This new column of ‘Der T(h)urmblick’ looks at our distorted picture of what we call ‘innovation’. Looking at it from a sustainability perspective, much of what we usually call innovation just prolongs or even makes some of our urgent problems even worse. Efficiency programs, productivity gains, new product generations – mostly all progress is eaten up by the conditions of these ‘innovations’ or the surrounding rebound effects. We are clapping shoulders because we made more turnover and/or profit, sometimes even think we did something good for the environment or society, but as long as self-created rebound effects or the continued use of old assets aren’t stopping or made obsolete, the impact will still be negative. The blog observes some of the boundary conditions under which we can better assess ‘real sustainable innovation’.
- By Ralph Thurm, A|HEAD|ahead, and Nick de Ruiter, Sustainalize -
The Global Reporting Initiative published their G4 Guidelines in May 2013, but at the same time announced that G3/G3.1 reports and the application level check services would be accepted until the end of 2015. In consequence, companies that want to continue reporting based on the requirements of the GRI Guidelines have time until 2016 to declare either core or comprehensive ‚in accordance’ with the G4 Guidelines. Does this indicate that companies would have ample time to transition towards G4 and more than 2 years still to go with G3/G3.1?
In our view this is a dangerous perception, both based on the different – and sharpened – requirements G4 poses and a critical reflection of the time needed to build the necessary understanding, internal buy-in and systems readiness to be able to comply. Also, an incorrect application of G4 makes that your report becomes too broad, too thick and lacks in relevancy. Here’s a variety of 10 reasons why we think there is no time to waste – working on the transition needs to start now!
- Understanding materiality is crucial. A company’s impact, related boundaries and focus on materiality are much more strongly emphasized in G4, some of them described in more depth below, but the consequences of that push by GRI go much deeper. While GRI G4 is out now and the requirements become slowly clearer (G4 is nicely designed, but still no easy read), companies need to ‚delearn’ G3/G3.1 first. Ignoring materiality could quite easily lead to an irrelevant and a report which is too broad. The flexibility of interpreting and reporting on certain indicators, the lax regime on the use of omissions, the 3 applications levels, and the comfortable, reductionistic and legalistic boundary setting, these days are gone.
- Sustainability needs to be part of your strategy. In order to better understand a company’s impact(s) – which in consequence will help to define boundary setting and material aspects for reporting– there needs to be a willingness of top management to look at sustainability in a more strategic way. For existing businesses we know that this can be a layered, multi-year process, and is demanding a personal openness of top managers and a willingness of letting go of certain mental stereotypes. Some of them are
- Short-termism driving hectic actionism for quick successes;
- Sustainability as merely risk management, thereby ignoring the fact that sustainability can be positioned as a means to distinguish yourselve from competitors;
- the avoidance of mid- to long-term (SMART) target setting including a clear positioning of the legacy and right to exist (today and in the future);
- data and performance become a goal in itself. The lack of the ability to accept that relationships will drive success and not over-ambitious targets that lead to customer dissatisfaction, stressed-out employees, and – in the worst case – neglect of aspects like human rights, environmental protection, and anti-corruption.
- You need to analyse and understand your impacts. While top-management commitment is necessary and needs to go further than just words, the ability to understanding a company’s impact needs to include various actions, amongst them
- understanding impact based on root causes, including environmental degradation, demographic effects, technological changes, world trade developments, urbanization and transparancy development and how the company is affected by this nexus as well as how the company itself affects others and these root causes. Many sustainability strategy development projects visibly have not gone through this important step, e.g. a simple ‚reduction of CO2 emissions’ target without a program of how to tackle different route causes will remain on the symptoms level and risks any effectiveness, and more dangerously could lead to wrong decisions, think of simple outsourcing of effects into the supply chain and where effects can even be worsened.
- the willingness to work on various scenarios that can describe a company’s reaction to the effects identified and where they occur in the value cycle (that in contrast to the value chain which is a concept based on a throughput economy). This includes an active exchange or even shared work with partners up and down the value cycle.
- The willingness to gather data about impacts and therefore prepare a readiness to discuss with stakeholders from an informed perspective.
