GRI's great start to 2017!

With the start of a new year, I decided to clear the decks and make way for all the good things that are going to happen in 2017. In a year when BrexiTrump did nothing to advance a positive vision of a shared, collaborative, inclusive, optimistic path forward, anything that might indicate that the future will get a little brighter is worth supporting. One of those things is the appointment of a promising new Chief Executive at GRI. Tim Mohin, Corporate Responsibility veteran, author, former regulator, ex Intel, Apple and soon AMD CSR exec, former Electronic Industry Citizenship Coalition (EICC) Board Chairman, Tim has a passion that's easy to recognize - it's about making the world a better place. He also has a proven track record in sustainability reporting, a singularly relevant ingredient for anyone planning to take the helm in Amsterdam.

I met Tim in person, after years of mutual retweeting, in Berlin earlier this year at Humboldt University's 7th International Conference on Corporate Sustainability and Responsibility. We shared a stage together in a panel on CSR and Digitization. Tim talked about what being a CSR practitioner means in the age of digitization. Tim explained that, while there is a lot that companies do to be "less bad", especially in the supply chain, there are many ways that companies can create "more good", including through digital technology. One of the most important aspects of all of this is designing these activities right from the outset - good by design to deliver sustainability at scale.

I chatted with Tim just before the holidays. Here's how it went: 

GRI Chief Exec is going to mean a lot of changes for you, right?

Absolutely. New job, new city, new home. new issues - it's a lot to take in. Especially with the holidays just around the corner. I am very excited.

What drew you to this job?  

I have been working in the sustainability arena for more than 20 years with different companies, and 10 years in government before that. My experience with transparency as a tool for sustainability is a good one. There is a great deal of power in transparency - think of the old phrase: sunshine is the best disinfectant! When you look back at my career, I have worked on sustainability reporting for Intel, Apple and now AMD (AMD has 21 consecutive years of sustainability reporting, well before there was a GRI). I can tell you from first-hand experience, transparency works!  But, it has to be done right. That's what I am interested in with this role.

What does "transparency works" mean?

The point of transparency - publishing information - is to advance sustainability and advance performance. That has almost gotten lost in the debate we have been having about this standard or other. We should be able to answer the question: Has it helped? Some of that clarity has gotten lost and I would very much like to see it come back.

What does the new GRI tag-line, Empowering Sustainable Decisions, mean to you?

I do subscribe to the vision of empowering - it goes back to what I was saying before - by putting information out to the world, information found its way into the hands of investors and others. That information matters, and its users create the pressure or leverage on a company to improve. You can track trends and you can do comparisons with other companies in the sector. But ultimately, someone in the company has to take action. That sounds like empowering sustainable decisions to me.

Who reads reports? How are reports are being used to generate action?

I have written on this topic a few times, for example, one piece I published a few years ago was called: "Is your report a window or a mirror?" We often think reports are a window - everyone can look in. More often they are a mirror and often the main readership is employees. The very act of reporting holds up a mirror to what's happening in the company, asking the question: How are you doing? It creates an opportunity for employees to think about their performance and contributions. Corporations are just a bunch of people. My experience of reporting at companies for many years is that it creates opportunities. Suddenly people light up with the realization that their job can actually help people and the planet. Well, yes, it can. It’s true there are issues - I've been around a long enough to know that. These issues were outside the mainstream for a long time. Now they are more inside the mainstream and it is uplifting to see how you can get a very positive response from different people in different functions in organizations.

Role of GRI to date? 

I'll share my perspective as the incoming Chief Executive. To start with, if you are running CSR department, the first thing I would say is go look at GRI. For the past 17 years, GRI has defined what CSR means in a very real and practical sense. GRI has created a sort of road-map for CSR and sustainability. You could call it the "installed base" of sustainability information and standards. That has been incredibly valuable and GRI has established a powerful leadership position. The future, on the other hand, is still full of challenges. When GRI started out, sustainability reporting was new and novel - today, most of the Fortune500 are doing it and most are using GRI.  But there is some confusion, some fatigue, both on the data provider side and on the data consumer side. If you are the installed base of that market, the question is how do you respond to those challenges. That's what I hope to get into in January. As a long-time practitioner and reporter, I can see those problems quite clearly. 

