Cosmetic materiality

This week, a Press Release announcing the publication of AS MADARA Cosmetics ESG Report for 2017 caught my eye for several reasons. (1) Madara is a Latvian company - not too many of those publish reports - the GRI Database lists just 5 reports in 2017/2018 from Latvia. (2) It's a FIRST report - and you know how much I 💗 first reports. (3) It highlighted a CEO pay ratio of 1.68:1 and (4) It follows the NASDAQ ESG Reporting Guidefor Nordic and Baltic Markets.

Now, as some of you may recall, I wrote about this guide a while back in a post entitled: Materiality: from meaningless to differentiating. The thing about materiality is that so many companies today use it as a box to tick rather than a considered strategic framework for sustainable development and reporting. The low-level thinking on materiality where people, society and the environment are material to every company has rendered materiality fairly meaningless as all companies, no matter what sectors, are driven to report on the same thing. Advanced materiality thinking is differentiating; it identifies those unique impacts where a company has the power to change lives and society for the better. So, a broadscale, unimaginative, limiting approach to materiality doesn't serve to advance sustainable development, it simply serves the purpose of transparency and accountability, albeit that is also a worthy and necessary purpose. I call this operational materiality, and it is reflected in the NASDAQ reporting indicators for all companies, all sectors, all sizes.

Thirty-three basic measures of the ESG performance of the business provide a positive overview of how a company performs from a sustainability standpoint. 

Madara Cosmetics is a woman-led Latvian-based natural cosmetics firm traded on NASDAQ. The Madara report uses this framework, responding to all NASDAQ indicators (most are labelled - five are not labelled but the disclosures are present). Thus, in a refreshingly clean and attractively designed 50-page report, Madara covers off the bases using a compact set of universal indicators in a coherent way. 

However, the brand has gone beyond a simple response to a set of measures. It tells a story.

And it takes a stand.

Part One of the report is an education on organic and/or natural ingredients and the different certifications and standards that govern claims that cosmetics companies make on their labels. While intuitively, anything labelled natural or organic sounds environmentally friendly and healthy, this may not always be the case. 

It is clear where Madara stands here. A new ISO Standard 16128 for natural beauty products permits petrochemical and GMO-based ingredients, according to Madara, and is in general an inadequate and inappropriate standard for natural cosmetic products. Madara also attacks new EU regulation governing claims that can be made on cosmetic products, commenting that the new regulation compromises the rights of consumers to information about products they use and the ability to prefer products that do not contain certain ingredients. This is getting a bit messy according to Madara and may encourage greenwashing rather than science-based true and accurate product labelling.

A bold move. In this first report, Madara has chosen to take a strong and well-articulated stand against market regulatory developments that influence how consumers perceive natural cosmetics and influence competition for natural and organic share. This is a good use of the Sustainability Report. It helps us get to know the company and what it stands for. It places the company operations in a market context that showcases how Madara positions its brand and stands out from the crowd. This is part of the brand identity and a clear element of the way Madara impacts lives. Had the company developed a differentiating set of materiality topics, "accurate natural product labelling" and "influencing regulation governing natural cosmetics for the benefit of consumers" might well have appeared on the list.  

What I am missing, however, are the rest of these broader impacts. After the regulatory and ingredient-type discussions, the report continues in three sections - environment, social and governance - using the NASDAQ guidelines as a (mainly chronological) basis to report. However, beyond product formulations, I am wondering how the company reaches and impacts the lives of consumers. "Deeper than skin" is the company motto. I would like to understand why Madara's products are so transformational for consumers and what a difference they really make. What consumer needs are Madara products responding to and how successful are they? These impacts are overlooked in this report. 

However, this first report is a good example of an activist company using reporting to amplify its message and differentiate itself while observing stakeholder expectations on transparency and disclosure. In fact, with a report such as this, you wonder - would using the GRI Standards have made any difference? Or would it have simply complicated the reporting process? 

