Category Archives: Sustainability Reporting

Transparency is the basic ingredient to create trust. Sustainability reporting is needed to cluster needed information in a way that comparison, benchmarking, rating, ranking and learning is possible. Due to Ralph’s work for the Global Reporting Initiative since its inception in 1997, specific blogs focus on this ever more needed part of the sustainomics.

GRI Reloaded – redefining the matrix for disclosure on sustainability performance – #GRI2016 conference reflections

It’s the week after the GRI Conference, the week when we attendees all return to our desks and reflect what we heard and learned. Clearly, GRI has set important steps, has changed its strategy towards becoming a standard setter, and has entered the digital age in earnest, finally. And yes, it was the networking that was valuable and to me it felt like a family gathering. There is no doubt about that. But are we convinced? Is this the big next thing?

Let me take you on my personal journey, and note my background with GRI from 1998 onwards, including time as a GRI staff member from 2002 until 2008. I am probably one of the very few that have been actively involved in developing all 4 generations of the GRI Guidelines. My feelings about GRI come deep from the heart, I sometimes joke about GRI as being a child going through its childhood and puberty, and now leaving home to truly build a life on its own, exploring new relationships, independent from the family’s own past. I’d like to present my thoughts in three sections:

Atmospheric distortions

In the run up to the conference I spoke to many people that I suspected going to GRI’s conference. I learnt that many of them decided not to go this year. When asking why, the answers were quite mixed, but they addressed various issues, and this continued in conversations at the conference as well:

  • The glamour is gone: earlier conferences had highlights that were missing this time. GRI had Al Gore, Queen Rania of Jordan, Michael Porter and BBC news anchors in the past. Seems like these ‚sustainability celebrities’ are indeed attracting numbers of participants and GRI might have purposefully decided not to approach such people this time, for various (good) reasons.
  • GRI’s communication about the new strategy, the new GOLD model of participation, the ‚exclusive clubs’ (Leader’s Group, Technology Collaboration, certified GRI practitioner process) isn’t yet resonating well with many, taking into account that most reporting organizations are also part of minimally half a dozen and up to a dozen other initiatives and networks. It all becomes complicated and hard to follow. Many out there who I talked to were surprised not to be ‚Organizational Stakeholders’ any more.
  • A feeling of cold commercialization of what was supposed to be a community that embraced its members, involved its stakeholders for a common purpose (and I’m not even touching the pricing strategy for the conference, especially the huge amount of ‚exclusive’ sessions and to-be-paid-for masterclasses). The true multi-stakeholder nature has moved a bit into the background. A new set of standards is now presented to the world, designed by the GRI staff and the GSSB. ‚Hold on a minute’, I heard often: ‚wasn’t there a working group process designing this? There suddenly is a public comment period about something I wasn’t even aware would come?’ Of course, just restructuring G4 into a set of standards doesn’t need a full multi-stakeholder process I said, but it wasn’t clear to many and a sign that information overload takes its toll.
  • The notion that GRI’s conferences tend to lose focus on the reporting aspect. Many sessions are broad discussions about sustainability with little rigor or facilitator focus to bring it back to reporting and/or disclosure, at least at the end of the sessions. Is it helpful to have sessions about who to trust more (governments or NGOs or corporations) when all of them have a role to play in adding and consuming data? While I thought this year’s conference was more focused when looking at the session’s titles, the discussions themselves often remained less focused.

Summing up this part, the words of a former high level representative of GRI’s governance bodies still rings in my ears, saying ‚GRI is losing its soul!’. Indeed, some say GRI starts to copy/paste what SASB has been doing in past years, has a strong bias with financial market players (although hardly present at the conference), is very North America and Europe focused, and communicates less with its (former) community. My own experience is that there’s now at least as much talk in conferences why not to follow GRI any more as there is talk to position it in the overall reporting regime, including IIRC’s integrated reporting approach, SASB’s industry specific disclosures, the EU Directive’s requirements, the rating organization’s questionnaires and the requirements of stock exchanges. I think we are at the point where GRI’s growing number of younger staff starts to forget about the roots of the organization, where the different departments within GRI have their own means of communication and that indeed some ‚soul searching’ would be recommendable. If 1.200 participants (including 200 speakers and GRI staff) mean ¼ less participants at the confernce (noted by many), it points to some homework to be done in re-emphasizing the true purpose of GRI. To many it isn’t so clear any more, before and after the conference, at least for those who went.


A lot of what GRI presented at the conference makes a lot of sense to me. The move from Guidelines to standards helps to generate a more constant work rhythm for the GRI Secretariat, creates the ability to make changes to individual standards, given the advances of science or technology, becoming more strict in defining requirements besides recommendations and guidance. This could strengthen stock exchange requirements, legal requirements, governance aspects, assurance processes and simply enhance additional clarity away from blurry descriptions. It would also hopefully reveal still existing greenwashing in reports.

GRI finally also moved into the world of digital technology and data. The Technology Consortium – as was announced at the conference – will be broadened through the ‚Digital Reporting Alliance’, called to be the ‚vanguard of the next phase of sustainability reporting’. I agree with the need to ‚liberate’ data from pdf’s and use new technology to make the data available for everyone’s use. In the end, it’s the impact that data make, so the number of sustainability reports per se doesn’t really define the success of sustainability reporting. Rather, it’s the transformational capacity these data entail; it’s what the data reveals about those affected by corporate actions and how companies and their stakeholders alike can use these data to drive such transformation. This needs new approaches and open source platforms, like WikiRate, that have the ability to not only liberate data, but also to democratise the accuracy and use of data and put them into context through open data indicator development. It holds the power that an emission scandal like Volkswagen could be detected before it actually goes through the roof. eRevalue, a narrative screening ‚vacuum cleaner’ data service has shown that disclosure of emission data has gone down in the majority of corporate sustainability reports of automotive companies in the last years, except Ford Motor Company. Look at what has come out over the last half year and who is now accused of using emission control software and who is not: Ford Motor Company is amongst the few in the latter category. The power of data is just at the beginning of an explosion, so GRI’s aim to support data liberation through partnerships is important. Various sessions during the conference focused on data and transparancy.

The uncovered to-do’s

GRI’s conference took place at an important moment in time. After COP21 in Paris and all the follow-up happening to get countries adopting the agreement, and after the SDGs got accepted and are now waiting for the processes to best implement them internationally and country-by-country, GRI looked at these from the perspective of making necessary links (GRI, WBCSD and UN GC already published the SDG Compass last year). Of course GRI was also involved in the preparations of both these events, within the limit of its mandate. These themes were of course captured in important sessions at the conference.