Initial areas of focus? 

It's a bit early to say! But one thing I will say is that expansion into emerging markets is an important priority for the organization. I spent a lot of my career at Apple in China and other parts of Asia. That area of the world is just booming and presents some of the most egregious and challenging CSR issues I have ever seen. Looking at those issues coupled with extreme growth, one of the things I believe is that the role of CSR is very important and much of this stems from globalization. Some corporations are bigger than nation states in terms of annual revenues and their operations can have an effect in every corner of the globe. We need to harness that incredible economic activity towards good - then all of a sudden, you are not waiting for this or that jurisdiction, you have created a broad scope of sustainability action and that's what I want to see GRI do more of.  

Let's get personal......
Born in: The U.S., into a military family, so I moved around often and that includes 3 years in London (British accent now a little faded!)
Married: Happily

Kids: Two children, both married, my daughter, who has a beautiful little baby, is an attorney and my son just gained his PhD in Chemistry. They won't be joining us in Amsterdam but I hope they will come to visit.    

Top hobby: I am a cyclist. I have clocked up a lot of miles this year -  around 3,100, averaging 60 miles per week.
Fave movie: Captain Fantastic
Fave book: I am now re-reading several leadership books and I audio-read about 3- 4 books a month. I just finished Bruce Springsteen's autobiography, Born to Run and that's pretty good. I wouldn't say I have a favorite book but the leadership book I am reading now is one I would recommend to anyone. It's called It's Your Ship written by a former navy captain, and its message is essentially: take care of your people and they will do a great job for you. 
Fave music: I listen to Slacker, which doesn't work in Europe so I am going to switch to Spotify. I stream music constantly. I love the classic rock genre and also Indie style and jazz.

Fave ice cream: Rocky Road, of course.

Favorite GRI Performance indicator:  They are all good 😏

Last word from Tim: For me, all the positions I have selected in my career have been about making the world better. It's my cause and I want it to be my legacy. We often get mired in a lot of details and debates and argue about things, but ultimately we all want to move the world forward. It doesn't have to be a zero-sum game. I see my new role at GRI as a wonderful way to pursue my cause. 

And the last last word from me: 

I was inspired by my chat with Tim (as I have been from his writings and talks) and believe he will bring a new discipline to GRI. I am sure he is not a Slacker and though he might have a Rocky Road ahead, I expect he will make the GRI his Ship and end up being Captain Fantastic. I am looking forward to hearing more from Tim and supporting his progress in the new year. 

Wishing all the CSR-Reporting Blog readers an equally fantastic year ahead.... where the Rocky Roads are only the kind you eat.  
    

   



elaine cohen, CSR consultant, Sustainability Reporter, HR Professional, Ice Cream Addict. Author of Understanding G4: the Concise Guide to Next Generation Sustainability Reporting  AND  Sustainability Reporting for SMEs: Competitive Advantage Through Transparency AND CSR for HR: A necessary partnership for advancing responsible business practices . Contact me via Twitter (@elainecohen)  or via my business website 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 missing piece of the materiality puzzle

Earlier this year, I had quite a lot of fun as a GRI-appointed Quality Control Officer, whose role is to attend GRI training courses as an observer and report back to GRI if certified GRI training is being conducted professionally, competently and in line with GRI standards. This is fascinating for me, mainly because it's so interesting to hear what training delegates ask about and comment on during the course. In one session, a delegate asked the ultimate G4 (now GRI Standards) question - the very same one that I asked GRI Standards leading architect Bastian Buck of GRI, three years back:

Is it OK to write a G4 report with just one material issue? 

The answer of course is Yes and No.

Yes, because technically, if you have determined that your organization has only one material impact, then disclosing this and using GRI to report it does actually tick the box.

