disclosure: Intel Israel is a client). 

At local level, reporting is not just about transparency, it's far more about empowerment, impact, and, as Katie says, enablement. Reporting is not just a report. The Virgin Media journey is proof. 

elaine cohen, CSR consultant, Sustainability Reporter, HR Professional, Ice Cream Addict. Owner/Manager of Beyond Business Ltdan inspired Sustainability Strategy and Reporting firm having supported 100+ client reports to date; author of three books and several chapters on Sustainability Reporting and the Human Resources connection to CSR; frequent chair and speaker at sustainability events and judge in several sustainability awards programs each year. Contact me via Twitter , LinkedIn or via Beyond Business

Wednesday, July 29, 2020

GRI Standards: And Now For The Fine Print

If you have read all my posts on the Exposure Draft of the new GRI Universal Standards in this past fortnight, you are probably more boggly-minded than I am, and GRI Standards overload may have caused you to deplete all your stock of mint choc chip ice cream. I am predicting an ice cream world shortage as people start delving into the Exposure Draft and considering their positions. But don’t worry, we can always move to frozen yogurt as a stop gap. And, you will be pleased to know that this is the last post in this series, so you can get back to Netflix and home schooling.

A quick recap of what we covered so far:
Shape up or Shape Out: An overview of the proposed changes with a focus on the new In Accordance rules
Human Rights Quadrupled: A look at the way human rights have infiltrated the GRI Standards better than than stray cats in a fish farm
Materiality: You've been doing it all wrong: Description of the new materiality definition and its implications
Governance Galore: An overview of the way governance now governs
Sector Standards: Back on the Map: The re-entry of sector differentiation to underpin material disclosures

And if that's not enough, here is the fine print. This post will cover a few changes that I thought were a little odd, outside of the main changes I have highlighted so far.

Disclosure Requirement A-7: Provide a statement of use
This In Accordance mandatory disclosure requires reporting organizations to include a statement from someone on the highest governance body or most senior executive, using the wording in this example:
“The Board of Directors (or CEO) acknowledges responsibility for the following statement of use: The information reported by ABC Limited for the year ending 31 December 2020 has been prepared in accordance with the GRI Standards.”

In other words, the Chair or CEO must confirm that the report has been prepared in accordance with the GRI Standards. What’s the purpose of this? Isn’t the CEO statement that is a mandatory part of the report enough of an endorsement? I can understand a statement that requires the CEO to accept responsibility for the information contained in the report as an accurate reflection of the organization’s impacts and performance. Why make it about adherence to GRI Standards? Is it really expected that CEOs will go into detail about the way the Standards have been used? If this type of statement is required, then the Reporting Manager or Sustainability Lead should sign off. Or the assurers – isn’t that what they are paid for?

GRI virtuoso Bastian Buck, Chief of Standards explained:
BASTIAN: “There are a couple of trends here, and honestly, we are not sure if we have landed in the right place with this one – the GSSB has discussed this issue at length and would like to hear from stakeholders on this. GRI-based reporting is increasingly regulated in different ways, for example, for listing on Stock Exchanges. Many jurisdictions are using GRI as recommended options for compliance with reporting requirements. Stakeholders and regulators want to know what this means and whether company’s GRI reporting is living up to expectations. They want clarity that the reporting standards have been applied in the way organizations promise, including application of the reporting principles and disclosure of material impacts. This Statement of Use requirement is modeled after what other standard setters have done. Often it can be achieved through the involvement of a third party who performs all the checks and enables the Board or CEO to make such a statement. But I agree this is an area where we need more discussion. There was not 100% consensus on this. On the one hand, we need to respond to the expectation of regulators; on the other hand, we do not want to overburden reporting companies with disclosure that does not add value.”

My view is that if a company is publishing a report, the CEO, who reports to the Board of Directors, must stand by the fact that this report is published in their name and that the claims made in the report are accurate. The CEO introductory message, which is part of the report, reinforces the CEO’s accountability for the report content. I do not think we need the CEO to say: “Just in case you were wondering, we have done what we claimed to have done.”