But what struck me most was what was not discussed, and given the fact that about 90% of the global multinationals are still not reporting on their sustainability achievements (partially based on the fact that a huge amount of these companies are privately held and still sneak out of mandatory reporting requirements), we are still far from mainstream. As the conference subtitle was ‚shaping reporting for the next 20 years’ GRI missed addressing a list of things that will have at least as much influence on the future success of GRI than the steps now taken. Here are my top 5:

  • As sustainability reporting sort of goes with the flow and – while mentioned in the Guidelines – chronically forgets about sustainability context, we remain at an incremental stage of disclosure. We are missing the benchmarks of getting closer to the real deal: disclosing when a company can call itself a ‚sustainable company’. While environmental ceilings and social floors are known, global footprints are defined up to local level, and more data about the condition of the world are available than company-internal data, the discussion around context was close to absent. Just a glimpse of that came up in a session about linking corporate data with national statistics data on the SDGs. I highly doubt that the national statistics offices will excite corporations to make the necessary data links and suddenly push innovation.
  • Redesigning dislosures based on a more capitals-based approach. The basic assumptiom of building accounts around a ‚systemic contribution’ to society will need to answer the question about value creation. There isn’t any better litmus test than to disclose in how far financial capital has been built on the back of any other capital. This doesn’t mean total monetization of all capitals, but starting to discuss conventions and directions on how to count and account, working towards qualities such as the ‚Total Contribution’ concept of the Crown Estate in the UK. Realizing that net positive and gross positive approaches are possible beyond what is now seen as sustainable (doing no harm) seem to be so far away from mainstream that GRI doesn’t give these truly commendable approaches a stage. As such the needed collaboration with accountants – not very active in rethinking accounting from throughput to circular – isn’t a programmatic area of GRI, but will be the Achilles heel of the purpose of sustainability disclosure if it wants to stand the litmus test.
  • The word ‚innovation’ was high up on the agenda. The opening session carried a set of three innovative entrepreneurs (potentially none of them producing a sustainability report), that aimed to somehow make a sort of connection to innovation, but in the proceedings it boiled down to the forthcoming standards and data aspects that seemed to be the only real news in reporting. Of course, communication, XBRL (if ever used mandatory) and open source data can make a big difference, but it’s the combination with data that are not yet in GRI’s terrain that can empower stakeholders to new qualities of dialog (at this moment often in a degenerating stage due to boring processes) that will potentially revitalize dialog, meaning empowering stakeholders to be well informed to talk to corporations at the same eye-level.
  • The systemic component of how to create a longer term roadmap involving macro, meso and micro level, defining a truly serving purpose of reporting, linked with innovations in accounting, data management and new business model reporting demands, was little to non existing. The conference emphasized once more the need to go beyond the reporting standard setting world to overcome the inherent problem of standard setting – a too short scope to be able to deliver on future-ready reporting. The Reporting 3.0 Platform, now in its 4th year of existence (, has recently announced the ‚Blueprint Projects’, a set of 4 projects that develop and cross-pollinate the different necessary constituencies in the reporting landscape: reporting (clarifying the principles and serving function of reporting that truly supports a green & inclusive economy), accounting (based on a multi-capitals approach), data (taking into account the internal and external data sources to deliver on the litmus test question of being sustainable), and new business models (and their demands to disclose in principal ‚handprint’). Will we be able to deliver on reporting ‚for the next 20 years’ without any of these areas fully embedded?
  • Lastly, are we actually asking the right questions? The predominant focus on ‚footprint’ isn’t exciting for the majority of companies on this planet. We totally forget forging ‚handprint’ information. Instead of not doing harm, doing good isn’t structured in sustainability reporting, so all reporters are asked to figure that out themselves. The new circular, sharing, collaborative businesses are bluntly absent from the disclosure through existing standards, but it would be them to learn most from. Also, there are no data and benchmarks that would aim to describe the organizational transformation capabilities and socio-cultural leadership capabilities of an organization, adding to the litmus test question described above. We’re not even touching the sustainability context gap in its totality, and we’re missing two major components of necessary disclosure (see the work of the ThriveAbility Foundation to learn more about that,

Summing up this last headline, GRI needs to of course balance the needs of the mainstream and take reporting organizations from where they are at to where they should be, but the conference didn’t deliver on a good sketch of ‚the next 20 years’, embedding the SDGs into disclosure and liberating the data seemed to be the maximum presentable to conference participants.

Of course, one can argue that first things come first and that we are expecting too much. I know so very well from my own GRI past that ‘globally applicable and globally acceptable’ was and is the mantra for disclosure items to be added to GRI’s list. There will be another 5 GRI conferences until 2030 where more of this could be discussed, but do we have the time to wait? The absence of at least a statement of what’s still needed to deliver on the mission of GRI and a roadmap that offers a back-casting of the next steps for the next couple of years, concerned many of us at the conference. Now was the time to address and embed these necessary enhancements, but it seems we have to wait until the 2019 edition of the conference to add these points to the reporting matrix. The least we can do is to continue to work with GRI to show what is possible until then.



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Heaven or Hell in Garden Eden? – A|HEAD|ahead’s year in review

Another year went by too quickly, at least this is how it feels. Let’s put the question aside if this is because of getting older or simply because this year was filled with (too?) much work. Maybe this is a good sign, too! Leaning back in my chair at the last ‘official’ working day in 2014 and thinking about how this year has been special, insightful, positive or negative, progress or setback, I can’t define a clear ‘yes or no’, more sort of an ‘and’.

Clearly, 2014 has been a year in which many of the problems on this planet have become even more strikingly clear, due to the many different events that reached the news. Amongst them, and in no particular order, are the brutal violence against women in India, the blazing racial incidents in the U.S., the wrecked havoc in the Middle East due to the never stopping war between Israel and Palestine, the brutality in Syria and its neighbor countries through IS and still existing governments in place, up to the sorrow for millions of climate and political refugees that need to leave home, and many of them not surviving on their trail of tears, e.g. when crossing the Mediterranean Sea. I can’t even imagine the pain that these millions go through and doubt I would personally be able to survive under these circumstances. Humans can be monsters, but humans can also be wonders, and many of the latter now stand up to make the world a better place, so I bow to humans like e.g. Malala, Bill McKibben (, and the many nameless individuals that risk career’s, reputation, legal punishment, and sometimes their life, just for their mission.

The roughness of the pictures add to the notion of urgency to find solutions to these problems, and my impatience is growing with all those that always have a ‘yes, but…’, stay inactive because there is a little risk in a sea full of opportunities, look at others to make the first step, ask ‘what’s in it for me’ as the first reaction to a proposal, or simply put their egos first. Many reactions are simply put under the smokescreen of political negotiations, tactics to ensure personal positioning (in order not to lose one’s reputation) or simply hiding behind the unavailability of budgets, or hierarchy not allowing to move forward. Sticking one’s neck out is often a no-go in an ongoing financial, climate, poverty, equality, … crisis, it often feels like talking to people in straight jackets in an inherent atmosphere of fear. I wonder what positions people are sometimes able to defend or take although they have families or kids at home, kids that will be very critical with their parents in the not-so-far future, and what excuses will these parents have when the kids start to ask these questions? How much guilt do they load upon their shoulders through inactiveness and by putting themselves or other bad reasons first. I also often ask that question to myself, too: what more and how much more could I have personally done? And yes, there are also bullet points on my secret list to do better, no question.

