The VITA Model for future Sustainability Leaders

And now for my third and final post about my adventures in Atlanta at the World Business Council for Sustainable Development (WBCSD) Council Meetings last week. I has to share this piece, as it's where everything comes together, and also, one of the most fun-important parts of the WBCSD activities. It's about the Future Leaders of our businesses and our sustainability efforts.

WBCSD has a fabulous program to educate future business leaders of the WBCSD member companies. It's a year-long program that provides tomorrow’s business leaders with "the skills and competencies to cope with an increasingly complex world as well as the social and environmental challenges across a changing competitive landscape."  Each year is themed, and the 2015 program is all about "scaling up business actions on climate change & improving the business case" with modules in the U.S., Hong Kong and Paris. Wow. Wish I were 10, 20, ok 30 years younger.

The 2014 Future Leaders Program (FLP) was populated with young up-and-coming mainly finance professionals from member companies and its theme was "Bridging the Capitals: Accounting for Natural & Social Capital in Business Decision Making".  25 young business people worked on this for a year, and delivered impressive outputs at the close of the program. In five teams, they worked on different aspects of the Bridging the Capitals theme and created reports that contain genuinely original and useful insights about reporting, measurement, materiality and more.

I highly recommend you take a look at some or all of these publications. I have read them all end-to-end and it was worth it.

Integrated Reporting in South Africa - From Concept to Practice: insights from interviews with South African reporting companies and investors.

Unraveling the Business Value Landscape: defining what value really means and recommendations on how to describe business value.

Integrated Performance Management: a quality approach to following through on sustainability commitments.

Sustainability - A new competence for financial leaders: a guide to help finance folks  understand, navigate and even influence the sustainability agenda.

Journey to materiality- A guide to achieve corporate goals by applying materiality to environmental, social and governance issues: views and recommendations around the challenges of defining materiality.

One of the highlights of my week in Atlanta was being asked to present my perspectives and insights  as an "expert" to this group. It's always nice to talk to young leaders and help shape their journey. Thinking about this, I wasn't quite sure what I could usefully add, given they were at the end of a year-long learning process. What could I tell them that they hadn't already heard? What could I add that could shape their journey further as they prepare for re-entry into the workplace with new sustainable-business shaded lenses? So, I used my trusty fall-back. When all else fails, build a model. In this case, I created a simple model designed to help these impressive young leaders remember to apply their learning as they grow and develop in their own professions. I called it the VITA model. Vita, according to the dictionary, is a biography or a resume. Quite fitting, I thought, because what I wanted to leave with the FLP participants was a thought about what they would want to see on their resume in 20 or 30 years time. What is the legacy of business activity they want to be proud of? How will their sustainability orientation show up in that 2030 resume? The VITA model has four main tenets:

VALUE – IMPACTS – TRANSPARENCY – ACCOUNTABILITY

VALUE:  It may still be of value even if it you can't put a money number on it.

IMPACTS: We must talk impacts not actions and get better at defining them.

TRANSPARENCY: Transparency is not the goal, relevant transparency is the goal.

ACCOUNTABILITY: The finance function must be accountable to all its stakeholders.

In talking to these points, I shared some true (and in some cases, quite incredible) stories from my own experience as a business person over thirty years, and from my work with clients (no names named!).  I won't fill up this post with stories ... but I will comment briefly on each part of the model.

VALUE:  It may still be of value even if it you can't put a money number on it. Essentially, here, despite a week about capitals, costing externalities, measurement and metrics, I couldn't help but make the point that not everything can be quantified scientifically. For example, the impact of corporate culture. Sure, we can measure employee engagement, retention, attrition, satisfaction, development and even conflict in an organization, and we can measure the cost of non-compliance or non-ethical conduct to some degree, but can we truly measure a the money value of a culture that is ethical, open and empowering? In corporate cultures where there are aspects of complicity, lack of freedom to express new ideas or lack of respect for human worth, the ripple effects are far-reaching but we don't know exactly how to count them. As young leaders, especially ones with a head for finance, it is crucially important to remember that, at the end of the day, business is just people trying to survive and thrive. Valuing them and valuing values is just as important as valuing value. Even if you can't count it.  

IMPACTS: We must talk impacts not actions and get better at defining them. I have said this many times, and often refer to "shopping-list" reports where I get what companies did but I didn't get what difference it made. Companies, and finance experts in companies, are soooooo good at calculating the last cent of the return on a capital investment. Yet companies are proud to say they donated (or even invested) tens of millions of $ in the community when they have no idea what a difference it made. We need to get better at why we are doing stuff and what impact we are trying to have. The ways of calculating impacts are partly about money but also about a range of intangibles that affect people lives which are harder to calculate. But that doesn’t mean we should ignore these impacts or even attempt to define them in at the planning stage. 