- The number of disclosures have been expanded. While the abovementioned steps are in our view necessary actions to define a sustainability strategy, GRI G4 is urging to also make early decisions about the ‚in accordance’ level. While both levels – core and comprehensive – put a materiality focus on top, there is a huge difference in disclosures. If a reporter is aiming for comprehensive reporting, the level of information that needs to be ready is considerably higher and should be reported for multiple years. Examples are disclosures on governance and remuneration, supply chain, anti-corruption, GHG emissions as well as ethics & integrity. It is therefore necessary to prepare the necessary data spectrum early on and define necessary ‚owners’, both with regard to responsibility as well as for the disclosures.
- Boundary setting has been changed. The G4 Guidelines have also changed the approach to boundary setting. While G3/G3.1 still allows a rather legalistic-reductionist approach based on ownership structures, G4 now asks for the definition of boundaries based on the underlying impacts. This is the reaction to the neglection of impacts down the supply chain – most companies never got beyond a policy level in their interaction with suppliers in the quest of reduced impact – and is now a major challenge internally in terms of data availability and enforcement of targets and policies.
- The stakeholder dialogue becomes more important. It is to be expected that the stakeholder dialogue process will see a change in depth and quality due to the new requirements of G4. Not only does the reporter have to clarify how the involvement of stakeholders was organized, but also how the dialogue has lead to the selection of material aspects. Obviously the company needs to be well prepared for this dialogue. It is recommended to use the sustainability context insight derived from a thorough impact-based assessment as a necessary precondition to have an informed and effective dialogue about the material aspects. This means that a proper stakeholder dialogue is less of a simple ‚negotiation’ between the company and its stakeholders, but a shared and joint point of view and therefore less confrontative, but more collaborative.
- Understanding the sustainability context is essential. Meaningful reporting demands a clear view in how far a company contributes – positively and/or negatively – to the most urging problem areas on this planet (or aspects in the language if GRI G4). The G4 guidelines demand certain disclosures, but many of them simply describe efficiency increases (in relation to earlier reporting periods), relative changes or compliance and quality in following a certain due dilligence (audits done, shortcomings recorded, mitigation measures taken). Overall, many of the indicators do not give the reader the impression that what a company has done is at least ‚good enough’ in the light of the global urgencies. This shortcoming in G4 (which also existed in G3 already) has been called the ‚sustainability context gap’ and refers to the requirements of the sustainability context principles in G4. Every company needs to have a good view on their micro-performance against a macro dataset (e.g. the ecological footprint, data from TEEB, etc.). This enables companies in setting focused strategies, it makes communication about real impact possible and facilitates readers in reviewing and understanding the actual performance.
- There will be less room for omissions. Another point to start working on the transition to G4 now, is the use of omissions as common in the GRI 3/3.1 Guidelines. GRI G4 has put a halt on the use of number of omissions as well as not allowing any omission without proper reasoning. With just 4 specific ones that are allowed (indicator not applicable and why, confidentiality constraints, legal prohibitions, and unavailability of data with a reference until when the company expects to have the data available). The use of a larger number of omissions may lead to a ‚invalidation’ of the claim for core or comprehensive in accordance reporting. It is not yet clear what process the GRI will adopt in the light of the new regime, but it is to be expected that companies claiming a certain level will at least need to notify GRI about it.
- Sector specific information is integrated in the reporting requirements. Sector supplements will be become an integral part of the reporting requirements both for core and comprehensive in accordance with GRI G4. This means that a reporting approach needs to take that fact into account from the start of the reporting process design. The luxury to just use feasible sector supplement indicators to obtain the highest grading (A/A+ in GRI 3/G3.1) will disappear.
- There are more frameworks, ratings and guidelines evolving. Additional frameworks like IIRC’s Framwork for Integrated Reporting, sector specifications as proposed by SASB (the Sustainable Accounting Standards Board) and GISR (Global Initiative of Sustainability Ratings) and the consequences of their focus, logic, requirements and information enlarge the plethora of reporting requirements. IIRC’s capital model, SASB’s industry-specific indicators, and at a later stage the recommendations by GISR on how to safeguard quality in ratings are maturing and will become evident in the coming two years (well within the timeline until GRI G4 will require in accordance statement by reporters). Together with all abovementioned reasons we think there is no time to waste to start using the combined set of requirements for the design of a continuously improving reporting regime.
Authors: Ralph Thurm is the Founder & Managing Director of A|HEAD|ahead, Nick de Ruiter is partner at Sustainalize. This is their first joint blog post and is posted on both blog sites.
