Reporting and Transparency

GRI Matchmaker Program Puts Students' Smarts To Work For Sustainability

Monday, March 31, 2008 / KW

Check out this story about a smart new program that brings together corporations, the GRI Sustainability Reporting Guidelines, and university students who are learning about the principles of sustainable business. Under the new GRI Matchmaker Program, companies are linked with undergraduate and graduate business students who offer their services in assessing, evaluating, and critiquing the companies' sustainability reporting efforts. The student teams, guided by business professors, act almost as free consultants, creating benefits for both the learners and the companies they study.

The article describes successful collaborations between businesses and student teams from two universities, Boise State University in Idaho and the Haskayne School of Business at the University of Calgary. The potential exists for broadening the students' participation in the future — for example, by having student teams assist in compiling the data used in producing company reports.

Today the GRI Matchmaker Program is small, but it suggests other possible links between companies and universities around sustainability performance and reporting. It's a natural outgrowth of one of the central ideas of sustainability — that businesses should strive to identify and nurture mutually beneficial links with all their stakeholders. When the right relationships are forged, colleges, universities, and the students and professors associated with them can became powerful associates and advocates for companies and sustainable business practices — not just potential anti-corporate protestors and adversaries.

As we discussed here, companies like IBM are discovering the practical benefits of transparency, including the fact that working cooperatively with community groups, advocacy organizations, and NGOs can actually reduce some of the burdens that transparency imposes on corporations. The GRI Matchmaker Program shows one way companies can add colleges and universities to that list.

The Power Of Knowing: It's All About Metrics

Monday, March 17, 2008 / KW

Last summer, when my wife bought her first Prius, I wrote elsewhere about how the new car had affected her driving:

As you may know, the car's dashboard features a touch-sensitive screen that displays various kinds of information and can be used to control the sound system, the air conditioning, etc. Mary-Jo normally keeps the screen set to show fuel economy, and the effect is quite fascinating. The display shows the current mileage you are getting (ranging from less than ten miles per gallon to a maximum of a hundred), the mileage you've achieved in five-minute travel increments, and your average mileage over any period you want — the current trip, the last week, whatever.

As a result, driving becomes a kind of video game: How far can I get the current mileage bar to extend? How high can I get my mileage rating for this trip? Can I beat my score from my last trip? And Mary-Jo is clearly driving differently. Her foot on the gas is much lighter, she avoids fuel-draining accelerations and needless braking, and she uses cruise control on long straight stretches of highway.

These are significant changes for a woman who used to get antsy when stuck behind a slow vehicle. Now instead of changing lanes she smiles serenely as her speed drifts down toward 50 mph and her mileage bar stretches up above 50 mpg.

Turns out I wasn't the only person to notice this effect. According to a recent article in The Economist, some smart companies are trying to apply the idea to another big energy guzzler, the average home:

What if you did the same thing to houses? A variety of products can provide real-time information about electricity consumption. Working out how much energy a house is using is harder than with a car, because electricity meters are generally hidden away in cupboards or cellars, and many people find them hard to understand. So an easily understood real-time read-out, akin to a car's fuel-efficiency gauge, could make a big difference.

The Economist articles goes on to describe two gadgets, the Owl and the Wattson, designed to make such energy-usage measurements easy and routine.

Of course, both the automative and home examples simply illustrate the old management principle, "You get what you measure." Whenever you develop a metric for tracking some activity, that act of measurement tends to affect the volume of that activity. So if, for example, you start providing daily reports about the number of defective products coming off your assembly line, within a few days it's likely that the number of defects will start to fall, just because people are suddenly thinking about and noticing defects more than ever. There's no reason to think the same can't apply to energy use, waste production, and other environmentally-sensitive activities.

Two lessons related to sustainable business:

A big, usually unremarked obstacle to green behaviors is the lack of reliable, easy-to-obtain feedback about the impact of our activities. (In most homes, even the traditional electric and water meters are located in an out-of-the-way corner of the basement or a closet and are hard for the average person to read and interpret. This is silly, and represents a big wasted opportunity.) Conversely, there's enormous value to be realized in the development of products, like Owl and Wattson, that don't save energy or reduce pollution directly but that improve human environmental behavior indirectly simply by making it transparent.
On a corporate level, the powerful impact of simply knowing what you are doing is one reason the reporting movement promoted by GRI and others is actually more important than many people realize. When a company is "forced" to report on its environmental, labor, and social practices every year, it has an automatic impact, subtle or marked, on the way its employees tend to think and act. The impact would be even greater, of course, if sustainability reporting were quarterly or even monthly rather than annual, but having any metrics at all is valuable in its own right.