I tend to think that identifying material impacts is a positive step and creates a clear focus that guides the reader. A materiality assessment, robustly developed and clearly presented is a good backbone for reporting and I would have appreciated this addition in the Madara report. On the other hand, there are interesting and important disclosures in the NASDAQ framework that I believe all companies should report, whether or not their materiality assessment picks them up (and we all know that processes for determining materiality are somewhat arbitrary in most cases). A GRI-compliant report would probably not have included these disclosures.

In my post of last year, then, I talked about operational and differentiating materiality. Those who read GRI's Annual Report for 2016-2017 will have noticed a similar presentation.

As you can see, this matrix is split into two parts: operational and mission effectiveness, which, coincidentally or otherwise (who knows!?) are pretty much how I was seeing it in August 2017, a little before the publication of the GRI Annual Report in May 2018. Operational issues are the ones GRI directly controls - transparency, advancing people, and partnerships. Mission effectiveness are the indirect impacts - the difference the organization makes in society as a result of its operational activities - driving better sustainability performance, reporting and harmonizing the sustainability landscape. The thing you notice about this is that the operational impacts could relate to any company. The mission effectiveness topics are differentiating and unique to GRI. 

(As an aside, not all indirect impacts are linked to mission effectiveness. An indirect impact of GRI, for example, might be job creation in the sustainability sector, as more reports means more reporters. But this is not the mission.)

I think we are at the point where we must elevate our approach to materiality so that it refers to real ways that companies affect our lives, and not just the things that companies do. We are lacking a robust process for determining materiality. Currently, each company individually defines the degree of stakeholder engagement required to define material topics and ranks the topics raised in unclear ways. The was the big fail of G4 (and now GRI Standards) when it first put materiality center-stage in 2013. It made materiality pivotal but did not provide the tools for companies to apply it adequately. If materiality is at the center of sustainability strategy and reporting, and not just a cosmetic addition, the process for defining the material topics should be more clearly prescribed and evidence-based.

Well done to Madara Cosmetics for reporting and for speaking out on issues that affect people's lives. Materiality or otherwise, this is an authentic and credible report. I give it three cones -  🍦🍦🍦 - including one for a first report. 

elaine cohen, CSR Consultant, Sustainability Reporter, former HR Professional, Trust Across America 2017 Lifetime Achievement Award honoree, Ice Cream Addict, Author of three totally groundbreaking books on sustainability (see About Me page). Contact me via Twitter (@elainecohen) or via my business website www.b-yond.biz (Beyond Business Ltd, an inspired CSR consulting and Sustainability Reporting firm). Need help writing your first / next Sustainability Report? Contact elaine: info@b-yond.biz 
Elaine will be co-chairing  the  second annual Asia Sustainability Reporting Summit 2018 in Singapore on 2/3 OCtober. Join me there!

Materiality: from meaningless to differentiating

Pretty much anything that's important these days is material. High material, medium material, low material... material for the business, material for stakeholders.. materiality assessments, materiality analyses, materiality matrices. We can't get enough of materiality. In fact, materiality has become so commonplace that it's almost materially meaningless. Since the coming-of-age of materiality via G4 in 2013, and the subsequent move to GRI Standards published in 2016, you are not on the map if your map is not material. While companies publish a list of material issues, at whatever level of granularity they (arbitrarily) choose, by and large, in many, many cases, the list does not really influence sustainability strategy, stakeholder relationships or sustainability reporting. It's often a list of broad-brush, carefully-massaged any-company issues that can be universally relevant. So what's the point of conducting a materiality assessment, if all you are going to come up with is what everybody already knows?

We love it when we have a nice matrix. If it's on a matrix, it must be right, right? The matrix surely indicates that companies have embraced materiality and that give us great comfort. The matrix must be a result of something, the company must have done the work, they must have truly understood what's important in terms of their impacts on society. Yes, materiality matrices inspire the warm fuzzies about a company and its reporting. If there's a matrix, all is well with the world.

So who are we kidding? I am reminded of Woodie Allen's well-known observation that "80% of success is showing up", and this certainly appears to be the driving motivator for many materiality matrices. The remaining 20% is the differentiator. A materiality matrix without this 20% is like an iPhone without IOS.