But 2014 was also the year in which I have personally witnessed and been engaged in areas that do give a lot of hope. Without mentioning all of them individually, I’d like to offer some of the insights of the conglomerate of my work in 2014, leading to positions that I take, and given the experience of the work I have done this year. I am thankful that my work has allowed me to derive to those insights, so a big thank you goes out to all my affiliations and business partners, you know where and who you are ;-). Some of these insights may be helpful for you, and I am much open to comments an reactions!

  1. Those dealing with sustainability have often forgotten the true meaning of sustainability, especially using ‘intergenerational equity’ as one of the most important guidelines of how to come to a net positive strategy. Overall, the majority of those corporations that have a certain focus on sustainability (in the still unbelievable absence of the majority of corporations to deal with sustainability at all) are happy with a ‘show less bad’ attitude, simply because they think becoming net positive is impossible to reach. There is only a handful of leaders that understood that net positive is not just one strategy to stay alive, but in the end the only strategy to keep a license to grow. It is impossible until it gets done, Mandela said.
  2. Many sustainability strategies fail to address a challenging ambition level because they are built on symptoms, not on root causes. This partially due to the standards and management systems that are built on the idea to reduce negative impact, not to increase positive impact. If climate change is an aspect to deal with, the symptoms-based strategy is to reduce emissions. A root-caused strategy will look at the causes of climate change (e.g. environmental degradation, demographic effects, urbanization, technical developments, world trade shifts, etc.) and look at ways how an organization’s business model can make positive contributions. Such a strategy will not just scratch the surface, it will go to the real questions about the purpose of the organization, the long-term vision of how the company can make a contribution, and how to excite employees, customers and investors anew.
  3. The question about the business case of sustainability is unfair to ask as long as the economic system boundaries always force people to the wrong direction due to existing pricing information. The discussion about the internalization of external effects into cost accounting, the translation into product and service prices and the counterbalancing of potentially raise in prices through lowering tax on work (and increase of taxes on resource use) needs to be seen in combination. Solutions of course need a level playing field, but again there is little fantasy to get these negotiations started. Too many ‘yes, buts …’. The effect is that a pure discussion around internalization of external effects leads to little (although we know much) as there is too much fear about unfair market conditions and increase of prices.
  4. The green and inclusive economy is undervalued and there is little going on in the corporate world to get it defined better or operationalized. I have come across people in corporations that even laugh about it since they see this as a revival of the various UN Green and Clean Tech programs, more of the old in new sheets. This is sad and possibly disastrous. Some of my work in 2014 focused on how to give shape to the idea of the green & inclusive economy and how a company’s reporting would react to that. What would be the methodologies, the tools, and what is already available. Find more through and read the posted report of the second Reporting 3.0 Annual conference. There are also great books that give more insights, I recommend John Elkington’s ‘Breakthrough Challenge’, Said Dawlabani’s ‘Memenomics’, Jeremy Rifkin’s ‘Zero Marginal Cost Society’, Frank Biermann’s ‘Earth System Governance’, Nick Gogerty’s ‘The Nature of Value’, Giles Hutchin’s ‘The Illusion of Separation’, Robin Wood’s ‘The Trouble with Paradise’, Tomas Sedlacek’s ‘Economics of Good and Evil’, and for those with more time, Thomas Piketty’s ‘Capitalism in the 21st Century’ makes sense if you acknowledge that there are more capitals than just financial capital. Take the essence of these books and tell me what else is missing to start making a green & inclusive economy a reality! Since we recently learned from the OECD that the idea of a ‘trickle-down economy’ is a complete failure, not one good reason is left not to work on the new economic model together.
  5. We forgot to take humans on board in order to shift from sustainability to ‘ThriveAbility’, the way to inhale new excitement to the idea of organizing the green & inclusive economy. I am deeply appreciative of the steps the ThriveAbility Foundation has taken in 2014 and is planning to take in the years from 2015-2018 and I deeply hope that the methodologies, factors, index algorithms will sink in quickly with many of the potential collaborators, and I am excited to be a co-founder of the ThriveAbility Foundation. The meetings this year have created so much positive energy, and hearing some of the partners we now have in our ecosystem, some of them experts in sustainability for decades, saying that this initiative has the potential of a ‘grand design’ truly makes me happy. I am sure the team now at the starting line will do its utmost to create the necessary breakthrough for the idea of ThriveAbility. Feel free to go to or drop me a response or email ( if you are curious or excited or simply want to learn more about it.
  6. UN Secretary general Ban Ki Moon has just published a report and some blogs about the great potential the year 2015 has with regard to climate change negotiations and the agreement on the Sustainable Development Goals (SDGs). In my view these are great and necessary steps to be taken to come closer to the idea of a green & inclusive economy, but they can only be intermediate steps. Take what I said in #2 about less bad strategies and #3 about the necessary pricing information to create new boundaries for an economic system and you understand why. I also realize that any successes in 2015 will need to be translated in national legislation and then operationalized in organizations, including controlling, mitigation and sanctions. This will take at least until 2017/2018 to become effective, and results not to be expected before 2019/2020. In the meanwhile I fear tactics like ‘creating shared value’ are not enough, in one of my blogs this year I even described them as ‘a spicy sauce to make a rotten meal taste good’, and I admit there is a cynic touch in that expression. I therefore put even more hope in the work the TriveAbility Foundation can potentially achieve in the meanwhile, so please take that journey with us.
  7. Let me finish with one more advice, and that one is a result of many years in this terrain: we need to avoid the idea that whatever we design for the green & inclusive economy would have to be 100% exact from the start. Whatever methodology we use, whatever algorithms we try out, and whatever reporting format we apply, they don’t have to be 100% correct from the beginning. Although academics don’t like that, although a lot of what to try out is based on normative assumptions and not always fully covered by science, there is no other way than to try it out, so me plea is for ‘progressive approximation’ and the result will lead to conventions that are good enough to make necessary decisions. Take the LCA movement and how that has come to conventions, take the examples of environmental profit&loss accounts and how they have helped corporate decision making. The design of the green & inclusive economy needs several iterations, and we can simulate trial & error until we are all good to go. We just need to do it, nothing holds us back! The immense progress IT has made in the last years is a great help, and I am happy to be involved in some of these, too.

I continue to like Omar Bradley’s quote ‘It’s time to be steered by the stars, not by the light of each passing ship’. We have seen many ships passing by that didn’t get us anywhere, so it’s long time to go back to the stars. For Martin Luther King it was enough to have a dream, the plans came later. So what is holding us back?

I hope to hear or see many of you somewhere in 2015. Thank you to all old & new subscribers to this blog and the thousands of readers of any of my blogs on Sustainable Brands, CSR Wire, Guardian Sustainable Business, to have taken out precious time to do so. Wishing all of you and your families all the best in 2015!