Here’s the pdf of the (German) article ‘Kontext bitte’ of the ‘forum Nachhaltig Wirtschaften’, edition 3/2013.
Why is Novo Nordisk’s newest integrated annual report tackling growth? Because they have to, it’s the context to their business model, and embracing the idea of a ‘Grenn & Inclusive Economy’ is core to them. Why is the Shell report missing enough context and get a clear ‘warning signal’ by their External Review Committee (while being famous for their scenarios)? Because they still don’t get how much is at stake in a rather short amount of time and they just neglect that a ‘Green & Inclusive Economy’ needs to be built without fossils; defenders of a certain faith just move as much as they’re absolutely forced to, unfortunately. So, will GRI G4, the IIRC and the approaches of SASB and GISR (to name a couple of new kids on the block) catalyze some of that change towards more context in reporting? Chances are they could be part of the solution as macro-micro benchmark information will become the ultimate litmus test of useful, context-based and satisfying information for all stakeholders. We need to start asking for that information. What is your right to exist today, and in the future? Did you ever have the idea that this – most important – question has been answered in a sustainability or integrated report you read recently? Novo Nordisk is close, Shell not, so my investment strategy is clear…
[This blog was first published on CSRwire Talkback on June 11, 2013; http://www.csrwire.com/blog/posts/883-gri-g4-a-gateway-to-meaningful-sustainability-reporting].
On May 22nd, GRI published the fourth generation of GRI Guidelines at a major conference in Amsterdam. But has GRI’s multi-stakeholder process delivered what is appropriate given the global multi-faceted sustainability nexus of global challenges? Or is G4 a compromise to what is currently possible to attract many more thousands of companies to sustainability reporting?
This at a time when new players like the International Integrated Reporting Committee [IIRC], the Sustainability Accounting Standards Board [SASB] and Global Initiative for Sustainability Reporting [GISR] are hitting the stage and creating some confusion with reporters about the relative importance of the pieces in this new plethora of tools?
G4: The Promise vs. Implementation
One has to read G4 very carefully to conclude that it can indeed – theoretically – deliver more meaningful reports through several changes made in the focus, structure, language and clarity of the guidelines. The crux really will be, if G4 is applied accordingly, accepting the very positive ambition of the authors, confirmed by the GRI governance bodies and several thousands of people that were involved through the working groups and feedback processes. Or will G4 be abused by a rather lax and unaccounted watering down of the reporting process? Only experienced, industry-specialized raters, rankers and alert stakeholders will be able to tell. Critical watchdogs like SOMO that looked at the application of the A, B, C system in G3/G3.1 and who complained about the lagging and unspecified indicator coverage in certain sectors and reporting areas have given us a taste of what is needed in the future on a much broader scale. To understand G4, we first need to de-learn G3.
Unlearning the G3
Forget about application levels and the extra plus for assurance, no matter if one indicator, incremental or reasonable assurance processes were applied. Forget about the GRI application level checks. G4 asks for self-assessments, supported by a flexible, but transparent application of external assurance. Forget about core and additional indicators. And forget about leaning back and ignoring your supply chain impacts because G3 allowed you to just report on those parts of your supply chain where you had a majority share in. And finally forget about too much flexibility to interpret an indicator much differently than literally defined in G3. All this now finds a place in the historical archive of GRI. Materiality was the magic word that you couldn’t escape from at the G4 launch conference. Reports should be as meaningful as possible while as concise as needed. GRI’s G4 development process mostly focused on a much better description of the reporting process to come to that specific selection. A much better description of the application of the four report content principles was needed, and one in which boundaries become functions of impact.
Abstracts: Pushing for Transparency + Sustainability Context
In consequence, the reporting boundaries can now vary per aspect and are no longer abstract legal constructs. GRI is now asking for much more transparency about this process and its outcomes, which helps to understand some of the context in which those crucial decisions have been made. A legal counselor can’t be the restrictive entity to define any more what needs to go into a report and what not; of course aspects of liability, litigation and reputation are sometimes tricky, but there is a common sense behind this whole exercise of transparency – to avoid those questions from the very beginning! Additionally, G4 puts much more focus on the reporter’s impact in the supply chain. Visibly, supply chain cuts through all three dimensions – economic, environmental and social – of the G4 Guidelines, through indicators around supplier assessments, the results and consequences of these assessments and grievance mechanisms in case of dispute. This is clearly a big step forward towards meaningful reporting. Together with the right application of the reporting principles and the boundary setting, the spectrum of reporting elements, while focused on the most material aspects, is enlarging. Aspect-specific boundaries will tell us much more about where a company thinks its responsibility starts and ends. Sustainability context, the most neglected of the four report content principles, can support a proper first step. Again, it needs to be applied correctly to bear the fruits of the more rigorous process.
