By Louis D Coppola @ G&A Institute..

Sustainability – “What Matters?” — That is the question for company managements and investors as they prepare sustainability / corporate responsibility reports.

Research results released recently by the Governance & Accountability Institute attempts to answer the question for company managements in 35 different sectors, by examining the disclosure practices of 1,246 global sustainability reporters using the Global Reporting Initiative (GRI) framework in year 2012.

About the Analysis

• Analyzed 1,246 GRI reporting companies and organizations;
• Categorized in 35 sectors as defined by GRI;
• Examined the level of disclosure of all 84 GRI performance indicators (KPIs) for each company;
• Ranked 1-84 the disclosures that were found to be most to least material by reporters in the sector, for each of the 35 sectors;
• Converted the GRI G3 and G3.1 Indicators to the new G4 Indicators for forward planning for companies using the G4 framework for their next report.

In 2011 and 2012 the Institute published its annual research report titled, “Sustainability – Does it Matter?”, these efforts analyzed the S&P 500 companies for their Sustainability reporting (or non-reporting) and type of reporting, tracking positive third party recognitions the companies enjoyed in the form of financial stock outperformance, inclusion in reputational lists; favorable rankings, ratings, and scores; and selection for investable index inclusions.

Hank Boerner, Chairman of G&A commented: “We found through our research that corporate sustainability surely does matter. The big picture from these results also showed the dramatic growth of Sustainability reporting in the S&P 500 with 20% in 2011, and 52% in 2012’s report. Investors and stakeholders are playing closer attention now to corporate sustainability disclosure.”

Earlier this month The G&A Institute team updated this big picture research with a flash report to show that for the 2013 reporting year 72% of the S&P 500 now report on Sustainability. As the number of organizations publishing sustainability or corporate responsibility reports is dramatically increasing, so too, is the focus on determining the materiality of content of reports.

Louis D. Coppola, G&As Executive VP, co-founder and the report architect:  “The original question–  ‘Sustainability – Does it Matter?’ — being answered definitively, we adjusted focus (and sharpened the question) in 2013 to ‘Sustainability – What Matters?’. This new research delves into 1,246 reports, divided into 35 sectors, to find out ‘What Matters?’ the most and least across 84 GRI performance indicators.”

“Disclosure overload” has become increasingly overwhelming to both the publishers and readers of corporate sustainability reports. Many of the enterprises now publishing sustainability reports have their resources spread thin trying to respond to many indicators (no matter how irrelevant or immaterial it may be to their business). The investors, and other readers of the reports may find it hard to cut through the overwhelming amount of information to find the key pieces of data and narrative that really matter.

G&A’s Louis Coppola observed: “As sustainability reporting becomes more mainstream the process is also maturing with an increased focus on materiality. Determining what sustainability issues are material — what really matters —  to an organization with its own unique attributes is key to making a real impact with the report, and making the business case for sustainability. When organizations try to do everything at once, they wind up accomplishing very little, and waste precious resources. Through this research we hope to empower company management to better identify what their peers see as the specific sustainability issues that they can focus their resources on to create significant return in the form of new opportunities for the company, its stakeholders and investors.”

The complimentary research report containing the top 10 and bottom 10 indicators and additional information for each of the 35 sectors analyzed is available at:
www.ga-institute.com/sustainability-what-matters

The full rankings for all 84 indicators for each of the 35 sectors are available for purchase at:
www.ga-institute.com/getall84

Noted G&A Chairman Hank Boerner: “The results of these continuing research and analysis projects are made publicly available as part of the Institute’s mission of sharing news, research and commentary. The research helps to make the business case, and the investment case, for company managements to embrace sustainability strategies and programs, and increase their disclosure and reporting on their sustainability journey.”

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About G&A Institute (www.ga-institute.com)
A New York-based, private sector company providing sustainability-focused services and resources to corporate and investment community clients, including: Issue Counseling & Sustainability Strategies; Sustainability Reporting; Materiality Assessments; Stakeholder Engagement; Benchmarking; Investor Relations; Communications; Coaching, Team Building & Training; Issues Monitoring & Customized Research; Third Party Recognitions. G&A is the exclusive Data Partner for the GRI in the United States of America, the United Kingdom and the Republic of Ireland.