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Reporting for the ‘future we create’ – shaping next-generation transparency

Recently the report of the October 6/7 Reporting 3.0 Platform Conference ‘Reporting at the crossroads – ensuring purpose, practicability, performance’ was posted at, together with a great video summary, a repository of presentations as well as an event gallery that wonderfully highlights the spirit and buzzing enthusiasm of the 170 participants from 4 continents and 13 countries. Please find the report attached here as well: R3_Conference_Report

I had the honor to curate the design and facilitate the conference on both days, together with a great team of BSD staff and voluntaries, and also wrote most parts of the conference report. During the whole process in the many months of preparing the conference (that included working on two Transition Labs and two Regional Roundtables), post-conference writing and thinking about how to shape Reporting 3.0 for 2015, I often wondered how much more would already be possible in reporting through a combination of existing vision, methodologies and tooling. Reporting 3.0 brought the majority of influencers together, so a glimpse of the possible was clearly visible already during the two days of the conference.

The report therefore also focuses on three main messages and gives a whole plethora of insights and examples:

1. The ingredients of the ‘green & inclusive economy’ are becoming much clearer and more tangible for corporate decision makers, investors and leading thinkers from academia and the civil society; 

2. New approaches, standards and benchmarks are under development or will be developed to close the ‘sustainability context gap’ in reporting; 

3. Information technology and respective providers offer new solutions for big data management and algorithms as well as applications that enable a new level of sustainability driven decision-making by corporate managers, investors and consumers.

As a teaser to read the full conference report I am also posting parts of my pre-conference speech that I held at the speakers dinner the day before the conference officially started here, shedding light on intentions, focus and ambitions.

“Let me start off by quoting Otto Scharmer, the author of Theory U, who once said, ‘We cannot transform the behaviour of systems (and the people in them) unless we transform the quality of attention that people apply to their actions within those systems, both individually and collectively’. I think this already comes quite close to what we want to achieve with Reporting 3.0, both the conference, but also the platform. We started off from three basic ideas: 1) that we will take serious the plea to achieve a green & inclusive economy and the design for a capitalism achieving that, made at Rio +20 in 2012; 2) that we believe that reporting has a trigger function to create necessary change (many from us come from the early days of sustainability reporting when that was indeed the case); 3) that reporting with that trigger function to achieve a green & inclusive economy will need to be different from what it is today, and most likely it is needed within just one decade.

Reporting 3.0 can change the ‚quality of attention that people apply to their actions towards an envisaged system’ through various pathways: 1) By taking note of the various developments that surround reporting, especially around new business models (circular, sharing, regenerative, restorative), and the enhanced role of (big) data, data architecture, and IT capabilities; 2) By assessing the necessary consequences of the idea of a green and inclusive economy to accounting, given the fact that these new business models need different accounting rules, and that accounting will need to embrace a grand design as well: true costing, true pricing, and even more necessary, true taxation, to balance the burdens to consumers and communities, and to allow to set new economic system boundaries in which market mechanisms can work towards the right direction, on a better and global level playing field; 3) By embracing the idea that measurement needs to much stronger close the sustainability context gap, meaning that macro-data and micro-data allow for assessing performance from a future-readiness perspective and give stakeholders confidence that what an organization says and does is good enough or in the right direction to achieve a green & inclusive economy.

Looking at the vast variety of players with different backgrounds, all knowingly or unknowingly part of the ‚grand design’, and many not from the reporting terrain, reporting more or less logically rather comes at the end of the thinking, if it comes up at all. And those in the reporting space often don’t have the time, capacity, capability to convene formats that deliver insights with these forward-looking players. They normally convene with other experts in the reporting field. The early infusion of knowledge to build the ecosystem for forward-looking reporting is rather uncovered terrain, reporting at this moment adapts to the unavoidable, and doesn’t deliver on a ‚grand design’.

To be clear, we already do benefit from what has been produced so far. There are indeed strong shoulders of that little child Reporting 3.0 to sit on! And still, not enough has been thought of, produced or tried out to sketch the new reporting landscape and to build a ‚grand design’, stemming from the North Star, the green & inclusive economy.”


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Posted by on December 18, 2014 in Sustainability Reporting


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‚Unsubscribe dialog – subscribe collaboration’

To survive stakeholder dialog needs to transform to stakeholder collaboration and make use of new forms of IT

This is the fourth and last installment of a blog series covering crucial sustainability reporting issues on materiality, sustainability context, comparability and stakeholder inclusiveness.

Stakeholder Inclusiveness is one of the four core principles in the GRI G4 Guidelines that help to define report content that is material to the reporting organization and its stakeholders. Since GRI introduced the logic flow of how and when to use these four principles in the reporting process (first done in a Technical Protocol in 2011 and then only slightly amended for G4) it became clear that stakeholder inclusiveness means an ongoing and unstoppable process – in parallel and supporting the use of the other three report content principles. Clearly, stakeholder dialog would not be useful for only creating an organization’s sustainability report.

And here lies the problem: exactly THAT is done in many reporting organizations. This is due to various reasons, some of them are:

  • There are other existing feedback instruments like customer or employee satisfaction surveys. Sustainability seldomly gets included there; these survey services are often offered by external third parties and the sample of topics can’t be changed. Getting varying sustainability issue feedback through those surveys is difficult and the internal owners of these instruments are hard to convince that they should be changing or adding to what is ‚theirs’ and already ‚cast in stone’.
  • New product or service testing is mainly done when prototypes are out for market trials. Before that R&D is still mainly working behind closed doors, sustainability aspects are – if existing – mainly built in through regulation, internal design standards or specifications; potential customer reactions are only due when testing starts. Crowdsourcing is still in its infancy for many of those organizations that have built R&D fortresses and it’s hard to conquer the walls of overestimation of one’s capabilities, the billions of dollars invested in know-how, brains and internal think tanks weren’t in vein, weren’t they?
  • Investor relations still doesn’t take sustainability into their analyst briefings and bulletins, and why should they? Nobody’s asking! These colleagues have to entertain a very specific stakeholder group, engrained in their own mental stereotypes of how markets function and reward. Dozens of sustainability indicators? Well, spare me the white noise, give me one or two!
  • Top management wants information rather quick: if somebody is asking difficult questions in an interview (the questions are mostly precooked) or if top management needs input for a speech, turnover time to serve with answers is often less than 48 hours, so better have handy all necessary data and sound bites in or through the sustainability team.
  • Finally we hear so often that sustainability team members need to be careful, need to create step-by-step approaches, need to draw a fine line, have to be politically correct, need to know ‚the game’ or ‚how it works’ inside the company. Risk-averse approaches are the consequence. Being one of the most important internal strategy or board advisors – a role we would wish for the sustainability department to have – is much different. Go ask some companies how often the head of sustainability meets the board or the head of strategy! Prepare yourself for some disturbing answers.

These descriptions may sound a bit over-exagerating for some, but feedback from dozens of organizations we spoke to internationally in the last year or so paint a rather difficult picture of how especially internal stakeholders react to demands by sustainability departments to include sustainability into their daily working instruments, surveys and dashboard. Of course, there are organizations in which ‚integrated thinking’ as proclaimed by the IIRC for integrated reporting works better in the meanwhile, but for the majority of companies we still doubt it.