Forgiving Material Omissions
G4 comes with a new system on how to be in accordance with the Guidelines, namely ‘core’ and ‘comprehensive’. While Elaine Cohen and Monaem Ben Lellahom elaborated on how these will work earlier this month on Talkback, taking into account that most indicators ask for multiple data points or qualitative descriptions, an experienced reporter that has data accuracy guaranteed will still feel challenged. I doubt that we will see many comprehensive reports in the first one or two years, even though the known holding message called ‘omission’ is still allowed for comprehensive reporters. It will be a fine line for the ambitious reporters to assess how much omission is acceptable for stakeholders before committing to become ‘comprehensive.’ There is a danger that using too many omissions in material aspects will backfire. Core reports are not allowed to use omissions due to the fewer number of indicators demanded. In that regard, the GRI also allows the use of the G3/G3.1 Guidelines for another two full reporting cycles, so the pressure to switch is rather low anyway. Finally, assurance: the ‘in accordance’ context index is now asking for assurance evidence per indicator and for all standard disclosures. It will be quick and easy to see what has been assured and what not. Also, G4 asks for page references for the External Assurance Statement, so the level of assurance – limited or reasonable – will become more transparent making it difficult for a comprehensive reporter to present a patchwork without a proper opinion about where to go with assurance in the future. So those are the main highlights of GRI’s G4.
License to Operate: Promises, Promises
The texts in both parts of G4 try to help the reader better understand the link to existing other global standards (OECD, UN GC, ILO). Still little is said about the link to integrated reporting, and nothing yet on the new players [CDP, SASB or GISR], but that’s understandable given either their regional focus or limited time of existence. Although MoUs now exist between GRI and many of the other players in this reporting landscape, there are still many open questions, mainly about synchronization, timing, responsibilities and overlap. How much that will lead to a vacuum in companies to find the right application opens new potential for the wrong application of G4. As I said earlier, it will need very experienced groups of reporting experts to offer a third-party review beyond the black boxes of rankings and ratings and single-focus advocacy of labor, human rights, anti-corruption or environmental groups. These groups will also need to push for further improvements of the reporting standards, since the biggest challenge in reporting remains unaddressed even now: making reporting fit to address the real sustainability context challenges through indicators that combine micro-performance with macro challenges. While the report content principle on sustainability context rightly addresses the need to create those micro-macro links in G4, the indicator section in GRI G4 hasn’t closed that gap. In sum, while G4 is a step in the right direction, it needs to develop further, either standalone or within the closer context of integrated reporting. Now everything depends on the correct use of G4 and the ability to make reporting ready for the real purpose: why has a company the right to exist in a green and inclusive economy?
Cutting fluff out of reporting by looking at some of the root causes of the sustainability challenges may help stakeholders to better understand in how far the majority of companies are part of the problem or can be part of the solution to human survival
A couple of weeks ago Shell published their newest sustainability report. The External Review Committee concluded their review with an astonishing statement: ‘While acknowledging the high quality of Shell’s sustainability reports, (…), there is a growing desire on the part of the ERC to see more strategic context and content in these reports. The Committee would like to see a more comprehensive presentation of Shell’s vision, strategy and metrics for sustainable development in a world facing climate change, growing energy demand, and continuing concern about environmental and social impacts’. How on earth is it possible that a world leader in scenario technology that just recently published their newest scenarios, misses the mark on putting their performance into relevant context? How is it possible that ongoing crucial discussions about the value of reserves on their balance sheet – now discussed by HSBC, Citibank, 350.org and Carbon Tracker as ‘Unburnable Carbon’ under a 2 degrees scenario – are not even mentioned in the report? How is it still possible that the company calls the stretch of their existing business model ‘sustainable innovation’, while their programs around renewables just burn some play money? Troubled and disturbed readers are left alone to make the connection to Shell’s scenarios in which they (finally) admit that renewables can have a majority market share in the future.
