trends in external assurance of sustainability reports: spotlight on the usa

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TRENDS IN EXTERNAL ASSURANCE OF SUSTAINABILITY REPORTS: Spotlight on the USA April 2013 In collaboration with:

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Page 1: Trends in external assurance of sustainability reports: spotlight on the USA

T r e n d s i n e x T e r n a l a s s u r a n c e o f s u s Ta i n a b i l i T y r e p o r T s:

Spotlight on the USA

April 2013

In col laboration with:

Page 2: Trends in external assurance of sustainability reports: spotlight on the USA

a c K n o W l e d G M e n T s

Research and analysis

•   Marjella Alma, Mike Wallace—Global 

Reporting Initiative (GRI) Focal Point USA

•   Louis Coppola, Dan Doyle—Governance 

and Accountability Institute—GRI Data 

Partner for Ireland, United Kingdom and 

United States of America

Data provided by

•   Rina Levy—Bloomberg LP

•   Ian van der Vlugt—Global Reporting 

Initiative (GRI)—Global Secretariat, 

Amsterdam

•   Louis Coppola—Governance and 

Accountability Institute

Interviews undertaken by

•   Gwendolyn White—Ball State University 

and Marjella Alma—GRI Focal Point USA

Design and editing

•   Curran & Connors, Inc.

Page 3: Trends in external assurance of sustainability reports: spotlight on the USA

T A B L E O F C O N T E N T S

•Introduction

•ExecutiveSummary

•SustainabilityReportingintheUSA

•ResearchMethodology

•ResearchLimitations

•AssuranceofSustainabilityReports—Definitions

•ProvidersofExternalAssurance

•LevelsofExternalAssurance

•ScopeofAssurance

•AssuranceStandards

•Conclusions

•RelevantDefinitionsandOrganizations

•AppendixA:InterviewQuestions

•AppendixB:BloombergData

•AboutGlobalReportingInitiative

•ThankYou

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Page 5: Trends in external assurance of sustainability reports: spotlight on the USA

i N T r O d u C T i O N

The Global reporting initiative is an international organization that is operating all

over the world. Gri continuously develops its Sustainable repor ting Guidelines,

which has been adopted by organizations from 88 countries. The mission of Gri is to

make sustainability reporting standard practice. Gri actively promotes the practice

of sustainability reporting to increase the number of orga nizations that report, as

well as the quality of reporting. To support organizations that want to publish a

sustainability report, Gri of fers the Sustainability reporting Guidelines.

Page 6: Trends in external assurance of sustainability reports: spotlight on the USA

The Global Reporting Initiative is an international

organizationthatisoperatingallovertheworld.GRI

continuously develops its Sustainable Reporting

Framework, or “GRI Guidelines,” which has been

adopted by organizations from 88 countries. The

mission of GRI is to make sustainability reporting

standardpractice.GRI activelypromotes theprac-

ticeofsustainability reportingto increasethenum-

beroforganizationsthatreport,aswellasthequality

of reporting. To support organizations that want

to publish a sustainability report, GRI offers the

SustainabilityReportingGuidelines.

Next to theGRI Secretariat inAmsterdam,which is

GRI’smainexecutiveanddevelopmentbody,ithassix

FocalPoints1 (regionaloffices) in countries thatare

strategicallypivotal to thepracticeof sustainability

information disclosure and the availability of this

data to larger society. In order to encourage the

practiceof sustainability reporting in theUSA,GRI

establisheditsFocalPointUSAinNewYork.

Since GRI kicked off its presence in the USA, the

US-based team and its local network have often

been asked about the importance of the practice

of external assurance to sustainability reportspre-

paredbyAmerican companies. As thedemand for

nonfinancial performance is increasing—driven by

investors, rating agencies, regulators and other

stakeholders when analyzing the risks and value

creationofcompanies—thedemandforreliabledata

alsoincreases.

Since GRI recommends the practice of external

assurance in the GRI Guidelines2, the Focal Point

decided to explore the current trends in external

assurance in theUSA inorder tobetterunderstand

externalassurance.

The GRI Guidelines advise reporters to start

their reporting process by defining their material

sustainability, or “nonfinancial” issues, to create a

focusedstrategy,managementapproachandreport.

Determiningthisfocusincludesengagingstakehold-

ers inthisexerciseaswellasananalysisofthesus-

tainabilitycontext.Bothshouldhelpdrivethequality

ofthereport.

Throughdialogueandnarrative, civil society, inves-

torsandother stakeholders can interactwithorga-

nizations on their performance and transparency

andhelp fosterunderstandingof the linksbetween

sustainabilityandthecorebusinessstrategy.

Inorder to showcommitment to transparencyand

reliability, theorganizationmaychoose tohave the

reportexternallyassured.Obtainingexternalassur-

anceon sustainability informationand theunderly-

ingreportingprocessesisintendedtomakethedata

morereliableandtheorganizationmorecredible.

GRI’s Data Partner for the USA, Governance &

Accountability Institute (G&A Institute) started to

research external assurance trends for all sustain-

ability reports that got published in 2011with the

aimofsheddinglightonthecurrentstatusofexter-

nal assurance in theUSAaswell as clarificationof

GRI guidance on this particular matter. After all

reportspublished in2011hadbeencataloguedand

analyzedbyG&AInstituteandGRIFocalPointUSA,

theGRIteamworkedwithGwenWhiteatBallState

Universitytointerviewthecompaniesthathadcho-

senassuranceandhavethempresentsomeperspec-

tiveonthevalueandfutureofexternalassuranceof

sustainabilityreports.

GRIiscurrentlydevelopingthenextgenerationofits

SustainabilityReportingGuidelines (G4).GRI’s guid-

anceonexternal assurance isnotunder revision in

theG4development process. This research report

shouldhelpinformreportingorganizationsandothers

onthecurrentstateofexternalassuranceintheUSA.

1Australia,Brazil,China,India,SouthAfricaandUnitedStatesofAmerica.2GRIGuidelines,versionG3,releasedOctober2006.

Trends in Ex ternal Assurance of Sustainabi l i t y Repor ts: Spotl ight on the USA

Page 7: Trends in external assurance of sustainability reports: spotlight on the USA

Thisreportcoversresearchconductedtoassessthe

current stateofexternalassuranceof sustainability

reporting in theUS,whileplacing these trends into

thecontextandperspectiveoftheglobalsituation.

Global trend analysis shows continued growth in

sustainability reporting around the world. Within

thereportinguniverse, reporters increasinglychose

external assurance of their sustainability report.

Although the growth in reporting numbers in the

USAisoutpacingtheglobalaverageinthepasttwo

years,theUSAisstillsubstantiallybehindintermsof

bothintegratedreportingandexternalassurance.

K E y F i N d i N G S 3 :

• The report shows that in theUSA, only 10 percent (26 out of 269) of GRI-based sustainability reports

obtainedexternalassurancein2011.Theinternationalpercentageismuchhigherat38percent.

• GRI’slatestSustainabilityReportingGuidelines,theG3anditsupdateG3.1,introducedtheApplicationLevel

systemwithA,BandC indicating the levelof transparencyof the report.Most assured reports (in this

report,thosedesignatedwitha“+”symbol) intheUSAin2011areApplicationLevelBGRI-basedsustain-

abilityreports.Globally,theseweremorelikelytobeonthehighestleveloftransparency,namelyApplication

LevelAreports.

• Someof the26assured reportscontainedmore thanoneassurancestatement;30assurancestatements

wereidentified.

• The30assurancestatementsidentified(fromreportsdesignatedwitha“+”symbol)wereperformedbydif-

ferentassuranceproviders:accountancy,engineeringorprofessionalservicefirms.

E X E C u T i V E S u M M A r y

Through interviewswith the organizations that had their GRI-based sustainability reports externally

assured,twoquestionswereaskedregularlybytheseorganizationsplayinga largerole inthedecision-

makingprocessofexternalassurance.

1

First, interviewees lookedatwhat valueassurancecouldprovideataparticular stage in the reporting

process.in other words, what are you hoping to achieve with assurance and do you feel fully informed

of the different providers and approaches? Thematurity levelandnature in their reportingprocesses

andnatureoftheirbusinesswerekeyfactorsfordecidingonthepreferredproviderandapproach.

2

Second,intervieweestalkedabouttherigorandperceivedcredibilityoftheexternalassuranceapproach

andprovider.does the selected provider and approach correspond with what you are expecting or

hoping to achieve?Alreadyexisting tieswith theassuranceprovider for financial reportingaswell as

practical considerationsas towhichpartsof thebusiness to improvewerekey factors indetermining

whichproviderwouldbedeliverthisservicebest.

3BasedondatatakenfromGRI’sSustainabilityDisclosureDatabase,accessedinOctober2012,database.globalreporting.org.

Trends in Ex ternal Assurance of Sustainabi l i t y repor ts: Spotl ighton theUSA+Page5

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S u S T A i N A B i L i T y r E P O r T i N G i N T H E u S A

6KPMGInternationalSurveyofCorporateResponsibilityReporting2011,http://www.kpmg.com/PT/pt/IssuesAndInsights/Documents/corporate-responsibility2011.pdf.