One consequence of these rather unsatisfying conditions is that a stakeholder dialog process is often done just through the sustainability department and – even more disturbing – just for the report that comes out. That again is input for some of the known rankings and ratings. Many sustainability department staff know the routine as they are both inviting and invitees (in other company’s dialog processes): once per year data is collected through existing niche software (or through some ERP system modules) or certain identified colleagues (issue owners) get an excel sheet into which they have to add data they are responsible for. Thank you, and until next year! Parallel to that a questionnaire is sent out to identified external stakeholders (often also from other companies), and of course the other usual suspects, including some internal stakeholders. After a max. 30 % feedback rate some statistics are pulled together. Usually, these are presented in one or several roundtables, sometimes in various countries (in the case of multinationals). Together with additional weighing factors a materiality matrix is then drawn up. Programs are set in motion to decrease the most negative impacts, and there goes your report and the shoulder clapping.

We expect that this sort of stakeholder dialog process will be dead in about 2-3 years. There are many indications for that:

  • Can this process convince to support and carry out reliable stakeholder input to really find out what the material issues are? In our view, it can show tendencies or possibly trends, but would you truly tell your top management that this is a proper assessment of the reality out there? As the availability of software and data is less and less of a threshold, one can demand a different quality and amount of data involved.
  • Hardly any sustainability department has organized stakeholder inclusiveness in a way that it is an ongoing process. There is anecdotal evidence at certain moments during the year and some have tried out standing stakeholder expert committees or panels to bridge that gap, but will that be seen as enough? Members of these committees are changing over time, so how stable is that interim solution?
  • Most corporate representatives are frustrated: having received many invitations to such rounds of questionnaires and roundtables from other companies, there is little excitement to go there more than once. Seen it, done it, had it, too little benefit to be involved. It also dawns on them that their own process will most likely face the same problem.
  • NGO representatives already face an ‚overflow error’ syndrom. Think about potentially up to 6.000 calls that Greenpeace will receive in 1-2 years based on the EU’s new Corporate Reporting Directive. No way! Same with most other NGOs, apart from the fact that they also already face the same frustration as mentioned above. Too little do they know what happened to their input and how far it lead to any transformation.

What will be the alternatives? Sure, there’s one big vision already on the horizon: the possibilities of Big Data for stakeholder involvement. In the coming years new data and information-based technologies will contribute to the development of new ways to collect, analyze and visualize bigger and so far unconnected sustainability data. Smart cities, infrastructure, sensors, the Internet-of-Things, portable and cognitive technologies, as well as new business models around Big Data will contribute to this development. Additionally, new interfaces between earth system science, satellite-based data and personalized technologies will emerge. IBM’s Watson and Smarter Planet are first examples of how enterprises prepare themselves for these changes. A bridge too far for the moment for most of us, we would say.

But there are also intermediate solutions to start already now. It all begins with a change of mindset. Like already mentioned we can be sure that stakeholders will more and more unsubscribe from the current approaches, simply because that sort of stakeholder ‘dialog’ is not fulfilling. In combination with a) the growing data availability and b) a further integration into corporate strategy development, stakeholder dialog needs to be replaced with ‘stakeholder collaboration’. That in our view is only possible if the different parts of the organization, those that are not yet connected (or willing to connect, see above), will tune in. Here’s how:

  • Employee and customer satisfaction insight need more than questionnaires with some extra questions on sustainability. We need offers to contribute instant feedback, ideas, openings to focused discussion forums. It is clear that stakeholders want quick feedback, want to know what happened to their input, and how it was used to support change. That data can very well be used to indicate material sustainability issues.
  • Crowdsourcing and crowdfunding are important, yet underestimated feedback instruments, not just to develop products & services, they are also indicators for the reputation of the organization on many fronts, the willingness to co-create and re-think by stakeholders, and the buy-in for potential new products and/or services developed and used by stakeholders. Best new recruits could stem from those sources.
  • Investors need new and aggregated data that can quickly show the ‚ThriveAbility’ of a company, both for investment decisions and for their own reputational buffer. The ThriveAbility Foundation (, going live soon) has started the development of an aggregate ThriveAbility Index as well as a ThriveAbility Assessment (designed to check organzational capabilities to being thrival) and ThriveAbility Pathways (a tool to assess leadership capabilities for becoming thrival). Thrival in short means the ability to instigate a net positive value creation process, the future precondition to have a right to grow and to get fresh capital.
  • Top management can get infomation instantly if new software tools like e.g. VERSO Workbook ( are used, to our knowledge the first holistic plan-do-check-act support tool that covers data aggregation, workflow management, facilitated discussion on issue-specific communities, communication and publication of sustainability information as well as coverage and use of all mainstream social media tools for stakeholder involvement. Think about your top management having access and all relevant information just 2-3 clicks away?
  • Sustainability departments can strengthen their role and need to be embedded in corporate strategy. The development of new qualities of materiality matrixes will be a growing field, but needs to be done differently. Virtual dialogue and online engagement platforms will increasingly fill this need, given the cost and carbon-intensity of in-person engagement, the scheduling nightmare of multi-party conference calls and webinars, and the inefficiency and isolation of individualized outreach to stakeholders. Convetit (, the online stakeholder engagement platform co-founded by Bill Baue and Tom O’Malley, helps solve these problems by hosting asynchronous online dialogues. Most recently, Convetit introduced an interactive Materiality Matrix tool that enables stakeholders to plot the importance of material issues on a matrix that the platform then aggregates and averages to paint a collective picture of stakeholder sentiment.

Other new tools using Big Data approaches will be arriving on the market soon and will have promising propositions: Take e.g. the startup eRevalue ( that analyzes external sources from the internet and provides business intelligence to companies. Through objective output analysis – screening sources that were published by third parties – companies can make an informed decision as to what issues to focus on. This depends per sector, per region, per operational structure, supplier locations etc.. Their software will help determine which sustainability issues are most relevant to a particular business. It uses a set of key topics (“semantic ontology”) related to environmental issues, social issues and corporate governance. This set of key topics creates a common language for companies to use for strategic decision-making.

It is time to get real on the new realities stakeholder collaboration demands. The earlier the new possibilities are used, the quicker we will see results. The technology is there, it will be polished, fine-tuned and upgraded by the growing amount of users. Together with the Big Data developments that we will be seeing within just a couple of years, old-fashioned stakeholder dialog for sustainability reports as we knew it will be history. If you are interested to get to know all these and even more players, don’t miss the 2nd International Annual Reporting Conference in Berlin, October 6/7, see

Authors: Ralph Thurm is the Founder & Managing Director of A|HEAD|ahead, Nick de Ruiter is partner at Sustainalize. Transparency disclaimer: Ralph is involved in VERSO and in that role has contact to a whole array of new tools for stakeholder collaboration. He is also curating the Reporting 3.0 Platform and is a Co-Founder and Technical Director of the ThriveAbility Foundation.


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Comparability of sustainability information – slaughtered on the altar of materiality?

This is the third of four installments of a blog series covering crucial sustainability reporting issues on materiality, sustainability context, comparability and stakeholder inclusiveness.