In one sense, of course, just knowing what you are doing isn't terribly meaningful. Standing on the scale every day doesn't, by itself, make you lose weight. But buying a scale and using it regularly — along with a full-length mirror! — is a pretty important first step in any weight-loss plan. It's all about metrics.

IBM On The Practical Benefits Of Transparency

Thursday, February 14, 2008 / KW

Here is a new study from IBM Global Business Services titled "Attaining sustainable growth through corporate social responsibility." Some of it simply confirms trends most of us in the "sustainability community" already recognize — for example, the fact that most companies are now beginning to look at corporate social responsibility initiatives as potential sources of business growth.

However, a couple of interesting observat ions from the report stuck out for me. Perhaps not surprisingly for a study from IBM, they relate to the information-management aspects of CSR.

Although the companies surveyed say they are pursuing CSR in large part because of demands from their customers, the great majority (76 percent) say they don't really understand what those customers expect or want. Most companies, it seems, relegate conversations about CSR to their sales, marketing, or PR people, which means that meaningful dialog about the topic doesn't generally involve line managers who have the power to make real changes in what the company does or how it does it.

It seems clear that this will have to change. After all, any company seriously interested in developing world-class customer service (for example) would make open dialog with customers about service expectations a high priority for its executives — and everyone, I think, understands this on some level. The same needs to be true when it comes to CSR
When it comes to transparency, we in business tend to focus on the costs and the downsides: Can we really expose our inner workings to public scrutiny? Will transparency open us up to lawsuits or public embarrassment? Will it give our competitors a leg up? How expensive will it be to retool our IT systems to make it possible? etc. etc.

The IBM study suggests some interesting upsides for transparency — practical ways in which being open to outside scrutiny can actually reduce costs and lessen risks:

Increasingly, we believe that the degree to which a company is willing and able to open itself to stakeholder scrutiny will be a make or break factor in achieving CSR objectives. In fact, the company that invites more eyes on its operations can preempt problems that would otherwise become very expensive to solve.

To illustrate, the report discussses the challenges facing a manufacturing firm with thousands of suppliers around the world. (Hello, Nike.) How can it monitor and control the behavior of all the links in this vast supply chain? The temptation is to hunker down and go on the defensive, because the costs and complexities are simply so great. However, transparency offers a possible alternative:

But if a company clearly pledges to enforce standards, openly sets goals to improve upon its current abilities, and invites and enables stakeholders like NGOs to help monitor practices, then transparency not only relieves the business of some of the burden for monitoring, but strengthens relationships that were once adversial.

Obviously, this is easier said than done. But the greatest hurdle isn't technical — it's psychological. Companies need to develop the willingness to talk openly about what they are doing (and not doing) and to let outsiders verify the information for themselves; to give up a large degree of control over the data they generate; and to entrust their corporate message and values to people at all levels of the organization, not just a few designated spokespeople.

Let's face it, this is scary. And it will take plenty of internal conversation, self-examination, training, and re-education for many companies to get to the point of accepting this kind of openness. But those that do this sooner — and do it well — will have an edge over the competition, because they will be in a position to become "trusted partners" of their customers, not just in words but in fact.

The Other Side of Greenwashing — "Greenmuting"

Wednesday, December 26, 2007 / KW

As the debate over what is or is not greenwashing continues (our contribution to the discussion can be found here), Scot Case of TerraChoice points out this thought-provoking post by Bob Langert on the McDonalds corporate blog:

I agree there are dangers associated with environmental marketing, but I actually think many companies are reluctant to talk about their environmental efforts because they are concerned they will only be met with criticism. After all, true progress is hard to define, and achieving perfection on the environmental front is impossible, because there will always be ways to improve.

But not talking about environmental efforts, or "greenmuting", can be a sin as well.

Langert goes on to provide his own list of the "Six Sins of Greenmuting," which basically involve companies' reluctance to publicly engage environmental issues at all out of fears they will get burned. As Langert, in effect, points out, as pressures to be socially and environmentally responsible continue to mount, you are likely to get burned sooner or later, one way or another; but if you get out in front of the issue and communicate freely about your honest efforts to do the right thing, the burns you suffer will almost surely be less severe and faster-healing (to push the "burning" metaphor perhaps one step too far).