How refreshing and contrasting to Shell’s cocooning is the newest integrated report of Novo Nordisk, called ‘Strategy is about choice’. A main theme covered in the report is ‘sustainable growth – can it be done?’ The company discusses on 3 full pages the contextualization of their business, posing various crucial questions right at the beginning: ‘Novo Nordisk’s projected growth trajectory puts the company’s sustainability aspirations to the stress test. How can it increase production while keeping environmental impacts down? How can it expand access to care where public healthcare’s financial means are limited or healthcare services are inadequate?’ The company then introduces the ‘Blueprints for Change’ program, a set of case studies that will look closer into the company’s foot- and handprints in a time of limits to growth and the need to increase health care in diabetes worldwide. The chapter closes with a clear commitment: ‘In our view, though, there is more to it than competitiveness. In our approach to business we strive to create long-term, sustainable value in a bigger picture perspective.’
Missing sustainability context is mainly based on three root causes – elephants in the glasshouse if you like – explaining the need to disclose a proper positioning of a company’s business model towards these three aspects of sustainability context:
1. Global efficiency gains: over the last decades the majority of efficiency gains in company approaches – mainly to save money – were reached through specialization and additional outsourcing; from a sustainability perspective this increased the need to bridge time & space, which in consequence lead to an absolute increase in resource and energy use worldwide in transport & logistics as well as infrastructure. The digitization of production and logistical processes needed additional expansion in supporting electronic infrastructure, again leading to additional resource and energy use. While we globally saved money per unit of product – also due to the collective neglect to internalize external effects in cost accounting – the absolute resource and energy use went up and will continue to do so. This is a slow death path for humanity on a finite planet.
2. Productivity increase through innovation: Looking back at innovation waves, as characterized by the famous Kondratieff cycles, we need to understand that every new cycle didn’t lead to just the use of new technology, but always left older technology behind and in use, either through new owners, or because they were shipped to other parts of the world. This accumulated world of old or stranded assets have not lead to an absolute global reduction of resource and energy use and remain part of the problem as long as they are not completely built back, something that will remain difficult up to impossible given the mingling of stuff in the past, not offering a lot of opportunity to reuse, recycle, or re-enter them in a circular economy. Again, this adds to a slow death path of humanity on this finite planet.
3. Rebound effects additionally overshadow efficiency and productivity gains: these lead to an extra sharpening of the global resource and energy use scenario. Amongst them are:
• Material Rebound Effects: a continuous increase of machines in daily lives and in industry make us completely dependent on tools and energy;
• Demographic Rebound Effects: the increased number of humans, mainly in emerging markets and developing countries lead to an even sharper increase in the need for ‘stuff’, especially when a Western lifestyle is anticipated;
• Financial Rebound Effects: Cost decreases lead to an increase in market asks through additional buying power. Income increases have the same effect;
• Psychological Rebound Effects: the increase of ‘environmentally-friendly’ products often leads to a higher level of use of these products;
• Political Rebound Effects: GDP growth has become the No. 1 need to allow a country to function given debt-financed systems, demographic effects and the inability of governments to reform social systems.
It’s no wonder that ‘green & inclusive growth’ is now the new buzzword. Decoupling growth from resource and energy use is an absolute prerequisite for humans to have a right to live on this planet. All positive contributions to human wellbeing by companies are important as well, but will be worth nothing without a breakthrough in capitalism that can safeguard that markets work in favor of human survival and not against it.
Companies are the most important implementation power of this change. Sustainable innovation needs to be re-defined in this context perspective, green & inclusive growth asks for an industry-coordinated adaptation plan; without cross-polination between industries the tough challenges mnetioned above can’t be tackled and solutions can’t be scaled to real impact. Although difficult to address these broader context aspects in a sustainability or integrated report, stakeholders have a right to know how companies – one by one – plan to address these breakthrough challenges through their individual business models, including those that at this moment need to admit that they are more part of the problem than part of the solution – and honestly most are still part of the problem since their strategies are based on addressing symptoms instead of going to the root causes. Therefore strategies that include sufficiency, local economies and new creative solutions involving companies, governments and civil society are inevitable. What this sharpened context means for sustainable innovation and reporting will be addressed in my next blog(s).
The ThriveAbility Consortium (founded by Renaissance2, A|HEAD|ahead and 5 DEEP) are happy to announce the second ‘Embedding ThriveAbility’ workshop in Perpignon, taking place June 28-30.
