Barriers to strengthening the Global Reporting Initiative (GRI) Framework: an exploration of the perceptions of consult

1. Barriers to strengthening the Global Reporting Initiative (GRI) Framework: an exploration of the perceptions of consultants, practitioners, and researchers CSIN Conference, 02.Mar.10 Alberto Fonseca

2. THE PRESENTATION • The GRI G3 framework • 3 Common Criticisms • Methodology • Motivational, Structural, and Specific Barriers • Implications for Reporters, Standard-setters, and Stakeholders

3. AN INFLUENTIAL FRAMEWORK • “Formally” used in 1,296 reports (2009) • Adopted by more than ¾ of the world’s 250 largest companies • Mentioned in the 2002 WSSD Plan of Implementation • Praised by global leaders • Changed the language and structure of non-financial reporting

4. GRI EVOLUTION Brown, H. S., Jong, M. d. and Lessidrenska, T. (2009), "The Rise of the Global Reporting Initiative: a case of institutional entrepreneurship", Environmental Politics, Vol. 18 No. 2, pp. 182 - 200. Source: Brown et al. (2009)

5. THE GRI AS AN ORGANIZATION • Multi-stakeholder network (Board of directors, stakeholder council, technical advisory, organizational stakeholder…) • Funded by governments, foundations, companies, individuals, and GRI’s services • Mission is to create conditions for the transparent and reliable exchange of sustainability information through the development and continuous improvement of its Sustainability Reporting Framework. • Main product: GRI G3 Framework

6. GRI G3 FRAMEWORK • Standard Disclosures: • 1 - Strategy and profile • 2 - Management approach • 3 – Performance Indicators • Economic • Environmental • Social • Human rights • Society • Product responsibility ? Source: GRI (2006)

7. GRI G3 FRAMEWORK Principles for defining contents: Materiality Stakeholder inclusiveness Sustainability context Completeness Principles for defining quality: Balance Clarity Accuracy Timeliness Comparability Reliability Principles for defining boundaries Source: GRI (2006)

8. GRI G3 FRAMEWORK • Sector Supplements: • Airports • Apparel & Footwear • Automotive • Construction and Real State • Electric Utilities • Financial Services • Food Processing • Logistic & Transportation • Mining & Metals • NGOs • Public Agencies • Telecommunications • Tour Operators Source: GRI (2006)

9. GRI G3 FRAMEWORK Application Level System ? Approaches: (1) Self-declaration; (2) Assurance, and (3) GRI check Source: GRI (2006)

10. GRI G3 USE Application level of GRI Reports in 2009 (n=1,296) • 25% externally assured (A+, B+, C+)

11. GRI G3 USE The geography of GRI reports in 2009 (n=1,296) Canada, 2.78% (36 reports)

12. GRI G3 USE • Reasons to celebrate: • GRI reporting is… • Driving companies to embrace “sustainability” culture • Enabling benchmarking and learning • Enhancing corporate reputation • Promoting stakeholder engagement • Informing investors, employees, NGOs, managers, etc. about something • Generating data for research • Creating a consultancy market

13. GRI G3 USE • Reasons to think about: • GRI reporting is not necessarily... • Promoting “sustainability” accountability • Contributing to sustainable development • GRI reporting may be… • Legitimizing “unsustainable” behaviour • Misleading sustainability-oriented decisions ?

14. ACADEMIA’s CONCERN Aras, G. and Crowther, D. (2008), "Corporate Sustainability Reporting: A Study in Disingenuity?", Journal of Business Ethics, Vol. 87, pp. 279-288. Archel, P., Fernández, M. and Larrinaga, C. (2008), "The Organizational and Operational Boundaries of Triple Bottom Line Reporting: A Survey", Environmental Management, Vol. 4, pp. 106-117. Baue, B. (2006), "Sustainability reporting improving, but not necessarily contributing to true sustainability.", available at: http://www.ethicalcorp.com/content.asp?ContentID=4723&ContTypeID= (accessed June 30, 2009). Gray, R. (2006), "Social, environmental and sustainability reporting and organisational value creation? Whose value? Whose creation?", Accounting, Auditing & Accountability Journal, Vol. 19 No. 6, pp. 793-819. Gray, R. (2010), "Is accounting for sustainability actually accounting for sustainabiltiy... and how would we know? An exploration of narratives of organisations and the planet", Accounting, Organizations and Society, Vol. 35, pp. 47-62. Gray, R. and Bebbington, J. (2007), "Corporate sustainability: accountability or impossible dream?", in Arkinson, G., Dietz, S. and Neumayer, E. (Eds.), Handbook of Sustainable Development. Edward Elgar, Cheltenham, Northampton. Gray, R. and Milne, M. J. (2002), "Sustainability Reporting: Who's Kidding Whom?", Chartered Accountants Journal of New Zealand Vol. 81 No. 6, pp. 66-70. Isaksson, R. and Steimle, U. (2009), "What does GRI-reporting tell us about corporate sustainability?", The TQM Journal, Vol. 21 No. 2, pp. 168-181. Laine, M. (2005), "Meanings of the term "sustainable development" in Finnish corporate disclosures", Accounting Forum, Vol. 29, pp. 395-413. Lenzen, M., Dey, C. J. and Murray, S. A. (2004), "Historical accountability and cumulative impacts: the treatment of time in corporate sustainability reporting", Ecological Economics, Vol. 51 No. 3-4, pp. 237-250. McElroy, M. W., Jorna, R. J. and Engelen, J. v. (2008), "Sustainability Quotients and the Social Footprint", Corporate Social Responsibility and Environmental Management, Vol. 15, pp. 223-234. Milne, M. J., Ball, A. and Gray, R. (2005), "From soothing palliatives and towards ecological literacy: a critique of the triple bottom line", in Working Paper. Department of Accountancy and Business Law. University of Otago. Milne, M. J., Ball, A. and Gray, R. (2008), "Wither Ecology? The Triple Bottom Line, the Global Reporting Initiative, and the Institutionalization of Corporate Sustainability Reporting", in American Accounting Association, Anaheim. Moneva, J. M., Archel, P. and Correa, C. (2006), "GRI and the camouflaging f corporate unsustainability", Accounting Forum, Vol. 30 No. 2, pp. 121-137. Morhardt, J. E. (2009), "General Disregard for Details of GRI Human Rights Reporting by Large Corporations", Global Business Review, Vol. 10 No. 2, pp. 141-158.