80% of the outcome of any materiality process is a known given before the process even starts. This is why:

• There are topics that are universally relevant - climate change, energy consumption, employee rights, anti-corruption - this is just a selection of issues that are relevant for any company anywhere. 
• There are topics that are business or sector-relevant - if you have an extended supply chain with tons of outsourced suppliers, ethical supply chain will always be material for you. 
• The markets speak to you - a company, in the natural course of business maintains interactions with the market that make it clear what the markets wants and where the market is dis/pleased with performance. Just ask Abercrombie and Fitch.
• The watchdogs woof at you - Check out Oxfam and its Behind the Brands ranking, or Know the Chain's food company rankings, or any of the ranking and rating analyst companies - they woof their message and any company on their radar cannot fail to hear.    

So, 80% of the issues are predictably material and do not need extensive analysis paralysis to determine. Engaging stakeholders then becomes an exercise that helps determine the remaining 20%, or fine-tune the prioritization. That is, of course, if you actually engage... and if you engage with stakeholders that are relevant. Not all stakeholders are created equal and not all should be represented with equal voice. Sending out a survey may sound like fun, and 500 responses may sound robust, but if the 500 voices are a random mix, and if the survey is the only tool you use, then it's quite possible that your outcome will not reflect a differentiating set of issues for your company.


GRI Standards, the most widely used sustainability reporting framework, has in part been responsible for creating this  double-edged sword. On the one hand, the notion that companies should focus on what's most important/impactful (material) makes absolute sense. On the other hand,  what's the point in going through a whole process to articulate the obvious? Maya Angelou is quoted as saying: "Ask for what you want and be prepared to get it." (This works well for me at the ice cream store). GRI asked for a list of material priorities - and that's exactly what GRI is getting in GRI Standards-based reports (and G4 reports before them). But is that really what GRI wanted? A generic list of material topics that are relevant to any company? While GRI Standards also ask for disclosures about stakeholders engaged and topics raised by them, responses by companies to this disclosure are often template-ish and not necessarily correlating to the final list of material topics presented.

Let's recap - my assertion is this:

• Materiality is the crux of sustainability strategy and relevant reporting.
• Material sustainability issues are 80% predetermined and 20% differential
• The material differentiators are business or sector specific.
• Most companies take a blanket approach to materiality - everything goes in the mix and every stakeholder has equal voice. What comes out the other end is a blanket list of material topics that could apply to most companies.
• The process of determining material impacts lacks specificity and robust structure. 

So this is what I am thinking:

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.

I recently came across a framework which shows how this Operational Materiality part might work. It was via an interesting interview on Forbes by Christopher P Skroupa of Evan Harvey, the Global Head of Sustainability for Nasdaq. Evan Harvey explains: "Nasdaq published an ESG Reporting Guide for our European markets in March, 2017. The Guide is meant to provide an overview of the “business case” for sustainability strategy, management and performance disclosure. We identify 33 different metrics across the ESG space — the common denominators in global reporting frameworks, the most revealing and insightful measurements of company vitality — and make the justification for each. Reaction has been almost uniformly positive, and many investors have thanked us for helping to declutter a crowded data landscape." I looked at this guide, which I hadn't seen before.

The guide is primarily written to help companies traded on Nasdaq provide the information that investor markets need. The guide presents a set of 33 "Operational Materiality" metrics that all companies should report.

 For each metric, there is an explanation, following the format;

• What does it measure? 
• How is it measured? 
• Why should it be reported? 
• How does this metric correlate with other major sustainability frameworks? 
• Research Notes

Now, the great thing about this guide is that is does not replicate the detail provided by other leading frameworks. It leaves the detailed metrics definition to the expert standards developers such as GRI and leaves the choice of which framework to use to the reporting companies. BUT, it elevates the most universally relevant metrics for all publicly-traded companies (and why would this not apply also to privately owned companies?) into a clear, well-worded and well-explained document that any corporate exec can understand, not just the ones with a post-doctorate in sustainable development. No jargon. Just plain, clear, straightforward language. This is a good start-point for what I call Operational Materiality.

