MAKING SUSTAINABILITY COUNT

Tracking Progress, Driving opportunity May 22-23, 2012, St. Louis

“SHOW ME THE VALUE” Opening Keynote Address Herman Mulder, Chairman of the Board, Global Reporting Initiative What is the true value of a business? How are we defining equity, profit? Do the published results and book value per the last reporting date indeed offer a fair representation of such intrinsic value? And are off -balance sheet, intangible, yet measurable assets and liabilities adequately recognized? And how about unknown and/or immeasurable, yet plausible and material, assets and liabilities (such as dependencies, impacts), which are relevant to future performance? What is the relevant scope and accountability of a business: is it limited to only its own housekeeping or is it also beyond, such as the full value chain of its investments and operations, and even of its downstream products and services. And for whom is such value relevant? To whom is, hence, management accountable? Is it essentially to shareholders and creditors, or are there other important stakeholders of the business, including those who are directly and indirectly affected, who should matter? The way we value business, its relevant scope and “for whom it may concern” has entered an accelerated mode of change. Such development is supporting and enlightening the self-interest of the business to improve its competitiveness by being “preferred” by its stakeholders (such as customers, financiers, talented staff, partners, contractors, the community in which it operates). It also strengthens its risk management and business strategy to enjoy the “prize” of a globalizing market place. But the habitat within which (large and/or small) business is operating is also radically changing. Drivers are lessons (often painful) from the past affecting the interests of, inter alia, customers and society-at-large, information technology causing broader and deeper access to knowledge and immediate transparency of and to all (with initial perceptions in the media and social networks driving reality), and the recognition of corporate social responsibility and accountability. These are among the emerging key factors for a sustained “license to operate” and brand-value recognition.

MAKING SUSTAINABILITY COUNT

Tracking Progress, Driving opportunity May 22-23, 2012, St. Louis

Moreover, we have entered “the age of scarcities and consequences”: we are living beyond our planetary limits, depleting essential natural resources (notably in energy- and food- chains), facing limits to clean water availability, ecosystem degradation, biodiversity loss, climate change. Through our consuming patterns we are becoming increasingly dependent of the poor workers and smallholders at the beginning of the supply chains: their social strife will, without a doubt, eventually cause us to pay the true and right price for their products. Shouldn’t we internalize all “externalities” which we currently off-load on society (including future generations) into our P&L and product prices? Isn’t it business’ social responsibility and long term interest to address, measure and manage ecological and social benefits and damages in your sphere of influence, including your dependencies and impacts, with priority and urgency? These are all key drivers for much more value-based value creation by business, with significantly enhanced public accountability and disclosure: customers, partners, civil society-at-large are demanding it. Appropriate, impact-sensitive, mandatory due diligence and meaningful contributing to sustainability from production, logistics, consumption and waste management/recycling are the right things to do. GRI is at the heart of this, as comprehensive, structured disclosure of non-financial factors is at the core of a more meaningful valuation of business. These days, the space of GRI is clearly accelerating and crowding: it is entering a new stage in its existence: after15 years of cutting edge pioneering (initiated in the USA in 1997), it is now entering the stage of leading the mainstreaming, and potentially assuming a more formal standard setting by business reporters for its continuingly evolving global framework to become embedded in business and in national policies and regulations.: “report or explain why not…”., GRI as leading paradigm. Its multi-stakeholder governance structure, its standards setting “due process”, its global network make it the acknowledged leader in non-financial/ESG reporting. Long term investors are slowly imposing themselves on business, seeking enhanced, verified disclosure of material non-financial issues, based on their view of risks and opportunities to emerge. Assurance providers are also getting increasingly involved and sharpening their pencils. Such structured and comparable disclosure is critically important for future markets to function, as data completeness and integrity are essential for risk assessment and proper valuation. GRI is one of the founding fathers of the International Integrated Reporting Council (IIRC): eventually risk-based, forward-looking corporate reporting will be based on integrating new-style, integrated financial with (GRI-style) non-financial reporting. Our new generation of disclosure indicators, G4, will be the bridge to this future.

MAKING SUSTAINABILITY COUNT

Tracking Progress, Driving opportunity May 22-23, 2012, St. Louis

“Let 1000 flowers bloom”, but not more: leading corporations want an international level play field, while SME’s need clear guidance of baseline business standards through generally accepted sector codes and even regulation. Governments should lead the market by their sustainable procurement and contracting policies. Public pension funds should become a role model by sharpening their duty of care by way of active ownership, advanced ESG screens, and public disclosure of their interventions. The norm for good business practice should be higher than is currently is the case, but inevitably the moment will come that inadequate disclosure becomes a liability. Rio+20 offers an important opportunity for governments (including the USA) to send a signal to itself and the private sector that structured (GRI-style) transparency is a key driver for markets and policies: let this not be waste this opportunity.