Sustainability --A Business Imperative

Sustainability --A Business Imperative
By William R. Blackburn Advanced Topics in Corporate Environmental Management Bren School of Environmental Science & Mgmt University of California Santa Barbara, CA October 19, 2012 ©2012 William Blackburn Consulting, Ltd.

Our Discussion Today Practical Meaning of Sustainability/ Social Responsibility (consensus from GRI, ISO, Conf Bd. Study) Implementation; Integration of Sustainability into Business Operations (The Sustainability Handbook; ISO Std.) Sustainability/CSR Reporting (GRI G4 Std., ISO Std.); Integrated Reporting ©2012 William Blackburn Consulting, Ltd.

What is sustainability? (and how do you determine that?)
©2012 William Blackburn Consulting, Ltd.

Defining Sustainability Obligations
Going beyond Brundtland Implied expectations (GRI, CSR Reports) Express expectations of global stakeholders Voluntary standards (ISO 26000, UNGC, Ethos Indicators, STARS, Star Community Index, industry standards, etc.) Mandatory integrated reporting standards (UK, S. Africa, France, Sweden, Denmark, et al.) 2008 Conference Board study Identified expectations of stakeholders from direct engagements NAFTA story—what do you think were their main concerns? ©2012 William Blackburn Consulting, Ltd.

Emerging Meaning of Sustainability from an Organizational View “The 2 Rs”
Values-driven management based on--- Respect: for people and other living things Resources: the wise use of economic and natural resources —for the purpose of sustaining and promoting the long-term well-being of the organization and society (including the environment). Not silos. Not collection of specific programs. Way we make decisions and do business. ©2012 William Blackburn Consulting, Ltd.

Sustainable Products & Services
Improve the efficient use of natural and economic resources along the product life cycle Provide greater respect and accommodation for the needs of people and other living things along the product life cycle ©2012 William Blackburn Consulting, Ltd.

Not Every “Green” Product is Successful…
Thomas Edison electric car Whirlpool Super Efficient Refrigerator Project (SERP); won $35 mil prize for eliminating Freon and improving energy efficiency, but size and pricing were wrong. ©2012 William Blackburn Consulting, Ltd.

What does it take to produce a successful sustainable product
What does it take to produce a successful sustainable product? Under what circumstances can you charge more? ©2012 William Blackburn Consulting, Ltd.

7 Lessons on Sustainable Products & Services
Customers will pay more for added safety of food and hygiene- and health-related products, and for a more natural living environment; some will pay more for lower life-cycle costs. Products and services for the poor must break barriers on cost/pricing either through low volume per unit, use sharing, or low-cost operations. Government mandate can create markets for green products and services. 3. Energy Star computers; green energy ©2012 William Blackburn Consulting, Ltd.

A small percentage of customers will pay more for a green product or service than a comparable non- green product purely for ethical reasons. Some customers will avoid products with a highly publicized social or environmental stigma as well as products from companies with such a stigma. 3. Energy star computers; green energy ©2012 William Blackburn Consulting, Ltd.

Some commercial customers will pay more for green products if they can gain a clear reputational advantage with their own customers or other important stakeholders. With those exceptions, a product’s social and environmental advantages and cause-based marketing are differentiating factors, not primary factors, to most consumers. ©2012 William Blackburn Consulting, Ltd.

One Key To Success: Knowing Market Segments
Dedicated Greens/ “Lifestyles of Health & Sustainability” (LOHAS) % Sympathetic, Pragmatic, Health & Wellness Greens – 25-35% Overwhelmed/ Procrastinators – 15-25% Unconcerned/ Other Priorities – 15-35% Survey Sources: -Roper -National Marketing Institute -Hartman Group -Landor Associates ©2012 William Blackburn Consulting, Ltd.

What topics, obligations does Sustainability entail?

