macpa 2012 small practitioner conference - reporting for social responsibility_newman_v3

Reporting for Social Responsibility? Exploring the Sustainability Reporting Process William Newman, MBA, CMC – Managing Principal, Newport Consulting Group

August 22-23, 2012 Mt. Pleasant, Michigan

Michigan Association of CPA’s Small Practitioner

Conference

Speaker Introduction

William D. Newman, CMC, MBA

• Managing Principal, Newport Consulting Group

• Member, SAP Sustainability Executive Advisory Council

• Certified Management Consultant (since 1995)

• Over 25 years in industry, professional services

• Adjunct faculty, Northwood University (International Management)

• Adjunct faculty, University of Oregon (Sustainability Leadership)

• Management Consulting Taskforce (Michigan Assn. of CPAs)

• Professional Speaker (American SAP User Group, SAP Insider, TEDx, Sustainable Business Forum, Michigan Assn. of CPAs) TEDx talk at http://www.youtube.com/watch?v=8BmLVpdWvFk

• Numerous articles on program oversight, stakeholder engagement, strategy, sustainable supply chain, social media

• Twitter (@william_newman)

• Google+ (+William Newman)

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http://www.youtube.com/watch?v=8BmLVpdWvFk

• The Changing Global Environment

• Today’s Sustainability Mandate

• Types of Common Sustainability Documents

• Reporting and Auditing

• Links and References

• Key Take-away Points

• Summary and Discussion

Discussion Points

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The Changing Global Environment

(cc) Library of Congress

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(cc) Elizabeth Swider


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What do I make? How do I make it?

Brand / OEM Manufacturer

What do they make? How do they make it?




Tier 1 Suppliers Product Materials

Social Performance

Quality and Price

Product Materials

Social Performance

Quality and Price

Product Materials

Social Performance

Quality and Price

Product Materials

Social Performance

Quality and Price

Tier n Suppliers


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Source: SAM Sustainability Annual Review, September, 2011

The investment community is giving increased weight to

Corporate Responsibility and Sustainability

measures to guide rating and investment

decisions.

The DJSI comprises publicly traded organizations that

follow the Global Reporting

Initiative (GRI) for Sustainability reporting








Discussion Points

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Today’s Sustainability Mandate

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The Challenge: A Real World Story

Photo: Sulekha.com


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The Challenge: A Real World Story

Photo: Sulekha.com


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According to a survey of global CEOs conducted by the UN Global compact over 90% of those surveyed considered sustainability issues either important or very important to the future success of their business.

But what does sustainability really mean? It depends on your framework.


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The University of Oregon Sustainability Leadership Program is tracking over 50

emerging standards, guidelines and

frameworks in the area of sustainability.

Source: University of Oregon, Sustainability Leadership Program


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So, how are we doing? I thought you might ask…

Well, if you were to ask me the global 1,000 corporations, you know, how many of them are sincere and seriously about sustainability and

long-term value creation, our own implementation survey and other leading think tanks would

probably suggest we are probably at 15 percent. - George Kell, Director

United Nations Global Compact

Source: American Public Media, Marketplace Morning Report (April 18, 2012)








Discussion Points

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Types of Common Sustainability Documents

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Complexity of Disclosure

Form

alit

y o

f St

ate

me

nt

Simple

Complex

Statement of Direction

DJSI / 10K Statement

UN Global Compact

GRI Report Code of Conduct

Intra-company Scorecards

Sourcing Audits

Company Sustainability

Plan


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A Statement of Direction is a

document intended to convey to the public,

customers, shareholders, analysts and other stakeholders

the position of the organization and its

intent.

A Statement of Direction – Similar to a 10K President’s Message – is a publicly communicated intent to address particular goals, mandates, or targets. This is generally non-binding and can be confused with company “green washing” of marketing efforts.


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A Code of Conduct is a statement of policy which governs how the company will behave inside its business ecosystem, as well as the individual behavior expectations of its employees and stakeholders. Codes may be binding from a performance management perspective.

A Code of Conduct is interpreted by

organizations abiding by them in the form of

policies, procedures and guidelines.








