GRI special report

Sustainability reporting gains worldwide momentum

Her Majesty Queen Rania Al Abdullah of Jordan announced the formation of the Arab Sustainability Leadership Group (ASLG), which will 'be the region's voice on the global stage, ensuring that the Arab world not only catches up, but keeps pace with the front runners in the field of sustainability'. The network, launched during Queen Rania's keynote address at the Amsterdam Global Conference on Sustainability and Transparency held in May 2008, is the first of its kind in the region and brings together 16 representatives of companies and NGOs spanning five countries in the Middle East.

Acknowledging the important role that business plays in addressing social and environmental challenges and the need to build trust and illustrate integrity, Queen Rania encouraged companies to chart their progress and outline their goals in a sustainability report. Citing the recent Edelman Trust Barometer survey, she remarked that when consumers consider companies socially responsible they are more likely to buy their products, recommend them, and invest in them. The same survey, however, noted that less than half of the respondents trust companies to do 'what’s right'.

Sustainability reports provide companies with the means to prove they are being responsible, accountable and transparent. 'For companies that want to remain competitive, [sustainability reports] are crucial,' said the Queen.

While commenting that sustainability reporting is still in its infancy in the Middle East, Queen Rania remarked that progress was being made: 'In our part of the world, sustainability is more than a concept but it's not yet a culture. But there are some encouraging signs that reporting is beginning to take root in our region’s business landscape.'

She went on to highlight recent developments in sustainability reporting including the first Global Reporting Initiative (GRI)-checked report by Aramex, an express operator based in Jordan, and the Jordan River Foundation, an NGO founded and chaired by Queen Rania. Also singled out were private equity firm Abraaj in Dubai and NCB, the largest bank in the region, both of which are committed to producing GRI-checked reports later this year.

Queen Rania also pledged to spotlight the issue of social equity as leader of the ASLG. Highlighting recent statistics from the region where 60% of the population are under the age of 30, 6 million children are not enrolled in schools, 9.2 million are illiterate and one in five lives below the national poverty line, the Queen gave examples of initiatives directed at the development of facilities for children and urged delegates to consider the plight of young people in the Middle East. 'We must put the young people of my region at the top of our boardroom agendas because a world where so many youth are hungering for opportunity is not a sustainable world.'

She paid tribute to the leadership of the GRI which has been successful in 'navigating the restless waters of non-financial reporting so wisely, calmly and confidently', and in producing the world's most widely used sustainability reporting framework. The Queen urged the business world to 'let conscience be your guide' and commit to sustainability and reporting.

GRI's growing stature and size were two points also made by GRI chairman

Mervyn E King in his speech at the conference. Remarking that the concept of GRI was born 10 years ago, King said that 'establishing a dialogue with stakeholders became the defining characteristic of GRI'; a notion still firmly rooted in the organisation today and 'distilled into the framework of G3' - the latest set of guidelines published by GRI in 2006 and currently used by over 1,500 companies worldwide.

Even if companies are not yet using the guidelines, interest continues to be high, said King, pointing out that the Swedish government's announcement in November 2007 that its 55 publicly-listed companies produce GRI-checked reports may pave the way for other governments to follow suit. 'We have passed the stage of just talking about sustainability,' he said.

Turning to the launch of the GRI Readers' Choice Survey Report, commissioned by GRI and issued by KPMG and independent think‑tank SustainAbility (see page 10), King asked what stakeholders most want from sustainability reports. He cited the purchase of products and services as well as investments in the company as key decisions made by users of sustainability reports but remarked that stakeholders are still sceptical that both good and bad aspects of the business are fully reported. Business leaders, he noted, should make it a requirement to publish a 'warts and all' report. 'In my judgement, if we can’t do that, are we steering a company in the right direction?'

Without a fit-for-purpose sustainability report, he concluded, users are unable to find the forward-looking information they need from a company in order to make informed decisions.

'We know that the balance sheet is a snapshot of a moment in time. It doesn’t tell the true story of the economic value of a company. For that, some assessment of future earnings is required [through assessment of] reputation, brand, the quality of governance and management, and the strategic thinking of the company, all shared with stakeholders. That is what users are looking for.'

Taking the lead in sustainability reporting among local authorities, the City of Amsterdam, venue for the conference, has published its second sustainability report. Opening the conference, the Mayor of Amsterdam, Job Cohen, said that reporting was not just to provide an account to citizens and members of the city council but also 'inspire both the readers and their authors, and to challenge them to be creative and come up with new ideas'.