Editors
On the G&A Institute web site there is additional information available on the Fact Sheet: What Matters Project (www.ga-institute.com/research-reports/sustainability-what-matters/fact-sheet). The resulting “most important” to “least important” ranking for the 35 sectors is available to media on a case-by-case basis please contact: Peter Hamilton (phamilton@ga-institute.com).

By: Yekta Karimi, GRI Data Partner Report Analyst at Governance & Accountability Institute

Those persons who tend to disapprove of the outsourcing phenomenon often think of three things when they hear the word: first, that outsourcing necessarily means offshore outsourcing; second, the idea of businesses encouraging inhumane treatment of workers and the presence of sweatshops; and third, that outsourcing is taking away jobs from perfectly capable domestic citizens and giving the jobs to foreigners.

Even though this mindset seems to be on the decline, it is still very essential to address each of these issues as they relate to effective Business Process Outsourcing (BPO).

BPO is the outsourcing of one or more parts of a company’s supply chain to a vendor, either in the same country or somewhere outside of the home country. This approach is now being complemented bybusiness process management—a management approach of aligning a business’ processes with its clients’ wants and needs.

As globalization trends in various industries increases the reach of industry players to many venues, and transparency becomes a more sought after characteristic by consumers, many large multinational companies and even smaller enterprises are now focusing on improving the business ethics of their outsourcing operations.

In fact, the relationship between many American companies, for example, and their outsourcing vendors is evolving to resemble a partnership rather than the traditional company-vendor relationships. This new model is often referred to as the Managed Service Model (MSM).

The shift to a Managed Service Model means that companies are
increasingly relying on the governance of their vendors for success.

The shift to MSM means that companies are increasingly relying on the governance of their vendors for success as up to 15 percent of the value of an outsourcing contract can be lost due to mismanaged vendor governance. This has encouraged many companies to invest in entities, both locally and abroad, which have efficient governing structures and adhere to governance best practices.

Oftentimes the ethical issues connected to outsourcing are generally perceived as the exploitation of workers living in poverty in the developing world. However, the BPO industry has the potential to empower a lot of foreign workers to lift themselves out of poverty and pursue further education. This new trend is referred to as Impact Sourcing (IS) and is steadily on the rise. IS is a perfect blend of Corporate Social Responsibility (CSR) and BPO in order to benefit the companies and consumer while also delivering a social impact.

The company Impact Hub serves as a liaison for companies and BPO service providers that hire and train disadvantaged women and youth in developing nations. Impact Hub estimates that there are 560,850 IS workers today. Even though studies show that both workers in the developing world usually approve of the presence of multinationals and that these same multinationals are aiming to enhance the working conditions of their foreign employees, the unfortunate reality of sweatshops is still something that needs to be addressed in a concrete way.

The American Prism

As expanded exposure of unethical behavior by outsourcing vendors in other countries continues, and more stakeholders learn more about certain practices or companies, American companies are forced to consider working only with vendors that practice ethical treatment of their laborers.

The news is not all bad. In places like the Philippines and El Salvador, the booming outsourcing industry has helped create a growing middle class as more people are benefiting from jobs that are stable and abundant.

Philippines Call Center.
Photo Courtesy of Yugatech BPO News

Additionally, the existence of a growing middle class and the availability of higher paying jobs means a decrease in the “brain drain” phenomenon as less people are forced to leave their countries in order to make financially stable lives for their families back home.

So why is it that so many Americans may still fear the mistreatment of employees in foreign US subsidiaries or vendor operations in the developing world? Is it feasible to expect a company to pay their foreign workers in a developing nation the same wage that they pay their American workers when we are looking at completely different economies, spending and saving cultures, and living standards?

It is important to understand the weight behind the use of the word “sweatshop.” Sweatshops are more than just businesses paying below living wages; they are also places that practice child labor; have inhumane and unsafe working environments; and are noted for the constant exploitation of workers’ poverty to work them hours on end without breaks or time for sleep.

An article on foxnews.com (2004) mentions that sweatshops for laborers in the developing world “…may actually be the best of a series of bad employment options available to them, and/or the only or best option for supporting themselves and lifting their families out of poverty.” If developed countries are to live by this standard, than we can just as easily say, for example, that the best option for American youth in poverty is to obtain a high school diploma so there is no reason to aim for anything higher.

It is understandable that child labor is a different matter in the developing world as it is in the United States. In many developing nations, removing a child from their job can result in much worse fates for them and their families. Not abiding by Western child labor law ideals does not change the economic setting of the developing countries and instead can make matters worse, sometimes resulting in child prostitution or crime.

