By Katherine V. Smith, Executive Director, Carroll School of Management Center for Corporate Citizenship at Boston College
We are in the public consultation period for the fourth iteration of the Global Reporting Initiative (GRI). We encourage our members to give their feedback on the framework. There are a number of enhancements to the framework that will be welcome to reporters (the abandonment of the application level rubric of assigned letter grades) and some where business stakeholders may want to provide guidance.
In the consultation process to date, one of the best surprises I had from the stakeholder feedback was the number of companies that use the GRI as a management framework even if they choose not to register their reports. Conversely, I was disappointed that so few corporate reporters have provided feedback on the G4. In the coming weeks the Center will be providing more information on the substance of the proposed changes – including proposals on reporting material impacts throughout the value chain, supply chain disclosures, and required disclosures regarding compensation of executives and workers in countries where your firm has significant operations.
The GRI is scheduling workshops to secure feedback through the comment period ending September 25 – including Dallas (August 2), Kansas City (August 22), and San Francisco (August 29). We encourage you to attend and provide your perspective. Click here to provide feedback directly, or talk with member services here at the Center to share your point of view to be included in our comments.
While GRI is the most widely adopted reporting framework globally, there are a number of other important conversations about reporting and disclosure that are taking place currently. As the field of social reporting continues to evolve and multiple organizations engage stakeholders to determine what gets measured and how, I am reminded of the words, “What gets measured gets managed.” This quote is attributed to management guru Peter Drucker, who considered himself an ecologist of sorts and who wrote so comprehensively about management and business that the subjects to which he made significant contributions are difficult to catalogue.
Among his most well-known are his texts about the importance of being clear about objectives. Drucker maintained that objectives focused on outcomes rather than activities are the framework for effective management. In his discussions of using controls to ensure that resources were being applied to the achievement of business objectives, he noted that the measurements, metrics, reports, and evaluations employed in corporations are an expression of the aims of the organization that reinforce and signal to everyone inside and outside of the company what is important and valued. We are at a pivotal point as a global business community in making commitments to what our shared values and aims are – and what controls we should employ to ensure that the decisions that we make are aligned with our objectives. In a November of 1997 speech, Drucker talked about the difficulty of accounting for what matters to business and our tendency toward myopia when viewing our operational contexts. Drucker writes, “. . . accounting information will be primarily about things that happen inside. But when you look at where the changes have come from in any industry over the last fifty years, not one of them since WWII has come from inside that industry . . . executives will need to learn how to ask ‘what information do I need to do my job, from whom, where, and when? . . . What outside information do I need?’”. In just the past year, environmental and social events affected the context for business in such an obvious way that even the most profit-focused among us, should see that at the very least, effects of these impacts can disrupt business continuity, ecosystems, and whole societies. We have some big “outside” forces to contend with.
The practice of reporting environmental, social, and governance data to reflect all of the material impacts of business performance is relatively new and still evolving. The material impacts of business on our natural and social resources and the ability to measure the real implications of these impacts over a timeframe long enough to understand their effects on the natural world and our interlinked economies and societies is at odds with the pressure to return and report financial performance on a quarterly basis.
There are multiple centers of discourse on how these pressures might be or should be reconciled and the increasing activity within them is signaling a new level of urgency about how we measure the impact and performance of firms as they relate to the natural and social environment. There are plenty of synergies and some potential overlap among the work of these groups. Anyone concerned with corporate citizenship will be interested in following these efforts. Here is an overview of a few:
The Sustainability Accounting Standards Board (SASB) seeks to create sustainability accounting standards suitable for disclosure in standard filings such as the Form 10-K. SASB addresses the unique needs of the U.S. market, establishing standards for integrated reporting that are concise, comparable within an industry, and relevant to all 35,000 publicly listed companies in the U.S.
SASB has several players in common with the International Integrated Reporting Committee (IIRC). Integrated Reporting seeks to demonstrate the linkages between an organization’s strategy, governance and financial performance, and the social, environmental, and economic context within which it operates.
An investor coalition formed by Ceres, which directs the $10 trillion Investor Network on Climate Risk (INCR), along with Calvert Investments and Oxfam America, issued a new guide for companies and investors navigating our current environmental risk terrain. “Physical Risks from Climate Change: A Guide for Companies and Investors on Disclosure and Management of Climate Impacts” is a tool companies can use – and investors can monitor – to improve their analysis and management of climate change risks.
With these tools in development, additional action is unfolding between U.S.-based FASB and the International Financial Reporting Standards IFSR. The IFRS Foundation is an independent, not-for-profit, private sector organization working to develop a single set of high quality, understandable, enforceable, and globally accepted standards through its standard-setting body, the International Accounting Standards Board (IASB). The intersection of what have historically been considered “nonfinancial” indicators of performance start to overlap with social and environmental concerns quickly. Among the standards being considered by this ambitious global initiative are international standards for emissions-trading schemes and the recognition of when in extractive processes natural resources are realized as firm-owned assets. Beyond the specific topics IFRS is grappling with, the international accounting community will have to be involved if we are to get to globally recognized assurance processes. Hopefully, some of these will merge or meld over time. In the meantime, we will keep you posted periodically on new developments.
The Carroll School of Management Center for Corporate Citizenship at Boston College is a GRI training partner in the process of certification and after completion of the certification process will be able to offer the GRI Certified Training Program. Watch for training opportunities in early 2013.
KEYWORDS: Business Ethics, Corporate Social Responsibility, Sustainability Professionals, Sustainability Business, CSR Reports, Katherine V. Smith, GRI, G4, social reporting, Carroll School of Management Center for Corporate Citizenship