(The Singapore Stock Exchange (SGX) also hints at this approach. While it does not strictly prescribe reporting topics, but rather adherence to a known framework, it does include guidance as follows: "In broad terms, environmental factors would include materials, energy, water, emissions, effluents and waste as well as environmental complaint mechanisms. Social factors would include health and safety, employment practices and labour rights such as collective bargaining, as well as product responsibility, anti-corruption and supplier assessments. The framework chosen is likely to have additional factors that the issuer would report on." 

If we accept that the Nasdaq selected indicators together form a sensible "common denominator", then companies are freed up to focus their materiality discussions on their "precision" topics. Precision topics go beyond the common denominator baseline to the real difference the company makes in our society. Such a process would be efficient. By doing precision, engagement becomes targeted on a smaller number of issues at a deeper level. An example might be a pharma company referencing access to medicine, or a casino company referencing responsible gaming or a food company referencing nutrition or an Indian bank discussing local access to finance. Instead of debating whether water is more of a priority than energy or otherwise,  you get to spend your time reviewing topics that have a differentiating impact, and you target stakeholders to engage with specifically on these topics, such as subject-matter experts, local communities, watchdogs etc. What we need is a process for determining Precision Materiality. 

Let's do the litmus test. I randomly picked a few reports that use GRI Standards (selected using the GRI Sustainability Disclosure Database).  

CapitaLand 2016 Global Sustainability Report: The "critical" material topics could easily be part of a common denominator of Operational Materiality. "Stakeholder engagement" has not been defined by GRI as an impact - it is a principle and process - but there's no rule to say that it couldn't be material, if the process of engaging stakeholders actually delivers an impact in society as well as being necessary to understand stakeholder perspectives. This could be precision. In the moderate and emerging section, building materials and construction waste are hints of business specific areas and could be precisionally material.

Fauji Fertilizer Company Corporate Sustainability Report 2016: Top-right quadrant topics listed are all Operational Materiality with the exception of Farmer Advisory which is definitely business-specific for agri companies. The other quadrants of the matrix are also fairly Operational. I might have expected to see something related to sustainable agriculture or groundwater contamination as material for a company in the fertilizer industry.

Hershey 2016 Corporate Responsibility Report: Wow. So many issues plotted in such detail. How long did THAT take? The red blobs indicate the most material priorities. "Product Ingredients and Transparency" is a clear precision topic for the food business, as are "Consumer Wellness", and "Food Safety". "Global competitiveness" is matched by Hershey to GRI Standard Anti-Competitive Behavior and is therefore operational not precision. "Supply Chain Sourcing" is also highly relevant to a food company - which includes, according to Hershey, "topics related to supplier management, supply chain transparency, sustainable and ethical sourcing, and practices to ensure supply chain continuity. This issue also includes our agricultural sourcing practices and support for farmers."  So, in a precision matrix, where all the operational priorities are removed, Supply Chain Sourcing could probably become two or even three precision issues - Sustainable Raw Materials, Agricultural Practices and Supplier Management. Hershey's report covers these topics in detail.

Target 2016 Corporate Responsibility Report:  Operational topics in the main, though "Better Products" and "Better Services and Experiences" are precision topics expressed in a not-very precise way. What does "better" mean? And does this refer to all products? All services? All experiences? "Resilient and Vibrant Communities" could also be precision, if it's more specific than general community contribution and employee volunteering. "Forest" is an interesting one - Target has a new Forest Products Policy - this could well be precisionally material as well. So, if you strip off the Operational Materiality from this list, you are left with a much shorter, focused, precise list that differentiates Target and its business. Together with  operational disclosures, that would make for a clearer focus and strong presentation of materiality and reporting. 