To illustrate the wealth of knowledge and expertise nurtured within the city, the Mayor referred to the Amsterdam South Axis where ABN AMRO Bank and the Free University of Amsterdam have set up a project called Amsterdam Bright City, an institution charged with creating inspiring, forward-thinking and innovative solutions to improve the quality of life in the city. Delegates were also informed of the myriad climate-change projects undertaken to lessen the city’s impact on the environment. Key among them is the decision taken by the municipal authorities to have 40% fewer carbon dioxide emissions in 2025 than in 1990. He added that the city government was also working to become a climate-neutral organisation by 2015.

These ambitions, said the Mayor, can only be achieved with the full cooperation of residents, businesses, academic institutions, housing corporations and social organisations. New measures to cut down on emissions will be introduced including an environmental zone that limits polluting vehicles, and the use of canals and trams for goods transportation. The city is also working with the IT sector to reduce electricity consumption and is at the forefront of waste disposal. Sustainability, said the Mayor, is a dynamic concept at the heart of which 'lies the necessity to improve the quality of life in our city and, if possible, in the rest of the world'.

His words were echoed by Bert Koenders, Minister of Development Cooperation, The Netherlands, who said that climate change had forced a rethink on how best to address health and environmental issues worldwide. In a speech focusing on the major challenges facing the planet, the Minister said that developing countries will need help and support in tackling social and ecological concerns.

Supporting the work of the GRI and the use of the G3 guidelines, the Minister said that 'awareness and appropriate information [through sustainability reporting] are prerequisites for action and motivation'. He commented on the publication from 2004 of an annual transparency benchmark ranking 175 listed and non-listed large companies in The Netherlands, adding that comparisons regarding the level of transparency on their social and environmental behaviour are useful. 'I believe there is a positive experience in benchmarking, which enables us to identify best practice and encourages companies to assess themselves and improve their performance.'

He urged the need for the global business community and governments to work together to consider sustainability issues. He concluded that the large number of delegates attending the conference was testimony to the growing momentum in sustainability reporting and stakeholder dialogue worldwide.

Readers' choice survey: results

Ninety per cent of sustainability report readers agreed that their views of a company had been influenced by reading its report, with 85% of these reporting a more positive perception of the company, according to a survey report, Count me in: The readers' take on sustainability reporting, released by the Global Reporting Initiative at its 2008 global conference on sustainability and transparency held in May 2008 in Amsterdam.

The survey, which garnered responses from around the world, was commissioned by GRI and undertaken by KPMG Netherlands and UK-based SustainAbility. It found that publishing information on sustainability performance had a strong positive impact on readers' perceptions of a company and added value to the corporate brand. The report, based on the findings of the largest ever global survey of readers and non-readers of sustainability reports, offers an insight into their views of such reports and their value and what prompts them to read and use, or ignore the reports.

Wim Bartels, of KPMG Sustainability, who with Judy Kuszewski of London-based SustainAbility, wrote the report, said, 'We found the clarity and consistency of these findings surprising. They suggest that not only do audiences for sustainability information exist, but that they are keen to understand and are open to being influenced by reports.'

'Indeed, the often-cited contention that reporters cannot possibly satisfy many different stakeholder groups may need to be revisited,' he added.

Wim Bartels reported that readers want to be involved and engaged in reporting and management, and they do not just want to see issues covered, but wish to be informed how these issues are translated into the company’s everyday actions. Bartels added that 80% of readers believed that a good sustainability report would reveal a clear link between sustainability and business strategy, showing the impact of the company's business activities on its sustainability agenda. A real and demonstrable commitment to sustainability should be shown by a thorough stakeholder engagement process, a clear link to business strategy, targets and results with explanations, and a balance between good and bad news.

'Readers ask for a genuine open process,' added Bartels, 'emphasising results and presenting then honestly.' But he acknowledged that readers remain of the belief that corporate failures may still be missing from reports.

GRI said it was also taken by surprise by the consistency of readers' opinions across all groups of respondents. Respondents who identified themselves as individuals or members of the business, not-for-profit, and investment communities, all agreed on the elements that should be presented in a report and agreed that a company's ability to establish a link in the report between its sustainability strategy and its core business strategy was of the utmost importance, with emphasis on how sustainability was translated into day-to-day actions. Readers also viewed adherence to sustainability reporting standards and telling a balanced story, which included both good and bad news, as critical to building trust and credibility. Ernst Ligteringen, GRI's chief executive, said, 'Openness in disclosing economic, environmental and social impacts can give companies a competitive edge, but people aren’t fools. They read these reports with a purpose and they want the truth, and particularly the whole truth, not just selective reporting where their performance is good. As more companies use sustainability reporting to provide information on how they are responding to pressing concerns like climate change and supply chain issues, it’s important for companies to create these reports with readers in mind.'

What is the GRI?