Growing Global Multi-stakeholder Consensus on SR/Sustainability Scope
ISO SR Core Subjects GRI Sustainability Indicator Categories/Aspects Organizational Governance Governance Human Rights Labour Practices Labor Practices & Decent Work The Environment Environment Fair Operating Practices Society: Corruption, Public Policy, Anti-competitive Behavior, etc. Consumer Issues Product Responsibility Community Involvement & Development Society: Community Economic: Indirect Economic Impacts Economic: Economic Performance, Market Performance, etc. *Based on the GRI reporting guidelines and ISO SR standard ©2012 William Blackburn Consulting, Ltd.

The Conference Board Study Participants
Alcan, acquired by Rio Tinto Aveda part of Estee Lauder ©2012 William Blackburn Consulting, Ltd.

A Corporate Commitment to Sustainability (A Sample Sustainability Policy)
It is within the best interests of our company and society as a whole that our company move along the path to sustainability. To that end, we will strive to achieve the following vision of performance: 1. Economic success: the wise use of financial resources a. Company Economic Prosperity Our business is positioned to survive and prosper economically. b. Community Economic Prosperity We are helping our community survive and prosper economically.

2. Social responsibility: respect for people
a. Respect for Employees We treat our employees in a respectful, fair, non-exploitative way, especially with regard to compensation and benefits; promotion; training; open, constructive dialogue with management; involvement in decision-making; working conditions that are safe, healthy and non-coercive; rights of association, collective bargaining and privacy; employment-termination practices; and work-life balance. b. Diversity, Fair Hiring Practices We promote diversity and use employment practices that are fair, responsible, non-discriminatory, and non-exploitative for our employees, board members, and suppliers. c. Responsible Governance We manage our risks properly, use our economic power responsibly and operate our business in a way that is ethical and legal. d. Respect for Stakeholders We are transparent, respectful and fair to local populations, investors, suppliers and other stakeholders outside our organization who may be affected by our operations. We work collaboratively with our communities, governments and supply chain to enhance the well-being of others. e. Fair Dealing With Customers We are honest and fair with our customers, competing fairly for their business, anticipating their needs, respecting their privacy, and providing them safe and effective products and services under the conditions we promise.

3. Environmental responsibility: respect for life; the wise management and use of natural resources
a. Resource Conservation We conserve our use of natural resources to the extent practicable. b. Waste Prevention and Management We reduce to the extent practicable the volume and degree of hazard of the wastes we generate from our operations, and handle them in a safe, legal and responsible way to minimize their environmental effects. c. Environmental Risk Control and Restoration We minimize the risk of spills and other potentially harmful environmental incidents, restore the environment where damaged by us, and enhance it to better support biodiversity. d. Supply Chain Impacts We work with others in our supply chain to help ensure environmental impacts and risks associated with our products and services are reduced and properly controlled. e. Collaboration With Communities We collaborate with our communities to protect and improve the environment.

Examples of Economic Topics
Brand strength Capital expenditures Cash flow Credit rating Dividends Debt and interest Income Liabilities Market share Sales Profits Retained earnings R&D investment Return on investment Community donations Local purchasing Taxes Tax subsidies

Examples of Social Topics
Access to healthcare by the poor Anti-sexual harassment policies Antitrust practices Bioterrorism Board diversity Bribery and corruption Charitable donations Child labor Community outreach Consumer privacy Corporate governance Disciplinary practices Emergency preparedness Employee assistance programs Employee diversity Employee layoff policies Employee privacy Employee relations Employee shared values Employee training & development Employee turnover Employee wellness programs Employee work-life balance Employment Ethics Fair advertising and labeling Flexible work options Food product nutrition Forced labor Helping the disadvantaged Human rights (security policies, etc.) Impacts on local culture Indigenous rights Indoor air pollution Industrial hygiene Legal compliance on social topics Non-discrimination policies Occupational health Political contributions Producer responsibility Product labeling Product quality Product safety Product usefulness Securities regulation Supplier diversity Support for community services Transparent public reporting Union relations Worker violence Workplace safety

