What is a Sustainability Report? What is a GRI Report? What is the Difference?

By: Cora Lee Mooney, Lead Trainer at BrownFlynn

In a recent blog post, Dilemma of GRI Reporting Stats in the US – Needs Grain of Salt?, Prizma does a nice job articulating the uncertainty about what counts as an “official” GRI report and challenges the reader to categorize what they consider to be borderline cases (Apple, Cummins and Yum) as either “GRI-Referenced” or “a GRI Report”.  Prizma has raised a provocative question and I agree that some clarity is needed.  This is a concern about which I have given a great deal thought ever since BrownFlynn’s adjunct trainer Steve Voien raised it during one of our GRI-Certified training courses last year.

They key question is this: When does a sustainability report become a GRI report?

BrownFlynn’s answer: A sustainability report becomes a GRI report when an Application Level is declared.

In order to understand why we came to this, I need to point out some key components of the GRI Framework that are important to keep in mind when discussing this topic – the GRI Profile Disclosures, GRI Disclosure on Management Approach and the implicit quality controls that GRI has in place for those who declare an Application Level.

These important differences (discussed in our recent whitepaper GRI Application Levels: Why Strive for an A?) lead me to call all three of Prizma’s borderline cases (Apple, Cummins and Yum) “GRI Referenced”–i.e., not a GRI report.  Why?  Because none of these three reports disclose even the minimum stakeholder engagement and materiality analysis required to declare a GRI Application Level.

Never mind the number of indicators…the reason why GRI reporting is an “upgrade” from other CSR responsibility reporting is because of the internal discussions that are prompted during pursuit of a GRI Application Level (especially Level A or B).  We find that the pursuit of an Application Level prompts internal discussions that improve governance, attention to key impacts, sustainability policies, procedures, training strategy, goals, internal controls and ultimately sustainability performance.

Producing a “GRI Referenced” report is simply a matter of adding an index that cross references to any number and set of GRI metrics (and usually only to indicators).  But producing a report with an Application Level requires demonstration of sustainability management strategies, which seems to be exactly what we want in an “official” GRI report.

My advice: If you want to know whether a given report is an “official” GRI report, search for the term “Application Level” instead of “GRI”.  If you find that an Application Level is declared (A, B or C), then you can be certain that the company has committed to report or explain a certain standard set of disclosures.  Without an Application Level, you just don’t know what to expect, regardless of how many times the word “GRI” shows up in the report.

An Ethical Voice Silenced

I was riding in the back of a cab some where between Detroit and Troy, Michigan when I knew he had died.  The Maine area code on my iPhone told me even before I heard the voice on the other end that Rush Kidder was no more.

I remember the day I started reading How Good People Make Tough Choices.  Or rather, I remember the day when I came upon the concept that would change my life: right versus wrong is easy; it’s right versus right that’s hard.  Whether he knew it or not, with that idea Rush captured the essence of the corporate responsibility movement.

As the cab sped on to the next sustainability conference, one in a series I would speak at this week, I thought about the people I would encounter.  Earnest, well meaning.  The kind of people that often ask me if I think that companies will, “ever finally come around,” and that’s when I miss Rush most.

It’s easy to paint the world in white hats and black hats, good guys and bad.  But Rush realized the world is made of little hats and big hats.  Business people aren’t inherently bad.  They — we — have to make trade-offs.  Short-term versus long-term.  The few versus the many.  Justice versus mercy.  It’s not a question of profits versus planet.  It’s a question of the health and wellbeing of the employees today versus the health and wellbeing of their grandchildren tomorrow.  The very present “now” of laying people off versus the very distant “then” of unknown risks to future generations.  Sometimes we wear the little hat of our narrow now — our own interests or those of our family, group, or organization.  Sometimes we wear the big hat of our community, our society, or our human race.

Rush knew all those things, defined them all in understandable models, and set a bunch of people — me included — on fire.  His words put a very needed boot in my very intellectually lazy backside, making me think differently about business as a wholly owned subsidiary of society.  About every business as a solution to a social problem.  About the need for teaching a whole generation to think about their place in the world as a series of right versus right decisions.

I thought about all that as the cab sped down the highway, as I heard the words, and knew that my friend, my colleague, my inspiration was no more.