Thepastdecadehasshowncontinuousgrowthinthe

number of organizations reporting publicly on

diverseaspectsof their sustainabilityperformance.

According to the KPMG International Survey of

Corporate Responsibility Reporting2011,95percent

of the largest250public companies in theworld—

G250—issuedsustainabilityreports,and80percent

didthisonthebasisofGRI’sSustainabilityReporting

Guidelinesin2011.6

Historically,most sustainability reports have been

published in Europe and Asia, but in the past two

years reporting numbers in theUS have increased

by 44 percent (according to GRI’s Sustainability

Disclosure Database), rapidly outpacing the global

growthinsustainabilityreporting,whichisestimated

tobea20percentincrease.

GRI,with theassistanceof itsUSDataPartner, the

Governance&AccountabilityInstitute,hasidentified

a totalof333 sustainability reports thatwerepub-

lished in2011byorganizationsbased in theUnited

States.Of the 333 reports, 244werepublishedby

publiclytradedcompanies.Another57reportswere

issuedbyprivatelyownedcompanies,eight reports

by nonprofit organizations and twelve reports by

public institutions. In12 instances,asubsidiaryofa

foreignbusinessissuedareport.

236 organizations applied the G3 Guidelines; 33

appliedG3.1.Oftheremainder,16organizationsref-

erencedGRIand48organizationsproducedsustain-

ability reports thatdidnot (explicitly)mention the

useoftheGRISustainabilityReportingGuidelines.

A totalof269organizationsmadeuseof theG3or

the G3.1 Guidelines and included a GRI Content

Index.Ofthese269organizations,187(69.5percent)

declaredanApplicationLevelfortheirreport.

Ofthose187organizationsthatdeclaredApplication

Levels,only26ofthereportsincludedanApplication

Levelwith a “+” symbol, indicating that the report

wasverifiedbyathirdpartyandincludedanexternal

assurancestatement.

In terms of absolute numbers, reporting has been

takenupbyvariousindustries intheUSA.Themain

sectors reportingare foodandbeverageproducts,

computers and technology, electric utilities and

healthcare.

Globally,38percentofGRI-basedreportsincludinga

GRIContent Index inGRI’s SustainabilityReporting

Disclosuredatabaseareassured, asmarkedby the

“+” symbol, and this percentage has grown in the

pastyearsfrom32percentin2008.TheUSpercent-

ageof10percentismuchlower.

Another major trend in reporting is integrated

reporting. Integrated reportingasproposedby the

IIRCisaformofcorporatereportingthatprovidesa

clearandconciserepresentationofhowanorganiza-

tion creates value,nowand in the future.An inte-

grated report is one that could bring together

material informationabout anorganization’s strat-

egy,governance,performanceandprospects.Again,

theUS levelof thispractice ismuch lower thanthe

global average.Only six percent ofGRI-based sus-

tainabilityreportsweredeclaredbythereportersas

“integrated reports” in comparison to 20 percent

globallyin2011.

Trends in Ex ternal Assurance of Sustainabi l i t y Repor ts: Spotl ight on the USA

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GRI-basedsustainabilityreports2011USA

LevelA

LevelA+

LevelB

LevelB+

LevelC

LevelC+

Undeclared

0 20 40 60 80 100

Theresearchmethodologyconsistedoftwophases:

The first phaseconsistedofdeskresearchondatafromGRI’sSustainabilityDisclosureDatabase,rawdatafromtheBloombergdatabaseandtrendanalysisfromtheKPMG’s International Survey of Corporate Responsibility Reporting 2011.4

Inthisphase,analysiswasperformedondatacontainedinGRI’sSustainabilityDisclosureDatabase.Thisdata-baseincludesthesustainabilityreportspublishedbetween1999and2012ofwhichGRIisaware.From1999to2010,thedatabaseonlycapturedtheGRI-basedsustainabilityreports.Asof2011,thedatabasealsoincludesother sustainability reports,butGRIacknowledges that thedata isnot complete, asGRIdoesnot knowallsustainabilityreportsthatarepublished.AllchartsincludedinthisreportarebasedonreportsincludedintheGRISustainabilityDisclosuredatabase.

TheresearchanalyzesGRI-basedsustainabilityreportsinthedatabasethatwerepublishedbetweenJanuary2008andDecember2012,witha closer focuson reportspublished in2011 (most likely coveringdata fromcalendaryear2010).Theresearchfocusesoncalendaryear2011asGRIstartedtotrackdatafieldsonexternalassuranceinthisyearforGRI-basedsustainabilityreportspublishedintheUSA.

r E S E A r C H S T E P S

• International trendswereanalyzedby reviewing thenumberofassurancestatements through identifyingassuredGRI-basedsustainabilityreports.Forpurposeofthisresearch,aGRI-basedsustainabilityreport isdefinedasonethatusestheG3orG3.1GuidelinesandcontainsaGRIContentIndex.

• Inthedatabase,the“+”symbolindicatesthatthereportingorganizationhasobtainedexternalassurance.TheresearchonlylookedatassuredGRI-basedreportsthatdeclaredthis“+”symbol.

Please note that the Application Level system operates under the premise that a “+” should only be declared by a reporting organization when it believes the assurance engagement has been conducted on the basis of GRI’s six key qualities for assurance (see box 1). By studying the reports that declared a “+” in 2011, GRI does not confirm the validity of this “+” declaration.

r E S E A r C H M E T H O d O L O G y

4http://www.kpmg.com/PT/pt/IssuesAndInsights/Documents/corporate-responsibility2011.pdf.

Trends in Ex ternal Assurance of Sustainabi l i t y repor ts: Spotl ighton theUSA+Page7

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• Internationaltrendspresentedinthispapercomprisedreportingperiods2008until2012.

• Forpublicationyear2011,alargersubsetofexternalassurancedata(i.e.,typeofprovider)wasstudiedandpresented inthispublication.Thismoreelaboratesubsetofdataonexternalassurancewasnotcapturedbefore2012byGRI.

• USspecifictrendswereidentifiedbyanalysisofassuredreportsinpublicationyear2011.Afteridentifyingthese reports, the researchers reviewed thepublishedassurance statements indetail for informationonscope, level, assurance provider, standards etc. The second phase consisted of phone interviewswithAmericancompanies thathad their sustainability reportexternallyassured in2011.Theoutcomesof theinterviewsareincludedasanonymousquotesinthispublication,andtheinterviewquestionscanbefoundinAppendixA.

ThesecondarysourcesthatarereferencedinthispublicationaretheKPMG International Survey of Corporate Responsibility Reporting 20115andtheBloombergdatabase.Bloombergranaseparateanalysisasacontribu-tiontothispublication.ThisrawdataisonlyaccessibletosubscribersoftheBloombergterminalandislocatedintheESGsectionofthisdatabase.Bothsourcescaptureexternalassurancedataandbothenablethisresearchtobeplacedintoaglobalcontext.

5http://www.kpmg.com/PT/pt/IssuesAndInsights/Documents/corporate-responsibility2011.pdf.

• TheGRISustainabilityDisclosureDatabaseincludesallreportsthatGRIand/oritsDataPartnershaveidenti-

fied.Registrationof sustainability reportswithGRI isnota requirement,and therefore reportsexist that

havenotbeenincludedinthisresearch.

• Thispublicationstudiesthe26assuredGRI-basedreportsthatexplicitlydeclarethe“+”symbolintheUSand

arecapturedinGRI’sSustainabilityDisclosuredatabase.Thisshouldbeconsidereda limited sampleasthe

aboveevidenceshowsthatotherassuranceengagementsmighthavebeenperformedwithoutthe“+”being

declaredaccordingtoGRI’smethodology.

• A“+”declarationismadebyareportingorganizationandshouldbebasedonGRI’ssixkeyqualitiesforassur-

ance (seebox1).Thevariety inassurancestatements indicatesvarying interpretationsandapplicationof

thesekeyqualities,i.e.,someassuranceengagementsonlylookatafewsustainabilityindicatorsortopics,

whereasotherapproachesassesstheentirereportincludingtestsofunderlyingprocesses.

• SomeGRI-basedsustainabilityreportsdonotusetheApplicationLevelsystem.Inthedatabase,suchreports

are classifiedas “GRI-undeclared” (withaContent Index)or “GRI-referenced” (withoutaContent Index)

reports.Forthesereports,thedatabasedoesnottrackwhethertheyhaveundergoneassurance.

• TherearealsoGRI-basedsustainabilityreports,declaringanApplicationLevelofA,BorC,thathaveassurance

statements,butwithouta“+”symbol.These falloutsideof thescopeof thedesk research.Someof these

assuranceengagementshavebeenidentifiedduringthisresearch.Eightofthesearelistedinthispublication.

• Tosupplementthedataanalysis,15ofthe26identifiedorganizationswereinterviewed.

r E S E A r C H L i M i T A T i O N S

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“ G R I S HOU L D UND ER S TAND WHAT vA R I OU S F I RM S

A R E D O I N G A N D WH AT S TA N DA R D S T H E Y A R E

F O L L OW I N G D U R I N G T H E R E P O R T I N G P R O C E S S .

A S SUR ANCE S TANDARDS NEED TO HAvE vA LUE .”