Examples of Environmental Topics
Air pollution Animal rights Biodiversity Chemical spills Compliance with environmental laws & permits Customer disposal of products Endangered species Energy conservation Environmentally sensitive design Greenhouse gases Natural habitat restoration Natural resource usage Ozone-depleting substances Packaging reduction Pollution prevention Precautionary Principle Product energy use Product take-back Recycling Renewable energy & materials Soil contamination Soil erosion/depletion Spill prevention Waste disposal Water conservation Water pollution Wetlands protection Wildlife conservation

Some Observations About Sustainability
Sustainability is not about one thing. The business case for sustainability is really the business case for a process that looks at sustainability trends and issues and prioritizes among the opportunities and threats to an organization to select those for action that contribute the most value. ©2012 William Blackburn Consulting, Ltd.

Common Organizational Threats and Opportunities?

Common Organizational Threats and Opportunities
-Legal -Financial -Reputational -Competitive -Operational -Productivity, cost -Employee relations -Reputation, brand -License to operate, community appeal -Sales, new markets, customer appeal -Innovation, new products and services

Sample SWOT Analysis for Sustainability Issue: Water
Threat Opportunity Strength Weakness Possible Objectives Depletion of Fresh Water Resources 1. Water shortage could jeopardize operations 2. Some competitors have long-term water rights conservation projects can save money, help secure supply 2. More on-site water treatment and reuse are possible 3. May be able to secure long- term water rights in some locations 1.Some water projects underway 2. Internal engineering expertise 1. No long-term water rights secured in some growth regions 2.Some communities serving our factories have poor water supply infrastructure 1. Investigate water risks on site-by-site basis and develop actions to address them 2. Consider more aggressive water treatment, reuse and conservation programs using internal engineers 3. Explore securing long-term water supplies in high risk areas while respecting community needs

Sustainability Trends
Conditions Responses Opposition to Globalization Extended Producer Responsibility Green Products Green Marketing/Labeling Green Product Certification Rise in Socially Responsible Investing Investor Concerns about Corporate Governance Increased Demands for Transparency/ Public Reporting Growing Power of NGOs/CSOs Increasing Global Terrorism Over-consumption of Resources Obesity; Poor Food Nutrition Fossil Fuel Depletion Climate Change Deforestation Threats to Biodiversity Fresh Water Depletion/ Water Contamination Wetlands Destruction Fish Depletion Coral Reef Destruction Spread of Hazardous Pollutants Declining Soil Quality Ozone Depletion Declining Corporate Credibility Growth in Global Business Competition Speed of Communications/ Digital Divide Widening Prosperity Gap (Health, Income, Services) Population Growth Serious Disease Mental Health Problems Increased Immigration; Lower Fertility in Industrialized Nations Hunger and Malnutrition Child and Forced Labor Education Needs for the Disenfranchised Urbanization No of TNCs jumped 10x in 30 years 51 of world’s largest companies aren’t countries but companies 10% have access to internet; 50% haven’t used a phone Extended Producer Resp: proactively control risk; hazards info, responsible for harm; take back Light brings heat brings change; surge in reporting; stockholder resolutions 150% increase in International NGOs in 20 years

How Fast Does The World Add Enough Additional People to Populate Another U.S.?
Years: a. 1 b. 5 c. 10 d. 25 e. 110 ©2012 William Blackburn Consulting, Ltd.

US Consumption and Waste!!
5% of the population ? % of the resources and wastes ©2012 William Blackburn Consulting, Ltd.

US Consumption and Waste!!
5% of the population 25-30% of the resources and wastes Need 5-6 worlds at current production if everyone consumed at US rates! Source: Worldwatch Institute, 2003, 2004; US Geological Survey, 1998 ©2012 William Blackburn Consulting, Ltd.

The "Big Squeeze" Decreasing Natural Resources
Consequence? Increasing Population and Consumption 1900 2000 2050 2100 The "Big Squeeze"

The "Big Squeeze" Decreasing Natural Resources
Resource Shortages Social Unrest Increasing Population and Consumption 1900 2000 2050 2100 The "Big Squeeze"

What can we do to prevent the Big Squeeze?