The contact point has disappeared 
In the current GRI Standards, Disclosure 102-53 requires the organization to state a contact point for questions regarding the report. The new Universal Standards Exposure Draft removes this. I found this really weird. Reporting is an engagement tool. Surely reporters must provide a channel for engagement - somewhere to direct your inquiries to? I occasionally write to companies about things I notice in their reports, and I do so using the contact point they publish. More often than not, I get a response.

Now, some companies offer a generic email address – such as or This is fine, and assumes these emails will be monitored by members of the reporting team. Not everyone wants to make their individual work email public, given the amount of spam and other rubbish you get via email. Ideally, I like to see the name of a person and a job title. Take this good example from Man’s 2019 CR Report:

Although the email is generic, the name of the senior person accountable for the report is included.

GRI maestro Bastian Buck, Chief of Standards explained:
BASTIAN: “We removed the contact point disclosure because we didn’t feel it was serving the purpose as intended. Most companies include generic emails. Feedback we have received indicates that it is often difficult for stakeholders to get through to the relevant contact in the reporting organization The information can be found on the organization's website and organizations can still report it if they wish.”

I say: BRING THE CONTACT POINT BACK! I think it is both useful and a signal that companies invite feedback and queries.

Disclosure REP-3 Reporting period and frequency 
This disclosure in the Exposure Draft requires organizations to specify the reporting period, and the reporting frequency (both are in the current standards) and also “if the organization has audited consolidated financial statements or financial information filed on public record, specify the reporting period for its financial reporting and provide an explanation if it does not align with the period for its sustainability reporting”.
This last part is new. The additional guidance states: "The organization should align the reporting period for its sustainability reporting with the reporting period for its other statutory and regulatory reporting, in particular, its financial reporting." 

I see this as another troubling consequence of force-fitting sustainability reporting into financial reporting frameworks to meet the needs of money markets. The timescale required for sustainability reporting may not align with financial accounting for many and varied reasons. As long as a company is reporting consistently, and on a regular frequency, and within a reasonable time-frame after the close of the reporting period, that works for me. While there is obviously a linkage (usually created by investors or investment analysts, for example, who analyze environmental performance normalized to revenue – a useless comparison, in my view), I think sustainability reporting serves different needs and is subject to different review and approval pressures, and does not need to be dictated by the money market calendars. On the contrary, there is benefit in all companies reporting a calendar year on sustainability, which is far more comparable than different financial year periods.

What is vastly more important, in my view, is the publication date. Companies should be encouraged to improve their reporting efficiency and ensure they publish within a reasonable time after the end of the sustainability reporting period – ideally six months. I think that the requirement of a disclosed publication date should be included in the new Universal Standards, pretty much like the example of Man’s report shown above. Their sustainability reporting year is calendar 2019, the report was published June 2020. Their Annual Report was published in March 2020.

GRI guru Bastian Buck, Chief of Standards explained:
BASTIAN: “Companies have numerous reporting requirements. All this information only makes a lot of sense if stakeholders have comprehensive information available. We have to bring this whole practice into a regular rolling schedule and that may include the integration of non-financial into financial reporting. We see it as a necessity to co-locate these disclosures. It’s not about monetizing everything, but it’s important that stakeholders have the whole picture.”

I disagree. But you know why. I said so above. But what do YOU think? Have your say on this point and other points made in this post and other posts, and anything else in the Exposure Draft that I didn’t get to in this series of reviews. The Exposure Draft is open for comments until 9th September 2020.

And that’s a wrap for the time being. This concludes six aspects of the new GRI proposals, all of which have implications for reporters and report users. Overall, I welcome this initiative, the new structure of the 101,102,103 Standards makes sense to me, key principles and definitions have been clarified in useful ways and some new areas of emphasis will support improved reporting on different topics. On the other hand, some of the proposals place unnecessary burden on reporting companies, and some don’t go far enough. It will be interesting to see how this plays out and what makes the final cut.

