MIM 521/ BA 548 Evaluating and Measuring the Sustainability Performance for Global Organizations

1. MIM 521/ BA 548Evaluating and Measuring the Sustainability Performance for Global Organizations Reporting Standards and Reporting Day 5, July 7

2. GRI Create reporting standards Element of certification, of reporting, but not performance

3. GRI Reporting Principles

5. Five sections 1. Vision and Strategy – description of the reporting Organization’s strategy with regard to sustainability, including a statement from the CEO. 2. Profile – overview of the reporting Organization’s structure and operations and of the scope of the report. 3. Governance Structure and Management Systems – description of Organizational structure, policies, and management systems, including stakeholder engagement efforts. 4. GRI Content Index – a table supplied by the reporting Organization identifying where the information listed in Part C of the Guidelines is located within the Organization’s report. 5. Performance Indicators – measures of the impact or effect of the reporting Organization divided into integrated, economic, environmental, and social performance indicators.

6. Report content (GRI-guidelines) CEO statement Profile of reporting organisation Executive summary and key indicators Vision and strategy Policies, organization and management systems Performance: environmental economic social

7. GRI guidelines—principles and indicators Principles What information to report Quality of reported information Accessibility of reported information Indicators: Economic Social Environmental

8. Global Reporting Initiative

9. EN17. Other relevant indirect greenhouse gas emissions by weight. • 1. Relevance • Greenhouse gas emissions are the main cause of climate change and are governed by the United Nations Framework Convention on Climate Change (UNFCC) and the subsequent Kyoto Protocol. For some organizations, indirect greenhouse gas emissions are significantly greater… • 2. Compilation • 2.1 Identify the greenhouse gas emissions resulting from indirect energy use. Exclude … as these are covered by EN16. • 2.2 Additionally, identify which of the reporting organization’s activities cause … • When deciding on the relevance of these activities, consider whether emissions: • Are large compared to other activities; Are judged to be critical by stakeholders; • Could be substantially reduced through actions taken by the reporting organization. • 2.3 Report the sum of indirect GHG emissions identified in tonnes of CO2 equivalent. • 3. Definitions • Indirect emissions • Carbon dioxide equivalent • CO2 (Carbon Dioxide) equivalent is the measure used to compare emissions from various greenhouse gases based on their global warming potential (GWP). The CO2 equivalent for a gas is derived by multiplying the tonnes of the gas by the associated GWP. • 4. Documentation • Information can be obtained from external suppliers of products and services. For certain types of indirect emissions …, the organization may need to combine its own records with data from external sources to arrive at an estimate. • 5. References

10. Global Reporting Initiative

12. Nike GRI indicators

13. The Guidelines Foundation for GRI Technical protocols Measurement guidance The Guidelines Energy Water Child labour Sector supplements Sector-specific indicators Resource Documents Topical and user-specific supporting material Automotive Financial Tourism Mining SMEs Productivity HIV/AIDS

14. Reporting level requirements

15. Certification level attributes

16. General Notes—from GRI 1. Boundaries—what constitutes an entity 2. Use of technical protocols—who uses, what’s there 3. Metrics—what are suggested 4. Time frames and targets—provides benchmarks 5. Absolute/normalized data—broad application 6. Data consolidation and disaggregation—who can use, how accessible 7. Graphics—useful, confusing 8. Executive summary—provide overview

17. Types of environmental reports ‘Green glossy’ One-off Descriptive State of the art: quantity, quality and comparability Sustainability: ‘triple bottom line’ Integrated reporting

18. Integrated reporting • Reporting based on transparency and accountability • Driven by strategy; providing information on performance • Various stakeholders; perhaps multiple reports • Combining reports without changing perspective is not useful; may have legal risks • Lots of foment…not much light

19. Reporting G250 and N100 Dark Blue is G250; Light Blue is N100

20. By country, for N100 (percent reporters) Brazil 78, S. Korea 42, Romania 23, Czech Republic 14

21. Standards for reporting Dark Blue is G250; Light Blue is N100

22. Drivers for reporting—G250 Dark Blue is 2005; Light Blue is 2008

23. Assurance • Assurance standards • ISAE 3000—developed by an international association of auditors • AS 1000—developed by AccountAbility, a not-for-profit partnership

24. ISAE 3000 • establishes basic principles and essential procedures for all assurance engagements other than audits or reviews of historical financial information (explicitly including sustainability reports) • Addresses • Ethical requirements; Quality control; Engagement acceptance; Planning; Using the work of an expert; Obtaining evidence; Documentation; and Preparing the assurance report.

25. Some details about engagement • Professional skepticism • Understanding of the subject matter • Risk of misstatement • Fraud • Work of expert • Sufficient evidence of competence • Identify, in report • Subject matter • Criteria • Scope and limitations • Summary of work done • Conclusion

26. Report conclusion • Reasonable assurance • Positive statement “In our opinion…, in all material respects, based on XYZ criteria, is fairly stated” • Limited assurance • Negative statement “Based on our work described in this report, nothing has come to our attention that causes us to believe that … is not … , in all material respects, based on XYZ criteria.”

27. AA1000 Assurance Standards • Align the non-financial aspects of sustainability with financial reporting and assurance • Establish credibility • Using independent assurers • Using established standards

28. AccountAbility Principles • Inclusivity • Participation of stakeholders in developing and achieving an accountable and strategic response to sustainability • Materiality • The relevance and significance of an issue to an organization and its stakeholders; an issue that will influence the decisions, actions and performance of an organization OR its stakeholders • Responsiveness • Response to stakeholder issues that affect its sustainability performance and is realized through the decisions, actions, and performance as well as communication with stakeholders.