An interesting case in point comes from the blog of hotelier Bill Marriott, which I discovered while writing this post. Marriott recently wrote about his company's efforts to make their corporate headquarters greener, involving recycling, energy conservation, and other initiatives.

What's interesting is that Marriott's post has drawn a few dozen comments — some of them thanking Marriott for his company's environmental efforts, but others offering criticisms from every possible direction. Some complain that the headquarters building is just the tip of the corporate iceberg ("How about the thousands of hotel rooms that leave lights on! As a Platinum client (over 100 nights a year ... mostly Toronto Airport) I found out that all lights and music in your suites are put on at 2pm!!"); others say that customers ought to receive some of the financial benefits from environmental cost-saving ("Please put your money where your mouth is — if you want your customers to save water, than show them some green!"); others worry that worthy issues such as comfort may be getting short shrift ("Look at the way the poor soul in the picture is sitting. Can someone please find him a keyboard tray, with a proper mouse surface. Why not green and healthy — that's the ticket!"); and still others disdain the whole concept ("the efforts to reduce greenhouse gases is misguided and ill informed. The latest research does not point to man as the cause of a changing climate, the Intergovernmental Panel for Climate Change and Mr. Gore's film notwithstanding").

If I were Bill Marriott, my reaction to this barrage of often-contradictory advice might well be to throw up my hands and wonder, "If this is what I get for trying to do the right thing, why do I bother?"

But of course that would be a short-sighted and counter-productive reaction — though perfectly human and understandable. And to Marriott's credit, I see no sign that he or his company are in fact responding that way.

I think they recognize this as one of the perennial truths of business (and of life): Anything good you do quickly gets taken for granted, and the conversation is always about "What's the next good thing you are going to do for us?" The only way to avoid criticism — well-founded or not — is to do nothing at all. And where's the fun in that?

The Lesson of Veolia: Green Business Can Be Sexy, Profitable — And Risky

Friday, September 07, 2007 / KW

Fascinating, isn't it, how boring, "mature," old-fashioned industries can become sexy growth businesses when new thinking is applied — as in this example (courtesy of Business Week) of a European-based water utility company that is being refashioned as a sustainability pioneer:

As the world's largest water company, Veolia is riding soaring demand for water supply and treatment in China. In the U.S. it's focusing on the fast-growing energy-services business helping large industrial and commercial customers trim their heating and cooling bills with more-efficient generation and distribution. Even in relatively slow-growth Europe, which accounts for 70% of revenues, Veolia is powering ahead by taking stakes in government-owned water and waste-treatment businesses that are now being partially privatized.

It's an impressive story. But then you dig a little further and run across a story with a different slant on Veolia:

Once again an impoverished Texas neighborhood, in this case in the town of Port Arthur, has become the disposal point for hazardous waste, only this time the waste is potentially so lethal that a drop the size of a pinhead can kill.

A chemical-weapons facility in Indiana is destroying obsolete weapons containing VX nerve agent, producing caustic wastewater that the Army is shipping to Veolia Environmental Services for incineration. The Army has claimed the waste is no more dangerous than kitchen cleaners. But when environmental scientists began looking at the disposal process, they found scary scenarios. The "neutralized" waste still contains some VX, and the incinerators might not destroy all of it. There are no monitors on the incinerator smokestacks to sound the alert if it isn’t eliminated. And VX components in the water could reconstitute in shipping tanks under certain conditions, endangering lives along the transportation route.

The article in The Texas Observer seems to do a responsible job of citing opinions on both sides of the controversy, including the comment, "It's just wastewater," offered by Dan Duncan, who is in charge of safety at the Veolia incinerator at Port Arthur. Who is right? I don't know, and it will take time for the dispute to get sorted out.

Fortunately, it appears that the key issues — the safety and transparency of Veolia's processes, the accuracy of the monitoring techniques in use, and the integrity of the local officials overseeing it all — are on the table, thanks in part to media like the Observer. Hopefully, one way or another, the rights of all parties will be respected by the courts and regulators now addressing the case, and the proper resolution will be reached.

