Time To Peel the Smiley Sticker off Your Sustainability Report
Now it's time to take the next step: Talking just as honestly and realistically about the risks, threats, and problems you face on the sustainability front as you do about the opportunities you are embracing.
This article from the World Business Council for Sustainable Development highlights a recent study of 50 sample GRI reports from companies around the world. The study found that most companies shy away from addressing or even mentioning the downside of today's leading sustainability issues. For example:
The report finds that 90% of surveyed reports include climate change. However, only 20% of the studies reports mention any risks to their businesses from climate change. This lack of information on risks is in spite of evidence from a number of sources, including the UK government's Stern Report on the Economics of Climate Change, that say that climate change has serious ramifications for the world's economy,It's understandable that corporations should want to emphasize the positive aspects of their sustainability efforts. Putting a happy face on the news, whatever it may be, is a common feature of corporate culture. (We know some companies where the word "problem" is practically forbidden; there are only "opportunities.") And particularly today, in the early days of the sustainability reporting movement, sustainability officers may be under pressure to accentuate the positive (i.e., the new businesses and new profits to be built around sustainability) rather than the negative, in order to justify the value of the sustainability concept.
Carbon emissions trading and credits, the report concludes, are the most focused on as new businesses opportunities created by climate change. Other opportunities from climate change vary widely from sector to sector, and include hybrid cars to energy efficient detergents.
The risk that was mentioned in the reports most often is the increase of energy costs, with about 20% of sustainability reports mentioning rising energy bills. Very few companies mentioned the risk of increased legal action, such as the risk of class-action lawsuits with regard to climate change.
Nonetheless, it's obvious that, in business as in life, there are practically no positives without corresponding negatives. And that certainly applies to sustainability. Take global warming as an example. Can you imagine a food company that isn't thinking about how climate change may affect their supply chain in the coming decades? A real estate developer that isn't looking at the effects of coastal flooding? A home supply company that isn't examining how water shortages and heat waves will impact house and garden designs? And that's not even to mention more obvious examples, from energy companies to utilities to transportation companies, all of which will be under enormous pressure to redesign their businesses as the cost of carbon emissions continues to climb.
Let's put it this way: None of us would want to invest in a company that is so short-sighted that it is not exploring the risks posed by global climate change. So why shouldn't companies discuss those risks--and the steps they are taking to cope with them--in their sustainability reports? To do so will only enhance their credibility.
Honest, realistic risk assessment may be the next big frontier in the world of sustainability reporting. You should be thinking about it now, as you begin planning for next year's report.
Labels: Greenwashing, GRI, Reporting and Transparency, WBCSD
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By 
Mark McElroy, on
August 22, 2007 2:36 PM
Thanks Mark. If I may, I'd like to use your comment as a springboard for a related but slightly different topic.
In a sense, your observation about the absence of true "boundaries" in most attempts to measure sustainability suggests that our references to a "double" or "triple bottom line" are somewhat inaccurate, in that the environmental and social "bottom lines" at this point lack the clarity that is the chief virtue of the traditional financial bottom line.
A company's P&L either has red ink or black ink at the bottom of the page, and all further discussions about the financial health of the company proceed from there. But when it comes to the environment or social impacts, we don't have such a clear thumbs-up or thumbs-down marker.
Would it be good to have such a marker, or would creating one force us to oversimplify issues that are inherently complex? I'm not sure. Mark? Other readers?
By 
KW, on
August 22, 2007 2:56 PM
Dear Karl:
Thans for your reply. I actually think your thought is not 'slightly different' from what I have in mind, but right on track. My own view is that sustainability bottom lines logically fall on what I call a binary scale. Think of it as digital versus analog. A company's sustainability performance is either sustainable or not sustainable. There is no more or less sustainable, no more than there is more or less pregnant.
That said, there can clearly be 'sustainable' with a wide margin, or 'unsustainable' with a wide margin. But there is one and only one demarcation point between sustainable and unsustainable. Like profitability, it is a mathematical relation.
If you look at my website, you will see these ideas made more explicit.
Regards,
Mark
By Mark McElroy, on
August 22, 2007 10:18 PM
All:
The absence of risk analysis in mainstream sustainability reports is actually a symptom of a much larger problem: missing context in related measurement models. GRI refers to this is as 'sustainability context' in its guidelines, yet fails to require its inclusion in related reports, much less explain how to do it.
Risk arises when organizations cross certain boundaries or thresholds of performance, such as contravening laws, regulations, or ecological limits, or simply failing to live up to societal expectations for impacts on human well-being.
What we need in sustainability reporting, then, is not just top line impacts, but top line impacts measured against such standards of performance. The latter is the missing context. Until we have that, mainstream sustainability reports will amount to little more than 'triple top line' reports, offering no way of communicating bottom line risks to outside parties.
Indeed, we know of only one comapny in the world that is including such context in at least part of its reports: Ben & Jerry's here in Vermont. From their report, we can tell, for example, not only what their CO2 emissions have been, but also whether or not they (the emissions) are sustainable in the truest sense of the term. Folks interested in learning more about this can contact me at mmcelroy@vermontel.net for more info.
Regards,
Mark W. McElroy
Executive Director
Center for Sustainable Innovation