“ GR I SHOULD REQU IRE A S SUR ANCE . I T K EEP S E v ERY-

ONE ON A L E vEL P L AY ING F I E LD .”

“ I T ’ S NOT T HE RO L E O F GR I TO PR E S CR I B E C ER TA IN

A S SUR ANCE PROv IDER S OR APPROACHE S . I T I S F INE

TO ENDOR SE C ERTA IN A S SUR ANCE S TANDARDS , BUT

NOT IN T ERMS OF WHO I S QUAL I F I ED TO PROv IDE I T.

T HAT ’ S THE BUS INE S S O F ACCRED I TAT ION BOD I E S . ”

CompanyRepresentative

Trends in Ex ternal Assurance of Sustainabi l i t y repor ts: Spotl ighton theUSA+Page9

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A S S u r A N C E O F S u S T A i N A B i L i T y R E P O R T S — D E F I N I T I O N S

W H A T i S i T ?

Theuseof third-party independent reviewsof sus-

tainability reports is intended to increase the trust-

worthiness of disclosed information. The terms

“assurance,” “external assurance,” “verification,”

“audit,” “certification,” “attestation,” “checks” and

“third-party opinions” are used interchangeably

by sustainability practitioners, but definitions and

interpretationsmaydiffer.

The topic of external assurance of sustainability

reportsisofparticularsignificanceinglobalmarkets

astheneedforcrediblesustainabilitydataincreases.

Financial markets rely on credible and verifiable

financial data, and market mechanisms will con-

tinually seek third-party validation of information

available inpublicdomain,be that financial and/or

nonfinancial.With sustainability reportingmaturing

andmorestakeholdersdependingontheavailability

of reliable data, the importance of external assur-

anceincreases.

Reporters and report users are increasingly inter-

ested inhowexternal assurance canhelp improve

sustainability disclosure, and many view a third-

partyassessmentasthenextstepinthesustainabil-

ity reporting journey. GRI uses the term “external

assurance”asanoverarching term to coverawide

rangeof approachesof thirdparties assessingGRI-

basedsustainabilityreports.

Trends in Ex ternal Assurance of Sustainabi l i t y Repor ts: Spotl ight on the USA

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r E F E r E N C E S T O E X T E r N A L A S S u r A N C E i N T H E G r i r E P O r T i N G G u i d E L i N E S

ThereferencesofexternalassuranceintheGRIReportingGuidelines:

BOX1:EXTERNALASSURANCEANDGRI“+”LEvELSOFREPORTING

1 ChoicesonAssurance(pg36,GRISustainabilityReportingGuidelines,versionG3)

Organizations use a variety of approaches to enhance the credibility of their reports. Organizations may have systems of internal controls in place, including internal audit functions, as part of their processes for managing and reporting information. These internal systems are important to the overall integrity and credibility of a report. However, GRI recommends the use of external assurance for sustainability reports in addition to any internal resources.

A variety of approaches are currently used by report preparers to implement external assur-ance, including the use of professional assurance providers, stakeholder panels, and other external groups or individuals. However, regardless of the specific approach, it should be conducted by competent groups or individuals external to the organization. These engagements may employ groups or individuals that follow professional standards for assurance, or they may involve approaches that follow systematic, documented, and evidence-based processes but are not governed by a specific standard.

GRI uses the term “external assurance” to refer to activities designed to result in published conclusions on the quality of the report and the information contained within it. This includes, but is not limited to, consideration of underlying processes for preparing this information. This is different from activities designed to assess or validate the quality or level of performance of an organization, such as issuing performance certifications or compliance assessments.

Overall, the key qualities for external assurance of reports using the GRI Reporting Framework are that it:

• Is conducted by groups or individuals external to the organization who are demonstrably competent in both the subject matter and assurance practices;

• Is implemented in a manner that is systematic, documented, evidence-based, and character-ized by defined procedures;

• Assesses whether the report provides a reasonable and balanced presentation of performance, taking into consideration the veracity of data in a report as well as the overall selection of content;

• Utilizes groups or individuals to conduct the assurance who are not unduly limited by their relationship with the organization or its stakeholders to reach and publish an independent and impartial conclusion on the report;

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BOX1:EXTERNALASSURANCEANDGRI“+”LEvELSOFREPORTING

• Assesses the extent to which the report preparer has applied the GRI Reporting Framework (including the Reporting Principles) in the course of reaching its conclusions; and

• Results in an opinion or set of conclusions that is publicly available in written form, and a statement from the assurance provider on their relationship to the report preparer.

As indicated in Profile Disclosure 3.13, organizations should disclose information on their approach to external assurance.

GRIApplicationLevels(pg5,GRISustainabilityReportingGuidelines,versionG3)

Upon finalization of their report, preparers should declare the level to which they have applied the GRI Reporting Framework via the “GRI Application Levels” system. This system aims to provide:

• Report readers with clarity about the extent to which the GRI Guidelines and other Reporting Framework elements have been applied in the preparation of a report.

• Report preparers with a vision or path for incrementally expanding application of the GRI Reporting Framework over time.

Declaring an Application Level results in a clear communication about which elements of the GRI Reporting Framework have been applied in the preparation of a report. To meet the needs of new beginners, advanced reporters, and those somewhere in between, there are three levels in the system. They are titled C, B, and A. The reporting criteria found in each level reflect an increasing application or coverage of the GRI Reporting Framework. An organization can self-declare a “plus” (+) at each level (eg., C+, B+, A+) if they have utilized external assurance. An organization self-declares a reporting level based on its own assessment of its report content against the criteria in the GRI Application Levels.

In addition to the self-declaration, reporting organizations can choose one or both of the follow-ing options:

• Have an assurance provider offer an opinion on the self-declaration,

• Request that the GRI check the self-declaration.

GRIPrincipleReliability(pg17,GRISustainabilityReportingGuidelines,versionG3)

Reliability

Definition: Information and processes used in the preparation of a report should be gathered, recorded, compiled, analyzed, and disclosed in a way that could be subject to examination and that establishes the quality and materiality of the information.

Trends in Ex ternal Assurance of Sustainabi l i t y repor ts: Spotl ighton theUSA

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BOX1:EXTERNALASSURANCEANDGRI“+”LEvELSOFREPORTING

Explanation: Stakeholders should have confidence that a report could be checked to establish the veracity of its contents and the extent to which it has appropriately applied Reporting Principles. The information and data included in a report should be supported by internal controls or docu-mentation that could be reviewed by individuals other than those who prepared the report. Disclosures about performance that are not substantiated by evidence should not appear in a sustainability report unless they represent material information, and the report provides unam-biguous explanations of any uncertainties associated with the information. The decision-making processes underlying a report should be documented in a manner that allows the basis of key decisions (such as processes for determining the report content and boundary or stakeholder engagement) to be examined. In designing information systems, reporting organizations should anticipate that the systems could be examined as part of an external assurance process.

ProfileDisclosure3.13(pg22,GRISustainabilityReportingFramework,versionG3)

3.13 Policy and current practice with regard to seeking external assurance for the report. If not included in the assurance report accompanying the sustainability report, explain the scope and basis of any external assurance provided. Also explain the relationship between the reporting organization and the assurance provider(s).

GRI does not make recommendations on which assurance provider to choose or which assurance approach to use.

The reporting organization should select its assurance provider on the basis of these key quali-ties and, provided they are fulfilled, only then declare a “+” for its GRI sustainability report.

During a GRI Application Level Check (see glossary), GRI does not assess whether the external assurance for a report meets the key qualities for assurance identified by GRI, and it offers no opinion on whether this “+” is justifiable. The GRI Application Level Check itself is also not an external assurance engagement. The Application Level Check is complementary to assurance, indicating the extent to which the G3 or the G.31 Guidelines have been applied.

“ THERE ARE INCONSISTENCIES IN THE REQUIREMENTS

FOREXTERNALASSURANCETHATLIMITTHEvALUEAND

EFFECTIvENESSOF IT.”—QuotefromCompanyRepresentative

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W H O i S S E E K i N G A S S u r A N C E i N T H E u S A A N d W H y ?

Parallel to the growth of sustainability reporting,

thereisariseinthenumberofsustainabilityreport-

ers seeking assurance. According to the KPMG

International Survey of Corporate Responsibility

Reporting 2011, 46percentof the reportingGlobal

250useassurancetoverifyandassesstheirsustain-

abilitydata,andoverthelastsixyearsthispercent-

age has been stable. Of those G250 companies

seeking assurance, more than 70 percent obtain

assurancefromaccountancyfirms.

In the US, federal securities law requires publicly

traded companies to submit an externally assured

financial statement. Tomeet the legal obligations,

such financial audits have to be conducted at the

highest level,which is called reasonableassurance.

In theUSA, the AICPA7 issued the AT101,which is

anattestation standard for financial reporting,but

whichisreferencedinsomeofthe30assurancestate-

mentsforsustainabilityreportsinourlimitedsample.

LookingataninternationalsetofGRI-basedsustain-

ability reports captured in GRI’s Sustainability

DisclosureDatabase, external assurancehasgrown

from32 percent to 38 percent between 2008 and

2011.8 Out of 34 countries included in the KPMG

International Survey of Corporate Responsibility

Reporting 2011, theUSA ranked32nd,withonly13

percent seeking assurance on their sustainability

report. Analysis of GRI’s Sustainability Disclosure

Databaseshowsverysimilarfigures,with15percent

oforganizationsseekingassuranceinNorthAmerica,

belowthelevelofallothercontinents.

