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A Public Plea to GRI: Enforce or Explain
September 19, 2011
Earlier this month, we (the Center for Sustainable Organizations) issued a press release in which we called for GRI to either enforce the ‘sustainability context’ requirement in its standard, or explain why it doesn’t. Motivated, in part, by GRI’s own Report or Explain Campaign, in which GRI exhorts businesses around the world to issue sustainability reports or explain why they don’t, our campaign is aimed at GRI itself. (Read the press release here)
Sustainability context, as GRI points out, is critically important to non-financial measurement and reporting. When measuring water use, for example, it is not enough to simply report the volume of water consumed this year versus last. Rather, as GRI puts it (Technical Protocol, p. 6), organizational performance should be reported….
… in relation to information about economic, environmental, and social conditions in relevant locations, e.g., discussing water consumption in relation to available supply in a particular location[.]
As GRI further explains (p. 11):
Information on performance should be placed in context. The underlying question of sustainability reporting is how an organization contributes, or aims to contribute in the future, to the improvement or deterioration of economic, environmental, and social conditions, developments, and trends at the local, regional, or global level. Reporting only on trends in individual performance (or the efficiency of the organization) will fail to respond to this underlying question.
You can learn more about context-based sustainability reporting from Mark when he speaks at The Future of Sustainable Metrics, our latest 1-day event this October 24th at The Wharton School in Philadelphia!
That said, such context is almost universally missing from contemporary GRI reports. This is a serious problem, since it is literally the case that sustainability measurement and reporting cannot be done without including the kind of context GRI’s guidelines call for. Nevertheless, GRI fails to enforce its requirement in three ways: 1) by not providing sufficient guidance for how to comply with it, 2) by awarding and/or endorsing superior ratings for reports that are entirely context-free, and (3) by excluding context itself in its own reports, thereby setting the wrong example.
As long as GRI adheres to its policy of failing to enforce the need to include context in sustainability measurement and reporting, corporate sustainability reports will amount to little more than eco-efficiency reports, citizenship reports or what have you, but not sustainability reports in any intellectually honest or authentic sense of the term. Indeed, in order for sustainability reporting to be meaningful, the social, economic and environmental impacts of an organization must be measured and reported relative to norms, standards or thresholds for what such impacts would have to be in order to be sustainable – the substance of which should be based on conditions on the ground, as it were.
In our work, sustainability context is determined by following a three-step procedure.
- First we identify vital resources in the world (human, social, economic and environmental) an organization is already having impact on, or ought to be having impact on, in ways that can affect stakeholder well-being;
- Next we identify the parties or populations responsible for preserving, producing and/or maintaining such resources (i.e., are the responsibilities for ensuring the resources shared or exclusive?);
- And third, based on 1 and 2 above, we determine what an organization’s proportionate share of and/or burden is for preserving, producing and/or maintaining the resources involved. This gives rise to norms, standards or thresholds against which actual impacts on the same resources can be measured and reported by a specific organization – and managed, too.
I have often likened context-based sustainability reporting to income statements in financial reporting. Indeed, they are very much alike except for the obvious difference in focus on financial resources in the one case versus non-financial resources in the other. Context is always present in financial reporting, most notably in the form of expenses or costs in income statements. Profitability is contingent upon revenues exceeding costs. Imagine an income statement in which costs were missing. How in the world could we draw any meaningful conclusions about profitability performance in such a case? Of course we couldn’t.
The same is true for non-financial performance. There are thresholds involved against which top-line performance, if you will, must be measured in order to draw meaningful bottom-line conclusions – about sustainability performance, that is. Indeed, if sustainability performance on, say, the environmental front is all about living within our means, exactly where are the means expressed in mainstream reports? And if missing in such reports, how are we supposed to know whether or not the impacts being reported are within our means or beyond them? In other words, how are we supposed to know if the performance being described is sustainable?
Including context in sustainability reports begins with quantifying the means or resources an organization is having impact on insofar as stakeholder well-being is concerned, followed by an allocation of the responsibility for preserving, producing and/or maintaining them to a specific organization. That, then, provides us with standards of performance against which actual impacts on the same resources can be measured and reported. This is sustainability measurement and reporting in the plain sense meaning of the term – impacts that conform to thresholds are sustainable, impacts that don’t are not.
For both GRI and all of the companies out there that either already do, or aspire to, disclose their sustainability performance, the question you have to ask yourselves is can there be sustainability measurement and reporting without norms, standards or thresholds for what performance would have to be in order to be sustainable? Can there be sustainability reporting for water use, for example, without making reference to the water resources involved? Or of solid waste emissions without reference to the landfills involved? Or of carbon emissions without reference to CO2 concentrations in the atmosphere? Or of employee compensation levels without reference to livable wage standards? The list goes on.
And so given the growing urgency of understanding and managing the sustainability of economic activity in the world, we call upon GRI to enforce this most basic principle of non-financial measurement and reporting, by 1) specifying procedures for how to measure and report performance in context, 2) modifying its rating guidelines so as to withhold superior ratings for reports that fail to include context, and 3) setting the proper example itself by including context in its own reports from now on. The legitimacy of sustainability measurement and reporting hangs in the balance.