Dr. Rushworth Kidder, founder of the Institute for Global Ethics and author of many books including How Good People Make Tough Choices, died of natural causes on March 5^th in Florida.  Rush was a keynote speaker at the 2011 COMMIT!Forum and helped inspire the theme for this year’s program as well.

Sneak Preview of 3rd Annual International Corporate Volunteerism Conference:Public and Private Sector Leaders Join to Discuss Shared Value & ICV

Climate Science is Useless (to Business)

Richard Crespin, Contributor

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Time to send scientists to b-school & business leaders back to science class

Kyoto. Montreal. Durban. Rio.

Venerable cities all, but, with the exception of Rio (only because it hasn’t happened yet), each is also synonymous with failure. Failure to get consensus on the future of the environment and sustainable development.

But why? When I speak with individual business and government leaders a broad consensus exists on the need for action. The barrier seems to be politics. So let’s by-pass the politics. To do that, though, we need a different kind of collective-action—one based on science and grounded in data.

The problem with science is that it’s mostly aimed at scientists. The “big science” coming out of scientific academies and institutions is aimed either at other scientists or at the big multi-national conferences. Let’s flip that on its head.

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A few months ago I had lunch with Patricia Mulroy, the General Manager of the Las Vegas Valley Water District, arguably one of the most powerful people in the Western United States. She oversees a critical juncture in the Colorado River Valley, stewarding the very essence of what makes life possible in the arid American Southwest. I expected to hear how automatic faucets, hanging up your towel, and other incremental programs save water. I heard none of that. Instead, I heard a lot about the science of water use and dissipation and how Pat put science to work to literally save Las Vegas from going dry.

We need more of that kind of science directed at individual government and business leaders so they can take action. As an example, Planet Under Pressure, a gathering of the global scientific community, and theCOMMIT!Forum, a gathering of concerned business leaders sponsored by theCorporate Responsibility Officers Association (CROA), have issued a joint challenge to the business and scientific communities. Planet Under Pressure has asked the CROA, to assemble a delegation of business leaders to come to its London conference on March 26^th – 29^th to challenge the scientific community. The CROA, in turn, has asked Planet Under Pressure to assemble a delegation of scientists to come to the New York COMMIT!Forum on October 2^nd – 3^rd to respond.

During a World Cafe at Planet Under Pressure, business leaders will call on the assembled scientists to re-direct their science to address the business problems their organizations face in tackling ecological degradation, human wellbeing, and food and energy security. Planet Under Pressure will then send a delegation of scientists to the COMMIT!Forum to respond with their plans for addressing the challenges laid out by the businesses.

If this “call and response” challenge succeeds, it has the potential to have a lasting impact on how we address these issues. It will create a new enlightenment, capable of directing resources to the most pressing needs and ending years of anecdote and speculation.  It will also put data in the hands of the people most inclined to, and capable of, taking action today.

If you would like to join the delegation of businesses, click here.  Click here to learn more about Planet Under Pressure and here to learn more aboutCOMMIT!Forum.

Where CSR Fits On The Board’s Agenda

Richard Crespin, Contributor

According to the National Association of Corporate Directors (NACD) 2011 Public Company Governance Survey, when asked to name the top three issues for the board, only 1.5% of corporate directors picked “Corporate Social Responsibility” among the highest priorities for the board in 2011.

But what counts as corporate responsibility (CR) and when and how should boards and CEOs take an interest in it?  When we use the term “CR” we define it as maximizing the positive impact while minimizing or eliminating the negative. A closer look at the survey shows that a good chunk of the respondents report a CR issue as among their top three priorities for the board, including risk and crisis oversight (27.1%), shareholder/owner relations (6.4%), and disclosure and transparency (4.7%).  We argue that boards and CEOs need to take a more expansive view of CR and a more active role in CR leadership.

Fortunately, there seems to be a growing number of business leaders who agree.  In our 2011 Corporate Responsibility Best Practices Study, 72% of companies reported having a formal CR program, up from 62% in 2010.  These programs take on the full spectrum of CR-related issues (see table).  Moreover, 86% of respondents said their CEOs believe CR is important, up from 81% in 2010 and 66% of CEOs have led a CR-related initiative in the past 12 months.  When it comes to board leadership, 84% of boards get briefed on CR-related issues and 34% of them have led a CR-related issue in the past 12 months.