Asofthedateofthispublication,theGRI-basedsus-

tainability reports released in 2012 suggest an

upward trend, with almost half of them having

soughtexternal assurance.More2012analysis can

befoundintheconclusionofthisreport.

Assurancelevelsvaryacrosscontinentsforreportspublishedin2011

NorthAmerica

LatinAmerica

Africa

Oceania

Asia

Europe

NoExternalAssurance

ExternalAssurance

0% 20% 40% 60% 80% 100%

7SeeDefinitions:AICPA.8SustainabilityDisclosureDatabase,September2011.

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GRI-based sustainability reporting in theUSgrewby44percent from2010 to2011.Of the187GRI-based

sustainabilityreports(withaGRIContentIndex)publishedin2010,18reportingorganizationsdeclareda“+”

symbol(9.6percent),comparedto26outof269reports(9.7percent)in2011.Inabsoluteterms,thenumber

ofreportswitha“+”symbolgrewbyeightreports.Threeorganizationsthatdeclareda“+”symbolin2010did

notrepeatthisin2011:onedidnotissueareport,andtwoissuedareportbutdidnotdeclarea“+”symbol.

Thetablesbelowshowthoseorganizationsthatdeclared“+”symbolsin2010and2011.Thereportingorgani-

zationshouldselectitsassuranceprovideronthebasisofthesekeyqualitiesand,provided they are fulfilled,

onlythendeclarea“+”symbolforitsGRIsustainabilityreport.

In2010:

ApplicationLevelA+(7) ApplicationLevelB+(6) ApplicationLevelC+(5)

DowChemical AMBProperty MohawkIndustries

FreeportMcMoran Bristol-MyersSquibb Praxair

GoLiteLLC CliffsNaturalResources Qualcomm

HessCorporation Prologis SouthwestAirlines

NewmontMining StateStreet TeradataCorporation

PacificNorthwest UPS

Nat.Lab

SouthernCopper

The table below shows the 26 organizations that declared a “+” symbol in 2011; they are organized by

ApplicationLevel:

ApplicationLevelA+(6) ApplicationLevelB+(18) ApplicationLevelC+(2)

Alcoa AMBProperty 3M

DowChemical BankofAmerica MohawkIndustries

Freeport-McMoran Bloomberg

HessCorporation BristolMyers-Squibb

NewmontMining BucyrusInternational

PacificNorthwest CliffsNaturalResources

Nat.Lab Clorox

Coca-ColaEnterprises

H.J.HeinzCompany

Kimberly-Clark

Nisource

NorthernTrust

Praxair

Qualcomm

SouthwestAirlines

StarbucksCoffee

StateStreet

UPS

Themajorityoftheassuredreportsin2011(18outof26),wereApplicationLevelBreporters.Also,allwere

business corporationsexcept forPacificNorthwestNat. Lab,which is apublic institutionownedby theUS

DepartmentofEnergy.Bloombergwastheonlyprivatelyownedbusinessinthissample.

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BOX2:EXTERNALASSURANCEANDGRI“+”LEvELSOFREPORTING

Inthecourseoftheresearch,eightadditionalassurancestatementswereidentifiedfromthelistof 2011 published GRI-based reports. These organizations used the GRI framework for theirreporting,andincludedaGRIContentIndex,butdidnotdeclarea“+”symbol.ThereasonmightbethatthereporterdidnotbelievetheassuranceengagementwasincorrespondencewithGRI’ssixkeyqualitiesforassuranceorthatthereporterwasunawareofthepossibilityofdeclaringa“+”symbol.

Other sustainability reports that have

(sections) assured:

Gri references

AbbottLaboratories NoApplicationLeveldeclared

Chevron NoApplicationLeveldeclared

Cummins NoApplicationLeveldeclared

ExxonMobil NoApplicationLeveldeclared

HewlettPackard B

IntelCorporation A

PinnacleWestCapitalCorporation NoApplicationLeveldeclared

WyndhamWorldwide C

Amongthe333sustainability reports inGRI’sdatabase thatwere releasedbyUSorganizations in2011, it is

likelythatthereareadditionalreportsthatsoughtassurancebutwerenotformallydocumentedassuchinthe

GRIdatabase.Forthisreason,Bloombergdatawasconsulted.Between2009and2011,Bloomberg’sdatabase

recorded24,39and36examplesof“verification”insustainabilityreports,respectively.Thosecompaniesthat

disclosed sustainability information canbe found inAppendixB. In classifyinganESG report as “verified,”

Bloomberg does not assess whether the statement in the report is in correspondence with the GRI six

keyqualitiesonassurance. It shouldbenoted thatmany reports in theUSAchoose tohaveonly theirGHG

emissionsassured.

The different approaches taken by KPMG, Bloomberg andGRI in capturing external assurance data show

similar trendsalbeitbasedondifferentmethodologies.KPMG looksatpercentagesoforganizationsseeking

assuranceof the largest 250public companiesworldwide and the largest 100 companies in 34 countries.

Bloomberglooksat“verification”ofallpubliclytradedcompaniesintheUS.Forpurposeofthisresearch,GRI

only lookedat thoseUSorganizations thatdeclareda “+” symbolon theirGRI-based sustainability reports

publishedin2011.

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The tablebelowmaps the26organizations, as identified in theGRIdatabase in2011, againstGRI’s sector

classification.Mining andmetals has five reporting companies and financial services has four companies

declaringa“+”ontheir2011GRI-basedsustainabilityreport.

Organization Sector ApplicationLevel

SouthwestAirlines Aviation B+

DowChemical Chemicals A+

Praxair Chemicals B+

3M Conglomerates C+

MohawkIndustries ConsumerDurables C+

HessCorporation Energy A+

Nisource EnergyUtilities B+

BankofAmerica FinancialServices B+

Bloomberg FinancialServices B+

NorthernTrust FinancialServices B+

StateStreet FinancialServices B+

Coca-ColaEnterprises FoodandBeverage B+

H.J.HeinzCompany FoodandBeverage B+

StarbucksCoffee FoodandBeverage B+

Kimberly-Clark ForestandPaper B+

BristolMyersSquibb HealthCareProducts B+

Clorox Household&Personal B+

UPS Logistics B+

Alcoa Mining&Metals A+

BucyrusInternational Mining&Metals B+

CliffsNaturalResources Mining&Metals B+

Freeport-McMoran Mining&Metals A+

NewmontMining Mining&Metals A+

PNNL PublicAgency A+

AMBProperty RealEstate B+

Qualcomm Telecommunications B+

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P r O V i d E r S O F E X T E r N A L A S S u r A N C E

“ S INCE THE COMPANY I S A TOP 10 0 BR AND, THE Y UNDER-

S TAND THAT THE SUS TA INAB I L I T Y REPORT AND THE A S SUR-

A N C E E N G AG EMEN T P RO C E S S N E ED T O B E B U S I N E S S

C R ED I B L E . A L SO , S I N C E T H E F I RM DOE S OUR F I NANC I A L

ACCOUNT ING , I T A L RE ADY HA S KNOWLEDGE OF THE COM-

PANY W I T H R EGARDS TO DATA S T R E AMS AND I T WA S A

NATUR AL F I T TO CHOOSE THE PROv IDER .”

“ OUR COMPANY WORKED W I TH THE S AME A S SUR ANCE PRO -

v IDER FOR THE PRE v IOUS TWO Y E AR S , SO THERE I S A C ER -

TA I N FAM I L I A R I T Y B E T WE EN T H E C OMPAN I E S WH I C H

A L LOWS TH INGS TO GO SMOOTHLY. OUR A S SUR ANCE PRO -

v I D ER UNDER S TOOD T H E ENv I RONMEN TA L A S P EC T S O F

T HE COMPANY AND US ED K E Y ME T R I C S TO COMPREHEN -

S I v ELY ANALY z E THE COMPANY AND MAKE SURE A L L REL-

E vANT ARE A S WERE COvERED IN THE REPORT.”

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A total of 24different assuranceproviderswere identified in the limited sample of 26 externally assured

GRI-based reports producing 30 assurance statements, and below they are aggregated into accountancy,

engineeringandprofessionalservicesfirms:

“ T H ER E WER E NO S I T E v I S I T S . E v ER Y T H I NG WA S DONE

E L EC TRON IC A L LY. ”

Forthe26reportersinthesample,therewere30assurancestatementsissuedintotal.BristolMyersSquibb

and3Mundertooktwodifferentassuranceengagements.UPSundertookthreedifferentassuranceengage-

ments,twowithanaccountancyfirmandonewithanengineeringfirm.