Factors Contributing to the Big Squeeze
Use: Resource consumption per person Number of consumers Destruction: Rate of waste of resources (inefficiency) Rate of destruction of resources Rate of contamination of resources Supply: Rate of production/replenishment of resources Rate of reuse/recycling of resources Rate of introducing resource substitutes ©2012 William Blackburn Consulting, Ltd.

What are the big global social issues?

Issues Addressed by the 2015 UN Millennium Development Goals
Extreme poverty and hunger Universal primary education Gender equality Child mortality Maternal mortality and health HIV/AIDS, malaria and other diseases Environmental progress Global partnerships to help developing nations Environmental sustainability (env. resources, drinking water and sanitation, slum conditions) Global partnerships to help developing nations (good governance, exports, reduced debt, work for youth, access to pharmaceuticals, new technologies) ©2012 William Blackburn Consulting, Ltd.

BREAK! Next up: Implementation

How do you implement a sustainability program in an organization?
Implementation/ Integration How do you implement a sustainability program in an organization? ©2012 William Blackburn Consulting, Ltd.

The Sustainability Handbook—
The Complete Management Guide to Achieving Social, Economic and Environmental Responsibility (See ) ©2012 William Blackburn Consulting, Ltd.

The Drivers? The Efficient Enablers The Pathway The Evaluators

The Drivers The Efficient Enablers? The Pathway The Evaluators A champion/leader; visible top management support Approach for selling the organization on sustainability Accountability/reward mechanisms

The Drivers The Efficient Enablers The Pathway The Evaluators A champion/leader; visible top management support Approach for selling the organization on sustainability Accountability/reward mechanisms Organizational structure Deployment and integration

Deployment, Integration, Alignment & Accountability
Deployment = Roll-out What does this entail? Clear objectives, transparency on performance, and consequences—rewards and pain

Developing and testing rollout tools (including trainers) Field implementation Integration — building the new into the familiar Clear objectives, transparency on performance, and consequences—rewards and pain

How do you integrate Sustainability into operations? What tools?

Why the increased focus on sustainability in supply chains?
Public perception of big company responsibility for supply chain NGO focus and reach, global e-communications Consumer sensitivity to ethical behavior of producers Extent of financial, environmental and social impact (risk) Product labeling on environmental/social impacts Legal compliance (e.g., EU RoHS, WEEE, Packaging Directive, REACH; MSDS, CFC rules) Supply chain efficiency ($); lean and green Sustainability as a company strategy; search for sustainable products WHY? Perception of increased risk and opportunity around sustainability in supply chain= good business Big impact from raw material supply and outsourcing (especially Nike, apparel suppliers) If you are a sub supplier, need to see what the ultimate consumer wants; this may influence your own customer and give him a competitive advantage with his own consumers, and give you a competitive advantage as well if you have a strong sustainability program ©2012 William Blackburn Consulting, Ltd.

What sustainability topics should you address with your suppliers?

Defining Sustainability Obligations
and Issues for Action—Common Topics* Governance (oversight structures and systems for legal and ethical compliance and risk control on below topics for organization and its supply chain) Human Rights (civil rights, nondiscrimination, etc.) Labor Practices (wages, working conditions, etc.) Environmental Issues (pollution, energy and resource conservation, biodiversity, etc.) Fair Operating Practices (anti-corruption, fair competition, etc.) Consumer/customer Issues (fair marketing, consumer safety, product compliance, etc.) Community Involvement & Development Economic Viability of the Organization *Based on the GRI reporting guidelines and ISO SR standard ©2012 William Blackburn Consulting, Ltd.

Tyco Supplier Social Responsibility Principles
Environment, health & safety Diversity Human rights, labor practices Ethics, conflicts of interest, non- corruption Financial responsibility, recordkeeping Legal compliance ©2012 William Blackburn Consulting, Ltd.