I work with a company called Netafim. Netafim is a world leader in drip irrigation – a climate-smart agricultural process that enables better yields, using less water and less fertilizer and less energy. The economic cost benefits of drip irrigation can be calculated and in each market, Netafim has amassed a range of data that supports and quantifies the environmental and economic impacts of using drip irrigation. However, there are also many intangibles. How do you factor them into the equation? How do you design them into the planning?  Rachel Shaul, the Marketing Director of Netafim went to Gujarat in India to talk to women farmers as part of a research project. Women's empowerment is a big thing in smallholder agriculture. The impact of using drip irrigation for them was the possibility of sending their kids to school, being able to buy a house for the first time or the ability to help other women become independent and self-sufficient. 

from Netafim Sustainability Report 204

How do you calculate the impact of that? Can you monetize that? Where would that get prioritized in the allocation of resources? Are these kind of impacts defined up front or are they a by-product that happens by doing business differently? Intuitively, supporting women smallholders makes sense. Objectively, data shows their economic situation improves. But how are all the other impacts on  the quality of their lives calculated? When you are looking at the difference your company makes, these are the sort of things that should also be understood more deeply and taken into account. We must get better at defining impacts in economic, social or environmental terms. We must get better at getting clearer about how a company is changing the world. And we must plan more holistically to deliver the impacts we desire to deliver. Some of that is about money, some of it is not.

TRANSPARENCY: Transparency is not the goal, relevant transparency is the goal. Everyone talks transparency, everyone believes that transparency is the goal. Everyone thinks that if they cram as much information as possible into a sustainability report or a website, that they will improve their reputation. Well, that may be. But in this world of overload, and with the increasing complexity of business, we don't need or want to know EVERYTHING. We want to know the most important things. How are those things defined and by whom? It's not easy. A materiality process can be designed to deliver the results you want to achieve. Getting granular and relevant on materiality requires good engagement. Engagement does not mean sending out a survey or having a meeting about your next contract with a supplier. Engagement means truly understanding the measure of impact you are having in a specific context and looking for the business risk and opportunities associated with that. 

ACCOUNTABILITY: The finance function must be accountable to all its stakeholders. As finance managers or business leaders, who are your stakeholders? Who is affected by the impact of your decisions?  Employees, of course. Management and their ability to advance positive reputation for your company and support business success, of course. But beyond that? Who do you have an impact on? What are the policies that you create that have an impact on society, the environment, the well-being of communities? How you establish investment policies, payment terms, restructuring frameworks and more? These all have an impact on the lives of people. This is often highly relevant when businesses undergo restructuring. The key partners in any company that manage processes such as these are the Human Resources and the Finance teams. We decide, with our policies, whether people have a future or what kind of future they can start to plan. It's that simple. 

U.S. Census data shows that more than 7 percent of American workers fell below the poverty line in 2012. Similar figures show up in Europe. Workers. Not people sitting on a beach somewhere. Workers. Going out every morning to a job and coming home and not being able to maintain a decent standard of living. Who's responsible for that ? HR? Finance? No-one? The competitive landscape? In the post-2015 agenda, the UN has begun to talk about eradicating poverty. Business has a role to play here, and so do finance managers and other business leaders. Who are your stakeholders? Are they the working poor? Or are they your management who wants to make more profit and show a better balance sheet? Of course a business must make money, profit is crucial to any business. But ultimately finance and business managers must be accountable for the impacts of their decisions, policies and actions on the way people live. And these elements must be factored into day-to-day decisions as well as in the bigger strategic directions. This means considering all stakeholder impacts up-front in the decision-making process, and not just about balancing a budget. As well as considering the long-term impact of doing business in a world where poverty is omnipresent. Behind every number is someone's life. This isn't about the financial crisis, or big events that need big responses. This is about the day-to-day of our jobs and how they have an impact on stakeholders.

That was pretty much my message to these young leaders. VITA: Value, Impacts, Transparency and Accountability. That's the legacy. That's the 2030 resume. You'll notice that most of what I said was about people not about money and not about numbers. As young business leaders, this group has the power to make change and impact people's lives for the better. They can drive a different way of doing business that is led from a new vision, a new way of thinking about the role of business in society, a new way of creating value and a new way of being accountable. In some cases, that means accounting for externalities. In other ways, it means being a decent person and making decent decisions. It always means knowing what impact you are having on all your stakeholders.