The GRI content principles – sustainability context, materiality, stakeholder inclusiveness and completeness – are forming a balanced set to give guidance on how to define what a ‚good’ sustainability report should cover. The focus of work pulling G4 together was on making that balance and the process of how to get to such reporting even more clear and crisp. While our last blogs were digging deeper into the need of putting real teeth into step 1 – defining sustainability context better – another principle from the report quality section, namely comparability, has started to be discussed. The reason for that is that most communication of GRI under the banner ‚what matters, where it matters’ zooms heavily into materiality, and questions start to arise on what that means for the other important reasoning for standardized reporting – producing information that can actually be compared. This discussion has a strong connection with our earlier plea on getting more clarity around sustainability context and working on micro-macro-linked indicators. The discussion around a potential lack of comparability is making painfully clear that not having worked on these potential indicators in the G4 development process will most likely break open a whole plethora of uncomparable information. We have enough experience how certain information was presented in sustainability reports so far: take SOMO’s 2013 study on energy companies disclosure, Transparency International’s 2012 study on reporting on anti-corruption indicators, or Deloitte’s 2012 study on zero impact growth strategies that examplified dozens of ways in which companies described their CO2 target-setting. Either information was presented in many different absolute or relative ways, or different information than asked for was published (should we call this pretending?), or no information was published at all, or no context was given on what was published (how would we call that then?). Our view here is: without micro-macro-linked indicators comparability will heavily suffer. The loop to our sustainability context plea and the need for ‚different’ indicators as we have them right now becomes clear when we consider the text in the Guidelines around comparability, the core sentences here are: „Comparisons between organizations require sensitivity to factors such as differences in organizational size, geographic influences, and other considerations that may affect the relative performance of an organization. When necessary, report preparers should consider providing context that helps report users understand the factors that may contribute to differences in performance between organizations.“ Together with the wording of the sustainability context principle we really doubt that consistency in reporting can be delivered in a way that comparability will at all become realistic with the current indicator set. In total, we think that the dilemma between focusing on materiality on the one hand, and delivering comparable information on the other hand, can’t be solved without micro-macro-based indicators. The existing indicators will not cut it, we have seen this all before! Work on micro-macro-based indicators will be necessary, the denominators of these indicators will need to help defining comparability, not the voluntary, company-by-company target setting (whose long-term basis is normally not disclosed – most likely because it doesn’t exist at all?). This status quo has several consequences and effects, and it is interesting to look at least at some of them:

  1. The work of rating & ranking organizations will continue to produce more confusion. As we continue to have information about how organizations became ‚less bad’, the more than 120+ different rankings & ratings will continue to produce ‚best-in-class’ champions, for none of them we know what that really means, since we don’t know what is feasibly ‚good enough’. We have seen first attempts of rating organizations to get out of this dead-end-street, e.g. Climate Counts or Inrate who themselves start to make the link to macro-based goals by simply setting them. As GISR also puts sustainability context clearly into the focus of ‚good’ ratings, the need to also consider macro-based information on global, regional and/or local level will also continue here. More comparability will most likely be the outcome.
  2. The lack of focus on micro-macro-based indicators will produce competition for GRI. A whole set of organizations already work on such indicators, first and foremost the Natural Step-based approach on the ‚Future-Fit-Benchmark’, an approach that includes Bob Willard and a set of sustainability reporting veterans. The Sustainability Context Group, around 120 members strong, has several members that actively work on other alternatives of context-based indicators, their plea to work on them together with GRI has been noted down there, but with no outcome so far. WBCSD has started to team up with the Stockholm Resilience Centre (and the various other players connected to them) to see how Vision 2050 can be supported by an Action 2020 and how ‚values-based reporting’ can be set up. Worthwhile to mention here is that this approach also includes tooling and accounting methods, so gets to a deeper level than to just think about reporting indicators, but also how to create the processes. WRI, CDP and WWF now work on ‚science-based target setting’ and has invited to several workshops. Also here, an increase in comparable information will be a foreseeable outcome.
  3. At this moment we also observe the development of the Sustainable Development Goals, to be presented in 2015. It will be interesting to see how they will develop further; as it stands right now they seem to be more sort of ‚corridors’ of change in 16 different issue areas, and it is not yet sure how interdependencies (nexus effects) will play out on this variety of areas. In our view it would be much more effective to take a step back and first develop a set of principles (based on the probably most important ‚North Star’ question: what will really make up a succesful green & inclusive economy?) and then define action areas with a special view on interconnectedness of effects to define clear and actionable roadmaps or adaptation plans on how to get there. Targets could be defined per region, taking into account the various cultural and mindset calibrations as well as timelines necessary to measure progress. These could be built into a comparability approach for defining indicators of change with actionable items where each company can define a positive impact (instead of concentrating on the reduction of negative impact). See it a bit like the approach Unilever took when they connected their mid-term target setting with main sustainability issue areas. It is no wonder to us that Unilever’s approach scores extremely well in certain ratings, e.g. the latest GlobeScan and SustainAbility Leaders Survey, published just a couple of days ago.
  4. As a side effect the lack of comparability also creates a revival of the discussion around what was supposed to be called ‚Beyond GDP’. First of all there is the question if GDP should be used as a denominator in order to increase comparability in micro-macro-based monetary and relative comparisons, but much more important there is also again increasing discussion about the usefulness to use GDP at all as a means to measure a valueable contribution of a single company. In our view this is a must-have discussion that will sparkle ideas on what ‚success’ really means for a society at large, it seemed to get stuck around the idea of happiness in the last couple of years, which in our view is a very individual mindset and difficult to standardize. Hence, there is a glimpse of hope, and it is good to see that GRI is also one of the partners in one of these projects, called ‚Measure what matters’, with amongst others the Green Economy Coalition, Accounting for Sustainability (who are the initiators of many good developments, e.g. IIRC as well), the Stockholm Environment Institute (SEI) and IIED.
  5. We are still amazed to see how little companies are interested in defining what a ‚green & inclusive economy’ or ‚resilient economy’ actually means for themselves. That is mainly due to the lack of real comparison opportunities to give this vision real meaning. And it will remain like that as long as we don’t define the expected minimal and/or positive contribution per company and stakeholder. We refer to our last blog on the ‚mindset gap’ for further depth there. Comparison and target setting will be the most interesting pathways for competition in the future, so again ask yourself what all that focus on materiality will help if comparability possibilities will suffer from that in this heavily interconnected world in which nexus effects will be part of the comparability agenda, to be analyzed when thinking about sustainability context.

Overall, we expect that the discussion about comparability will become as vital as the one on materiality today, simply because more materiality will not automatically lead to more comparability of information (we fear even less), and more comparability focus will not simply lead to more materiality. There needs to be a balance as both are of critical importance to understand, define and act on these urgently needed adaptation plans towards the economic blueprint of the future, the ‚green & inclusive economy’. Authors: Ralph Thurm is the Founder & Managing Director of A|HEAD|ahead, Nick de Ruiter is partner at Sustainalize.


Posted by on May 27, 2014 in Sustainability Reporting


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The mindset gap in addressing sustainability context

This is the second of four installments of a blog series covering crucial sustainability reporting issues on materiality, sustainability context, comparability and stakeholder inclusiveness.

Around two weeks ago we discussed the ‚sudden materiality shock’ here and received many comments and recognitions for the points discussed there. In addition, we spoke at various events and explained the need to make the connection between the importance of sustainability context for defining materiality and the need to develop a reporting mechanism that captures this specific performance that could eventually best be described as ‚micro-macro-linked’.

What became painfully clear through these last events is the considerable distance of people working in sustainability to be able to make that connection, several reasons to be discussed below. Obviously, we need to first address that ‚mindset gap’ that keeps us artificially busy and away from the ‚greater good’ – achieving a green & inclusive economy together – before getting down to the core of how to address sustainability context through purposeful and future-oriented disclosure in reporting, including feasible strategic discussions and – like it or not – a different sort or set of indicators as we have them right now. So why is there such a distance to seeing sustainability context in a corporation’s setting? Here are various observations:

  1. For too many in our community sustainability and strategy are still two different things or are still completely or partially disconnected. If sustainability managers tell that working in scenario teams or being closely involved in strategy development and subsequent R&D/innovation efforts is simply not what they are paid for, we are disappointed by the little mindset progress we made. Honestly, we hoped we went beyond the idea that the sustainability manager or head of sustainability simply just orchestrates compliance towards laws & regulation, standards or guidelines. What we still sense is a deep hesitation to overcome certain thresholds towards an integrated approach, using careful tactics to not ‚overstretch it’, deep fear to be seen as the ‚activist’, so better remaining the ‚lobbyist’ for what is good for the company and the individual position on short-term. As this has been a rather successful approach in the past, why change it? Most global problems are mentally and physically still far away, and most colleagues that do not work in sustainability wouldn’t want to understand them anyway (too complicated, scientifically not 110% proven, disturbing, etc.). So, why bother about megatrends?
  2. We specifically observed how companies react to the macro-based information out there, ranging from the work TEEB did, the Global Footprint Network produced, The Global Nature Fund collected, and to the dozens of reports that are produced and macro scenarios that are presented by institutes, issue groups and initiatives. The basic response is close to denial, using the argument that the way this information is presented doesn’t help companies to translate this into concrete tooling, so in the end they couldn’t do more than just to take note, and that’s it. When we then asked why certain companies seem to be able to use this information and work with these data, denial level two kicks in: either these were special companies with a specific or fitting product/service portfolio, or they would have a size not too big, so that working with these data wouldn’t be too complex for them. Also, this sort of work shouldn’t be done by a single company anyway since level playing fields would be needed when introduced on broader scale, but these wouldn’t exist today. Puma’s e-p/l is great, but hardly any other company tried it out since Puma came out with it in 2011, the number of excuses to not dig into it is too long, and the argument ‚it will come one day, so better be prepared’ (playing the risk managemnt card) doesn’t work either. Too much workload, too short the horizon, too low the incentives, too high the fear to stick out the neck. And that leads directly to the next point:
  3. Fortunately, not all companies are like that, and that has to do with leadership. We see a constant pattern that only those companies that have an enlightened leader or leadership group get to a level of commitment that these – let’s call them ‚experiments’ – are wanted, a certain ‚trial-and-error’ attitude is giving some breath to sustainability managers involved. Also, those leaders actually encourage cross-functional project groups around long-term performance targets based on scenarios and the idea of an integrated strategy. It is interesting to see that these companies in most cases don’t have a sustainability strategy, they just have ‚a’ strategy. Dealing with context information in these companies is a no-brainer and the necessary tools are normally ‚created’ right there and not ‚delivered by others’. These companies see external advisors as a positive stretch and challenge to their own knowledge base and encourage infusions, external advisors can even become a separate stakeholder group. The triangular project setup that includes a company, an NGO and a consultant in a team setting seems to work, as well as the willingness to work with other companies in cross-industry learning environments, initiatives, labs, etc.
  4. Another constant part of that ‚mindset gap’ is that many sustainability strategies are based on effects of (not closer discussed) root causes. Doing work with leaders we first try to observe the whole set of often intermingled action areas, something that one can actually already start from the existing materiality matrix of issues that companies use in their reporting. Sustainability strategy areas are normally based on the GRI Guidelines aspects or industry-specific action areas, and many of them derive from root causes like environmental degradation, demografic effects, world trade shifts, urbanization, technological developments and transparency gains, but none of these root causes are addressed in the G4 Guidelines and therefore remain out of focus of the sustainability personnel, so going back that one step to the root cause level actually falls out of the scope of sustainability experts (supported by what was discussed under point 2).
  5. As a consequence this reduced approach just based on the existing GRI Guidelines leads to ‚less bad’ target setting, and very often disconnected with the main impact through products and/or services. Have a look at the GRI Guidelines and ask yourself how often the Guidelines talk about products and/or services, apart from product stewardship in the social section!?! One can argue that this would actually be the job of sector disclosures, but then there would be the need to focus work on a complete set of them more throroughly, an approach not followed by GRI for several years now. A sustainability regime based on effects or symptoms instead of the real root causes mentally restricts to go ‚to the real core’ and making the connection to the real opportunities a company has in sustainability. Instead, there is a more risk-based tendency to reduce harm, and not to increase positive impacts. That is the real reason that an idea like ‚becoming a net-positive impact’ company is still lightyears away for the majority of companies, they find a million reasons and ‚yes, buts…’ instead of accepting that working on this ultimate business case for sustainability should be started today, and not one day later.
  6. In consequence the G4 content principle on sustainability context is the most neglected one, while the wording there clearly defines the need to address context from a root cause base, think about opportunities, ambitions and positioning of the company’s strategy vis-à-vis these root causes, and only then define the necessary boundaries to decide which impact reduction strategies actually make sense in the light of a positive impact focus.
  7. A further cause for relaxed thinking about sustainability context is the smooth way IIRC has taken on the idea of the six capitals that are part of the Framework Version 1. While we personally commend the IIRC to sticking to this generic model (called the ‚octupus’) from the moment it presented its first discussion paper, we were hoping for a way more rigid use of the idea of the capitals. In our view the capitals form a great link to and present a great structure of introducing proper context and value-creation ‚docking stations’ for the above presented approach of starting from root causes to strategy development. Instead, we face a situation where IIRC mentions the capitals as an area ‚for inspiration’ in order to ‚not forget potential impact areas’. That is too weak and doesn’t sound like ‚important’, so again not too much time is spent on assessing the capitals. The work of the 100-companies-strong IIRC pilot group has focused mainly on ‚integrated thinking’, wheras ‚holistic thinking’ would have been way more appropriate. If the capitals model isn’t taken serious we will remain on symptoms and effects level instead of addressing the real route causes.
  8. To finish off, the work of the Thriveability Consortium (of which Ralph is one of the founders) has been an eye-opener over the last two years with regard to the levels of human consciousness for the development of a ‚world view’ within an individual or corporate mindset. The idea of ‚spiral dynamics’ that emerged over the last 20-30 years clearly differentiates various levels of human consciousness development, and also differentiates between first and second tier awareness, decribing their ability or disability to create the world we need. Only second-tier individuals and organizations will be able to really develop the idea of a world view through the inherent different ways of interconnectedness and organizing codes and principles needed in a sustainable world. We are generally positive that we will be able to level up more companies to the second-tier level. Those organizations will see the ‚macro-micro link’ as a no-brainer. Those companies will be winning, but for a big group of tier-one ompanies life will become tough.

We are on a journey. It is not enough to approach the abyss with 40 miles per hour instead of 60 miles per hour; we need to find the brake and turn around the vehicle. Awareness of the need for that turnaround, timing still available and definition of a new direction will become essential. There is no useful sustainability reporting or integrated reporting without this information, defined for the individual business case per company. Sustainability context is therefore an absolute core. The more companies get out of the avantgarde and into the mainstream, the sooner we will get there. ‚It’s time to be steered by the stars, and not by the light of each passing ship’, said Omar Bradley decades ago. Today this is more true than ever.

Authors: Ralph Thurm is the Founder & Managing Director of A|HEAD|ahead, Nick de Ruiter is partner at Sustainalize.

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Posted by on May 13, 2014 in Sustainability Reporting


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The sudden ‚materiality shock’

This is the first of four installments of a blog series covering crucial sustainability reporting issues on materiality, sustainability context, comparability and stakeholder inclusiveness.

Spring 2014 seems to be the moment in time where ‚materiality’ suddenly appeared on the screen of corporate sustainability reporters. At least one could wonder why within a couple of weeks countless workshops popped up around the world, webcasts were announced and books were published just on this one single issue of the sustainability reporting agenda. One author even declared a calm ‚war on materiality’. But wait a minute, the issue of defining what is material in sustainability reports isn’t by far new, so what’s the reason for this sudden shake-up? Several reasons could be mentioned:

  1. Since the publication of GRI’s G4 Guidelines in May 2013 materiality went to the forefront of communication items around the new Guidelines. The reports based on G4 should show ‚what matters, where it matters’. For that reason GRI visualized the application of the four report content principles as one seamless workflow. But is this new? The answer is no, because the same process was already pulled together in a resource document in 2010, but now got finally included in the main document, the G4 Guidelines, without considerable changes. Also, GRI’s certified training program presented a five-step process since its inception years ago that followed this logic, and thousands of practitioners around the world were trained for doing exactly that – defining what is material.The reason for the extra attention lies elsewhere: the combination between impact definition, boundary setting, transparent stakeholder dialog and the level of disclosure that GRI is demanding in this thematic triangle adds rigour and demands a much more crisp process. Gone are the times when a mentioning of stakeholder dialog was enough, a materiality matrix could be presented without further process description on how this was pulled together, and the legal shortcut of 50%+1 share was enough to cut off responsibility in reporting due to the one boundary chosen by the legal counsellor. So, for some ‚what matters, where it matters’ now suddenly means ‚what hurts, where it hurts’, especially for those that define sustainability as an additional topic that needs to be addressed through a separate report, and where the corporate strategy isn’t that much connected with sustainability thinking.
  2. Another reason for the new level of attention can easily also be detected when looking through the outcomes of KPMG’s 2013 international report quality survey amongst the biggest 250 companies, many of them call themselves leaders in sustainability. Just a couple of numbers to clarify the problem: 13% of the reports do not identity megaforces that affect business at all, and from the other 87% at least some megaforces are identified, with climate change only affecting 55% of businesses, ecosystem degradation is a just a problem for 18% of the G250. One can only wonder how identifying ‚what matters, where it matters’ is at all possible if so little sustainability context analysis is done in the beginning of the materiality definition process. When looking at information how often companies do assess materiality, 58% do not give any indication and 19% indicate a limited assessment of materiality. That means that just 23% of the G250 have a thorough process in place to assess matariality. This is shocking evidence. Stakeholder inclusiveness is another painful area to look at. For only 45% the process link between stakeholders and the materiality process is clear, for the majority stake of 55% the process is not yet clear (34%) or not explained at all (21%). Finally looking at target setting one might expect that material issues would also lead to clear targets, but the opposite is true. 13% of the G250 haven’t declared any targets, 28% of the reports carry some targets with no clarity on how they relate to material issues. 23% of the reports carry information that links to less than 50% of material issues, and finally 36% carry targets that relate to more than 50% of the material issues. The shortcomings of these data explain very clearly why the pocess of cutting through from sustainability context information through stakeholder dialog to material issues now needs to get more rigour. Companies just did what needed to be done, just little of them did more than absolutely necessary. We leave it up the reader to contrast this information with the many CEO speeches that tell us how much sustainability is in the genes and DNA of their organization.
  3. A new level of recognition of materiality is surely also due to the growing number of frameworks and guidelines around corporate reporting. Whereas GRI addresses materiality from the perspective of all stakeholders, the IIRC clearly defines materiality from the point of view of the providers of financial capital. SASB just replicated the definition of the U.S. Supreme Court, focusing on shareholders only. And that whole array of different definitions seems to be confusing, especially as many users see these documents as standards. It is therefore time to step back and again recognize that none of these documents are ‚standards’ or ‚cooking books’. They are recommendations as they present guidance and framing. Not more, not less. Furthermore they are still all voluntary instruments to trigger thinking about the inclusion of sustainability into an organization’s core – the business model and the strategy. If this is managed well we think the discussion on materiality will by definition become a no-brainer.
  4. Lastly, there is new fuel to the fire of mandatory sustainability reporting through the positive vote of the European Parliament to amend the European Transparancy Directive and make sustainability reporting compulsary for roundabout 6.000 listed companies in Europe, with a size of more than 500 employees. The Directive passed the European Parliament on April 15, 2014. The Directive needs to be translated into member-states laws and regulation, so that the application is only expected to start in 2017 for reporting year 2016, maybe even one year later. In short, material issues of importance need to be reported in annual reports or sustainability reports on corporate level. Discussion arises mostly on the point of the EU’s definition of CSR, saying it entails all voluntary action of companies above and beyond what is legally already demanded for. In our view this definition is counterproductive to the real meaning of materiality, and therefore misleading to help describe the core of the issue. Nevertheless, the fact that many companies are now demanded to report on their sustainability risks and opportunities, covering a range of issues that is nearly 100% overlaping with the UN Global Compact 10 core principles, has put new emphasis on the materiality discussion in companies.

In our view there is only one useful way of dealing with the issue of materiality, and that is to step one step back from the idea of standards that would tell us what clearly has to be done. We see materiality in the closest of all possible meanings: all areas in which the company affects or is affected by those areas of sustainability it can influence by its existence and through its doing, through products, services, as enablers and advocates of positive change. The measurement of ‚Net Positive Impact’ will therefore become the future litmus test of the right to exist for companies. It would be good for companies to already follow in the footsteps of those frontrunners that aim doing exactly this ambitious step.

Authors: Ralph Thurm is the Founder & Managing Director of A|HEAD|ahead, Nick de Ruiter is partner at Sustainalize.


Posted by on April 26, 2014 in Sustainability Reporting


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