Count me in: The readers' take on sustainability reporting, together with the first GRI Readers' Choice Awards also announced at the conference, suggest that sustainability reporting is maturing and becoming the norm rather than the exception, says the GRI. The GRI was formed by the Coalition for Environmentally Responsible Economies (CERES) and the United Nations Environment Programme (UNEP) in 1997. In 2002, at the World Summit on Sustainable Development, GRI became a permanent institution as a Foundation, now headquartered in Amsterdam.

The GRI is the steward of the most widely used business reporting framework for performance on human rights, labour, environmental impact, anti-corruption, and other corporate citizenship issues. Today, more than 1,500 organisations in over 70 countries have declared their use of the GRI Reporting Framework, the latest of which are the G3 guidelines. GRI is a network of thousands of individuals from over 60 countries from business, civil society, labour and professional institutions, that governs the organisation and creates the content of the Reporting Framework through a consensus-seeking process. The network is open to those who wish to use the Reporting Framework, access information in GRI-based reports, or contribute to the GRI mission in other ways, both formal and informal.

The GRI's vision is that stakeholders will increasingly need disclosure of economic, environmental, and social performance, and sustainability reporting will become the normal expectation for all organisations.

The pain and gain of sustainability reporting

Embarking on the road of sustainability reporting can lead to 'real corporate pain' for those companies who choose to subject themselves to the scrutiny of stakeholders and pressure groups, acknowledged BBC World's Nik Gowing, moderating the BBC World Debate on sustainability reporting at the GRI’s International Conference on Sustainability and Transparency in Amsterdam. One thousand delegates attending the debate heard Gowing cite the example of Dutch multinational electronics giant, Philips, which in spite of its commitment to sustainability action and reporting, was recently rated a lowly 17th out of a group of 18 electronics companies by Greenpeace and criticised for its allegedly low levels of recycling and how it deals with waste.

But there is an extremely strong business case for sustainability argued BT Group Plc chairman, and debate panellist, Sir Michael Rake. However, he stopped short of calling for mandatory reporting and added that without companies seeing the need to embrace sustainability as an integral part of their business strategies, reporting alone could not of itself achieve the desired result of reducing the negative impact of corporate activity on the world and its communities. 'The real issue here is to make the business case. Just reporting does not mean the company has strategically embraced the issues,' he said. 'Start with the business case… get that right and the reporting can become meaningful. It’s better that you make a difference and then have clarity in reporting on it afterwards,' Sir Michael argued.

Alessandro Carlucci, CEO of Brazilian cosmetics giant, Natura, denied that embracing sustainability is a business risk and sees full sustainable disclosure, 'as building good business practice', and transparency as essential. 'We must share everything, including the bad,' he said, having committed his own company fully to reporting on the negative as well as the positive impacts of its activities. 'It doesn’t mean that we don't have problems, but we really feel that we should be transparent.'

But for Bruno Prior, who runs his own renewable energy company Summerleaze, sustainability is about delivering sustainable products as efficiently as possible. He accused some who produce sustainability reports of 'dressing it up' and making the reports more like advertising brochures. Arguing that sustainability reporting is a costly and unnecessary burden, he believes that many companies do not have the necessary information and knowledge to report their sustainability accurately and claimed that BT's recent claims to have reduced its carbon footprint by around 60%, based on buying zero carbon electricity, may not have achieved the level of carbon savings that one would have initially anticipated. Sir Michael Rake insisted that BT was absolutely serious about its environmental responsibilities and fully committed to sustainable means of doing business. Natura's Carlucci, while acknowledging that it could be difficult for companies to be frank, denied the suggestion by Gowing that some companies might be tempted to manipulate data and emphasised that his company was fully committed to sustainable business, and that senior officials in the company were fully behind the strategy and would not permit such activity.

Sustainability is being driven by active consumerism said Maud Olofsson, Swedish Minister for Enterprise and Energy, and Deputy Prime Minister of Sweden, and consumers will ask for much more than simply economic figures. She argued for the benefits of compelling state-owned companies in Sweden to report transparently on their environmental and social impact but acknowledged that such reports may not be perfect. She acknowledged that many ordinary consumers may not read the reports but argued that the reports would be read by pressure groups and journalists who would communicate their contents to a wide range of interested stakeholders and investors.

However, Florida is not yet shifting its investment in accordance with sustainability reports, conceded Alex Sink, Florida’s CFO. Agreeing with Olofsson, that some information was better than no information, Sink said that Florida was just at the 'front end' stage of analysis of sustainability and that because financial reporting alone produced historic data about past performance, it was critical to investment decisions to have information about whether companies are taking advantage of new opportunities and thinking about the future. She admitted that in the US there was no requirement to offer any information on the sustainability of a business but supported closer scrutiny of companies and a consistent policy on sustainability reporting, possibly under the auspices of the SEC.