Discussion Points

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Reporting and Auditing

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Organizations may have several reasons for implementing a sustainability program. While the initial focus may be on fixing “hygiene” problems, organizations may exploit the opportunity to achieve more strategic objectives in corporate sustainability and social performance reporting areas.

Problems

Manual (spreadsheet-based) systems are “siloed,” error-prone, and do not reuse data in enterprise systems

Roll-up processes to support audits and other reporting needs are cumbersome

Organizational accountabilities for sustainability are unclear

Risk of being out of compliance with changing global regulations

No systematic way to respond to crisis or other unforeseen event

No alignment with overall corporate sustainability goals

Opportunities

Adopt a more proactive approach to supplier management

Anticipate and mitigate risk events; develop response plans should these events occur

Elevate profile of global corporate citizenship and enhance competitive brand position

Permeate sustainability initiatives and a culture of social responsibility throughout the organization

Improve efficiency of adjacent core processes (design, manufacturing, QA)

Incorporate sustainability in strategic planning and enterprise performance management


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Sustainability has Three Pillars — we find that while there may be an immediate focus on one key area of Corporate Sustainability, attention must be given to how reporting and decision-making occurs. This increases value drivers, reduces redundancy, improves operations, and manages costs.

Target Focus of Sample Fortune 500 CSR Programs Survey of Selected Cross-section of Industries 2007-2009

Company Economic and Financial Environmental Social Accountability

UPS Strengthen the Enterprise Protect the Environment Improve the Human

Condition

Starbucks Sustainable Coffee Prices Minimize Environmental

Impacts Local Community

Engagement

Kimberly-Clark Commitment to Ethical

Business Practices Environmental Stewardship Safety and Health

Lockheed Martin Perform with Excellence Eliminate Adverse Impacts

from Operations Safety of Every Employee

Source: CSR documents from each organization, selected from 2007-9 supplier manuals and other internal corporate documents.

Generally organizations focus on one particular domain of sustainability which needs immediate attention, however understanding the strategic interaction of the other Corporate Sustainability areas is essential and often required by reporting guidelines.


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• Development of Sustainability Programs

• Align to “pillars” and determine materiality

• Determine strategic orientation

• Define areas, actions, ownership, roles, viability

• Assurance of Sustainability Programs

• Confirm roles, metrics, outcomes, ownership

• Assure program is “as advertised”

• Second-party corporate reporting

• Third-party accreditations / certifications

• Enablement of Sustainability Programs

• Identification of source information

• Definition of reporting cycles, metrics

• Monitoring processes and governance

• Technology platforms, solutions, practices

Reporting

Program Development

Governance Monitoring

Corporate Sustainability

Program Assurance

Program Enablement

Corporate Sustainability Programs The three “aspects” of program activities

Three aspects of corporate sustainability programs have emerged: (1) development of corporate sustainability as a profit-driven strategy, (2) assurance of the actions of the corporate sustainability program, and (3) technology enablement of corporate sustainability for reporting and monitoring.


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In 2006, the Global Reporting Initiative (GRI) was created to provide guidelines and audit recommendations for organizations participating in sustainability reporting activities. These guidelines ensure a level of consistency and governance in the practice of corporate sustainability.

Sources: The Future of Corporate Sustainability Reporting, The Journal of Accountancy. The American Institute of Certified Public Accountants, 2006. Royal Dutch Shell, 2003 Corporate Sustainability Report (courtesy of AICPA).

CSR as a practice in accounting areas is still emerging, with general guidelines based on the objectives of the Corporate Sustainability program.

How does GRI consider Sustainability?

CSR “involves reporting financial and nonfinancial information to key stakeholders on the company’s operational, social, and environmental activities and its ability to deal with related risks.”

Considers the “triple bottom-line” of reporting – Economic Performance

– Social Responsibility

– Environmental Compliance

Considers broader set of stakeholders beyond shareholders – Financial

– Regulatory

– Political

– Others based on company program


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GRI reporting is a function of confirming that program initiatives, principles, and objectives are tracked, monitored, and reported correctly across specific areas. Some guidelines for GRI reporting have emerged, leaving management free to “do what you say” as long as it is verifiable.

Source: 2008 Corporate Sustainability Report, United Parcel Service (used with permission).