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Finally, with this third and final piece in a trilogy of posts, I want to extend my personal thanks and gratitude to the folks on the WBCSD team that totally impressed my with their dedication, drive and skill and made me feel so welcome. Triple fudge with sprinkles to Rodney Irwin, Anne-Leonore Boffi and Susanne Feinman.


PS: One thing can't resist adding. I was very pleased to see in Peter White's (WBCSD COO) plenary presentation about WBCSD priorities, that he mentioned my company, Beyond Business Ltd. Hahahahah. Well, he didn't really. But it looks like he did. Or maybe it's just a case of "great minds think alike"!

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).  Check out our G4 Report Expert Analysis Service - for published G4 reports or pre-publication - write to Elaine at info@b-yond.biz to help make your G4 reporting  even better. 

The G4 technobabble of Aspect Boundaries

One of the things that appears challenging for many reporters in G4 requirements to define material Aspect Boundaries. I just had a query on that this week from another consultant who is working an a client G4 report.  Here are the GRI disclosure requirements:

When you get past the techno-babble, you can see that reporters are asked to state the locations where material impacts occur. It's fairly easy to assume what was in the minds of the GRI G4 designers when they put this together. It's like this. Not all impacts are equal, and not all impacts are relevant to all parts of an organization. Some have an impact outside the organization, and, taking a value chain approach to sustainability, it's important to identify where your organization is accountable even though it is not directly in control. The GRI FAQ states: "Listing entities outside of the organization where impacts related to material Aspects occur, is the first step for reporters to show that they are aware of these impacts in their value chain."

One of a few examples in the G4 implementation manual refers, for example, to child labor in the supply chain. 

While child labor may be strictly controlled in direct company operations, it's much harder to control in the supply chain and the relevant material impact may be pinpointed there. The G4 expectation, therefore, is that companies would specifically identify impacts that occur outside the organization as well as inside, making a distinction between the two, so that stakeholders can be appropriately informed. 

At some level, this makes sense. It's part of the G4 transformation that requires companies to actually think about their material issues rather than auto-list boilerplate issues that mean everything to everybody. Now, reporters should think about who is affected outside the factory gate as well. Companies which analyze their material issues right down to specific localized impacts will probably have a better foundation for addressing the risks of  such issues and engaging more closely with local stakeholders to inform a strategic approach.  

However, this is proving to be rather challenging for many large reporters at a global level. Responses to G4-20 and G4-21 are lacking depth and showing signs of box-ticking in a way that undermines the true value of this kind of disclosure. Remember that the Aspect Boundary relates to a material Aspect, and each material Aspect requires a DMA - a disclosure on management approach describing why the Aspect is material and what the organization is doing about it. G4-20 and G4-21 are effectively extensions of the descriptions of the most material issues.

Material issues are not that simple, however. Almost every material issue that has an external impact also has an internal one and vice versa. Companies are having a hard time understanding the distinction between the two. The default seems to be that everything impacts everything and everybody and all company entities are affected. In G4-21, there is also a requirement to state the geographical location where external impacts occur. Well. GRI might just have suggested an auto-response for this. The Universe. 

Insurance company Metlife's G4 2013 Corporate Responsibility report was just published. Take a look Metlife's response to G4-201 and G4-21 to a some of their material issues. 

As you can see, everything is both material internally and externally and impacting pretty much everyone everywhere. Stakeholder groups (not entities) have been noted against each issue. Entities have not been stated so we can assume everything applies to the entire organization. 

It's not so easy to define where impacts occur. Employment and diversity are noted as only material internally. However, in some cases, with large companies, the impact of a diverse employment policy can be quite significant in local communities.  Many of the decisions taken in the Human Resources Department have broadly-felt impacts on society. Check out my book, CSR for HR. The stakeholder view of people management goes way beyond the impacts felt inside the organization. Metlife confirms this in the DMA for this diversity:

The impact of a diverse organization is also felt at the level of customers and in communities. With operations around the world, and more than 65,000 employees, perhaps Metlife's hiring and inclusion policies are having an impact at local level. Or maybe not materially so. It's an interesting thought - one that is probably answered through engagement with local stakeholders.  