1311

06

ProfessionalServicesFirms

EngineeringFirms

AccountancyFirms

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Thetablebelowdisplayswhichreportingorganizationschosewhattypeofassuranceproviderbrokendownby

accountancyfirm,engineeringfirmorprofessionalservicesfirm:

ByAccountancyFirm ByEngineeringFirm OtherProfessionalServicesFirm

Alcoa BankofAmerica 3M(2)

CliffsNaturalResources Clorox AMBProperty

NorthernTrust Coca-ColaEnterprises Bloomberg

StarbucksCoffee DowChemical BristolMyersSquibb(2)

UPS(2) HessCorporation BucyrusInternational

NewmontMining Freeport-McMoran

Nisource H.J.HeinzCompany

Praxair Kimberly-Clark

StateStreet MohawkIndustries

SouthwestAirlines PacificNorthwest

UPS Nat.Lab

Qualcomm

6AssuranceStatements 11AssuranceStatements 13AssuranceStatements

“ I N AUGUS T/ S EP T EMBER WE S TART ED THE IN I T I A L CONvER-

S AT I ONS I N WH I CH WE TA L K ED A BOUT T HOS E S I T E S WE

BEL I E v ED THAT RE A L LY NEEDED TO BE LOOKED AT. SOME

SMA L L ER S I T E S A R E P I C K ED U P ON A SMA L L ER C YC L E ,

E v ERY 5 Y E A R S FOR I N S TANC E . A S I T E v I S I T COU LD B E

ONE DAY TO T HR EE DAY S D EP END ING ON T H E S I z E O F

OPER AT IONS/EM I S S IONS THAT THE S I T E REPRE SENT S AND

WHE THER I T I S A COMPL E X S I T UAT I ON . T H E P ROv I D ER

PRODUC E S R EPORT S FOR E ACH v I S I T, AND T H E Y DO AN

OvER A L L REPORT AT THE END. THE WHOLE PROCE S S L A S T S

UNT I L JUNE .”

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The International FederationofAccountants (IFAC)

definesanassuranceengagementas“oneinwhicha

practitioner expresses a conclusion designed to

enhance thedegreeof confidenceof the intended

users other than the responsible party about the

outcomeoftheevaluationormeasurementofasub-

ject matter against criteria.”9 This research found

referencestotwodifferentlevelsofassuranceinthe

sampleof30assurance statements; the two levels

are limited(ormoderate)assuranceandreasonable

(orhigh)assurance.

There isonefactorthat indicates limitedorreason-

able assurance, and that is whether the opinion

given ispositiveornegative. IFACdistinguishes rea-

sonable and limited assurance as follows: “The

objectiveofareasonableassuranceengagementisa

reductioninassurance engagement risk(seedefini-

tions) to anacceptably low level as thebasis for a

positiveformofexpressionofthepractitioner’scon-

clusion.Theobjectiveofalimitedassuranceengage-

mentisareductioninassuranceengagementriskto

alevelthatisacceptableinthecircumstancesofthe

engagement,butwherethatriskisgreaterthanfora

reasonableassuranceengagement,asthebasisfora

negative form of expression of the practitioner’s

conclusion.”10

From the30assurance statements in the sample,16 indicated that limitedassurancehadbeenperformed.

Therewereonlythreeassurancestatementsthatclaimedtobereasonableassurance.Examplesofreasonable

assuranceinoursampleweresoughtbyUPS(obtainedfromDeloitteandSGS)andStarbucksCoffee(obtained

fromMossAdams).Alevelofassurancewasnotspecifiedin11cases.

L E V E L S O F E X T E r N A L A S S u r A N C E

LevelsofassuranceforUSreportspublishedin2011

Reasonable

Limited

NotSpecified

0 2 4 6 8 10 12 14 16 18

11

3

16

9http://www.ifac.org/sites/default/files/downloads/b003-2010-iaasb-handbook-framework.pdf.10http://www.ifac.org/sites/default/files/downloads/International_Framework_for_Assurance_Engagements.pdf.

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S C O P E O F A S S u r A N C E

For16outof the30assurance statements, awide

rangeofsustainabilitytopicswereassured.Itneeds

to be noted that although a wide range of topics

wereassured,someengagementsonlycoveredKPI’s

whereasothersweremorethorough,i.e.,alsocover-

ing underlying internal control processes. Out of

these30statements,7indicatedthattheassurance

hadbeenperformedforthetopicofgreenhousegas

(GHG)emissionsonly.Another7statementscanbe

classified as assurance of specific sections, which

were environmental sustainability topics, such as

water,carbonandwasteinall7cases.

“ E X T ERNA L A S SUR ANCE G I v E S YOU T HE UNDER S TAND ING

O F B E I NG ON T H E R I GH T T R AC K . I T A L SO S HOWS T HAT

YOU ARE B E ING T R ANSPARENT.”

“ WE WANT TO PROvE OUR ME THODOLOG I E S AND S Y S T EMS .

WE O F T EN FAC E I S SU E S W I T H OUR S I T E - S P EC I F I C DATA

S E T S , AND WE N EED TO G E T T H EM CORREC T ED B E FORE

GO ING TO PUB L I C AT ION . T H E DATA NEED S TO B E ACCU -

R AT E AND REL I AB L E . QUAL I TAT I v ELY, WE WANTED TO GE T

S OME UNDER S TAND ING O F WHAT S OME OTHER COMPA -

N I E S A R E D O I NG A ND HOW OUR S Y S T EM S C OMPA R E

AGA INS T OUR PEER S . ”

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Thebelowtableoutlinesthe26organizationsdeclaringa“+”bythescopeoftheverificationorassuranceren-

dered for their sustainability reports. Considering GRI’s six key qualities on assurance, one can question

whethersustainabilitywithoutassuranceonawiderangeofsustainabilitytopics,shouldwarranta“+”level.

WideRangeof

SustainabilityTopicsSpecificSections GHGOnly

AMBProperty 3M(2) Alcoa

BankofAmerica BristolMyersSquibb(1) Bloomberg

BucyrusInternational CliffsNaturalResources BristolMyersSquibb(1)

Coca-ColaEnterprises H.J.HeinzCompany Clorox

DowChemical Praxair UPS(2)

Freeport-McMoran StarbucksCoffeeCompany

HessCorporation

Kimberly-Clark

MohawkIndustries

NewmontMining

Nisource

NorthernTrust

PacificNorthwestNat.Lab

SouthwestAirlines

StateStreet

Qualcomm

UPS(1)

“ E ACH Y E A R S I N C E T H E F I R S T A S SUR ANC E ENGAGEMEN T

HA S TAKEN L E S S AND L E S S T IME . T HE PROCE S S U SUA L LY

TA K E S A F EW MONTH S F ROM S TA R T TO F I N I S H . T H ER E

WERE vAR IOUS FACE -TO - FACE AND PHONE MEE T INGS . T HE

PROv IDER GAvE S TATUS UPDAT E S AT 3 0 PERCENT, 5 0 PER -

C ENT, 8 5 PERCENT, AND 95 PERCENT COMPL E T ION R AT E S .

T H E F I RM K E P T T H E F I N A L R E POR T F O R 2 1 DAY S F O R

RE v I EW BY S EN IOR PARTNER S , WH ICH I S v ERY FORMAL .”

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Belowareexamplesof assurance statementsas illustrationsofdifferent variationsof approaches in terms

of level of assurance (limited/reasonable), scope of assurance (range of topics), coverage (KPI’s/internal

processes)andboundary(entities):

CompanyAssuranceProvider

Examples

3M TrucostandAshleyHamiltonConsulting

LevelLimited/Moderate

Scope:Waste,waterconsumption,vOCsemissions

Boundary:Allfacilitiesglobally(withanexemptionofnewacquisitions)

Two Assurance Providers: Trucosthasverifiedtheenvironmentalpartofthereport,andAshleyHamiltonConsultinghasverifiedthesocialandgovernanceinformation.

BucyrusInternational ISOSGroup

LevelLimited/Moderate

Approach:AlthoughonlytwentymaterialindicatorsarerequiredforaBlevelreport,thisexternalassur-ancestatementisbasedontheresultsofacompre-hensiveverificationofalldisclosedindicators.

CliffsNaturalResources Ernst&Young

LevelLimited/Moderate

Approach/Coverage:Wehavecarriedoutalimitedassuranceengagementinrelationtoselected2010performanceindicatorsdenotedbythe✔symbolintheGRIIndexonpages57and58ofCliffs’2010SustainabilityReport.

H.J.HeinzCompany SKMEnviros

LevelNotSpecified

Scope/Coverage:TheKeyPerformanceIndicatorswereselectedbyH.J.HeinzCompany.ThefollowingKPI’swereverified:• Electricity• Fuels• GHGemissions• Wateruse• Solidwaste

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CompanyAssuranceProvider

Examples

StarbucksCoffee MossAdamsLLP

LevelReasonable/High

Scope:Ourresponsibilityistoexpressanopiniononthedatalistedbelowbasedonourexamination:• Greencoffeepurchasesandaveragepriceper

poundoftotalcoffeepurchased• C.A.F.E.Practicescoffeepurchasesandpurchasesas

apercentageoftotalcoffeepurchased• Fairtradecertifiedgreencoffeepurchasesandpur-

chasesasapercentageoftotalcoffeepurchased• Certifiedorganiccoffeepurchasesandpurchasesas

apercentageoftotalcoffeepurchased• Amountofcommitmenttoinvestmentinfarmer

loansandnumberoffarmers

UPS Deloitte Approach:WithintheUPSSustainabilityReportfor2010,therearetwostatementsbyDeloitte.Thefirstisan“IndependentAccountants’Report.”Thesecondisan“IndependentAccountant’sExaminationReport.”