No, because, I believe, no organization can be so simple that its impact is entirely mono-dimensional. Even micro-businesses operate across more than one dimension. No business has just one stakeholder.

Behind this ultimate question, then, is the deeper consideration of how organizations define their most material impacts for the purpose of strategy development and reporting. It's not so much about whether you can ride the framework with one material issue; it's about the value you derive from understanding what's material for your business. 

Materiality and Strategy 

One of the positive developments following the introduction of G4 was the elevation of materiality from dormant to active in the minds of companies and reporters. Transitioning to G4 has generally appeared to cause companies to engage in some level of thinking about what's material and how to define it. In some cases, this has been a meaningful exercise where materiality is the result of insightful stakeholder dialogue and the precursor to a multi-year sustainability strategy and basis for reporting. In other cases, we are still seeing the disconnect - where companies have, on the one hand, a sustainability strategy and, on the other hand, a list of material issues that bears no resemblance to the strategy and a report which covers everything except what is deemed material. The next stage in materiality maturity is helping companies to see that this all plays out on the same playground. Sustainability strategy has to be the result of materiality analysis. Materiality can never be in a vacuum.

Materiality and Impacts
Which brings me to another interesting and highly geeky thing I did this week. I listened in on the GRI Global Sustainability Standards Board (GSSB) meeting (for the second time). It's fascinating to be a fly on the wall as the GSSB debates the different aspects of developing GRI Standards. I have to commend GRI and GSSB on full transparency here - all the meeting documents are available and the meeting itself is audio live-streamed (shame about the video!) - and it's a truly illuminating discussion... if you are a reporting geek like me.

One of the topics that came up this time around was the definition of materiality and the clarification of this in the new GRI Standards. GRI maintains that to date, people have "misinterpreted" the definition of materiality, and that the new terminology in GRI Standards makes this much clearer. GRI Standards 100:1.3 states: "Relevant topics, which potentially merit inclusion in the report, are those that can reasonably be considered important for reflecting the organization’s economic, environmental, and social impacts, or influencing the decisions of stakeholders. In this context, ‘impact’ refers to the effect an organization has on the economy, the environment, and/or society (positive or negative)."

In G4, material impacts were defined as follows:

In the GRI 100 Glossary of the GRI Standards, it is now clarified as follows:

A Sustainability Report should therefore report impacts OF the business and ON the decisions of stakeholders. It is not about the impacts of sustainability on the business. The guidance matrix in the GRI Standards remains the same in the GRI Standards is it was in G4 (though the colors have changed a little 😌) (NB: I remind you that a matrix is NOT necessary for GRI Reporting - a list of priority issues is perfectly adequate.)

This the application of this matrix - or specifically, the focus of each of the axes -  has commonly been misused in G4 reporting.

3M's 2016 Sustainability Report, for example, uses reputation on the Y axis and stakeholders on the X axis:

The Fedex 2016 Global Citizenship Report uses stakeholders and business success:

Both these approaches do not reflect the actual intention of the GRI framework. The GRI approach is designed to create a report that reflects impacts on the economy, people and planet. The shape and size of the impact of your specific business is key to defining your positive (or negative) contribution to society. The primary focus in sustainability reporting should be the size and nature of the impacts OF your business and how your business affects our lives. In the GRI Standards, that should now be crystal clear. The outcomes of the way your business addresses mitigating negative impacts or enhancing positive impacts is reflected in your reputation, business success and value creation.

In the conversation at the GSSB, where I was a fly, a concern was raised that some companies have spent fortunes on materiality assessments that include this measure of "importance to business success". "What should they do now?", was the question. Well, it's not the end of the world. There is some overlap. Quite often, these issues will naturally coincide. Almost always, in fact. But in the next review of material impacts, there's an opportunity to better align with the letter and spirit of the reporting standard (and stakeholder expectations).

Which brings me to the more important question: How do you prioritize material impacts?

