The Triple Bottom Line
A talk with Alyson Slator on the Global Reporting Initiative
Not only the fiancncial bottom line counts, but also the social and environmental ones. Obviously it is very embarrassing if a company has been cooking its own books.. The goal is a change in business reporting.
The Triple Bottom Line
Craig Morris 19.02.2007
A talk with Alyson Slator, Communications Director at the Global Reporting Initiative
Sustainability reporting is an outgrowth of financial reporting. It goes beyond finances to cover the social and environmental aspects of a company's performance. Thus, not only the financial bottom line counts, but also the social and environmental ones: the Triple Bottom Line. The recent case of Apple last summer is a good example of why such reporting is needed: it was reported that a supplier was manufacturing under sweatshop conditions. All Apple had to show for itself was a Code of Supplier Conduct, not a sustainability report based on guidelines drawn up with input from consumers and investors. At a conference in Amsterdam in October, the Global Reporting Initiative (1) presented its latest guidelines, the G3 (2), for discussion. The hope is that companies that report in accordance with GRI G3 will have done their homework in advance for the report, thus sparing themselves the embarrassment of such bad publicity. Last but not least, consumers in the West can protect their home economies but insisting that companies report in accordance with GRI G3 in order to demonstrate that they are not going abroad to escape labor and environmental laws at home. Craig Morris spoke with Alyson Slator, Communications Director at the Global Reporting Initiative, about the future of the GRI and the main concerns expressed at the conference.
How does your organization respond to the charge that GRI reports are mere "greenwashing"?
Alyson Slator: Our organization was founded in response to that criticism. The term "greenwashing" was first coined in the 1980s and 1990s when large multinationals had their first environmental or social crises. Organizations such as Greenpeace and others from organized civil society were calling them to account. One of the first things these companies tried to do was point out all the good things they were doing. People started reading these reports and saying, "Thanks for these glossy, shiny things with pictures of dolphins and trees, but you did not say anything meaningful about your true performance." People were demanding that these companies take the major footprint they have on the planet into account as a risk.
Ceres http://ceres.org/ -- an NGO that is basically a coalition of labor, investors, and environmental advocacy groups -- founded the GRI in 1997 as a result of this dialogue. These groups joined forces to take on the big US companies better. The gist of their demands was that companies must report on their environmental and social performance. The companies that had already published such reports, such as General Motors and Ford, were interested in this dialogue because they had been shocked at how overwhelming the criticism was of their early environmental reports. They wanted the critics to tell them what they wanted to see reported, and that discussion led to the call for a standardization of these reports. So the companies sat down at the table to negotiate the standards because they companies were not about to leave this up to the NGOs.
So you argue that this is not greenwashing because you can go back to the raw data and corroborate the claims?
Alyson Slator: Yes. If you are reporting based on independent, third-party framework developed by thousands of people over a period of decades in multi-stakeholder negotiations, you are not reporting on what you would like to, but on a credible framework.
Without auditing? Obviously, it is very embarrassing if it turns out that company has been cooking its environmental books, but don't we need auditors? And who do we take? Financial auditors are probably not qualified, are they?
Alyson Slator: It is an emerging practice. There is no defined industry, and there are no rules. GRI welcomes external assurance, but the guidelines do not make it mandatory. Some companies do have their financial auditors verify their sustainability reports. Those who do not believe that these auditors are qualified are moving into an interesting cottage industry of labor and environmental experts who have performed similar audits. Others have stakeholder panels or review committees of six to 10 people consisting of people representing employees, the community, etc. These people have open access to the entire reporting process.
Where do you see the GRI going in the midterm? Will the SEC make these guidelines mandatory? Or is that more of a long-term prospect?
Alyson Slator: The question of mandatory reports is different in just about every country. I can see the Japanese government making this mandatory tomorrow. I can see the South African government working GRI in through the stock exchange, where companies already have to report such figures, albeit not in line with the GRI standards. The same holds true for some European countries, such as France and Denmark, where companies on the stock exchange also have to report a certain amount of environmental and social performance indicators. So there isn't one answer that would be consistent for the whole world.
What about the US?
Alyson Slator: The US environment is interesting for me. At the moment, they are laggards. If you look at the size of the US economy, you find a small percentage of the companies actually reporting even though the absolute number is large because so many of the Fortune 500 companies report. For instance, the percentage is much higher in the UK and South Africa. The US has some 150 companies reporting, but so does the UK. And 240 come from Japan. Spain has 100. So it's really not in proportion. A lot of the B2B companies that do not have quite the public exposure of Nike are still hiding.
I am Canadian, so I have always been following what happens in the US as an onlooker, not as a citizen. But Alan White, one of the founders of GRI, has always believed that the US may not be one of the first movers but will one day leap forward as a second-mover and surprise people by mandating some level of sustainability reporting -- obviously not the entire GRI, but maybe five or 10 major indicators.
Is the ultimate goal not to have all this in one report, i.e. to have sustainability indicators play a prominent role in annual reports?
Alyson Slator: Yes, the goal is a change in business reporting. The main problem today is that financial reports are simply not three-dimensional. They take into account financials, but not the dimensions of social responsibility and environmental impact. GRI is not about having separate reports for these other two dimensions. In fact, we are pleased to see a number of companies including all three areas in their annual reports. After all, these are not separate things. Indeed, Nova Nodisk (3), a Norwegian pharmaceutical company, has even begun merging all three areas in its quarterly reports. Some of their indicators change very quickly, and they wanted to reflect that.
Craig Morris is the author of Energy Switch (4), editor of the magazine Energie Sparen (5), and translates annual and sustainability reports at Petite Plančte (6).
(4) link to www.amazon.com
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