But while acknowledging that sustainability reporting was a step in the right direction, Gerd Leipold, executive director of Greenpeace International, said, 'we are moving away from sustainability at a rate never before in human history. We are desperately moving away from solving the climate crisis.' Sustainability reporting was not the same as sustainable development he argued. 'Reporting that pretends everything is fine, we're doing well, is a lie.' But Leipold agreed that Greenpeace supported reporting and accepted that many companies were taking it seriously. He said that the good intentions were there, and that reporting was an important tool but did not reflect reality. However, he agreed that having reports was better than having none and that they offered the opportunity for debate. 'The figures are more important than the nice pictures. If we want a 50% reduction in greenhouse gases, how will we measure, unless we have reporting as countries, as companies, as individuals?'

But, said Sir Michael Rake, this is not going to be solved by business on its own. 'We have Kyoto. We have the growing countries of India and China with a huge need to create wealth. The only way this can be resolved is by a coalition of governments, business, and individuals. We have to have a Kyoto 2 because what business also wants is a level playing field… There is a need to recognise that business on its own can't solve the deteriorating aspects of the climate.'

Brazilian and Indian companies reap lion’s share at GRI readers’ choice sustainability awards

At the inaugural GRI Readers' Choice Awards ceremony for sustainability reporting in Amsterdam on 7 May 2008, Petrobras of Brazil won best report from all stakeholder groups, with other Brazilian and Indian companies crowding the award winners roster. This is the first time the GRI has held sustainability reporting awards, with the award winners being judged by readers rather than a judging panel of experts. To select the awards, GRI invited readers of sustainability reports to vote for the best reports based on their needs and preferences. More than 1,700 readers in 70 countries participated in the scoring process, evaluating 800 reports from 50 countries.

GRI chief executive, Ernst Ligteringen, said, 'People want to know how the companies they buy from, invest in, and work for, are addressing the pressing issues of today. They are taking note of those who are providing the best information and rewarding them.' GRI expressed itself to be delighted by the large number of responses from emerging markets, saying that this proved 'sustainability reporting has become a truly global concern'. 'It is heartening to us that so many new voices have been heard. They are rightly proud of those companies and groups who are leading with transparency and accountability in their region,' said Jacqueline Aloisi de Larderel, chair of the Readers' Choice Awards Integrity Committee and former assistant executive director of the United Nations Environment Program (UNEP).

GRI Readership Group Awards

Best Report, All Stakeholder Groups

Scores from all readership groups (media, investors, employees, civil society, and ‘just me’) were totalled and the following three reports came out on top:
Winner: Petrobras (Brazil)
Finalists: Banco Real ABN (Brazil);
BP Group (UK)

Best Report, Media

Journalists and other media professionals chose the following reports for this award:
Winner: Gas Natural SDG (Spain)
Finalists: Italcementi (Italy); TGC-5 (Russia)

Best Report, Financial Markets

Investors, analysts, rating agencies and other professionals in the financial market industry scored the following three reports highest:
Winner: ABN AMRO India (India)
Finalists: Banco do Brasil (Brazil); Banco Real ABN (Brazil)

Best Report, Employees

A company's own employees could score its report. Employees at the following three companies put their employer on top of the field:
Winner: ITC (India)
Finalists: Usinas Siderúrgicas de Minas Gerais (Brazil); ABN AMRO India (India)

Best Report, Civil Society

People working in non-governmental or civil society organisations evaluated the following three reports as top in their class:
Winner: Petrobras (Brazil)
Finalists: Natura Cosmeticos (Brazil); BP Group (UK)

Special Award Categories

Best Report, Non-Business
All reader group scores were added to put these three non-profit and/or public organisations reports on top:
Winner: Fundación Empredimientos Rurales Los Grobo (Argentina)
Finalists: City of Melbourne (Australia); CILSA (Argentina)

Best Report, Not-So-Big-Business

Sustainability reporting is also important for smaller businesses. Scores from all reader groups were totalled to put these three reports top of the list.
Winner: Frigoglass (Greece)
Finalists: Findesa (Nicaragua); Euskatel (Spain)

Best Report, Non-OECD Company

A special category was created to reward the highest scoring report, across all reader groups, from an organisation located in a non-OECD country:
Winner: TGC-5 (Russia)
Finalists: Usinas Siderúrgicas de Minas Gerais (Brazil); ITC (India)

The GRI Readers' Choice Awards 2008 were assisted by Awards Partners, KPMG, acconia, ACCA, Rabobank, TATA Consultancy Services, and SustainAbility.