What about public policy? Metlife calls this  both an internal and an external impact. I can understand the external part. In the DMA, Metlife writes:

This seems to indicate that the impact is external, rather than internal. So where is the internal impact? Could it be that engaging in public policy requires an internal effort  by the organization to understand and maintain positions on public policy, ensure staff are appropriately trained, manage the internal adjustments required as a result of regulatory changes etc? Could it be the effect on profit of political donations? It's possible. But Metlife has not mentioned this internal impact in its narrative, focusing on the external impacts of regulation. The performance indicator supporting this material issue that Metlife reports is G4-S06 which relates to the number of political donations made -  maybe this is then both internal (expenditure/profit) and external (political influence). Either way, deciding the exact Aspect Boundary of this material Aspect is not so straightforward. 

Metlife is not the only one....

Banco Santander in its G4 Comprehensive report for 2013  report adds a nice little matrix (it's in Portuguese but we'll get the gist).

Everything is material internally and externally (red triangles) , with the exception of the positive impacts of the bank on society (black circle) - indirect economic impacts and local community impacts. These are not considered to have an internal impact. In addition, in the report's GRI Content Index, Banco Santander notes different stakeholder groups that are affected by the different impacts. But no differentiation is made between entities and no geographic location is mentioned. Oh, and this report was verified by Deloitte. 

Dow Chemicals in its G4 comprehensive 2013 Annual Sustainability Report also has a nice little matrix. Dow is a global company with 53,000 people and products manufactured in 201 sites in 63 countries. Try breaking down Aspect Boundaries for each of those entities.

At Dow, then, all material impacts are internally material. Only three material impacts are external as well, affecting broader society - product safety, health and environment protection and community success. Issues such as water, sustainable agriculture and climate change are not noted as materially important outside the organization. I wonder how this analysis was performed and how material issues such as climate change and sustainable agriculture are not considered to be  material externally. Oh, and this report was verified by ERM. 

H&M Conscious Actions 2013 Sustainability Report fares no better on G4-20 and G4-21. The response to these disclosures is a webpage. But the webpage is the GRI index page. So you get into a G4-20 G4-21 loop -  and you never get to the actual disclosure. That's one way of avoiding having to think about this rather messy disclosure conundrum. 

Oh, and the H&M report was verified by Ernst and Young.

CVS Caremark's 2013 CSR Report includes a little more detail in this table contained in the content index. It clearly states that internal issues relate to all CVS Caremark's operations in the U.S. and that externally material issues are predominantly in the supply chain in China. This is getting closer to the G4-20 and G4-21 requirement.

But, with 19 material issues, this summary goes only part way to fully providing the Aspect Boundaries for each material Aspect. Also, in all the external issues reported, the company is noted as one of the affected stakeholders. But the company is an internal stakeholder. Hmm. A bit confusing. 

GRI's own G4 report has a fairly clear approach. Although geographic locations are not noted, there are some explanations as to what's material to whom. Most of the material impacts occur both externally and internally.  

Overall, then, I am not finding responses to G4 Aspect Boundaries especially helpful in many of the G4 reports I have reviewed so far.  I think this just as much a flaw of the framework as it is with reporters who can't be bothered to think about this more meaningfully or simply don't know how to respond.

The idea is good. 

Companies should identify how and where their operations are impacting external stakeholders. 

It's quite simple really.

But, the roundabout rather convoluted GRI-techno-babble of G4-20 and G4-21 dumbfounds companies and is leading to a bunch of stilted and meaningless disclosures. It's also dumbfounding report assurers - all of whom confirm that reports are in accordance when these basic general disclosures are not adequately reported. 

In G5, maybe it would be simpler to have just one disclosure. Forget internal impacts. Everything the company externally does affects it internally one way or another. There's not much point in stating that everything affects employees. 

My suggestion:

G5-20: State how and where your business activities materially affect external stakeholders throughout your value chain. 

Voila! Plain, simple, clear, helpful and tecnhobabbly-challenged.

No?

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 www.twitter.com/elainecohen   or via my business website www.b-yond.biz   (Beyond Business Ltd, an inspired CSR consulting and Sustainability Reporting firm). Check out our G4 Report Expert Analysis Service - for published G4 reports or pre-publication - write to Elaine at info@b-yond.biz  to help make your G4 reporting  even better.   

Sustainability with Passion

The Novus International 2012 Sustainability Report, the fifth annual report of this billion $ privately-owned company was published recently online. 