At the same time, in talking with management and directors, we hear a lot of confusion about the role boards should play in CR.  In the NACD study, only 4% of respondents said they had a committee dedicated to “Public Affairs/Policy/Social Responsibility.”  We would argue that this, again, too narrowly defines CR.  Using our broader definition, and many respondents have committees with some CR responsibility: Risk Oversight/Crisis Management (12.5%), Ethics/Compliance (5%), Environmental Policy (4%), Public Affairs/Policy/Social Responsibility (4%), and HR/Labor Relations/Management Development (2.1%).  By taking this broader view, companies would make progress on one of the principal deficiencies pointed out in the NACD study: the need for better risk management.

Many investors we’ve spoken with look at CR programs, especially those related to disclosure and ethics, as proxies for risk management. In the NACD study, fully 20.7% of respondents say CEO “ethical performance is not measured,” and 11.4% say “board and management do not gather information to assess ethical risks.” The NACD study finds a high correlation between the existence of formal risk management programs and board satisfaction with risk reporting, stating that, “those with formal programs were more likely to find that the program informed management and the board of the organization’s risks to a ‘great extent.’”

What do you think?  The NACD study also found that most boards characterize current disclosure and reporting requirements as “excessive.”  Are we asking too much of boards?  Should CR continue to be defined more narrowly?  Should boards have more formal roles in CR oversight and leadership?  Share your thoughts.

Do Corporate Responsibility “best practices” really exist?

By Richard J. Crespin, Executive Director of the CROA and Michelle Greene, VP & Head of Corporate Responsibility, NYSE Euronext

In short, no.  Although there are a growing number of examples of “successful practices”.  More often than not, companies are still sorting out what CR really means for them.  While companies have an important role to play in tackling some of our most pressing challenges, each company’s CR strategy has to make sense for their industry, their business model, and the identity of their individual organization.  So rarely does CR look the same at different companies.  Moreover, this remains a nascent field, making it a little early declare any practice “best”.

Each year Corporate Responsibility Magazine, the Corporate Responsibility Officers Association (CROA), and NYSE Euronext conduct a survey on Corporate Responsibility Best Practices.   This year’s results bear witness to corporations’ continued investment in corporate responsibility, even in the worst economic times:

• More respondents are committed to CR than last year
• More CEOs and boards support CR than last year
• A growing number of large and small companies continue to implement CR programs

The study also finds some holes that need filling:

• Medium-sized companies seem stalled in their ability to take on CR programs and implement them effectively
• A gap persists between companies’ desire and implementation abilities

Over the next few weeks we’d like your help to start discussions on several of the study’s key findings and the implications for your organization:

If there’s a will is there always a way?  Survey respondents have high hopes for their sustainability programs, hopes that often outpace their resources.  Can CR programs and the CR field as a whole live up to all these expectations?

Rising commitment?  A lot of people said tough economic times would kill CR.  What do the data tell us about how companies are investing in their CR programs?

C-Suite support?  Real change takes support from the top.  How are boards and CEOs leading the CR charge?

The hole in the middle?  Big companies invest in CR.  Small companies invest in CR.  Mid-sized firms, not so much.  What’s holding them back?

Please share your thoughts and questions and we’ll do our best to respond in the upcoming posts.

Agree with us?  Disagree with us?  Join us at the annual COMMIT!Forum October 2^nd & 3^rd in New York City to take on these issues and more!  Register now to save 50% off by entering ID Code PSTWD50.

Showcasing Supply Chains

A few years ago, Nike paid the price for the bad labor and human rights practices of its suppliers.  Now it’s Apple’s turn in the penalty box.

In stark contrast, McDonald’s has put its suppliers front-and-center in a series of heartwarming new ads.  McDonald’s put faces, names, and voices to these folks.  Frank Martinez, potato supplier.  Dirk Giannini, lettuce supplier.  Steve Fogelsong, beef supplier.

Pictured in their fields, on horseback, or perched atop piles of produce, McDonald’s has brought these hearty men into the limelight.  The ads are rich with subtle signaling.  Fogelsong’s cowboy hat: we’re part of preserving the American cowboy tradition.  Martinez’s accent: we use minority-owned suppliers. Gianni’s family story: we support the family farmer — not just big agri-business.

Don’t get me wrong.  I love these ads.  They show how you can turn your supply chain into a brand asset.  I’m also not naive. McDonald’s has had its share of supply chain issues.  But these ads show what you can do when you’re not afraid to shine a light on your supply chain.  McDonald’s has invited us behind the curtain in the hopes that we’ll like what we see.