Home Depot Supplier Social & Environmental Responsibility Program
Access to audit Age requirements Forced labor Wages and working conditions Discrimination Emergency planning Environment, health and safety Freedom of expression and association Fraud prevention ©2012 William Blackburn Consulting, Ltd.

Duke Supplier Code of Conduct
Environment, health & safety stewardship Ethics Diversity Transparency; involvement of, respect for individual High performance Win-win relationships Initiative, leadership Legal compliance ©2012 William Blackburn Consulting, Ltd.

Wal-Mart Supplier Sustainability Assessment Questionnaire
Energy & climate Waste & water Safety, labor and human rights compliance Community development investment in source locations Sub-supplier oversight: Locations, traceability Guidelines on environmental compliance, labor practices, product safety Pre-evaluation of production quality & capacity ©2012 William Blackburn Consulting, Ltd.

How do you address these topics with your suppliers?

Sustainability Supply Chain Program --Basic Elements
Oversight structure Expectations of suppliers (requirements, code, guidelines) (TCB: 8 of 11) Evaluation process Questionnaire (Baxter, Bristol Myers, HP) Self assessment (Dow Corning, Penney’s, Wal-Mart) Third party audit/certification (vs standards) (Many) Tracking and reporting (internal, external) Traceability (Wal-Mart) Metrics and goals (Wal-Mart, Marks & Spencer) Supplier audit/survey items and close-out (HP) Supplier index (Nike) ©2012 William Blackburn Consulting, Ltd.

Sustainability Supply Chain Program --Basic Elements
Training and engagement (internal staff and suppliers) Website, guidance book Online, on-site training Conference (Baxter, Penney’s) Newsletter (Marks & Spencer) Networks (Wal-Mart) Model supplier facilities (Marks & Spencer) Management system for suppliers (Adidas, HP, IBM) ©2012 William Blackburn Consulting, Ltd.

Sustainability Supply Chain Program Elements
Awards, motivators (Penney’s) Collaboration programs Customer-supplier (Coke, Aveda) Government (EPA Green Supplier Network) Peer companies ©2012 William Blackburn Consulting, Ltd.

Supplier Program Collaboration
Ethical Trading Initiative (companies, unions, NGOs) AIM Progress (consumer goods sector, esp. N. Am, EU) Apparel, Mills & Sundries Working Group Beyond Monitoring Working Group (misc. industries) Business Social Compliance Initiative (retail, brand, importing, trading sectors) Electronic Industry Citizenship Coalition Global e-Sustainability Initiative (IT and communications sectors) Global Social Compliance Programme (esp., retail, clothing, food sectors) The Sustainability Consortium: Measuring and communicating sustainability impacts of consumer goods (Wal-Mart, HP, J&J, P&G, Dell, General Mills, NGOs, academics, et al.) ETI: jointly identifies good labor practice implementation, including monitoring and verifying code provisions Can form own with others –but good to get guidance from antitrust lawyer ©2012 William Blackburn Consulting, Ltd.

Developing and testing rollout tools Field implementation Integration — building the new into the familiar Alignment?? Clear objectives, transparency on performance, and consequences—rewards and pain ©2012 William Blackburn Consulting, Ltd.

Developing and testing rollout tools Field implementation Integration — building the new into the familiar Alignment —balancing organization-wide consistency with cultural accommodation Clear objectives, transparency on performance, and consequences—rewards and pain ©2012 William Blackburn Consulting, Ltd.

Baxter-did with management systems

Developing and testing rollout tools Field implementation Integration — building the new into the familiar Alignment —balancing organization-wide consistency with cultural accommodation Accountability?? Clear objectives, transparency on performance, and consequences—rewards and pain

Developing and testing rollout tools Field implementation Integration — building the new into the familiar Alignment —balancing organization-wide consistency with cultural accommodation Accountability —connecting execution with personal objectives (with consequences) Clear objectives, transparency on performance, and consequences—rewards and pain

The Drivers The Efficient Enablers The Pathway? The Evaluators A champion/leader; visible top management support Approach for selling the organization on sustainability Accountability/reward mechanisms Organizational structure Deployment and integration