15. COMMON CRITICISMS • 1. GRI is promoting non-contextualized disclosures • The “Sustainability Context” principle has been overlooked by reporters and external verifiers • Disclosures do not reflect the interactive effects of organizations with the external environment • Bellagio Principle 2: “The underlying social, economic and environmental system as a whole and the interactions among its components” Reaction:

16. COMMON CRITICISMS • 2. GRI’s focus on “organizational” performance is insufficient and potentially misleading • Disclosures tend not to be geographically-based • Lack of transparency of facility-level performance • Leads to “controversial” aggregations of data, particularly among MNCs or TNCs • Bellagio Principle 3: “Appropriate geographical scope ranging from local to global” FLR Facility-level Sustainability Reporting Reaction:

17. COMMON CRITICISMS • 3. Non-integrated disclosures (silos approach) • What do those 143 indicators indicate? • Where and how significant are the trade-offs? • After all, is the organization contributing or not to sustainability? • Bellagio Principle 2: “The underlying social, economic and environmental system as a whole and the interactions among its components” / Bellagio Principle 3: “Implications for decision making, including trade-offs and synergies” Reaction: Alternative frameworks with indices and aggregated indicators

18. FILLING THE GAPS

19. METHODOLOGY • Qualitative approach: grounded theory (constructivist version). • Data collection and analysis techniques: • - Semi-structured, confidential interviews • - Software-supported (Endnote X3 and NVivo 8) • - Memo-writing, coding, and diagramming Among them are: 1 co-founder of GRI, 2 members of GRI’s Stakeholder Council and Board of Directors, and 7 representatives of GRI’s Organizational Stakeholder

20. MOTIVATIONAL BARRIERS • Voluntary nature of sustainability reporting • Current GRI G3 framework is already perceived as demanding • GRI’s imbalanced governance (predominance of business organizations) • Path dependence in GRI mission

21. STRUCTURAL BARRIERS • Consistency among reporting standards (Global Compact, AA1000AS, Global Compact, IFC, sector standards…) • Interdependence among framework elements (Supplements, protocols, indicators, and principles…) • Example: GRI Application Level • (we got A+. Why do more?)

22. BARRIERS TO SUSTAINABILTIY CONTEXT PROTOCOL • Data difficulties • . Definition of boundaries • . Lack of data • . Definition of indicators • Definitions of responsibilities • Decreased comparability (conflicts between context and comparability principles) • Conceptual problems (“Isn’t context the same as materiality?”)

23. BARRIERS TO IMPACTED SYSTEMS DISCLOSURES • Data difficulties • . Definition of boundaries • . Lack of data • . Definition of indicators • Definitions of responsibilities BARRIERS TO CUMULATIVE DISCLOSURES • All of the above, plus: • Changing materiality • Decreased comparability

24. BARRIERS TO FACILITY-LEVEL SUPPLEMENT • Capacity-building at sites • Lack of interest from local stakeholders • Unclear cost-benefits • Increased information management • Excessive corporate exposure

25. BARRIERS TO INTEGRATED DISCLOSURES • Conceptual confusion • . Integration means different things to different people • Data difficulties • . Criteria for weighting indicators • . Methods of aggregation • . Lack of data • . Definition of thresholds, unit of analysis • Definitions of responsibilities • Decreased comparability (conflicts with comparability principle) • Promotion of “unfair” trade-offs • . Room for promoting “weak” sustainability

26. KEY IMPLICATIONS • Many barriers cannot be overcome in the short-term, whereas some can (e.g. ABC Application Level) • GRI, reporters, and industry associations need to recognize current gaps and establish incremental and/or transformational strategies for change • Stakeholders should be consulted not only to identify relevant “issues”, but also facilities, methods of aggregation, boundaries, etc.

27. KEY IMPLICATIONS • Sustainability reporting is, of course, a learning process. However, it seems to be very demanding and complex to be standardized by a single institution. • GRI is becoming the centrepiece of mutually enforcing reporting tools. Enhanced coordination among these initiatives is needed.

28. THANK YOU Alberto Fonseca Department of Geography & Environmental Management 1-519-804-4046 adfonsec@uwaterloo.ca