#ErnstRIP

If anything could force me out of too long a silence on this blog (apologies, I haven't been able to keep up the pace this year due to client work and other commitments) then it has to be the desire to express my appreciation for Ernst Ligteringen, whose passing yesterday has come as a total shock to family, friends and the entire sustainability reporting community. I dedicate this post to his memory and in appreciation of his contribution to making reporting real.

I'll take this summary of Ernst's accomplishments from the statement that GRI published today:

"Ernst joined GRI in 2002, and transitioned it from a project that was started under CERES, in Boston, US, into an independent international organization with a solid independent governance structure and system. He was instrumental in establishing GRI’s leadership position in sustainability reporting with a balanced focus on economic, environmental, social and human rights issues. Ernst developed the evolution of the sustainability reporting guidelines towards G3, then G4 and finally the GRI Standards. He introduced GRI’s organizational stakeholder program, which acquired more than 600 members in just a few years, and developed GRI’s training program with certified trainers on all continents."

While I never worked closely with Ernst, I met him many times at different events and meetings over the years. I will always recall when we shared a stage at the Smarter Sustainability Reporting Conference in 2012 which I chaired. GRI at that time was right in the middle of the journey towards G4 which would be launched in May 2013. Ernst was obviously delighted with the process and referred to "good things cooking in the kitchen" through he wouldn't tell us exactly what. But he inspired us that day with the promise that GRI would continue to evolve the role of sustainability reporting and expand its relevance, and he did indeed fulfill that promise. In 2014, Ernst left GRI to continue his professional journey in other directions.

One of these directions was the support for innovations in sustainability and this included his work as a Strategic Advisor at Datamaran. Marjella Alma-Lecourt writes a moving tribute to the support Ernst provided to this growing company.

"He was passionate, well-spoken and credible – he was able to get anyone to listen to him, connect with people from any background and social status, and with that skill he was able to make significant moves in society and the global business community in particular. I started as an intern at GRI in 2007 – Ernst was my CEO – he was impressive and always traveling, I so looked up to him and still do. When we started eRevalue (now Datamaran), he got involved immediately and became a mentor like no other. I asked him how to be a CEO, and he started guiding me."

More than all of Ernst's professional leadership and accomplishments, he was a genuinely good man. As I knew him, he was always smiling, always positive, always ready to spread a little optimism. He even accepted my friendly provocations and occasional teasing in good spirit, with humility and readiness to engage. Ernst was the gentleman of sustainability reporting and a gentleman in our community. His passing comes as such a shock - it's 30 years too early.

Our comfort is that his legacy lives on in much of what all of us do every day. Ernst helped make business better and that affects us all. He personified determination, decency and positive spirit and that continues to inspire us all. I will remember him with respect, deep affection and always a smile.  

My heart goes out to Ernst's family. I wish them strength to keep going in the face of such an unexpected and tragic loss. 

#ErnstRIP

elaine cohen, CSR consultant, Sustainability Reporter, 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 

6,000 European Sustainability Reports... coming soon

Get ready, folks. The sustainability reporting revolution has just heated up. Congratulations to the European Parliament for taking this major step towards the transparency and accountability of European business. On 15th April, 599 members of the European Parliament passed a vote to amend Directive 2013/34/EU and require mandatory disclosure of non-financial and diversity information by certain large companies and groups  on a "report or explain" basis for all European-based "Public Interest Entities" (PIEs) of 500 employees or more (or by parent companies of European-based 500+ PIEs). This Directive will come into force when ratified by the EU Member States in the European Council which is expected to formally adopt the proposal in the coming weeks.

(PIEs include listed companies as well as some unlisted companies, such as banks, insurance companies and other companies that are so designated by Member States because of their activities, size or number of employees.)

RCV= Roll Call Vote: In favor, against, abstentions on 15th April 2014

For those of you who want to see all the detailed published by the EU Commission, you can find them here. For those of you who want the headlines that I picked out from the EU communication docs, including the Q&A, read on (red highlights are mine).

Companies covered by the Directive, aka PIEs, will be required to disclose in their management report relevant and material information on policies, outcomes and risks, including due diligence that they implement, and relevant non-financial key performance indicators concerning environmental aspects, social and employee-related matters, respect for human rights, anti-corruption and bribery issues, and diversity on the boards of directors.

This information should include:

• a brief description of the group's business model
• a description of the policy pursued by the group in relation to those matters, including due diligence processes implemented;
• the outcome of those policies
• the principal risks related to those matters linked to the group's operations including, where relevant and proportionate, its business relationships, products or services which are likely to cause adverse impacts in those areas, and how the group manages those risks
• non-financial key performance indicators relevant to the particular business. 

Where the group does not pursue policies in relation to one or more of those matters, the consolidated non-financial statement shall provide a clear and reasoned explanation for not doing so.

Companies will retain flexibility to disclose relevant information in the way that they consider most useful, whether this is as part of their annual report or in a separate report. References to acceptable international frameworks include the UN Global Compact, the German Sustainability code, ISO26000, OECD Guidelines for Multinational Enterprises  and of course, GRI.