The Drivers The Efficient Enablers The Pathway The Evaluators A champion/leader; visible top management support Approach for selling the organization on sustainability Accountability/reward mechanisms Organizational structure Deployment and integration Vision and policy Operating (mgmt) system standards Strategic planning for aligned priorities

Continual Improvement Cycle
(Operating or Management System) (For sustainable quantum leap in performance) Collect Data to Measure Performance Implement Plan Identify Strengths and Gaps Plan Priorities for Addressing Gaps Report Data Solicit Stakeholder Feedback

Combined Management Systems (from Conf. Bd. Study)
EHS: ISO (Ab, H, FP) + OHSAS 18001 Mandatory certifications by Al, Bx EHS and quality (P, CC) EHS and security (DC) EHS and product responsibility (BMS)

The Drivers The Efficient Enablers The Pathway The Evaluators A champion/leader; visible top management support Approach for selling the organization on sustainability Accountability/reward mechanisms Organizational structure Deployment and integration Vision and policy Operating (mgmt) system standards Strategic planning for aligned priorities

Companywide Balanced Scorecard
Employee Objectives Build the best global team in our industry Financial (Investor/Lender) Deliver significant shareholder return Supply Chain (Customer/Supplier) Create sustainable win-win customer relationships Citizenship (Community/ Government) Improve lives in local global communities Share talent and learning across the company to improve business results Achieve profitable, sustainable, and capital-efficient growth targets in sales, earnings per share, cash flow and margins Consistently evaluate and meet agreed customer and product-quality requirements Establish the company as a community leader Ensure frequent, open two-way feedback and communication Invest targeted funds in R& D and capital projects to drive long-term sustainable growth while balancing short-term commitments Continually identify unmet needs of current and future customers Facilitate the participation of employees in their communities Attract, develop and retain the best talent to achieve current and future results Deliver superior shareholder returns that exceed the average for our industry Develop and launch innovative products and services to meet customer, product-quality and financial needs Reduce waste and achieve targeted improved efficiencies in energy, packaging and water use Create an environment that motivates, develops and rewards individuals for living the company’s shared values and achieving results Improve cost efficiency by achieving targets for days sales outstanding, inventory turns, and costs of supplies and travel Increase global access to our products so as to improve the quality of lives Ensure safety in the workplace Increase the number of foundation grants to new organizations, especially those in new locations ©2012 William Blackburn Consulting, Ltd.

The Drivers The Efficient Enablers The Pathway The Evaluators? A champion/leader; visible top management support Approach for selling the organization on sustainability Accountability/reward mechanisms Organizational structure Deployment and integration Vision and policy Operating (mgmt) system standards Strategic planning for aligned priorities

The Drivers The Efficient Enablers The Pathway The Evaluators A champion/leader; visible top management support Approach for selling the organization on sustainability Accountability/reward mechanisms Organizational structure Deployment and integration Vision and policy Operating system standards Strategic planning for aligned priorities Indicators and goals Measuring and reporting progress Stakeholder engagement and feedback

No. of Companies with Goals on Subject Per Conf Bd. Study (total=11)
Source: W. Blackburn, Frameworks for Integrating Citizenship and Sustainability…, Report 1446, (2009), available at

ISO 26000 Scope What it was supposed to be
International “guidance standard” providing practical guidance-- 1. explaining and operationalizing social responsibility 2. engaging stakeholders 3. enhancing the credibility of SR reports and claims Applicable to all types and sizes of organizations (??) Guidance emphasizing results and performance improvement What it was NOT to be A management systems (PDCA) standard (??) A specification standard for certification ©2012 William Blackburn Consulting, Ltd.

ISO 26000 Content Definitions SR principles
Accountability Transparency Ethical Behavior Respect for Stakeholder Interests Respect for Rule of Law Respect for International Norms of Behavior Respect for Human Rights Stakeholder Identification & Engagement ©2012 William Blackburn Consulting, Ltd.