Wacker 2015/2016 Sustainability Report: There are 32 dots on this matrix (3 fewer than the Hershey matrix). Compliance, Product Safety and Plant Safety stand out as being the most significant topics. Compliance doesn't feature in the Nasdaq 33 metrics explicitly, and probably that's an omission. Every company must be compliant, that's a basic prerequisite for all sustainability initiatives and performance. However, stakeholders can benefit from understanding processes the company uses to ensure compliance, train its people and the outcomes of compliance (or non-compliance). I would call this Operational Materiality and include it as metric number 34. Plant Safety is operational. Product Safety is precision -  in this case, it relates to chemical products where safety may be critical. As for the rest, there is not much that's not operational.

So, in this very brief review, we can see that just a fraction of the material issues are truly material in a very specific sense. Most of the issues labeled "material" are direct impact accountability as defined by 33 metrics - or a few more if required. Why spend so much time debating things that we all know to be a given? How many more hours will we waste moving dots around on a matrix? Yes, I hear you saying that some companies may not have as big an impact on energy, water, waste or other areas and therefore these issues are not universally material. I disagree. I think every company of a certain size must have accountability for its resource consumption, for its people management and for its governance practices and should report performance. Where companies have a greater impact in these areas, their disclosure can be more extensive.

I think there is an opportunity to simplify and harmonize sustainability disclosures in this way and use a standard set of fundamental, universally relevant operational disclosures to form the basis of sustainability reporting. The Nasdaq guide is based on recommendations from the World Federation of Exchanges (WFE) so we know this would resonate with an investor audience and be a good core for inclusion in integrated reporting. Beyond this, Precision Materiality would enable us to understand the company specific impacts, the area where added value is generated and/or where specific risks are managed.

In considering the next evolution of GRI Standards, in particular the Core / Comprehensive options, which are not terribly helpful, GRI might consider encouraging reporters to report all Operational Material Metrics (with policies, goals and targets etc in line with current GRI standards) as the GRI Standards Baseline Material Reporting Option. Each company would report on all of these metrics, using the relevant individual GRI Standards and the General Disclosures (GRI 102) to frame their reporting as now. In addition, companies would select additional business/company/sector specific topics using input from internal and external expert stakeholders, to disclose on precision material issues as the GRI Standards Advanced Material Reporting Option. In this way, companies won't be able to hide behind a materiality matrix filled with things that are relevant to everybody, but will need to elevate their focus to the things that are relevant to them and their specific stakeholders.

Phew. That turned out to be rather a long ramble that I hadn't intended. I haven't mentioned things like impact assessments and outcomes reporting - or even all those capitals that it's so sexy to talk about these days -  more on these on another sunny day - it's all relevant to materiality. But in the meantime, this could be a way of demystifying of black-box materiality to satisfy multiple stakeholders. Wondering if anyone thinks it's too much and I need a vacation? (preferably one where there is lots of ice cream)



elaine cohen, CSR Consultant, Sustainability Reporter, former HR Professional, Trust Across America 2017 Lifetime Achievement Award honoree, 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 www.b-yond.biz  (Beyond Business Ltd, an inspired CSR consulting and Sustainability Reporting firm).  Need help writing your first / next Sustainability Report? Contact elaine: info@b-yond.biz 

The GRI Barmitzvah

The sold-out  biennial GRI 2010 conference with 1,200 attendees from 77 countries was certainly a highlight of the 2010 #CSR calendar and the GRI did an impressive job of bringing such a large crowd of people committed to sustainable business and a sustainable world together for discussion, reflection, presentation, exhibition, interview, debate, LOTS of sandwiches, tweets, awards and networking. The conference was an important landmark in the coming of age of sustainability, a sort of barmitzvah party, attended by the parents and grandparents of the GRI movement, infused with a kind of euphoric sense of achievement coupled with a knowledge that what happens next will be even more significant, propelling the GRI teenager into adolescence with several duties, obligations and  a vision of how to make a difference in the world.  There were several very clear overriding themes dominating the conference which could not possibly have gone unnoticed by any of the participants.