The global community can do better to alleviate abuses on several fronts.
This is where Corporate Social Responsibility can play a large role.

The global community can certainly do better to alleviate these abuses on several fronts. This is where Corporate Social Responsibility (CSR) can play a large role. Rather than drastically eliminating certain aspects of outsourcing operations or completely ending these operations, companies – especially those that are financially able – can use their R&D resources to promote education, child and health care, and other community benefit programs to support their offshore outsourcing.

Photo Courtesy of Kheng Guan Toh and www.referenceforbusiness.com

The decline in the use of sweatshops and increasing wages for workers employed at foreign companies in the developing world can be attributed to two trends: (1) the increased demand for ethical behavior and transparency from consumers, and (2) the better understanding of the benefits of CSR.

CSR Impacts

A company that engages in CSR and practices good business ethics, can make a better case for its clients who may not believe that outsourcing is a good thing for either the company or its foreign workers. The CSR program can serve as a mitigating factor in some of the perceived negative aspects of BPO. It has been shown that companies who have formal CSR strategies have happier and more efficient employees, which means that a company that supports its BPO activities with a CSR strategy, should be able to reduce some of the potential risks related to outsourcing by creating a more welcoming environment for employees to thrive. Employees who work for companies committed to ethical practices and engage with their communities in a positive and impactful way often feel more values, happy, and safe, which results in higher productivity levels and lower risk of attrition. Indeed, a 2012 Net Impact survey showed that 45% of respondents would take a 15% pay cut, with all other factors equal, for a job that makes a social or environmental impact.

An active CSR strategy has been proven to serve as a positive financial benefit to company – Unilever is a well publicized exampled of this. However, more than just financial gains, CSR engagement results in better branding for companies and can mitigate the negative perceptions that many have on outsourcing. As more companies ensure that their BPO activities are ethical and socially beneficial, those companies that are left behind will need to find ways to catch up in order to maintain customer retention rates and remain as going concerns. BPO has even higher impact potential with the influence of CSR and IS.

About the Author: Yekta Karimi is a GRI Data Partner Report Analyst at Governance & Accountability Institute (the exclusive GRI data partner in the US, UK, and Ireland). She is also a graduate student at Columbia University’s School of International and Public Affairs, pursuing her Master’s degree in international affairs with a focus on international finance and economic policy.

Prior to coming to New York, she worked as a program director for a Small Business Development Center in California. Having lived and traveled all over the world, Yekta has invested her interest in international relations and sustainability looking to fuse the private and civil service sectors.

By Louis D Coppola @ G&A Institute..

The London Stock Exchange is the latest exchange to join the United Nations (UN) Sustainable Stock Exchanges Initiative (SSEI).  They now join exchanges such as NASDAQ and NYSE who have signed on to the initiative last year.

The Sustainable Stock Exchanges (SSE) initiative is a peer-to-peer learning platform for exploring how exchanges, in collaboration with investors, regulators, and companies, can enhance corporate transparency – and ultimately performance – on ESG (environmental, social and corporate governance) issues and encourage sustainable investment.

You can read more about it here (http://www.sseinitiative.org/)

This is in the shadows of the recent draft listing requirements for exchanges developed by CERES, INCR, and other signatories of the PRI (including Blackrock and NASDAQ) to be discussed at this years meeting with the World Federation of Exchanges (WFE) in October.

At the Ceres 2013 Annual Conference, Sandy Frucher, Vice Chairman of NASDAQ OMX, spoke about the importance of sustainability disclosure, NASDAQ OMX’s dedication to encouraging stock exchanges around the world to get involved in sustainability, and Ceres’ leadership in developing a universal standard. Watch here: https://www.youtube.com/watch?v=LwK3ihCCYv0&list=PL9tkB4R2XNgzGDIr_q01BFM_TAGSoRB2T

As the world’s stock exchanges come together on this issue of better sustainability disclosure, and the European Union mandates sustainability reporting, and we now see 72% of the S&P 500 reporting on sustainability, we are beginning to see the tipping point where resistance becomes less then the momentum, demand, and drive for more and better sustainability disclosure.

We will keep our eyes open and update you as we see new developments on this front.