Overall graphic, such as a Venn diagram, communicates the areas of importance to various stakeholders.

Areas of CSR program called out, then detailed against Key Performance Indicators (KPIs) in subsequent sections of the sustainability report.

Interactive Web sites allow stakeholders including shareholders to create personalized reports, graphics, and tables.


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GRI3 provides a number of criteria whereby the organization pursues a self-assessment, third-party review, and final grading. This is similar to self-reporting, compliance audit and certification review followed by audit, assurance and assessment of other management systems.

Report Content Guidance Report Content Principles Report Quality Principles Report Boundary Setting

Profile Profile Profile Profile

Management Report Management Report Management Report Management Report

Performance Indicators Performance Indicators Performance Indicators Performance Indicators

Inputs and Outputs for Standard Reporting

Ou

tpu

ts

Source: GRI3 Standard Guidance Documents, 2006-2010.

Inputs


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• Key conclusions provided by assurance activities on GRI3 and AA1000 AS (2008)

• Inclusivity: Does organization X engage with stakeholders and involve them in organizational decision making?

• Materiality: Does organization X identify the issues relevant and significant to it and its stakeholders and include these in its disclosures?

• Responsiveness: Does organization X respond to stakeholder issues and feedback through decisions, actions, performance and communication?

• An assurance statement for a Type 2 engagement must also provide conclusions on the reliability and accuracy of specified performance information.

• Additional observations, comments, and recommendations are provided in an assurance report.

AA1000 AS (2008) has emerged as a guidance document in assurance circles with respect to sustainability and corporate responsibility programs. This approach considers two levels of assurance reporting: (1) dealing with organization behaviors and (2) behaviors in combination with KPIs, metrics.








Discussion Points

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Links and References

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• Psycho-sustainability: A Model for Personal Sustainability, TEDxFlint, October 11, 2011

• Increase Supplier Compliance with Sustainable Business Networks, GRC Expert (July 18, 2011)

• Best practices for managing sustainable supply chains, searchManufacturingERP.com (July 14, 2011)

• Mastering the IT demands of a sustainable supply chain, searchManufacturingERP.com (July 7, 2011)

• A Framework for Social Media in Sustainability Programs, Sustainable Business Forum (February 22, 2012)

• Strategic Intent for Green Marketing and Disclosure using Social Media, Sustainable Business Forum (March 30, 2012)

• Leverage ERP for a Greener Supply Chain, Sustainable Business Forum (January 14, 2012)

• Sneak Peek: Sustainable Procurement as an Embedded Process in Supplier Management Activities , GRC Expert (December 1, 2010)

• Comply with the EPA’s MRR Standard with SAP Carbon Impact OnDemand, GRC Expert (January 7, 2011)




http://www.grcexpertonline.com/article.cfm?id=5991

http://searchmanufacturingerp.techtarget.com/news/2240037770/Best-practices-for-managing-sustainable-supply-chains

http://searchmanufacturingerp.techtarget.com/news/2240037609/Mastering-the-IT-demands-of-a-sustainable-supply-chain

http://sustainablebusinessforum.com/williamnewman/56585/framework-social-media-sustainability-programs

http://sustainablebusinessforum.com/williamnewman/57188/strategic-intent-green-marketing-and-disclosure-using-social-media

http://sustainablebusinessforum.com/williamnewman/55898/leverage-erp-greener-supply-chain












Discussion Points

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1. Sustainability is a growing field of business practice, winners and losers will be chosen in part by what organizations decide to do in this field

2. There is a compelling economic and financial incentive for pursuing long-term sustainability strategies (5-7% increase in performance)

3. Each organization is different, therefore stakeholders need to determine which frameworks, guidelines and approaches are applicable.

4. You can’t do everything – and if you say you will you will be held accountable for binding statements. Determine your KPIs and goals realistically.

5. Even if you do “low-effort” GRI3 reporting, make sure the benefits outweigh the costs. Plenty of companies “ISO’d themselves out of business” – the same can happen with GRI3 reporting.

6. Use assurance services judiciously and at the appropriate program time. 7. Celebrate your accomplishments, use success to create opportunities

elsewhere inside the organization!

Key Take-away Points

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Your turn!

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Thank you for participating.

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