Integrated Reporting

From the opening of this conference, with the announcement that "GRI proposes that ESG reporting and financial reporting need to converge over the coming decade. GRI advocates that a standard for integrated reporting should be defined, tested and adopted by 2020. GRI is working with leading global organizations in financial markets, accounting, corporate responsibility, ESG reporting, and civil society to establish the International Integrated Reporting Committee. The committee’s purpose is to promote integrated reporting, and to facilitate and coordinate collaboration between key institutions to develop an integrated reporting standard" right through to Mervyn King's closing remarks with the announcement  that the Johannesburg stock exchange will require integrated reporting as a condition of listing, it was hard to hear the word reporting at this conference without its new prefix- integrated.

Sustainability as Climate Change

From the words of Mathis Wackernagel, President of the Global Footprint Network in the opening plenary "Humanity is running down the planet" to the words of Kumi Naidoo at the closing plenary "We have no planet B", the meaning of sustainability at the GRI conference was overridingly environmental sustainability and the effects of climate change, at the expense, I feel, of many other social, product, marketplace and supply chain impacts, though breakout sessions were diverse.   

Technology and data

The new ways of gathering, analysing and disseminating sustainability metrics and data via Bloomberg terminals and other technologically supported metrics analysis from firms such as CRD analytics, which is used as the basis for the Nasdaq OMX Global Sustainability Index, XBRL reporting language and taxonomies (note new sustainability upcoming buzzword)  and software for gathering sustainability data in companies such as that delivered by SAP or Credit360, were all prominently featured throughout this conference. Technology is up front as the key to developing transparency and integration of data for use, primarily by analysts and financial data experts, but also as a business decision making tool. Excel, apparently, is passe. 

Regulation

The voluntary nature of CSR and sustainability efforts is giving way to greater pressure for regulation and legal requirements for sustainability disclosures. Apparently, voluntary is not achieving the scale and pace of change towards transparency that our planet needs. Governments, regulators and stock exchanges around the world will be urged to play a much greater role in driving companies to disclose, though little was said about the processes that will be needed to enforce such new regulation.

Partnerships for standardisation

The GRI has established many high level partnerships to ensure the reporting voice in moving towards greater alignment of the global direction of sustainability transparency - the UNCG partnership to strengthen collaboration, work with several other UN agencies, the OECD, NASDAQ and other exchanges, big NGO's such as Greenpeace, the big accounting companies, think tanks and more, the Integrated Reporting Committee etc. Partnerships for greater global alignment is clearly the way forward.  

Brazil

How did Brazil end up with 6 out of a possible 6 awards in the Readers Choice Report Awards , sponsored by last time Award winner Petrobras, also Brazilian, was the question on everyone's lips at the end of the Awards Gala. What is Brazil doing that no one else is ? Clearly, a point of significant interest for all the other 59 countries whose reports were represented  in the Awards this year.

Tweets

The impact of social media as a whole and in particular the use of the #griconference hashtag, encouraged in every session, and the high quality of tweets  flowing throughout the 3 days, including reactions and questions from those not attending, signalled the arrival of the GRI, previously only a moderate voice on social media, into the upper league of real-time microblogging and an ackowledgement that social media is where the voices of today are meeting and influencing. Social media cannot be ignored as a place to engage stakeholders.  

It seems that this conference heralded move of the GRI  into a new era. Beyond the Bar Mitzvah . The establishment of sustainability reporting and GRI leadership in this field has lent a certain power to the GRI which one senses was bolted into place, not without some dramatics, at this conference. The GRI is moving out of its idealist, start-up, optimistic, improve-the world platform towards a bolder positioning, aligned with where the money is, this time, not to simply to create a better world, but assuming a responsibility to save us all from disaster. From the carrot to the stick, to paraphrase the title of a report launched at the conference on Trends in Voluntary and Mandatory Approaches to Sustainability Reporting, the GRI has lost the infectious, youthful, pioneering enthusiasm of the early days and has moved to where the stakes are more serious, money talks and the currency is planet or no planet.  This may not be noticeable to the casual observer, but the shift is there. Perhaps this is not a bad thing. Perhaps this is the only way to create the mindset transformation that was so often pronounced "urgent" by the conference speakers. Perhaps, after all, the triple bottom line really is only one bottom line, as Henk de Bruin of Philips said in a session on integrated reporting. But perhaps, in moving forward, the risk is that the GRI loses sight of the cause and inevitably adopts the behaviours of  those big businesses  it seeks to change. Perhaps the risk is that, by focusing on financial stakeholders, as the key to all stakeholders, the resulting reality will  relegate non-financial stakeholders to the level of recipients of the hand-me-downs of big finance, whose voice is heard at low-volume unless they happen to have the charisma of Kumi Naidoo 