I don't have the expertise to adjudicate in this matter, and I wouldn't want to pass judgment on the folks at Veolia, who for all I know may be utterly blameless. But I can offer a few observations that business people may find relevant:

With sustainability issues now high on the agenda of communities, governments, activist groups, and the media, green business opportunities are (finally) becoming exciting, even sexy. But that same sex appeal makes them lightning rods for controversy. Don't expect to take advantage of the boom in green business unless you're ready to take seriously the life-and-death responsibilities that go with it.
Business Week notes that Veolia's attractiveness as an investment is due, in large part, to its current acquisition spree. Since being spun off by its former owner, the Vivendi conglomerate, Veolia has been shedding debt and using increased profits to buy environmentally-minded companies around the world. That's fine — but most business people know that acquiring companies and imbuing them with your corporate culture and values can be quite challenging, time-consuming, and at times perilous.

I would be nervous about engaging in a rapid-fire series of acquisitions in an area as sensitive as environmental remediation, where a single procedural misstep (or even a mere misunderstanding) can cause real harm, both to the environment and to your corporate reputation.

Is a strategy of rapid expansion an absolute no-no for an environmental company? I wouldn't go that far — but I would wave a yellow caution flag if I were a corporate manager or an investor.
A business involved in sensitive environmental issues can't afford to rely on government assurances or regulatory clearances to shield it from accountability. In the Texas case, Veolia is working under contract for the U.S. Army, and local government officials (including the mayor of Port Arthur) have pooh-poohed the concerns of community activists.

One might think that this would clear Veolia of any further responsibility, particularly in a conservative state like Texas, where respect for the military and for government authority is a strong tradition. But no. If green groups on the local, state, or national levels decide to press Veolia on this issue, all the government sign-offs in the world won't matter. The company's name can still be dragged effectively through the mud — with potentially serious effects on its future business prospects and stock price.

The moral: If you're a business executive and are lucky enough to get laudatory press coverage like that given to Veolia by Business Week, enjoy it — but don't let it go to your head. It's nice to be a leader in this quarter's "sexiest" business, but remember what your junior high school Phys Ed teacher told you: The fun of sex comes with plenty of risks and consequences.

Time To Peel the Smiley Sticker off Your Sustainability Report

Tuesday, August 14, 2007 / KW

If your company is among those that have begun monitoring and reporting information about your sustainability efforts, good and bad, for the benefit of your stakeholders and the general public, congratulations. And if you take the job seriously enough to have adapted the guidelines established by the Global Reporting Initiative (GRI), congratulations again. You're among the corporate vanguard that are leading the way on making sustainability a routine and important part of the business conversation.

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,

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.

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.

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.

John Mackey and Corporate Transparency — The Risky, Essential Value

Saturday, July 28, 2007 / KW

This isn't a blog devoted to corporate communications, public relations, or business transparency. But all those topics are deeply intertwined with the theme of sustainability.

As we explain in our book, sustainability today is about doing business in an interconnected world and paying attention — not just lip service — to the responsibilities that entails. And in an interconnected world, you can't afford not to communicate with all your stakeholders. You need to listen to them, learn from their gripes and demands, and work with them to create meaningful improvements in the way you operate. And you need to talk back to them, presenting your side of controversies honestly and clearly, and claiming your fair share of credit for the genuinely good things you do.

For these reasons, we pay a lot of attention to how well corporations connect with the world around them. A few do a great job. Most, not so great. And one of the weirder current stories of bobbled communication efforts involves one of America's otherwise more responsible, sustainable companies — Whole Foods.

As you've probably heard by now, Whole Foods' founder and CEO, John Mackey, has gotten caught up in controversy over a series of unfortunate communications missteps. They include his vocal complaints about what he perceives as biased enforcement of the antitrust laws by the FTC (seeking to block Whole Foods' merger with Wild Oats while approving other similar acquisitions) and his posting of scores of pseudonymous messages on a Yahoo chat site that lauded Whole Foods and dissed the future prospects of Wild Oats.

Mackey has apologized to shareholders for his indiscretions, but this hasn't deflected an ongoing SEC probe into whether his postings violated corporate disclosure rules, as well as a wave of criticism from various watchdog groups and commentators ("monumental poor judgment," in the words of Nell Minow).

With this background, we were interested to read a recent Fortune magazine interview with Mackey in which he sounded a defiant note about not allowing his own CEO blog to be silenced, despite the controversies swirling around him. When the interviewer questioned Mackey about "the proper role for a CEO's blog," he responded:

I don't want to say what the proper role for a CEO's blog is. We want to communicate as honestly as we can. I am talking about the things I most care about. I don't do what other bloggers do. I don't post all the time. The great thing about blogging is that I don't need you journalists to interpret me anymore.