LevelLimited/Moderate

Scope /Level: Statement1:Basedonourreview,noth-ingcametoourattentionthatcausedustobelievethatsuchsustainabilityreportdoesnotinclude,inallmaterialrespects,therequiredelementsofGlobalReportingInitiativeG3.1GuidelinesforApplication Level Bsustainabilityreports.11

LevelReasonable/High

TheStatementofGreenhouseGasEmissionsofthecompanyfortheyearendedDecember31,2010pre-sentedinAppendixBwasexaminedbyus,andinourreportdatedMay27,2011,weexpressedanunquali-fiedopinionofthatStatement.

Astheabovereportexcerptsshow,nexttovaryinglevelsandscopeofassurance,assurancestatementsmight

takedifferentapproachestowardsboundaryandcoverage.

11Often,butnotinallcases,ApplicationLevelChecksformpartofanexternalassuranceengagement.Inaddition,areportingorganizationmightopttoobtainanApplicationLevelCheckdirectlyfromGRI.

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“ S EN IOR MANAGEMENT WA S NOT IN T ERv I EWED. THE

A SSURANCE PROv IDER SPOKE TO THE ENv IRONMENTAL

MANAGER D I R EC T LY B EC AU S E T H E F O CU S O F T H E

A S SUR ANCE ENGAGEMENT WA S ENv IRONMENTAL .”

“ OUR PROv IDER REQU IRED A L ARGE AMOUNT OF DATA

AND SUPPORT ING MAT ER I A L S I N ORDER FOR T HEM

TO PROv I D E T H E I R E X T ERNA L A S SUR ANC E ON T H E

REPORT.”

OntheApproach

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“ WE SHARED T HE SU S TA INAB I L I T Y R EPORT AND T HE

OUTCOMES OF THE A S SUR ANCE ENGAGEMENT W I TH

S EN I O R MANAGEMEN T. I T H E L P S U S TO IMPROv E

OvER T IME AND S E T GOAL S . ”

“ T H E R E POR T WA S S H A R ED AND D I S CU S S ED W I T H

TWO vERY S EN IOR C- SU I T E E X ECUT I v E S . T HE REPORT

WA S NOT S H A R ED W I T H T H E AUD I T C OMM I T T E E .

T WO S EN I O R E X E CU T I v E S A L S O S AT I N O N T H E

DEBR I EF ING MEE T ING FOR THE ENGAGEMENT.”

“ NO, NOT CURRENT LY. ”

“ THE REPORT I S R E v I EWED BY THE C FO AND C EO, AND

OUR GENER A L COUNC I L . T H E OU TCOME S A RE A L SO

R E v I EWED B Y A P PROPR I AT E E X ECU T I v E S F O R T H E

vAR IOUS BUS INE S S UN I T S . ”

OnSharingtheOutcomeswiththeC-Suite

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A S S u r A N C E S T A N d A r d S

Thetablebelowshowswhichdocumentsweremen-

tionedinthe30assurancestatementsas“assurance

standards.” A third of assurance statements (10

statements for8organizations)didnotmake refer-

encetoanyassurancestandards.

The most-referenced assurance standard was

AA1000AS,whichwasmentioned innineoutof30

assurance statements. The ISAE3000 standard and

AICPAAT-101(whicharerequiredforusebyaccoun-

tancyfirms)wereeachreferenced in fiveassurance

statements.Threeassurancestatementsmentioned

ISO14064-3 as an assurance standard,which pro-

videsguidance for thevalidationandverificationof

greenhousegasassertions.Oneassurancestatement

mentioned theeGrid2007andEPA40CFRasassur-

ancestandards,butthesearenot.

“ I T G I v E S THE COMPANY AND S TAKEHOLDER S CONF IDENCE

T H AT T H E NUMB ER S A R E C O R R E C T A ND C OMP L E T ED

ACCORD ING TO PROPER S TANDARDS . ANOTHER vA LUE HA S

TO DO W I TH EDUCAT ION . D I L I GENT LY US ING ACCOUNT ING

S TANDA RD S H E L P S T H E EN T I R E C OMPAN Y G A I N MOR E

KNOWLEDGE ON THE PURPOSE OF SUS TA INAB I L I T Y REPORT-

ING . A L SO, THE L ARGE AMOUNT OF DATA COL L EC T ED DUR-

ING THE A S SUR ANCE ENGAGEMENT G I v E S T HE COMPANY

L E v ER AGE AND H E L P S TO EN SURE T HAT T H E C A L CU L A -

T IONS ARE CORREC T.”

Otherpublications, referencedocumentsand reporting frameworks thatwerementioned,butnotasassur-

ancestandards,were:GRISustainabilityFramework,GRIGuidelines,GRIG3Protocols,theBloombergCarbon

EmissionsCalculationProcess, the IPIECA/APIOil andGas IndustryGuidance, ISO14001,OHSAS18001, the

ICMMSDFrameworkassuranceprocedureandtheAA1000APS.

AssuranceStandards–2011USReports

AICPAAT-101/ISAE3000

AA1000AS

ISO14064-3

0 02 04 06 08 10 12

03

05 05

09

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O N T H E M A j O r C H A L L E N G E F O r A S S u r A N C E

“ MANY PEOPL E TH INK THE MA IN CHA L L ENGE I S COS T, AND

OTHER S TH INK THAT I T I S JUS T TOO L ARGE OF A TA SK TO

P ROv I D E A S SU R ANC E F O R A S U S TA I N A B I L I T Y R E P O R T.

O T H ER S F E E L T H AT C OMPAN I E S A R E NO T O RG AN I z ED

ENOUGH TO COMPL E T E THE TA SK CORREC T LY. I F DATA I S

IM PO R TAN T ENOUGH TO S P END T IM E A N A LY z I N G , I T

SHOULD BE A NATUR AL S T EP TO CHECK I T W I TH ANOTHER

SOURCE TO ENSURE MORE CONF IDENCE . T HE F I R S T REPORT

M IGH T B E AN E XC EP T ION , BU T OTHER R EPORT S SHOULD

BE A S SURED. A S SUR ANCE OF SUS TA INAB I L I T Y REPORT ING

I S R I GH T I N L I N E W I T H T H E Ov ER A L L GOA L S O F T H E

COMPANY.”

“ THE B IGGE S T CHA L L ENGE I S MAK ING SURE THAT THE R IGHT

PROCE S S E S ARE IN P L ACE TO ENSURE ACCURAT E DATA .”

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TheresearchshowsthattheUSAisrapidlycatching

up when it comes to increases in the number of

sustainability reports being issued. There are now

more reports thaneverbefore;however, the focus

on improving sustainability reports by utilizing

assurance is laggingbehind substantially.Outofall

GRI-based reports (with an Application Level and

an Index) released in 2011, 38 percent underwent

assurance on a global scale compared to a mere

10percentintheUSA.

There is a large rangeofbothassuranceproviders

andapproachesintheUSmarket.In2011,thereare

26reportersthatdeclarea“+”symbol,andbymak-

ingthisdeclarationtheyareoftheopinionthatthe

externalassuranceis inlinewithGRI’ssixkeyquali-

ties. Some reporters use multiple providers for

different parts of the report, some reporters only

have their GHG emissions verified and some hire

assurance providers that use assurance standards

(such as AICPA AT-101, AA1000AS etc.) whereas

othersdonot.This variety calls fora closer lookat

the “+” declarations and should encourage both

companiesand their stakeholders to takea careful

lookat these claims.AmyPawlicki, fromassurance

standard developer AICPA, says, “We are very

pleased that GRI has conducted this research

studytogainabetterunderstandingofthird-party

verification on GRI-based reports. This research

represents an important step in helping the pre-

parersandusersofsustainabilitydisclosuresbetter

assess thediversityof assuranceoptions available

tothem.”

Awiderangeofplayersareactive inprovidingassurance,rangingfromtraditionalaccountancy,engineering

andotherprofessionalservicesfirms.Mostassuranceengagementsarebeingcarriedoutbyengineeringfirms

andotherprofessionalservicesfirms,whereasgloballyaccountancyfirmshavethebiggestmarketshare.The

interviewswith reporters that chose some formofexternal assurancehighlighted that thedecision-making

processonassurancerevolvesaroundtwomain ideas: first, interviewees indicatedthat itwas important to

assesswhatvalueassurancecouldprovideataparticularstageinthereportingprocess.Second,interviewees

explainedthatperceivedcredibilityoftheexternalassuranceapproachandproviderwasanimportantconsid-

erationaswell.

Itwillbe interestingtoseehowexternalassurancetrendswilldevelop intheUSA. It is likelythat the initial

phaseofmoreandmore companiesgetting startedwith sustainability reportingwill beaccompaniedbya

secondphasethatcanbecharacterizedasmorecompaniesandtheirstakeholderslookingcriticallyatthequality

of sustainability informationand looking forways toenhance thatquality.Halfway through theyear2012,

numbersfromGRI’sdatabaseshowedthattherewerealready30organizationsthatdeclareda“+”symbolwith

GRIwrappingupits2012figuresinthefirstquarterof2013,thesenumbersseempromising.Also,thedistri-

butionof assuranceproviders in this sample seems to be suggestive of changes in themarket,with over

40percentofprovidersbeingtraditionalaccountancyfirms,followedbycloseto35percentfromengineering

firmsand25percentfromotherprofessionalservicesfirms.Thefactthatbothaccountancyfirmsaswellas

engineeringfirmsaremorelikelytomakeuseofassurancestandardsmightsuggestamaturingmarket.