A Workshop Where Breakthroughs Become the Norm
You are invited to join an elite executive group learning to design thriving organisations. Through interactive sessions, case studies and expert inputs you will explore how leading organisations are making breakthroughs the norm, transforming sustainability into viability and thriveability. Brought to you by the ThriveAbility Consortium!
During three exciting days we will cover the following topics:
- Origins of ThriveAbility- What are the roots of ThriveAbility? How does it transcend and include the 40 year heritage it builds on? What do the pioneers of Sustainability have to say about ThriveAbility? Who are the ThriveAbility Pioneers?
- Conscious Economy- How fast can we transition from an unsustainable, high stress, linear economy powered by fear, fossil fuels & materialism, to a thriving circular economy powered by caring, renewable energy & conscious enterprise? What role does business design, innovation and the circular economy play in this transition? Why are companies like Coca-Cola, Desso, FLOOW2, iFixit, Ikea Group, M&S, Morrisons, Ricoh, Vestas, WRAP, Turntoo, Renault, National Grid, B&Q, Cisco, BT, Tarkett applying these approaches?
- Sustainability to ThriveAbility- What makes ThriveAbility radically different to Sustainability? Why is Flourishing so important, and how are governments and corporations shifting from measuring raw economic outputs to beneficial social and environmental outcomes? Who are the world leaders making the transition from sustainability to thriveability? How are they applying ThriveAbility thinking? What can we learn from InterfaceFlor, Unilever, Philips and other pioneers?
- Incremental vs Breakthrough Change and Innovation- Why are breakthroughs now critical, and how can the ThriveAbility Approach help make breakthroughs the norm? Why do handprints now matter as much as footprints? How do companies such as Puma, Steelcase, Nike and Natura apply breakthrough science, activism, culture, finance and economics? How does one go from incremental to Factor 100 change?
- Business Models- How can business design using strongly sustainable organizational models be a force for radical change? What do you need to know to design thriving organisations? How are the three contexts (environmental, socio-technical and financial) integrated with the four perspectives (stakeholders, value, processes and measurement) to ensure sustainability, innovation and thrival are built in to your business?
- Beneficial Leadership- Why do existing behavioural change approaches fail to achieve the results expected? How does integral psychology transform the way we go about leading organisations to deliver breakthroughs? What are the eight levels of change and transformation we need to pay attention to, and how can we measure where our organisation is at? How do we design pathways to future beneficial outcomes based on probabilistic models of change, and integrate this using the ThriveAbility Approach? How can ThriveAbility Thought Leadership move your organisation from the chaordic zone into the bridging zone where breakthroughs become the norm?
- Measuring ThriveAbility- Why do we need to move beyond integrated reporting to ThriveAbility reporting and modelling? What are the key sources of big data we need to integrate into our management and reporting systems that will stimulate breakthroughs? How does ThriveAbility help investors and financiers make better decisions using the ThriveAbility Factor? What kinds of dashboards can be developed using the ThriveAbility Approach?
- Methods, Frameworks and Tools- why is it critical to fully integrate ThriveAbility into existing strategy, design, quality and innovation frameworks? How can the methods and tools already used in leading organisations provide a solid foundation for breakthroughs? How are ISO9001 /2, 14001/ 26000, EFQM, EOQ, Baldridge and other standards integrated into ThriveAbility? How are disruptive innovation, bottom of the pyramid, cradle to cradle, frugal design, the circular economy and dozens of other excellent approaches embedded in the ThriveAbility Approach?
Download the complete brochure here: Embedding ThriveAbility2- Brochure 28-30 June 2013 Final
Registration for the workshop can be done directly at http://r2meshwork.ning.com/
This article was first published on the Guardian Sustainable Business Blog on April 9, 2013.
Sustainability reporting has only shown which companies are “less bad” when what we really need is a minimum standard
When Deloitte Netherlands published the results of its first zero impact growth monitor (ZIG-M) last year, the press and social media response was overwhelmingly positive. Finally, a methodology to measure the quality of a company’s performance against a “north star” benchmark. And where zero impact growth is not seen as the end point of sustainability, but as the minimal target that all industries, with support from civil society and governments, need to maintain human well-being.
If zero impact growth is to be seen as the gateway to a green and inclusive economy, any adaptation plan must involve parties sharing a world view and accepting their specific roles and responsibilities. Instead of the vertical silo-per-silo perspective shown in the first version of the World Business Council for Sustainable Development’s Vision 2050, a more horizontal process would instigate cross-fertilisation and innovation between industries, still the most untapped resource given the potential of new technologies, ongoing innovation in IT and the availability of big data.
Lack of minimum standards
Most of the technology we need to survive as a human race on a finite planet has already been developed, it’s the human brain that needs a higher level of consciousness to understand how to use it. A north star approach, starting with zero impact growth would be a systemic and culturally-adapted start towards a net-positive impact world. If we can fly to the moon, we should be able to agree on how to safeguard our very own existence.
Apart from various gaps that the ZIG-M showed, one aspect became clear – information available through sustainability reports and websites only tells us who is less bad. We seem completely in the dark when it comes to knowing what is minimally good enough. A north star benchmark like zero impact growth would allow exactly that – a good context of sustainability performance, balancing both reduction of negative impacts and increase of positive impacts.
And why don’t we read more about sustainability context and long-term targets, legacies and scenarios in sustainability? The inconvenient truth is because companies often don’t have them, don’t want them, and sometimes hate them given the accountability pressure involved. There are more than enough excuses offered: an increasingly complex world, changing industry landscapes, a shift in world trade, disruptions in the financial markets, the unforeseen reactions from stakeholders, the list continues.
Wriggling out of full sustainability reporting
The most used reporting framework, GRI 3/3.1, allowed companies to sneak away from sustainability context through the simple use of legal boundaries for their reports, meaning that impacts in the value chains, both up and downstream, remained out of scope over the years. Also, when G3 was released, GRI itself was not able to agree on at least a couple of indicators that would inhale micro-macro comparisons (the performance of an organisation against all sorts of planetary limits and/or aspects of well-being). What we have and will continue to have, are efficiency-driven relative indicators, good enough for rankings and ratings, but less useful to put the individual performance into the necessary context.
While we need to acknowledge that GRI at the time of the release of G3 guidelines simply wasn’t able to deliver indicators that allowed for more contextual information (all indicators must be globally applicable and globally accepted to be used in the guidelines), there was hope that with the forthcoming G4 guidelines the sustainability context gap could be closed. Unfortunately, GRI’s work on the indicators was limited mainly to the areas where alignment to other international standards was necessary.
Surprisingly enough the draft G4 guidelines didn’t present any context-based indicators in areas like carbon, water, biodiversity; areas in which the outcomes of the work of the Global Footprint Network or TEEB would have been given considerable backbone, considering their work as globally accepted and applicable as well. Also, on the social side, while the Ruggie framework is now built in, the indicators don’t reflect sustainability context. GRI has all the instruments built into the reporting process to start with impact and/or context-based indicators – the boundary setting, the disclosures on management approach, the omissions option, the multi-year target-setting option (allowing companies to start small and then take the learning to scale). None of that was taken into account. Looking at the urgency with which certain sustainability issues have to be solved, we now need to ask the question: what do we do with a new generation of GRI guidelines, given that they will be in place until 2020, and with no prospect in sight for further revisions that will finally close the sustainability context gap?
Putting sustainability context into reporting
There is the argument that sustainability context would be too difficult to implement through indicators. Well, heavyweights in sustainability reporting, management and governance areas have shown the GRI in their response to the G4 draft public comment period how it can work, using carbon and water as examples. We shouldn’t be ridiculed by the cynics that argue there’s no sense in knowing that company X exploits 0.0000000000001% of the world’s freshwater resources. Clearly sustainability context can be global, but it’s also regional and local. So far, the Sustainability Context Group has not received any answer from GRI on how they plan to respond to that essential challenge.
Who will now pick up the challenge of inserting sustainability context inclusion into reporting? Recently, the Global Initiative for Sustainability Ratings (GISR) opened to public comment on framework principles, and “context” is included in principle 12: “Context – A ratings framework should assess performance within the wider context of the company’s sustainability impacts at various geographic scales, referencing widely accepted thresholds, limits, targets or norms applicable to such impacts.”
What counts for a rating framework also counts for reporters, and it remains to be seen if GISR will support the principle through feasible indicators, a promise that GRI hasn’t been able to deliver on so far.
Ralph Thurm is the founder and managing director of A|HEAD|ahead, a management consultancy. Thurm is also one of the founders of the ThriveAbility Consortium; he tweets at @aheadahead1.