Strong, forthright language, and for those of us who believe in the value of transparency, rather heartening. But then we tried logging on to Mackey's blog to read his latest honest, spin-free comments on business. And here's what we found:

Dear Stakeholders,

A Special Committee of our Board of Directors' is conducting an independent internal investigation into online financial message board postings related to Whole Foods Market and Wild Oats Markets. In light of this, it is in the best interest of the company to temporarily hold off on posting on my Company blog. The ability to post comments to this blog will be disabled during this time as well. I look forward to resuming our conversations and plan on being in touch with you again soon.

Best regards,
John

So much for Mackey's experiment in unfettered corporate honesty — at least for the time being.

It would be a mistake, however, for CEOs to conclude that the Mackey saga demonstrates the folly of striving for transparency. If anything, the lesson is just the opposite. Mackey's mistake was hiding his identity behind a false identity while promulgating messages that served his own interests and those of Whole Foods. It wasn't transparency but opacity that got him in trouble.

The World Wide Web makes it possible to communicate anonymously (as the famous cartoon says, "On the Internet, no one knows you're a dog"). But anonymity is a luxury that company chieftains can't afford to indulge. If you're a business leader, you're a public figure, and you need to behave like one. That means taking responsibility not only for your actions but also for your words, whether you're being interviewed on CNN or typing an off-the-cuff blog posting in your pajamas at 2 a.m.

Are there risks involved in taking this attitude? Absolutely. But trying to elude responsibility for the messages you send is even more risky — as John Mackey and Whole Foods have discovered.

Mark Buchanan on Business Ethics: As the Game Changes, the Rules Change, Too

Tuesday, July 24, 2007 / KW

One of the most interesting new blogs is The Social Atom, produced by science writer Mark Buchanan. Although Buchanan is a physicist, his primary interest is in the social sciences.

This recent post is a typically interesting one. Buchanan is responding to a profile of Howard Gardner, the Harvard professor of cognition and education best known for his concept of "multiple intelligences," in Strategy + Business magazine. According to Buchanan, the profile, which focuses on the theme of corporate ethics, is both inspiring and depressing:

Here's a man [Gardner] who is immensely well motivated and clearly a force for the good; for decades he's been writing books and talking to corporate leaders, trying to bring ethics into the corporate world. Yet he's clearly been encountering a deeply held view that sees ethical behavior as an "expensive luxury." The received wisdom glorifies the business importance of "hard-nosed" decision-makers who focus only on "the bottom line," and who know that greed is ultimately good.

Why do business people who are probably well-meaning, ethical people in their personal lives sometimes engage in selfish, unethical behavior in their corporate lives? Probing for an answer to this question, Buchanan describes a number of experiments in which social scientists tested the mechanisms by which "the tragedy of the commons" tends to be enacted in settings where both competition and cooperation are possible.

As Buchanan describes them, the experiments show that, where self-interested behavior goes unnoticed and unpunished by the group, cooperative behavior that benefits everyone (such as voluntarily contibuting to a common investment pot) tends to be extinguished over time. (After all, who wants to be the only "sucker" who contributes to the common good?) But where the experimental conditions are altered so that everyone's actions are transparent and there is the possibility of social sanctions against those who behave selfishly, then cooperative, mutually beneficial behaviors are encouraged and appear to remain the norm indefinitely.

Of course, it's dangerous to directly apply the results of simple experiments to the complexities of life. But it may be that the real world in which Howard Gardner, Mark Buchanan, and the rest of us are operating — in which a significant number of well-intentioned people are trying to "do the right thing" while feeling undermined by others who advocate a "greed is good, to hell with the rest of you" philosophy — is in the process of morphing from one experimental condition to another.

That is, as modern communication technologies expand their speed, reach, and power, business behavior is becoming more and more transparent; and as transparency increases, the possibility of meaningful social sanctions against antisocial business behavior becomes greater. These sanctions may take the form of penalties meted out by government. But increasingly they are taking the form of media exposure, PR disaster, customer backlash, and value collapse in the stock market — a costly modern form of social stigmatization as applied to corporations.

Who knows? — Perhaps we are nearing a "tipping point" at which the number of business people who recognize the new "experimental conditions" and are prepared to adapt to them becomes so great that the overall norm shifts. It may be that, a generation from now, the kind of self-centered business behavior once taken for granted (despoiling the environment, exploiting workers, ravaging communities) will be largely unthinkable, simply because the social circumstances that once made it easy to get away with will have disappeared.