Currently, around 2,500 large EU companies disclose environmental and social information regularly. This Directive, applying to PIEs with more than 500 employees, will affect around 6,000 large companies and groups across the EU.  Millions of SMEs are excluded from this legislation, which makes sense.... for now.

The Directive does not require comprehensive reporting on environmental and social aspects (although the Commission certainly encourages it). The Directive requires only the disclosure of certain information on policies, outcomes and risks. This is estimated to result in an additional direct cost for large companies of less than €5,000 per year. (Though who knows how this was calculated!)

Several measures have been taken to limit the administrative burden for larger companies. For instance, the disclosure requirements may be fulfilled once at group level, rather than by each affiliate in the group, and auditing aspects are limited to an annual check. However...

The Directive requests that the Commission examines and reports back by July 2018 on the possibility of introducing an obligation requiring large undertakings to produce, on an annual basis, a country-by-country report, containing information on, as a minimum, profits made, taxes paid on profits and public subsidies received.

The Directive focuses on environmental and social disclosures. Integrated reporting is a step ahead, and is about the integration by companies of financial, environmental, social and other information in a comprehensive and coherent manner. To be clear, this Directive does not require companies to comply with integrated reporting.

The Commission shall prepare non-binding guidelines on methodology for reporting non-financial information, including non-financial key performance indicators, general and sectoral, with a view to facilitating relevant, useful and comparable disclosure of non-financial information by Union undertakings. In doing so, the Commission shall consult relevant stakeholders. The Commission shall publish the guidelines no later than 24 months after the entry into force of this Directive.

YEAH!!!

This is a great leap forward for business transparency. The EU statement boldly makes the point:

"Transparency leads to better performance. This is true not only about disclosure of financial information, but also as regards information on environmental and social matters. Transparent companies perform better over time, have lower financing costs, attract and retain talented employees, and are ultimately more successful."

I am sure many many people have been instrumental in working towards this achievement, but I would like to highlight a few that I personally know have been behind this great news. 

At the GRI: Ernst Ligteringen, Teresa Fogelberg and Pietro Bertazzi,  and the rest of the GRI team. This legislation is a fabulous validation of the tireless work of GRI over many years. Teresa Fogelberg, the dynamo behind GRIs government relations  and advocacy team, said in the GRI Press Release:

“This directive is the vital catalyst needed to usher in a new era of transparency in the largest economic region in the world. This is a truly historic moment and I am confident that this is just the beginning of a new era for transparency and sustainable and inclusive growth in the EU.”

This is also a fabulous conclusion to an era at GRI which has been led by the formidable Ernst Ligteringen. Ernst announced his intention to step down from 11 years of GRI leadership earlier this month, and he continues as Chief Executive while the organization seeks its next leader. It is very fitting that this culmination of so many years of effort should be just in time to constitute a tribute to his leadership and contribution to sustainable and transparent business. 

At the EU: European Parliament Rapporteur on Corporate Social Responsibility Richard Howitt MEP proposed this change way back in 1999, and has been working consistently since then to get the Euro folks moving. I heard Richard talk passionately about the need for this legislation a couple of years back, hearing his confidence that such legislation would become reality in the not too distant future. This is a validation of his efforts, as well as all the other EU parliamentarian pioneers that drive positive change in our society. See Richard's notes on Facebook here.

For further light reading, some articles already published:

eRevalue blog: Tuesday April 15th 2014: a good day for the corporate world
The Sustainability Report: European Parliament adopts standards for ESG disclosure
Compliance Week: European Parliament approves new rules for non-financial disclosure


This Directive is, I believe, very wise.

It is non-prescriptive enough to allow flexibility about the nature of disclosure and frameworks and data points so as to enable companies to get on board whatever stage of the journey they are at, without having to start again from a blank page. At the same time, it clearly sets a new standard of expectation for disclosure.

It focuses on relevance, materiality, process and outcomes. Coincidentally, or perhaps not so coincidentally, this is the heart of G4. Disclosure is not for disclosure's sake. It is part of an entire connection of business impacts on society and the environment. This approach will hopefully ensure we don't see just a list of numbers clumped together in an Annual Report, but a serious and sensible, meaningful and valuable account of a company's impacts. 

It exempts smaller and non-listed companies. For the time being. Completely logical. With a target of a total of 6,000 companies, of which only 2,500 currently report, this is going to be tough enough to implement and enforce. Maybe later.... the scope could be expanded. 

All that is needed now is a further Directive which requires all adults in the EU to actually take an interest in the non-financial disclosures of PIEs and provide feedback to such companies as to how they are or are not meeting their expectations. However, I guess that's a Directive which might take a little longer to approve. In the meantime, we are making progress.  Well done to all those involved. Good luck to all those affected.  

elaine cohen, CSR consultant, winning (CRRA'12) Sustainability Reporter, HR Professional, Ice Cream Addict. Author of Understanding G4: the Concise guide to Next Generation Sustainability Reporting  AND  Sustainability Reporting for SMEs: Competitive Advantage Through Transparency AND CSR for HR: A necessary partnership for advancing responsible business practices . Contact me at www.twitter.com/elainecohen   or via my business website www.b-yond.biz   (Beyond Business Ltd, an inspired CSR consulting and Sustainability Reporting firm)