Materiality and Prioritization

The big weakness in the GRI Standards is the lack of robust guidance for defining the process for prioritizing material impacts. GRI could have been prescriptive in this area. The GRI Standards omit the guidance that was contained in G4 around the stages of defining material impacts: identification, prioritization, validation and review. However, even that guidance did not prescribe a robust process for getting from the universe of many impacts to the fewer most material impacts.  Few companies, if any, actually report this process in a way that help us understand the voices that counted in prioritizing specific impacts.

It's easy enough to define the landscape of relevant issues. But the prioritization has often been reduced to a number-crunching exercise, where different groups give scores to different topics, the numbers are added up and voila - you have a matrix. The outcome of this process can vary widely depending on which voices you count, what weight you give to each voice, how each voice assesses the value of each impact and the weighting factors you use to roll that up into one coherent list of issues. These details are rarely disclosed by companies. The entire basis upon which material impact reporting rests is therefore not transparent and possibly, not robust.

Lloyds Bank publishes a Materiality Report.

The bank describes its process for defining material impacts:

This looks like an invested process. A universe of 50 issues was established. Representatives of six stakeholder groups (including employees as one group) took part in an online survey to rank the issues in order of importance. The online input was supplemented by the opinions of Lloyds external Stakeholder Advisory Group who provided "proxy representation on behalf of some of these groups". The responses were weighted according to "stakeholder group sample and data quality with priority given to direct feedback and Stakeholder Advisory Panel feedback". Then it was all rolled up into a set of 14 issues in 5 categories that appear to have equal priority as the most material impacts.

The issues look to be a reasonable mix of what we might expect a large banking group to prioritize at a general level. But they could also be the issues of any bank anywhere in any country. Trust in business, job creation, access to products and services, customer satisfaction - this tells me nothing about Lloyds Banking Group that is specific to that company. This begs the questions: How detailed was the initial universe of material issues? How was the weighting of stakeholder responses constructed?

Another bank, for example, presents a more company-sector specific picture. Westpac Australia's materiality matrix includes impacts such as positive impact finance, financial capability and empowerment, digital product and service transformation (an issue which is sweeping the banking industry worldwide for obvious reasons) and macroeconomic and demographic trends that are current in the materiality assessment period.

 

Westpac's matrix refers to impacts that are important to stakeholder and important to the business, but, despite this bank's detailed disclosure of stakeholder issues and responses, we are still left in the dark about the process used to assign prioritization to these top 18 material impacts. What influenced the positioning of the dots on this matrix? How were the different stakeholder inputs evaluated?

Next week, I will be presenting the findings of an analysis I performed on behalf of BSI, the UK's national standards body, of sustainability performance and reporting standards that are used predominantly today. The presentation will serve as a basis for dialogue at an event hosted by BSI to consider where standardization or additional focused guidance may assist companies in advancing sustainability performance and reporting. 

If materiality is central to reporting, does the process of defining materiality not merit greater structure and transparency? Good process, good outcome. But what is the process for determining materiality? Every company uses its own logic to develop a process that delivers a result. But if the process is flawed, then the result is flawed. How can we know that companies are reporting the most material issues? If the process is different in every case, the outcomes are not comparable. One of the recommendations I am tabling for discussion next week is that there should be robust process standards for the determination of material impacts. What do you think? I'd welcome your thoughts as we consider this fundamental question that goes to the heart of relevant corporate transparency. The actual event is fully booked with a long waiting list, so if you have a strong view, write to me here or comment on this blog. I am very interested to hear your views.

In the meantime, the good news is that companies are making efforts to define material impacts. Even an imperfect, undisclosed process is a start. As I often say, 80% of something is better than 100% of nothing.

 

elaine cohen, CSR consultant, Sustainability Reporter, HR Professional, Ice Cream Addict. Author of Understanding G4: the Concise Guide to Next Generation Sustainability Reporting  AND  Sustainability Reporting for SMEs: Competitive Advantage Through Transparency AND CSR for HR: A necessary partnership for advancing responsible business practices . Contact me via Twitter (@elainecohen)  or via my business website 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