I’d like to thank Bastian Buck and Laura Espinach for their time and insights and their endless patience with me in a discussion with covered even more ground that I have been able to record in these posts. It’s been a fascinating exercise for me, a self-professed reporting geek, and I hope it’s useful for you.

Stay safe, stay well, stay optimistic! 

elaine cohen, CSR consultant, Sustainability Reporter, HR Professional, Ice Cream Addict. Owner/Manager of Beyond Business Ltdan inspired Sustainability Strategy and Reporting firm having supported 107 client reports to date; author of three books and several chapters on Sustainability Reporting and the Human Resources connection to CSR; frequent chair and speaker at sustainability events and judge in several sustainability awards programs each year. Contact me via Twitter , LinkedIn or via Beyond Business

Tuesday, July 28, 2020

GRI Standards: Sector Standards: Back on the Map

This is another short(!) post in the GRI Standards series – an anatomical dissection of the Exposure Draft of the new GRI Universal Standards and what it means for reporters and report users. This fifth post is all about sectors. You’ll recall that Sector Standards were a thing a long while ago at GRI, and a number of Sector Standards were developed. Then it stopped. 

It’s clear that sectors enable segregation of companies into categories that often share the same context and same issues. That’s why there are so many sector associations, several of which have developed their own sustainability and reporting standards (in addition to bespoke Codes of Conduct and sustainability initiatives). IPIECA, for example, the oil and gas industry association, has a sustainability reporting manual for its members, now in its fourth edition. The World Steel Association has a sustainability reporting indicators guide for its members. The Responsible Business Alliance (for companies from the electronic, retail, toy and auto sectors) has a guide for transparency in procurement for its members. Cosmetics Europe has a sustainability guide for its members, that includes sustainability reporting with recommended indicators.The Better Buildings Partnership in the UK has a guide on reporting and metrics for its members. And the list goes on. 

(By the way, the High Meadows Institute recently released a super-useful Business Leadership in Society Database of global partnerships and industry associations with detailed profiles of each that can help you check out what’s happening in your sector anywhere in the world, and companies that subscribe to these initiatives.) 

Sectors is definitely a thing. And Larry Fink did not mince words when he wrote to companies that Blackrock is investing in, requiring them to publicly disclose using SASB Standards. SASB (Sustainability Accounting Standards Board) as you probably know, was established in 2011 and has developed a list of 77 sector-aligned Standards designed to encourage companies to report on financially material sustainability topics within their corporate reporting for investors. Originally targeted at the U.S. market, SASB believes you cannot get enough of a good thing and therefore now promotes these standards globally. With 77 Standards, they pretty much cover the sector spectrum. 

Time to let GRI have their say. I directed a few innocent questions to GRI expert-in-chief, Bastian Buck, Director of Standards. 

ME: What’s the point in developing sector standards? Hasn’t SASB already done this work? 
BASTIAN: "The Sector Standards complete and strengthen the GRI Standards. One of the main criticisms of sustainability reporting and of GRI has been the lack of detailed guidance for determining materiality, so we are addressing that through the Sector Standards. It’s important to remember that we are not changing the approach on stakeholder engagement, and companies should continue consulting stakeholders on materiality. Our Standards will define what is likely to be material in each sector. We don’t want to prescribe, but there is evidence that certain topics will be material by sector and GRI wants to ensure that these will be considered as part of any materiality assessment." 