Alongside the massive and unequivocal success of the GRI Reporting Framework and the warm applause at the end of the conference, the GRI will have to be careful to ensure its roots are solid as it cultivates new directional offshoots. Let's look at reality:

Over 4,000 "sustainability" reports of sorts are issued annually. GRI say that around 1,300 of these are GRI reports - 30% -  though many others are "inspired" by the GRI framework. So whilst the GRI framework is the biggest single reporting framework in use today, the reality is that it is still not applied by the vast majority of reporters.

Sustainability reporting, whilst growing year on year and adopted by a majoirity of leading global businesses, the 5,000 or so businesses that report today  remain a drop in the ocean compared to the 82,000 transnational corporations operating worldwide (quoted in "Carrots and Sticks" mentioned above) and the significantly larger number of non-transnational corporations.   The reality is that reporting, regrettably, is nowhere near mainstream, even thought we might like to think it is.

The quality of GRI reports varies substantially from the outstanding indicator-by-indicator disclosure-by-disclosure reporters to those reporters whose use of the GRI framework is no more than abuse. "We are not policement" says Ernst Ligteringen. "The GRI does not police the quality of the reports."  But perhaps it is time for the GRI to make a fundamental assessment of how, and not only how much, the GRI report framework is applied - how companies are reporting on indicators, how many indicators, how Companies report what they claim to report, the consistency of application of the framework in so many ways. A comprehensive study such as this might reveal a pareto picture - that 20% of the reporters are delivering 80% of the quality, and that 80% of reporters are at best inadequately applying and at worst actively misusing the reporting framework. The reality is that overall, the quality of sustainability reporting using the GRI framework is inconsistent and often inadequate.

The level of integrated reporting remains low at 5% of reports issued and here again we see massive variance in approach and quality, ranging from the simple combination of two types of largely unconnected reports within one cover to the more holistic approach attempted by Novo Nordisk and others. The proclamation of integrated reporting as the ultimate goal is the start of a new path, representing, in my view, the evolution of financial reporting and not of sustainability reporting. The reality is that integrated reporting has hardly taken off, despite the strong drive to buzz it up.

The quality of assurance processes, once again, unpoliced and unchecked, remains as I termed it some time ago, a Wild West. The new AccountAbility standards are a mystery in their pedantic complexity and assurance statements beg more questions than they answer. The assurance market is controlled by the accounting companies, and by and large lacks the depth and scope of a process which can truly assure stakeholders on report integrity. Who assures the assurers ? The reality is, that with only 20-25% of all reports currently being assured, and many badly, the assurance process has not taken firm root.  

The success of the GRI must be viewed alongside these challenges, and as the new era of the GRI takes shape,  the GRI must be alert and remain true to its broader constituency. As integrated reporting takes off, the GRI must take care to establish a solid platform around quality sustainability reporting that attracts more than just the financiers. The GRI must take care to ensure the rhetoric is founded in reality.  The GRI must not let the euphoria of the barmitzvah party mask the responsibility the organization has to the extended family, who represent more than cash and climate change. As  transparency takes hold, the GRI must ensure that this is more than just carbon emission data on Bloomberg terminals, and as the GRI expands its influence, it must assume responsibility to align itself not only with those who count in Euros and Dollars, but also with those who count in principles and values.

Well done to the GRI for coming thus far, and for delivering an unmistakeably positive impact on sustainable business processes through reporting. Good luck to the GRI as it faces the challenges ahead. We should continue to be participative and supportive. And watchful.

elaine cohen is co-founder and co-CEO of Beyond Business, a leading social and environmental consulting and reporting firm. Visit our website at www.b-yond.biz/en