ISO Content Prioritization of subjects/issues for action, based on relevance and significance of impact to stakeholders and sustainable development Responsibility extends across an organization’s “sphere of influence” ©2012 William Blackburn Consulting, Ltd.

ISO 26000 Content: Implementing SR
General guidance for organizations in implementing SR (not a management system??) Vision, strategy development, objectives Stakeholder identification and engagement Monitoring and measurement Integration into governance, systems, procedures Reporting and communication References, existing tools ©2012 William Blackburn Consulting, Ltd.

Next up: Public Sustainability Reporting
BREAK! Next up: Public Sustainability Reporting ©2012 William Blackburn Consulting, Ltd.

Why report Sustainability plans and performance to the public
Why report Sustainability plans and performance to the public? Why is it important to strengthen the credibility of such reports? ©2012 William Blackburn Consulting, Ltd.

Top Strategies for Strengthening the Credibility of Reports
External verification Being honest about mistakes and bad practices External reporting standard (GRI) Source: Pleon Kohtes Klewes Global Stakeholder Survey--2005 ©2012 William Blackburn Consulting, Ltd.

Majority Use Global Reporting Initiative Sustainability Reporting Guidelines
Founded 1997 by CERES & UNEP Global multi-stakeholder consensus Model indicators/ metrics Reporting process ©2012 William Blackburn Consulting, Ltd.

GRI Background Global Reporting Initiative Sustainability Reporting Guidelines = the international gold standard for public sustainability/CSR reporting— env., social, econ. ~2,500 GRI reports (2011) ; ~2000 (2010) 95% of top 250 global companies report on sustainability/CSR; 80% use GRI Currently 3rd edition (G3 & G3.1); th edition (G4), May 2013 ©2012 William Blackburn Consulting, Ltd.

GRI Reporting Framework
Principles (content & quality) Standard Disclosures (w/ protocols) + Sector Supplements Key message: Good reports: are based on a credible, trusted, transparent framework, which facilitates comparable reporting. The G3: The improved Guidelines are part of the world’s most used and trusted framework. 2) Supporting facts: (overview of the following few slides, which provide greater detail) The Guidelines are the basis of all the Reporting Framework. They are the entry point for all reporting organizations. They contain principles and guidance (helping determine the content of the report) as well as standard disclosures, including performance indicators Indicator protocols: provide ‘the recipe’ for the indicators: eg, compilation methodology, further reference. Ensure consistency and comparability when different organizations report on the same indicator. Sector supplements: respond to the limits of a ‘one size fits all’ and contains some guidance for sector specific information. National annexes: soon to start, not yet existing. enables thorough reporting that fits in with national-specific reporting requirements, legislation, or issues – whilst being GRI based enables globally comparable information disclosures. National Annexes ©2012 William Blackburn Consulting, Ltd.

GRI- ISO 26000 Linkage* (Content and Quality)
ISO SR Information Characteristics GRI Reporting Principles (with Tests) Complete Completeness, Materiality Accurate Accuracy, Reliability Balanced Balance Timely Timeliness Understandable Clarity Responsiveness Stakeholder Inclusiveness Accessible Comparability Sustainability Context *Based on the GRI reporting guidelines and ISO SR standard ©2012 William Blackburn Consulting, Ltd.

Examples of the 3 Classification Levels of Indicators (GRI Draft G4)
Category (6) -Economic -Environment -Social (4) Environment Social: Labor Practices & Decent Work Aspect (44) Water Occupational Health & Safety Indicator (95) -66 core -29 additional Total water withdrawal by source Injury, occ. disease, lost-day, and absenteeism rates, and no. of fatalities, broken down by total workforce, gender, region & contractors

Developments Influencing G4
GRI 2015 Goal: “Report or Explain”: All large and medium companies from OECD (developed) and large emerging countries (BRICS, etc.) should publicly report their sustainability (soc., env., econ.) performance or explain why not Mandatory integrated (financial + sustainability/ESG) reporting (S. Africa, UK, France, Denmark, Sweden, et al.) Voluntary integrated reporting Voluntary reporters (AEP, United Technologies, Southwest Air, et al.); Over ¼ of top 250 global companies include sustainability/ESG info in financial report International Integrated Reporting Comm. (IIRC) “Carpet bombing” reporting (data overload) ©2012 William Blackburn Consulting, Ltd.