International figures (basedonGRI2012data) suggest thataccountancy firmsnowhaveover70percentof

themarket,withengineeringandotherprofessional services firmshavinga relatively evendistributionof

theremainder.

C O N C L u S i O N S

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r E L E V A N T d E F i N i T i O N S A N d O r G A N i Z A T i O N S

A A 1 0 0 0 A SThe firsteditionof theAA1000AssuranceStandardwaspublished in2003byAccountAbilityas theworld’s

firstsustainabilityassurancestandard.Itwasdevelopedtoassurethecredibilityandqualityofsustainability

performanceand reporting, andwas the resultof anextensive, two-year,worldwideconsultation involving

hundreds of organizations. The 2008 edition of the AA1000Assurance Standard, AA1000AS (2008), is its

secondedition.TheAA1000AS(2008)iscompatiblewiththemethodologyofISAE3000andAICPAAT-101.

A C C O u N T A B i L i T yAccountAbility is a think tank and advisory services firm focusing on “mainstreaming” sustainability into

organizationalthinkingandpractice.Byproviding innovativeandpracticalsolutions,theyaimtohelpclients

improvetheirbusinessperformance,createvalueandbuildasustainablecompetitiveadvantage.Theirwidely-

usedstandards (e.g.AA1000AS), research,andstrategicadvisoryservicesaimtohelporganizationsbecome

moreaccountable,responsibleandsustainable.12

A i C P ATheAmericanInstituteofCertifiedPublicAccountants(AICPA)istheworld’slargestmemberassociationrepre-

sentingtheaccountingprofession,withnearly386,000membersin128countriesanda125-yearheritageof

servingthepublicinterest.AICPAmembersrepresentmanyareasofpractice,includingbusinessandindustry,

publicpractice,government,educationandconsulting.TheAICPAsetsethicalstandardsfortheprofessionand

US auditing standards for audits of private companies, nonprofit organizations, federal, state and local

governments.

A i C P A A T 1 0 1 1 3

AT101wasdevelopedbytheAmericanInstituteofCertifiedPublicAccountants(AICPA)toputrequirementsin

placeforCPAsexaminingand issuingreportsoncontrolsoversubjectmatterotherthanfinancial reporting.

ThesestandardsarecodifiedwithinATsection101,Attest Engagements,oftheattestationstandards.

A S S u r A N C E E N G A G E M E N TAnassurance engagement is one inwhich a practitioner expresses a conclusiondesigned to enhance the

degreeofconfidenceoftheintendedusersotherthantheresponsiblepartyabouttheoutcomeoftheevalua-

tionormeasurementofasubjectmatteragainstcriteria.(DefinitionbyIFAC;seebelowforIFAC.)

12www.accountability.org.13http://www.aicpa.org/Research/Standards/AuditAttest/DownloadableDocuments/AT-00101.pdf.

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A S S u r A N C E E N G A G E M E N T r i S K“Assuranceengagementrisk istheriskthatthepractitionerexpressesaninappropriateconclusionwhenthe

subjectmatter information ismateriallymisstated. Ina reasonableassuranceengagement, thepractitioner

reducesassuranceengagement risk toanacceptably low level in the circumstancesof theengagement to

obtainreasonableassuranceasthebasisforapositiveformofexpressionofthepractitioner’sconclusion.The

levelofassuranceengagementriskishigherinalimitedassuranceengagementthaninareasonableassurance

engagementbecauseof thedifferentnature, timingorextentofevidence-gatheringprocedures.However,

ina limitedassuranceengagement, thecombinationof thenature, timingandextentofevidence-gathering

proceduresisatleastsufficientforthepractitionertoobtainameaningfullevelofassuranceasthebasisfora

negativeformofexpression.Tobemeaningful,thelevelofassuranceobtainedbythepractitionerislikelyto

enhancetheintendedusers’confidenceaboutthesubjectmatterinformationtoadegreethatisclearlymore

thaninconsequential.”14

B L O O M B E r GThe company was founded in 1982 and within 10 years had over 10,000 customers for the Bloomberg

Professionalservice,agroundbreakingprivatenetworkwithdata,analyticsandotherfinancialinformation.In

thesamedecade,BloomberglaunchedBloombergNewsandopenedofficesaroundtheworld.Subscriptions

totheBloombergProfessionalserviceskyrocketedinthenextdecade,andthecompanylaunchedBloomberg

TradebookandBloomberg.com.BloombergEnvironmental,SocialandGovernance (ESG)productsenableall

investorsacrossarangeofassetclassestounderstandtherisksandopportunitiesassociatedwithpotential

investmentsor counterparties as themarket continues toembraceESG factors.Bloomberg is aGRI Sector

LeaderandworkscloselywithGRI’sFocalPointUSAinawarenessraisingactivitiesintermsofthevalueofESG

andsustainabilityissues.15

F i N A N C i A L A u d i TAfinancialaudit,ormoreaccurately,anauditoffinancialstatements,istheverificationofthefinancialstate-

mentsof a legal entity,with a view toexpress anauditopinion. Theauditopinion is intended toprovide

reasonableassurancethatthefinancialstatementsarepresentedfairly,inallmaterialrespects,and/orgivea

trueandfairviewinaccordancewiththefinancialreportingframework.Thepurposeofanauditistoenhance

thedegreeofconfidenceofintendedusersinthefinancialstatements.

G r i A P P L i C A T i O N L E V E L SApplicationLevels indicatetheextenttowhichtheGRI’sG3orG3.1SustainabilityReportingGuidelineshave

beenapplied.TheA,BorClevelscommunicatewhichpartsoftheReportingFrameworkhavebeenaddressed

andwhichsetofdisclosuresareincluded.Theydonotgiveanopiniononthesustainabilityperformanceofthe

reportingorganization,thequalityofthereport,orformalcompliancewiththeG3orG3.1Guidelines.

14AsdefinedbyIFAC:http://www.ifac.org/sites/default/files/downloads/International_Framework_for_Assurance_Engagements.pdf.15www.bloomberg.com/company.

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G r i A P P L i C A T i O N L E V E L C H E C KAGRIApplicationLevelCheck isapaid serviceprovidedbyGRIandothers that confirmsandpublicizes the

extenttowhichareporthasaddressedGRI’sstandarddisclosures.

G r i C O N T E N T i N d E XTheGRIContent Index listseveryG3orG3.1disclosureaddressed ina report.The Indexcomplements,and

shouldcorrespond to,anApplicationLeveldeclaration.Awell-constructed Indexenables readers toaccess,

understand and communicate aboutGRI-based reportsmore readily. The Index communicateswhichGRI

disclosureshavebeenreportedandthereasonwhycertaindisclosureshavenotbeenreported.TheIndexis

thegateway to thesustainabilityperformancedata. It shouldhaveclearanddirect referencing,and ifused

online,canbeaninteractivenavigationtool.ThroughtheGRIContentIndex,reportusersshouldeasilyfindthe

specificGRIdataofinterest.

i F A CTheInternationalFederationofAccountants(IFAC)isaglobalorganizationfortheaccountancyprofessionthat

workswith itsmember organizations to protect the public interest by encouraging high-quality practices

aroundtheworld.IFACisfacilitatingtheadoptionandimplementationofhigh-quality-standardsandguidance.

GRI’sFocalPointUSAislocatedwithintheIFACofficesinNewYorkCity,USA.

i S A E 3 0 0 0The ISAE3000 (2003) is the International StandardonAssuranceEngagements.This is a recognized interna-

tionalstandardtoensurethequalityofassurancework,includingreportverification,aswellasassuranceon

environmentalperformance,corporategovernance, internalcompliance,stakeholderengagementandother

areascentraltocorporateresponsibility.DevelopedbytheInternationalFederationofAccountants(IFAC)asa

successortotheISAE100,theframeworkisdesignedtoguideaccountants,auditorsandassuranceprofession-

alswhenundertakingnonfinancialaudits.

I S O 1 4 0 6 4 - 3 : 2 0 0 6ThisISOstandardspecifiesprinciplesandrequirementsandprovidesguidanceforthoseconductingormanag-

ingthevalidationand/orverificationofgreenhousegas(GHG)assertions.Itcanbeappliedtoorganizationalor

GHGprojectquantification,includingGHGquantification,monitoringandreportingcarriedoutinaccordance

with ISO 14064-1 or ISO 14064-2. ISO 14064-3:2006 specifies requirements for selectingGHG validators/

verifiers, establishing the level of assurance, objectives, criteria and scope, determining the validation/

verificationapproach, assessingGHGdata, information, information systemsand controls, evaluatingGHG

assertionsandpreparingvalidation/verificationstatements.

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V A L u E

• Whatdoyouseeasthevalueofexternalassurance?