Earlier this year, together with the American Society for Quality and the Institute for Supply Management and with help from Deloitte, the Corporate Responsibility Officers Association launched what will become one of – if not the – largest, most comprehensive study into sustainable supply chain practices.  Entitled The Sustainable Value Chain the study seeks to identify which management practices deliver the greatest value both in sustainability outcomes and ROI.  The study includes an annual electronic survey and live interviews with supply chain executives from both the private and public sectors.

The study will look up- as well as down-stream from extraction to reuse/recycle/disposal.  It will also look longitudinally across multiple years.  Ultimately we will develop a series of “do this not that” recommendations that will guide decision-makers in how they structure, operate, and measure their sustainable value chains.

To read more about the study, click here.  To participate, click here.

Preliminary results from the first round of electronic surveys will be presented at the ASQ World Conference May 21-23.  Final results for 2012 will be presented at the COMMIT!Forum October 2-3.  I hope you will share your insights by participating in the study and join us for the results.

Finding & Supporting New Models of Collaboration for Good

Following up on last week’s blog post about how, in the midst of the economic downturn, the best corporate citizens built more successful ways of working with governments and NGOs, we now look at how to help organizations establish them by shining a light on real-world examples and providing a platform for connecting with potential partners.

At the 2011 COMMIT!Forum we highlighted several new models of collaboration.  Two of my personal favorites were the work done by the Coalition of Immokalee Workers and Compass Group to alleviate slave-like working conditions for migrant workers in Florida and the work of Western Union and USAID to establish an African Diaspora Marketplace to harness the wealth and entrepreneurialism of this community to jump-start new businesses in Africa itself.  These initiatives exemplify the successful practices discussed in the previous blog post.  “Challenge campaigns” and “prizes,” like the COMMIT!Campaign and Clinton Global Initiative, have become increasingly popular ways of calling companies to make new “commitments” to changing the world.  In reflecting on these best practices, we can also see some ways to restructure “challenge campaigns” to be more effective.

• Relish self-interest.  When Bono said he hoped companies participating in his Product (RED) campaign would make huge profits, he faced a firestorm of criticism especially from the non-profit sector.  While no one benefits from unconstrained avarice, we see more, not less benefit for target communities when the business has an enduring self-interest in solving the problem at hand.  The solution is not to strip away self-interest, but to frame the problem in a way that a corporate partner can engage for the long-term.  In the case of the Coalition of Immokalee Workers and Compass Group, the Coalition could have asked Compass to just write a check.  Instead, it showed Compass that it had a human and a brand interest in improving working conditions and in driving commitment through its supply chain.

• Insist on mutual accountability.  We’ve made it a requirement that participants in the COMMIT!Campaign a) publicly state a goal, and b) commit to on-going coverage of the commitment in CR Magazine.  Other challenge campaigns should use similar models to reinforce a culture of measurement and accountability between commitment partners.

To help further the development of these new models of collaboration, we’ve restructured the COMMIT!Campaign for 2012.  Through the Campaign, governments, and NGOs can publicly articulate “commitments” — specific programs with measurable results for which they need corporate support — and we’ll work with them to find the right corporate sponsors.  We’ll also track and report progress from the 2011 and 2012 Campaigns in CR Magazine.  If you have a worthy cause that you’d like to see become part of the Campaign, sign on here.

We also want your input on how to create even stronger forms of collaboration:

• What do you think makes for the best kind of NGO-government-company collaboration?

• Do you have examples where things have gone dramatically right or dramatically wrong?

• What kinds of people need to be in leadership positions on all sides?

• How can we increase involvement on all sides?

The bad news is that the world continues to struggle through a tough economic climate.  The good news is that because of that tough climate, creative and inspired people are not just making do, but finding ways to excel.  Budget deficits have driven governments and NGOs to find corporate partners.  Trust deficits mean businesses are looking to good works to build their brands.  Together, like-minded people combine their financial, trust, and acumen assets to make partnerships that are all the stronger because of the “forced” collaboration.

Leveraging Deficits

How the Best Corporate Citizens drove more effective cross-sector collaboration during the Great Recession

In last week’s blog post, I pointed to the emergence of a “renaissance” in how companies, NGOs, and governments are collaborating to tackle some of our toughest challenges.  This week I’m going to look in-depth at the specific new models and practices we’re seeing emerge.

