Tuesday, March 31, 2015

Guest Blog Post: Flipping the Lens on Sustainability Disclosure Frameworks

Written by: Nick Martin and Michael Rieger, Antea Group (MassTLC Member)

It seems that every day there is an article about the ‘Internet of Things’ or ‘Big Data’ and while we have yet to fully grasp the magnitude of this shift in technologies, it is a clear indication of where we are headed in terms of access and sharing of information.  This new operating environment with transparency and disclosure expectations is bound to increase given the state of technology, social media, and access to information.

The last decade has demonstrated the importance of transparency within the business world and we believe most companies, either through voluntary or mandated response, have embraced this as a fundamental requirement of success. The renewed calls for transparency have been amplified by simultaneous technological advancements and opportunistic stakeholders ranging from investor representatives (e.g., CDP, Ceres) to major corporations such as Walmart. The result has been an explosion of disclosure requests and expectations being placed upon companies in the United States and abroad. Many companies are feeling overwhelmed by survey requests, requiring a significant and seemingly endless allocation of resources.

Companies are increasingly being pushed into a precarious position of either declining sustainability disclosures outright or picking and choosing which surveys to respond to. Branded companies with a complex and diverse stakeholder base have increasingly begun to question the ongoing business value of disclosures compared with redirecting resources to other company investments and partnerships.

While the question of ‘do’ or ‘do not’ disclose will remain, in this blog we offer a different perspective on the business value of utilizing disclosure frameworks and requests. If you ‘flip the lens’, you can find an invaluable resource that we believe is underappreciated.    

Disclosure frameworks have completed significant research and ‘leg work’ to define the most critical and effective elements of Corporate strategies. They have engaged leading experts and companies, facilitating a rigorous development and maintenance effort to accelerate Corporate adoption of sustainability-related initiatives. The business value is that surveys and associated scoring methodologies can be utilized by companies as comprehensive gap analysis tools for developing an effective, holistic strategy and/or validating efforts to date. Furthermore, these methods are absolutely free and include a wealth of guidance information and resources (e.g., reports, webinars, diagnostic tools, etc.).

Making This Real
The following are three examples of disclosure frameworks that are primed for extracting meaningful insights and utilizing these as a gap analysis process to enhance company standards:

§ CDP (Water, Climate Change, and Forests) – an exceptionally transparent organization with surveys, methodologies, and scoring publicly available: https://www.cdp.net/en-US/Pages/guidance.aspx
Ø Questions to ask: is our strategy well aligned with the associated CDP questionnaire?  Can we answer questions affirmatively?  What are the gaps, especially for elements that CDP applies a higher scoring weight? 

§ Global Reporting Initiative (GRI) – the G4 Standard outlines a process for completing Corporate annual reports, including clear guidance on individual indicator definitions and a quality rating methodology. In addition, GRI provides a search tool to see real examples of Corporate reports at varying quality levels, which provides valuable benchmarks and examples to utilize in developing your company’s annual report.   https://g4.globalreporting.org/Pages/default.aspx
Ø Questions to ask: Which of the GRI indicators is our company able and comfortable reporting? If not able or comfortable, why not (e.g., insufficient data, not material, not a compelling story or performance level, not previously considered)? How do we compare to sector or peer leaders? Are there elements of the GRI guidance that would help our other disclosures (e.g., website material, supplier or customer communications, materiality assessment)?

§ Sustainability Accounting Standards Board (SASB) – a unique initiative that is focused upon defining the materiality of social and environmental issues for up to 80 unique sectors.  The ultimate objective is to embed the outputs of the SASB Standards into financial disclosures (e.g., 10-K, SEC Filings). The website provides: 1) Industry Briefs; 2) Industry-specific Standards; and, 3) a Materiality Map. http://www.sasb.org/approach/our-process/industry-briefs/technology-communication-sector-industry-briefs/
Ø Questions to ask: has our company acknowledged the same materiality issues as proposed by SASB for our sector?  If not, what are the differences and why? How prepared are we to align with the SASB Standards if they are integrated into financial filings?  Is there additional data we should consider collecting now to be prepared? 

In addition to these examples, there are many others that could be utilized in a similar manner such as: ISO 14001; ISO 50001; USGBC Leadership in Energy & Environmental Design (LEED); UN Global Compact and CEO Water Mandate; and Ceres Aqua Gauge and the Ceres Roadmap for Sustainability.  There are also a variety of industry and material sourcing-specific guidelines.  
While disclosure frameworks and standards will likely continue to proliferate in at least the short-term, companies can ‘flip the lens’ and extract added value by using these well thought-out resources. This approach will benefit companies to define cutting edge strategies, drive business value and prepare the organization internally, regardless of ultimate disclosure decisions

Nick Martin is Sustainability Practice Lead (nick.martin@anteagroup.com) and Michael Rieger (michael.rieger@anteagroup.com) is a Consultant in the Boston area with Antea Group

No comments: