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‘A journey to the North Stars’ – Ralph’s newest column in forum Nachhaltig Wirtschaften (in German)

The latest column is following up on the column ‘Leaving the cuddly corner’ in forum edition 4 of 2013, clarifying what sustainable innovations really are, seen the macro-developments that undermine a shift towards a more green & inclusive economy. The new column covers the ingredients towards true sustainable transformation and presents a mental mind shift model in which corporate culture and systemic thinking are preconditions to allow moves towards a ‘net positive impact’ commitment. The examples of Kingfisher, InterfaceFLOR, and recently IKEA, Unilever or Puma are signposts of this coming mind shift. Both columns 4/2013 and 1/2014 round up and describe first thoughts that lead to the idea around ThriveAbility, more can be found here in the category blog posts under the heading ‘Thriveability’, and more in-depth material can be found at http://www.embeddingthriveability.org.

The pdf of this latest column of ‘Der T(h)urmblick’ can be found here: FNW_2014_01_Thurmblick.

 

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Recalibration of sustainability – welcome ‚ThriveAbility’

The below article has been published in the January 2014 edition of the China Quality Magazine. This goes to more than 30.000 readers I’ve been told. I thank the editors of the China Quality Magazine for the opportunity to make their readers familiar with the ThriveAbility concept.

More than 400 quality managers and executives were gathered in Tallin in the middle of 2013 on the occasion of the yearly EOQ Conference, and for the first time the participants were confronted with a new term – Thriveability. Here’s why:

2012 marked the 20th anniversary of the first Earth Summit in Rio de Janeiro. The sequel of the Earth Summit was again held in Rio, so consequently that Summit was called Rio+20. The attending corporate world, represented by hundreds of companies, as well as the political leaders, agreed on the vision of a ‚Green & Inclusive Economy’.

Sustainability as it is used in companies today has only little to do with what the Brundtland Report in 1987 and the Rio Declaration from 1992 remind us of: a company’s doing has to be put in context, enabling human beings to live a healthy life in harmony with nature, as well as enabling a development that meets the needs of the present generation without compromising the ability of future generations to meet their own needs. This in summary is often also called the triple bottom line, a term coined by John Elkington in his 1998 book ‚Cannibals with forks’.

In a way sustainability management has adopted a lot from the quality movement: in the interest of efficiency gains a higher level of transparency has moved in, and the proactive companies have harvested the low hanging fruit in the first years. We have seen sustainability management support from ISO, starting with ISO 14000, and later ISO 26000. We have seen reporting standards like the Global Reporting Initiative, a rather generic umbrella to discuss the most material sustainability issues and align performance indicators alongside this focus, or more issue-specific reporting like the CDP (covering carbon and water now, and probably even more in the future). The sustainability movement has also adopted the idea of awards, general and sector-specific. More than 120 ranking and rating schemes, mostly methodological black boxes, have seen the light of day. But is that enough? By far not, and China already does feel the consequences every day.

What we can conclude more than 20 years after the first conference and more than 25 years after the Brundtland report is simply unsatisfactory, even more it has cemented our path to a slow death of humans on this planet. Ban Ki-moon, UN Secretary General already addressed this in front of the World Economic Forum’s corporate leaders by saying ‚Our current economic model is a global suicide pact. We mined our way to growth. We burned our way to prosperity. We believed in consumption without consequences. Those days are gone’.

What does make ThriveAbility different from our current management of sustainability? Two main areas need to be mentioned:

At first, Thriveability is aiming at closing the so-called ‚Sustainability Context Gap’. By that it starts to reclaim the focus of sustainability. At this moment companies are mainly telling us how much ‚less bad’ they have become, with a focus to decrease negative impacts and with little up to no ideas how to improve positive impacts through their daily sales of products and/or services. Focusing on ‚net positive impact’ as a balance of the total behavior towards the environment and society and developing a positive legacy, would be a great ‚North Star’, but hardly any company can answer at this moment in how far their doing is endangering the ability of next generations to live a decent live with the same opportunities as the current generation.

We recognize that sustainability strategies are often aligned to symptoms, not to root causes, and that leads to narrowly focused action. For example, a company that focuses on a reduction of CO2 normally makes little effort to go beyond its own production facilities, and is not looking at the opportunities that the megatrends causing the global or regional CO2 rise may have for their core business. We have identified that a combination of six megatrends needs to be analyzed in depth to understand the nexus implications on a company’s (sustainability) strategy: environmental degradation, demographic changes, urbanization, shifts in world trade, shifts in technology, shifts in transparency. This discussion helps to develop a ‚world view’ and can be the starting point for building an opportunities-based roadmap towards thrival.

Secondly, ThriveAbility needs to also regain excitement. Talking to companies on a daily basis it is shocking to see the little willingness to go ‚the extra mile’, simply because it would make business sense. As there is no sustainable company on an unsustainable planet, we need to move away from sustainability as the ‚Sword of Damocles’, and back to enthusiastic engagement. We observe that the combination of sustainability (with regained meaning as mentioned above), innovation, design, and beneficial leadership (based on the work done around spiral dynamics, flourishing and mindfulness) can open up new gates towards a thriving economy.

A ThriveAbility Dashboard would pull together four quadrants of information:

  • Information about the level of change for the transformation towards a thriving business model, by that enabling the ‚possibility’ for thrival;
  • Current performance based on the ‚footprints’ (negative impacts) and ‚handprints’ (positive impacts) of actions and creations;
  • North Star information about the carrying capacity of a flourishing world;
  • Predictive models that pull the information of the first three quadrants together and allow a clear picture of where a company stands vis-à-vis set micro-macro targets and where it may still need to move towards in the future.

The quality movement can become a great enabler if it understands that quality has an inside-out and an outside-in component. As said, what is inside quality worth if it can’t help to make the outside world better? What if efficiency and quality gains are realized by burdening natural capital, human capital, intellectual capital or societal capital? It is time for the quality movement to give itself a new ‚North Star’! Be part of the change, ThriveAbility will be a great gateway to redefine that particular scope.

Here’s the link from China Quality Magazine 1 2014 Article Ralph Thurm (in case you are able to read it ;-))

 
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Posted by on January 13, 2014 in Thriveability

 

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TEDxRSM: Ralph Thurm on ‘how to move from a global suicide pact to a thriving econonmy’

November 2013 saw the first edition of TEDx at the Rotterdam School of Management. I was invited to speak due to my ideas about ThriveAbility that I am also teaching at Erasmus University’s Executive Program on CSR in a module about sustainability and innovation. It is the idea that sustainability in the way it is used today – reductionistic, technocratic, mechanistic, and therefore not inspiring to most in organizations – needs to regain it’s meaning. This is only possible through the reactivation of what it was made for, especially intra- and intergenerational balance and equal opportunities for human beings, and combining it with the learning from innovation, design and advanced knowledge on human consciousness (e.g. beneficial leadership, spiral dynamics, integral theory).  Structuring this in a feasible methodology will help us to design a thrival world and an economic system reflecting this. The ingredients are all there, we just need to get it done! See how in Ralph’s TED talk here.

Bildschirmfoto 2013-12-04 um 11.25.21

I would like to thank the organizers of TEDxRSM for the opportunity to speak. Not one economist in the room thought that our current economic system serves the needs of the existing generation and future generations to come. This is the biggest challenge for the next two to three decades and I am asking my fellow economists to seriously go out and be part of the change to a thriving world for all human beings, while finally accepting that growth is limited, costs and prices don’t tell the truth, and taxes and incentives mainly go into the wrong direction. Take ideas like the circular economy seriously and adapt accounting and reporting accordingly. Join those that want to change education towards thrival. Only then we are able to realize the dream of a ‘Green & Inclusive Economy’!

Anybody interested in being part of the journey, feel free to go to www.embeddingthriveability.org to learn more, or contact me directly at ralph.thurm@kpnmail.nl.

Additional thanks go out to my fellow founders of the ThriveAbility Consortium (Robin Wood, Chris & Sheila Cooke) for their wonderful companionship and belief that something really necessary needs to see the light of day – our regained inspiration to make this world a thrival place!

Bildschirmfoto 2013-12-04 um 11.19.17

 
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Posted by on December 16, 2013 in Thriveability

 

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Leaving the ‘cuddly corner’ – New column published in Forum Nachhaltig Wirtschaften (in German)

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’.

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Transition from GRI 3.1 to G4 – 10 reasons why there is no time to waste!

- 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!

  1. 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.
  2. 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
    1. Short-termism driving hectic actionism for quick successes;
    2. Sustainability as merely risk management, thereby ignoring the fact that sustainability can be positioned as a means to distinguish yourselve from competitors;
    3. 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);
    4. 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.
  3. 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
    1. 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.
    2. 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.
    3. The willingness to gather data about impacts and therefore prepare a readiness to discuss with stakeholders from an informed perspective.
  4. 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.
  5. 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.
  6. 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.
  7. 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.
  8. 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.
  9. 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.
  10. 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.

 
 

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Context, please! Ralph’s column in edition 3/2013 of ‘forum Nachhaltig Wirtschaften’

Here’s the pdf of the (German) article ‘Kontext bitte’ of the ‘forum Nachhaltig Wirtschaften’, edition 3/2013.

FNW_2013_03_Thurm

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…

 

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GRI G4: A Gateway to Meaningful Sustainability Reporting?

[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?

 
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Posted by on July 18, 2013 in Sustainability Reporting

 

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