C H O i C E O F A S S u r A N C E

• Whatwasyourrationaleforchoosingyourassuranceproviderandapproach?

• DidyouhaveaclearunderstandingoftheGRI’srequirementstodeclarethatyourreporthasbeenexternally

assuredandthereforeshouldgeta“+”?

• Howdidyoudecidethatyourreportwasa“+”report?

G r i A N d A S S u r A N C E

• WhatroleshouldGRIplaywithregardstotheexternalassuranceofsustainabilityreporting?

F u T u r E O F A S S u r A N C E

• Shouldexternalassuranceofsustainabilityreportingbecomemandatory?

• Whatdoyouconsiderthemainchallengesofassuranceofsustainabilityinformation?

A P P r O A C H

• Didyourassuranceproviderpresentaclearplan(methodologyanddefinitivetasks)fortheirassurancepro-

ceduresandexplaintherationalebehindtheirapproach?

• Didyouunderstandtheassuranceprovider’sapproachandexecutionoftheassuranceengagement?

• Didyouunderstandthedifferenceinscopeofanengagementtoprovideassuranceonanentiresustainabil-

ityreportvs.thescopeofanengagementtoprovideassuranceonselectedindicators?

C O M P O S i T i O N O F T E A M

• Howmanyassuranceengagementteammembersparticipated(includingtheirprofessionallevelsandexpe-

rience)intheengagement?

• Didyouunderstandtherolesandresponsibilitiesofeachintheexecutionoftheengagement?

A S S u r A N C E E N G A G E M E N T

• Wereyouaskedtoprovideunderlyingsupportforthedataandinformationincludedinyoursustainability

reportaspartoftheassuranceengagement?

• Did the assurance provider challenge assumptions you made for any of the GRI indicators subject to

assurance?

A P P E N d i X A : i N T E r V i E W Q u E S T i O N S

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• Didtheassuranceproviderraiseobservationsaroundyourreport’sfulfillmentoftheGRI’sreportingprinci-

plesfordefiningcontent:materiality,stakeholderinclusiveness,sustainabilitycontextandcompleteness?

• Didtheassuranceproviderraiseobservationsaroundyourreport’sfulfillmentoftheGRI’sreportingprinci-

plesfordefiningquality:balance,comparability,accuracy,timeliness,clarity,andreliability?

• Didyourassuranceproviderdiscusstherisksofmaterialmisstatementandfraudconsiderationswithyour

CSRlead?

• Didyourassuranceproviderfocusondocumentingaclearunderstandingofthedatamanagementprocess

foreachindicatorandconfirmtheirunderstandingwiththedataprovider?

• Didyourassuranceproviderreviewtheinternalcontrolsyourorganizationhasinplacetoensureaccurate

andcompletedata?

• Iftheassuranceproviderwasprovidinglimitedassurance,weresitevisitsincludedinthescopeoftheassur-

anceengagement?

i N T E r V i E W S

• Wereyouaskedtoparticipateininterviewsaspartoftheassuranceengagement?

Ifso,

• DidyourassuranceproviderinterviewyourdataprovidersoftheKPIswithinscope?

• DidyourassuranceproviderinterviewseniormanagementwithinyourCSR/CRcommitteetounderstandthe

overallreportingstructure,reportingobjectivesandsustainabilitypriorities?

d u r A T i O N

• Whatwasthedurationoftheassuranceengagement,i.e.,numberofweeksfromkickoffmeetingtotheissu-

anceoftheassurancestatement?

O u T C O M E S

• Didyourassuranceproviderprovideyouwithaninternalmanagementreportonobservations/findingsfor

processimprovementattheendofyourassuranceengagement?

• Ifso,howvaluablewasthisreport(1to5)?

• DidyousharethisreportwithyourC-suite,InternalAuditgrouporAuditCommittee?

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BloombergDatabase 2009 2010 2011

Organization GRI verification GRI verification GRI verification

3M GRI No GRI Yes GRI YesAbbott GRI No GRI Yes GRI YesAgilentTech No No GRI Yes GRI YesAlcoa GRI Yes GRI Yes GRI YesAmgen No No GRI No GRI YesBankofAmerica GRI No GRI Yes GRI YesBaxter GRI Yes GRI Yes GRI YesBiogenIdec GRI Yes GRI No GRI YesBristolMyersSquibb GRI No GRI Yes No NoCampbellSoup GRI No GRI Yes GRI YesChevron GRI Yes GRI Yes GRI YesCitigroup GRI Yes No Yes GRI NoCliffsNaturalResources GRI Yes GRI Yes GRI YesCoca-ColaCompany GRI Yes GRI Yes No NoCoca-ColaEnterprises GRI No GRI Yes GRI YesDowChemical GRI Yes GRI Yes GRI YesDukeEnergy GRI Yes GRI Yes GRI YesEntergy No No No No GRI YesExxonMobil GRI Yes GRI Yes GRI YesFordMotor GRI Yes GRI Yes GRI YesFreeport-McMoran GRI Yes GRI Yes GRI YesTheHersheyCompany GRI No No No GRI YesHessCorporation GRI Yes GRI Yes GRI YesH.J.HeinzCompany GRI No No Yes GRI YesIntel GRI No GRI Yes GRI YesJMSmucker No No No No GRI YesJohnsonControls GRI Yes GRI Yes GRI YesKimberly-Clark No No GRI Yes GRI YesMolsonCoors No Yes No Yes No YesMondelez GRI Yes No No No NoMorganStanley No Yes No Yes GRI YesMotorola No No GRI Yes No NoNewmontMining No No GRI Yes GRI YesNewsCorporation No Yes No Yes No NoNisource GRI No GRI Yes GRI YesNorthernTrust No No GRI Yes GRI YesPraxair GRI Yes GRI Yes GRI NoPrologis NA NA No No GRI YesQualcomm GRI No GRI Yes GRI NoReynoldsAmerica GRI No GRI Yes GRI NoSouthwestAirlines GRI Yes GRI Yes GRI YesStarbucksCoffee No Yes GRI Yes GRI YesStateStreet GRI Yes GRI Yes GRI YesUPS GRI Yes GRI Yes GRI YesWellsFargo GRI Yes No Yes GRI NoWyndhamWorldwide No No GRI Yes GRI Yes

24 39 36

A P P E N d i X B : B L O O M B E r G d A T AV E R I F I E D ( S E c T I O N S O F ) S u S T a I N a b I l I T y R E P O R T S 2 0 0 9 – 2 0 1 1

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G L O B A L r E P O r T i N G i N i T i A T i V E

Global reporting initiative Focal Point uSA

Aspartofitsregionalexpansionstrategy,GRIenteredintoanagreementinOctober2010toestablishaFocal

PointintheUnitedStates.ThisFocalPointissupportedbyfoundingsponsorsDeloitteLLP,Ernst&YoungLLP,

KPMGLLP,andPwCU.S.,andishostedbyIFAC.

GRIFocalPointUSAplaysacrucialroleinmainstreamingsustainabilityreporting.

FocalPointUSAaims toboost thenumberofUScompanies reportingon sustainabilityand to improve the

qualityof those reports, and to increaseUSorganizations’ input intodevelopingnewguidance for sustain-

abilityreporting.

Website:www.globalreporting.org

Contact:[email protected]

Governance and Accountability institute—Gri data Partner for ireland, united Kingdom and uSA

TheGovernance&Accountability Institute, Inc. isaglobal consulting, research,newsand trendmonitoring,

editorialservices/publishing,analysis,andadvisory[services]organizationservingleadersandboardsoforga-

nizationsinthecorporate(private),publicandsocial/institutionalsectors.

Website:www.ga-institute.com

Reportingdashboard:www.sustainabilityhq.com/reports

USBlogSite:http://grifocalpointblog.org/usa

A B O u T

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GRI’sFocalPointUSAisparticularlygratefulfortheongoingsupportof:

Our FOuNdiNG SPONSOrS:Eachofthe“BigFour”accountingandprofessionalservicesfirmsintheUnited

States—Deloitte,Ernst&YoungLLP,KPMGandPwCUS—forprovidingdonations.

Our SEVEN SECTOr LEAdErS:Bloomberg,Clorox,Curran&Connors,Dell,Sprint,TheMosaicCompanyand

theNewYorkStockExchange—forcommittingtoshowingleadershipintheirsectorwhenitcomestosustain-

abilityreportingandworkingcloselywithustocrystallizethatleadershipintoaction.

Our BOArd OF dirECTOrS: Mark Cohen, vanderbilt University; Julie Gorte, PAXWorld; Sean Harrigan

(Chairman),PastExecutiveDirector,StatesCouncil,Region8;PeterWestra,GlobalReportingInitiative;Heather

White,NewStandards.

Our AdViSOry GrOuP:Mark Cohen, vanderbiltUniversity; EricHespenheide,Deloitte LLP; JohnHickox,

KPMGLLP;KathyNieland,PwCUS;CurtisRavenel,Bloomberg;SteveStarbuck,Ernst&YoungLLP;Davidvidal,

TheConferenceBoard.

AndofcoursewethankourNorthAmericanOrganizationalStakeholders,ourNorthAmericanGRICertified

TrainingPartnersandtheGRISecretariat.

T H A N K y O u

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