Commentary by Selene Lawrence, Analyst, G&A Institute

June 4^th, 2014

Today I fittingly utilized New York City’s waterways and hitched a ride on the East River Ferry to the United Nations complex, where the first day of panels at the SE4ALL — Sustainable Energy for All — Forum — takes place.

SE4ALL echoes the UN’s Sustainable Development goals, and is also coming on the heels of the most recent Climate Summit, as well as an accelerating movement towards sustainability as a necessary part of our futures as a society.

The initiative has three ambitious global objectives for 2030: (1) universal energy access; (2) twice as much energy efficiency improvement; and (3) doubling the proportion of renewable energy use.

The forum featured a host of big industry players, including representatives of UNDP, World Bank, Bloomberg, WHO, US Department of State, academia — and of course, SE4ALL representatives.

There was a wide range of conversation taking place surrounding the topic of “Energy of Now and of the Future”; the main focal points being access, distribution, and of special interest to me as a representative of Governance & Accountability Institute, reliable and accessible sustainability reporting and data. 

One of the sessions that I attended had discussion exploring how the private and public sectors could effectively collaborate on renewable energy solutions. The panel tried to lead as an example, offering spokespersons from the Accenture Foundation such as Executive Director Scott Fast; Zia Kahn, the VP for Initiatives and Strategy of the Rockefeller Foundation; Harvey Rubin, a Professor of Medicine at University of Pennsylvania; and Christine Eibs-Singer the Senior Advisor for SE4ALL.

Various experimental projects from around the world implemented by Accenture and their recruited partners from both the public and private sector were used as examples.  The conversation led us to better understanding of the meaningful partnerships that can be developed with academia, NGO’s, investors, and  both the private and public sector. This argues that the ability to succeed in Sustainable Development is dependent on the fostering, advocating, and closing of such partnerships.

Depending on the other sectors, and also cross-sector collaboration to break down sectorial silos, was key to the success, we learned, and I believe also key and relevant here in sustainability reporting.

A panel I found most relevant to our work here at G&A and with our partner GRI, was one entitled:  Knowledge Hub for SE4ALL: Research consortium & analytical agenda. The panel included the Deputy Director of IIASA, a research and data hub, Nebojsa  Nakicenovic ; Vivien Foster, Sector Manager of Sustainable Energy Unit at the World Bank; Letha Tawney from World Resources Institute;  and Doug Arent, Acting Center Director of the Strategic Energy Analysis Center at the National Renewable Energy Laboratory in Colorado.

This panel introduced the SE4ALL data hub, which has a Global Tracking Framework to measure how countries are performing in the field of Sustainable Energy. This resource measures Access to Energy with indicators such as measuring the percentage of a population with an electricity connection, but also looks at Renewable Resources and emissions.

Vivian Foster of the World Bank described the framework; it has encountered difficulty measuring output (common in the field), but its strong point seems to be measuring access.

I met with panel speaker Letha Tawney, the Senior Analyst at WRI, discussing with her which norms companies commonly use to assess their GHG emissions (against other companies’ performance). I asked her how the transparency of GHG emissions and use of renewable energies provided by sustainability reporting for public sector utilities in place now by GRI, and others could be useful here.  Also, how SE4ALL indicators could help build on them.

Her response gave voice to the general complaints on the lack of regulation in the reporting numbers that WRI’s corporate partners could actually use. She described it as the dilemma of not using apples-to-apples for comparison, and that reporting in this field should produce numbers that are more useful for comparison. That seems to be the problem across the field, where numerous metrics and frameworks are being produced but few are apples to apples, as the saying goes.

Further collaborations (as emphasized in the earlier panel) between the public and private sectors) might produce solutions. And although sustainability reporting is chiefly intended for stakeholders and the public, reporting is not (yet) regulated, the way financial performance is.

The common question I heard several times during the sessions: why not make the reporting translatable to public policy and the rigors of academic research?

In the USA we are one of the few countries where information about energy output and use is systemically gathered, facilitating comparisons and knowledge that can be easily shared. Having data and information about sustainability issues that is comparable and share-able is the way to make real  progress.

At the forum there was considerable buzz about President Barack Obama’s new carbon rule (announced early in the week). This action was cited by speakers on various panels and in informal chatter in the UN complex hallways.

As for sustainability reporting with inclusion of more data and more emphasis on energy, we will soon see if the future has in store for us regulated and standardized metrics for providing data on energy use from the public, private (or both) sectors of our economy.