 

Novus International, Inc. is a provider of health and nutrition solutions for livestock, poultry, pets and people, headquartered in St. Charles, Missouri, U.S.A., employing more than 800 people in over 50 countries and serving more than 3,000 customers worldwide in over 100 countries. Novus operates facilities including corporate offices, research and development laboratories and manufacturing operations, as well as smaller offices with field staff in most local markets. Working from a strong base of scientific understanding and technological innovation, Novus has brought more than 100 new products to market over the past decade, contributing consistently to sustainable animal agriculture production and global food security while growing revenues and global presence. The Novus pledge is a Triple S Bottom Line – Solutions, Service and Sustainability.

 

I am particularly happy to blog about Novus, because (here it comes... disclosure >>>) Novus has been my client for some years now and I have been involved in developing and writing the 2012 report, as well as prior reports for 2011 and 2010. In preparation for the report, I interviewed around 50 Novus executives (including the CEO who is directly involved and passionate about Novus's sustainability journey) and many staff all over the world, and some external stakeholders, and collected data from over 10 manufacturing, offices and research sites. The thing that always impresses me each year about working with Novus is the absolute clarity that all the people in the organization have about their company's mission and purpose, and the passion with which they talk about their role in advancing the mission. When I asked Thad Simons, the President and CEO of Novus, about his major achievements as CEO over the past few years, without hesitation, he talked about creating an organizational culture that supports the sustainability mission - "building Novus with a sense of purpose and passion and a service culture". A CEO who leads a sustainable culture is a CEO who creates a sustainable business. Novus has grown year on year and makes a significant contribution to advancing sustainable food and improving food security in many ways. This approach is paying off!

 

The highlights of the Novus 2012 Sustainability report are to be found in the approach to reporting as well as in the data and information presented. For the first time, Novus includes a description of the organization's value chain, which shows where and how Novus generates triple bottom line impacts. Also for the first time, each section of this report is presented personally by the managers and staff who lead the organization. In each section, a Novus person tells her or his story, in her or his own words. For example, the Human Resources VP and Director talk about how they are advancing this prized organizational culture, and different managers talk about their experience in nurturing partnerships to advance sustainable solutions, while EHS Managers talk about sustainable design of offices and working spaces (Novus has a LEED Platinum certified HQ which has won several awards). The insights shared by Novus people  - the narrative is what they actually said,  not professionally copy-written texts  - are what makes up the Novus story: information and data combined with the personal contribution, leadership and drive of all the individuals. Supplementing the written narrative are several short videos, prepared specially for the report, which give you, report-users and stakeholders, a chance to see the faces behind the names and experience the passion beyond the written word. 

 

At GRI B level, GRI-checked Sustainability Report, Novus is not short on transparency either, and this report includes evidence of good performance. For example, energy consumption in production operations reduced by 5.7% in 2012, and safety performance continues to be well above industry averages with an injury rate of 0.48 per 100 employees (compared to a rate of 3.8 in all sectors in the U.S.).

One of the highlights in helping prepare the report for me is the Novus employee wellness program - see insights from Judith Thelwell who manages the program. For years, Novus has been demonstrating leading practice with one of the most comprehensive and highly engaging employee wellness programs around, that offers practical benefits for employees, and financial benefits for both employees and the company. This is a vibrant program which enables employees to engage in health and fitness related activities and earn benefits for doing so, beyond the personal benefit to their own health. In my discussions, I chatted with Andy Critchell, who works in IT Systems at Novus, (read his insights, too, in the same section), and his story was very moving. Diagnosed with diabetes, Andy had to make some serious life changes. The accessibility of Novus wellness benefits helped Andy take control and actually terminate medication for his condition. Without me even having to ask, he confirmed that this actually makes him a more productive employee. This conversation brought home to me, once again, the massive impact companies have on the lives of individuals, and the force for good that companies can become.

Another inspiring part of this report is the section on Valuing Partnerships. Novus works in partnership in almost every area the company is involved in. In fact, partnership development is a core competency of Novus, whether this means global partnerships to effect major transformation - such as the collaboration with the International Egg Commission (IEC) to advance the consumption of eggs as a low-cost, highly accessible source of nutrition (read Joanne Ivy's insights - she's President of the IEC), or specific local partnerships, such as a multi-stakeholder public-private partnership in Chad, to help build a $50 million industrial poultry production facility which will provide around 30 percent of the country's poultry needs and contribute substantially to food security in that country. This partnership includes the Chad government as well as a Novus customer, Globoaves, and a financing partner, working together to provide affordable, wholesome food for the Chad population and improve the quality of their lives. Read insights from Luis Azevedo about how all this came about. Partnerships are at the heart of sustainability. Companies who know how to collaborate in the true spirit of partnership are the ones that will be around for many years to come.

Please take a look at the Novus report and as always, give feedback.

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