Throughout 2011 we looked for successful practices in cross-sector collaboration by examining commitments made as part of the annual COMMIT!Campaign and by talking with CR Magazine’s Best Corporate Citizens.  There were stark differences in the way these organizations engage with NGOs and governments as compared with most companies and donors.  The best:

• Focus on issues of enduring self-interest.  Philanthropy for philanthropy’s sake opens businesses up to the Milton Friedman-esque arguments of squandering shareholder value.  The best companies work on issues core to their business strategy where they have a vested interest in the outcome.  Michael Porter’s work in “shared value” bears this point out.  In fact, several leaders we spoke with avoid involving their foundations because ethical restrictions on self-dealing would prevent them from taking a long-term interest in solving a given problem.  By showing up as a business (and not as a non-profit) they can have a bigger, more lasting impact.

• Combine the company’s result-orientation with the NGO/governments “brand-trust”.  Where in the past the business provided the wallet and left execution largely to the NGO or government, companies increasingly bring their hard-nosed business thinking with them.  At the same time, because trust in business remains low, NGOs lend their “brand credibility” engendering trust in the target community that might otherwise go lacking.  These new combinations offer the opportunity to bridge the last kind of deficit: results.

• Hold each other accountable.  Robert Eggers, founder of DC Central Kitchen, recently said, “People are not gonna want to just give to charity or buy a product without knowing more about the results or where the money goes.”  Customers and donors want more transparency into what good their money is doing.  The best partnerships had publicly declared goals with regular reporting from both sides. This created an environment conducive to driving results.

• Have a culture of measurement.  Average players look at what they can measure and set goals they can report on.  Leaders make bold declarations and then follow them up with measurement systems that hold themselves accountable.  The best didn’t focus on the metrics themselves, but rather on the culture of measurement they created.  The habit of measuring and reporting data reinforced accountability for achieving outcomes.

• Develop partnerships fit-for-purpose.  A recent Guidestar report makes the case for exercising due diligence when selecting philanthropic partners.  Beyond finding qualified partners, the best create collaborative structures designed to address the challenge.  Using new formats – from volunteer corps to community action networks and beyond – companies and their employees bring a business acumen and results orientation that, when combined with the brand-trust of the NGO, makes the entire undertaking more productive for everyone, especially the target community.

Read next week’s blog post for ways you can help highlight successful partnerships already in existence as well as find potential new collaboration partners.  In the meantime, we’d like your reactions to these practices.  Have you used them yourself?  How did it go?  Where do you agree with our assessments and where have you seen these practices go awry?  Many people question the motives and self-interest of companies when they try to collaborate in these ways.  Is that skepticism justified and what do we do about it?

Deficit-Driven Developments

The recession started a renaissance in how companies, NGOs, & governments collaborate

Necessity, they say, is the mother of invention.  With governments and non-profits facing yawning budget deficits and business facing one of its biggest trust-deficits in history, organizations are coming together in unprecedented ways to tackle some of society’s greatest challenges.  In fact, a distinct set of collaborative practices used by the “best corporate citizens” and their partners have emerged that others could adopt.

Even as movements like Occupy Wall Street show how dramatically trust in business has declined and even in the depths of the recession, most companies continued investing in corporate responsibility programs (according to a recent survey by CR Magazine).  At the same time, countries face mounting budget shortfalls especially in foreign aid, and many NGOs face declining giving, leaving vital programs in the lurch.  As a result, what began as small experiments in public-private partnerships have taken off and spread throughout communities, working to address everything from global health to education.

I’ve made the rounds here in Washington, DC, speaking with leaders at multiple NGOs and US federal government agencies, many of which now have appointed executives to lead “partnerships”.  The Department of Education has its Director of Strategic Partnerships in Suzanne Immerman and the State Department has its Director of the Global Partnership Initiative, Kris Balderston, to name just two.

Public-private partnerships themselves are not new.  What is new is how businesses and their partners engage with each other.  Guidestar’s recent Money for Good II report shows a vast difference in the dollar-for-dollar results produced by different NGOs.  It also shows a striking lack of due diligence on the part of most donors.

So what drives successful partnership decisions and how can companies adopt best practices in their approach to cross-sector collaboration?  We want to hear from you!  What successful practices have you deployed that others can adopt?  Do you have examples of what not to do?

In next week’s blog post we’ll explore what the “best” organizations are doing in this area.