29. Engagement types • Type 1 • AccountAbility principles only • Can look at performance issues to support adherence to principles • Type 2 • AccountAbility principles and performance information • Specified sustainability performance information

30. Assurance levels • High • Sufficient evidence that the risk of assurer’s conclusion is very low (not zero) • Principles…evidence from external and internal sources • Performance…extensive depth of information, emphasis on reliability • Moderate • Risk of conclusion has been reduced, but not to very low • Principles…internal sources • Performance…limited depth of information, analytical procedures, emphasis on plausibility

31. Assurance statement • High • Principles…nature and extent of adherence • Performance…reliability • Moderate • Principles…based on work done, nature and extent of adherence • Performance…based on work done, reliability

32. Reporters with any assurance (G250 dark, N100 light)for G250, that is about 40% of 80%...32%

33. By country, for N100 (percent reporters) Brazil 78/27, S. Korea 42/67, Romania 23/4, Czech Republic 14/29

34. Assurance standards used

35. Drivers for assurance Dark Blue is G250; Light Blue is N100

36. Some assurance examples in here • Nike • Committee • Scottish Power two tomorrows • Caterpillar fluffy • Rio Tinto assurance report

37. Presentation issues • Simplicity, transparency… • Organization • Credibility—often lost when unable to simply interpret the information in response to questions • Know your audience • Be honest

38. LCA tools, reports, and sundry items • Patagonia—The Footprint Chronicles • Sustainability Consortium—the ultimate consumer-based Sustainability Index • Walmart’s questions

39. Energy and Climate: Reducing Energy Costs and Greenhouse Gas Emissions • 1. Have you measured your corporate greenhouse gas emissions? • 2. Have you opted to report your greenhouse gas emissions to the CDP? • 3. What is your total annual greenhouse gas emissions reported in the most recent year? • 4. Have you set publicly available greenhouse gas reduction targets? If yes, what are those targets? • Material Efficiency: Reducing Waste and Enhancing Quality • 1. If measured, please report the total amount of solid waste generated from the facilities that produce your product(s) for Walmart for the most recent year measured. • 2. Have you set publicly available solid waste reduction targets? If yes, what are those targets? • 3. If measured, please report total water use from facilities that produce your product(s) for Walmart for the most recent year measured. • 4. Have you set publicly available water use reduction targets? If yes, what are those targets? • Natural Resources: Producing High Quality, Responsibly Sourced Raw Materials • 1. Have you established publicly available sustainability purchasing guidelines for your direct suppliers that address issues such as environmental compliance, employment practices and product/ingredient safety? • 2. Have you obtained 3rd party certifications for any of the products that you sell to Walmart? • People and Community: Ensuring Responsible and Ethical Production • 1. Do you know the location of 100 percent of the facilities that produce your product(s)? • 2. Before beginning a business relationship with a manufacturing facility, do you evaluate the quality of, and capacity for, production? • 3. Do you have a process for managing social compliance at the manufacturing level? • 4. Do you work with your supply base to resolve issues found during social compliance • evaluations and also document specific corrections and improvements? • 5. Do you invest in community development activities in the markets you source from and/or operate within?

40. Summary • The devil really is in the details • What measures to choose • What hurdle rates to establish • How to communicate to decision-makers • How to communicate to stakeholders • How to create appropriate incentives • Think behavioral economics…people really do not have one-dimensional utility functions

43. Reporting—Energy Year 1 Year 2 Year 3 Energy usage (Millions of Kwh) 619 623 606 Percentage renewable 8.8% 6.5% 23.4% Reduction in usage is due to success of worldwide energy management program and decrease in production. Increased use of renewable energy is due to improved reporting. Renewable energy is defined as hydroelectric, solar, and wind. (from a multinational chemical company)

44. Some random-ish stuff • Lifecycle assessment—the nuke/holy grail of environmental measurement for business • Investing/assessing—some tools from finance • Interesting tidbits

45. Life cycle analysis • Intuitively, a summation of all environmental inputs and outputs related to the entire life of a product (process, business, whatever) • Practically, data-intensive summation of chosen environmental inputs and outputs within a chosen temporal and spatial boundary related to a product

46. Definition—Life cycle assessment • Systematic approach to manage potential environmental impacts of product and service systems • Build a quantitative inventory of environmental burdens or releases (life cycle analysis), evaluate their potential impacts, and consider alternatives to interpret the results or improve environmental performance (life cycle assessment)

47. LCA process • Define aims, product system, scope • Inventory analysis • Extractions and emissions are quantified and related to product function (miles travelled, people housed, etc) • Impact assessment • Environmental relevance • Aggregation into relevant issues • Interpretation • Compare with the goal of the study

48. Core principles—per ISO • Life cycle perspective • Environmental focus • Relative approach around a functional unit • Iterative approach • Transparency • Comprehensiveness • Natural environment and resources, human health • Scientific approach • adapted from Fava (2005)

49. Drivers to do LCA • Companies are taking action • Customers want to know • Capture cost savings • Evolving regulations • adapted from Deloitte, 2009

50. Benefits of LCA • Innovation • Cost savings • Internal alignment • Regulatory preparedness • Corporate reputation • Risk reduction • adapted from Deloitte, 2009