ME: Why not simply reference the SASB Standards and not waste a whole lot of money and time reinventing the wheel? 
BASTIAN: "It’s not about entering into a competition about what’s financially material, we see ourselves as building on what others have done in this space. We don’t want to start with a blank sheet of paper and that is why there is stronger emphasis on research and existing sources in this program. At the heart of the whole rationale for GRI’s standard setting and therefore also the sector program is the point that GRI focuses on impacts on others, not primarily on the risks to companies or issues that affect them. This necessitates the consideration of a wider set of topics than ESG topics considered by SASB. It is likely that we will observe that the gap between the two offerings in terms of topics covered is considerable. The reason is a fundamental difference: we look at a much wider set of considerations. To ensure we don’t lose sight of the potential overlaps and alignments, we have included SASB in our first pilot project which looks to resources such as SASB as an input to the process. We expect to see considerable if not complete overlap for most sectors and a SASB representative was included in the first pilot project for the GRI Oil and Gas Sector Standard."  

ME: There are also several sector standards developed by industry associations such as IPIECA. Why not simply refer to those where they exist and/or encourage associations to develop these where they do not? 
BASTIAN: “We recognize the strong work done in this space by many sectors, and we hope to collaborate with them as we do with SASB, IPIECA and other relevant players. It’s important to remember that industry associations may not have the same multi-stakeholder impact-driven focus. Often their reference point is regulatory considerations. Remember, industry associations are industry led. Our role is to ensure balance across all stakeholder expectations with our Sector Standards.” 

ME: How long will it take to develop a full set of Sector Standards? How many sectors are expected to be covered? 
BASTIAN: “We are currently piloting three sector standards – Oil and Gas , Coal , and Agriculture and Fishing. The idea is to scale relatively quickly with 5 – 10 standards being developed concurrently at any given time to deliver a total of around 45 once the program is complete.” 

ME: Why make Sector Standards mandatory to be In Accordance? That means that some companies must report with the Sector Standards while others will not have to because they have not been developed yet. This is creating an uneven playing field for reporting over a long period of time. Why not make them optional / recommended? 
BASTIAN: “We believe we need to address one of the shortcomings of sustainability reporting, and that is that it’s too easy to avoid reporting on certain things. The Standard Setter has to play a role in this. We are not mandating the use of all the topics but only the use of the Sector Standard. At the end of the day, the requirement is for an organization to consider the topics described in the applicable Sector Standard. Each Standard will apply to all companies in a certain sector - so all companies in the same sector will be equal. This will make sustainability reporting more comprehensive and complete and help to address the the issue of underreporting of material topics. It can also be used as an engagement tool. We believe that having a reference point for the dialogue between stakeholders and companies is pivotal to leverage the true value of the transparency exercise for all stakeholders and society at large. It will be interesting also to see how the sector standards fuel further dialogue across industries – elevating certain issues so that they are not only a struggle for an individual company, but part of a wider set of considerations. The EU and OECD are already driving work in this direction.” 

And that concludes the Sector story for now. And if you want to see what the first one looks like, the Oil and Gas Sector Standard Exposure Draft is now open for consultation (until 6th October). It’s only an 87-page document including glossary and bibliography with 22 material topics for the sector to consider, so working through it should be a piece of cake. 

What do you think about Sector Standards? Is the rationale for a whole load of time and investment in this area entirely justified? Will it add value? Will this ensure that companies report on topics they have conveniently (or unwittingly) avoided in the past? Have your say before Sectors get locked down with the new Universal Standards. The Exposure Draft is open for comments until 9th September 2020

Stay tuned for loads of Sector Exposure Drafts coming your way in the not too distant future. In the meantime, don't go anywhere as I will soon be publishing the next and final post in this series on the Universal Standards and a few other changes that may not appear obvious at first glance. 

Stay safe, stay well, stay optimistic!

elaine cohen, CSR consultant, Sustainability Reporter, HR Professional, Ice Cream Addict. Owner/Manager of Beyond Business Ltdan inspired Sustainability Strategy and Reporting firm having supported 107 client reports to date; author of three books and several chapters on Sustainability Reporting and the Human Resources connection to CSR; frequent chair and speaker at sustainability events and judge in several sustainability awards programs each year. Contact me via Twitter , LinkedIn or via Beyond Business
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