GRI Report Content CEO statement (addresses GRI conformance plus “report or explain”) Strategy & analysis Organizational profile (including supply chain) Governance, commitments, & stakeholder engagement Disclosure on Management Approach (DMA) Performance/impact indicators Material core and additional indicators Sector supplements (certain sectors) National annexes (TBD) GRI Index ©2012 William Blackburn Consulting, Ltd.

Defining Report Content and Boundaries
Step 1. Map Value Chain (entities and relationships where there may be significant sustainability impacts). E.g., : Upstream Elements Downstream Elements Local Communities Company Customers Recycling Facilities Suppliers Carbon Disclosure Project Transportation Transportation Et al. ©2012 William Blackburn Consulting, Ltd.

Step 2. Identify Relevant Topics and Their Boundaries Identify value chain elements with sustainability issues that may (a) have important impacts or (b) influence the decisions of the organization’s stakeholders At a minimum, consider all GRI Aspects in G4 and applicable Sector Supplement Carbon Disclosure Project ©2012 William Blackburn Consulting, Ltd.

Step 3. Prioritize Aspects (for “Materiality” and depth of disclosure) “Material” issues= Significant economic, social and environmental impacts, or Substantively influence the assessments and decisions of stakeholders More in-depth disclosure for Aspects with greatest impacts on organization or stakeholders Need consistent, systematic, documented process Carbon Disclosure Project ©2012 William Blackburn Consulting, Ltd.

Step 4. “Validation” …to check the completeness of the Material Aspects to assure the report will provide a reasonable and balanced picture of the organization’s positive and negative performance Carbon Disclosure Project ©2012 William Blackburn Consulting, Ltd.

Disclosures on Management Approach (DMAs)
Generic DMA and some category- and indicator- specific DMAs Generic DMA content for Material topics “Topic” (aspect, multiple aspects or category) and why it’s Material How impacts are managed Policies, commitments, goals Responsibilities, resources Specific actions Challenges and Dilemmas Results from approach and related adjustments to it; How effectiveness of approach is monitored and evaluated ©2012 William Blackburn Consulting, Ltd.

DMAs Historically poor DMA reporting
Connection with Management Discussion & Analysis (MDA) for financial reports?? ©2012 William Blackburn Consulting, Ltd.

Why switch to integrated reporting? Challenges in doing so?

Integrated Reporting Sustainability/CSR + financial reporting helps integrate sustainability International Integrated Reporting Committee (2010) Founders: GRI + Prince of Wales Accounting for Sustainability Project Global accounting organizations Investor Network (25 institutional investors) NGOs 75 reporters (pilot reports Oct 2011-Oct 2013)

Integrated Reporting—IIRC
Framework and guidance on sustainability/CSR + financial reporting, but not “cut-and-paste” combined reporting (2012 Draft; Dec Final) Shows the organization’s stewardship and how it creates and sustains value (“5 Capitals”: financial, manufactured, human, intellectual, natural, and social) Build on GRI, and on U.S. and international financial reporting standards [IFRS (IASB), GAAP (U.S. FASB), etc.]

Segregated vs. Integrated Reporting under IIRC
Thinking Segregated, isolated Integrated Stewardship Financial capital All forms of capital Focus Past, financial Past & future, connected, strategic Timeframe Short term Short, medium & long term Trust Narrow disclosure Greater transparency Adaptive Rule bound Responsive to individual circumstances Concise Long & complex Concise & material Technology -enabled Paper issued Technology enabled

The Sustainability Handbook—
The Complete Management Guide to Achieving Social, Economic and Environmental Responsibility (See ) ©2012 William Blackburn Consulting, Ltd.

Sustainability --A Business Imperative

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