Linkages to impact assessment and next-generation regulation & CSR

1. Facility-level sustainability reporting: Linkages to impact assessment and next-generation regulation & CSR Mark Stoughton, Ph.D.The Cadmus Group Seoul • 5 June 2007

2. Common themes in “next generation” environmental regulation & CSR • “Leadership”—a core concept for “next generation” EH&S regulatory approaches • Regulatory flexibility, expedited permitting of expansion & facilities modifications in return for • good compliance record; • greater transparency & disclosure of performance • (sometimes) adoption/certification of an EMS • E.g.: US EPA “Performance Track” program • “External value” —Key concept for next-generation EMSs • Incorporating stakeholder engagement in the EMS process to help set environmental improvement priorities & build local goodwill.

3. Common themes in “next generation” environmental regulation & CSR • Key element of CSR:Awareness/management of the local impacts of operations. Requires measuring env and social performance--and local consultations to understand their significance. • All require disclosure of environmental and social performance information beyond regulatory requirements In principle,sustainability reporting can meet this need

4. Sustainability Reporting • Basic idea: companies, institutions publicly disclosing information about their sustainability performance • Voluntary sustainability reporting is increasingly a basic CSR expectation • Began with large listed corporations • Increasingly, reporting by public & para-statal organizations (e.g., utilities, ports), academic and medical institutions. . . • Began as environmental reporting—expanded to reflect social dimensions of sustainability, “triple bottom line”

5. To be more than “greenwashing”. . . • Sustainability reporting must be to a credible standard and transparent • The de facto global standard:“G3” reporting framework • GRI: “a multi-stakeholder process and independent institution” • Vision:that “reporting on economic, environmental, and social performance by all organizations becomes as routine and comparable as financial reporting” • Reach: 1000+ organizations worldwide report based on the GRI reporting framework See www.corporateregister.com for single-portal access to a 3000+ CSR/Sustainability Reports

6. The problem: getting down to the facility level • Next-generation regulation, EMSs, “local CSR” all operate at the facility level • However, sustainability reporting has evolved first at the organizational level. Facility reporting is far more embryonic. • Organization-level reporting standards are not suitable for facility-level reporting

7. Differences betweenfacility- and organization-level reporting Compared to organizational-level reporting, facility-level reporting. . . • Emphasizes local impacts (including “nuisance” impacts, burdens and contributions to local infrastructure, adverse and beneficial impacts.) • Accommodates legitimate security, competitiveness and privacy concernsattendant to disclosing facility-level data. • Reflects the scope of facility decision-making(many decisions with sustainability implications not decided at the facility level.) • Focus on clarity and easy comprehensionfor non-specialist report users

8. The Facility Reporting Project (FRP) The FRP is multi-stakeholder initiative to develop a generally-accepted, consistent, comparable and credible facility-levelsustainabilityreporting framework. (US-based initially, GRI-compatible) The FRP’s main product is its Sustainability Reporting Guidance —step by step guidance and indicators for companies and other organizations to report on the environmental and social performance of manufacturing and other facilities.

9. About the initiative • Launched in 2002 by Tellus Institute and Ceres • Ceres (www.ceres.org): “national network of investors, environmental organizations and other public interest groups working with companies and investors to address sustainability challenges such as global climate change.” • Funding. Major initial funding from The Joyce Foundation. Subsequent funding from MSWG, US EPA, state environmental agencies, pilot companies • Secretariat now hosted by Ceres • My involvement: 1st-phase manager, continuing advisory role to secretariat TELLUS INSTITUTE

10. FRP indicator categories Facility overview Facility Profile Report Scope Facility Organizational Context Stakeholders and how they are engaged in the reporting process Environmental indicators Materials  Energy Water  Biodiversity/Land Use Emissions, effluents, and waste Compliance Quality of life (Community Impacts of odor, noise, dust, traffic, lighting, vibration) • Economic Indicators • Payroll & local procurement • Taxes paid & Subsidies received • Community donations • Community infrastructure investments • Social indicators • Employment  Labor/Management Relations • Health & Safety  Diversity and Opportunity • Human rights  Society • Product responsibility

11. Examples of FRP indicators Complete reporting against all indicators is an ideal—but some reporting is better than none—so long as the starting point are indicators that are most critical to internal and external stakeholders

12. Stakeholder engagement:critical to the reporting process Why? • Reporting is a process intended to meet the needs of stakeholders • Objective is to measure sustainability performance. A basic principle of impact assessment applies: significance of impacts determined in significant part by those affected.

13. So why this talk at IAIA07?

14. FRP: Linkages to impact assessment • FRP indicators constitute a credible, stakeholder-tested framework for profiling the local impacts of facilities. Thus, they are a tool for establishing a facility’s baseline local impacts prior to expansion or modification • The FRP Guidance and associated tools support community engagement to identify the dimensions of sustainability performance most critical to local stakeholders • FRP-based reporting ideal where continuing community consultations and disclosure of sustainability performance are mandated by environmental management plans.

15. Is the FRP guidance realistic? Facility sustainability reports resulting from the pilot tests can be downloaded at http://www.ceres.org/sustreporting/frp.php • La-Z-Boy - Utah • Timberland - Santiago, Dominican Republic • Northside Foods- Cumming, GA • National Renewable Energy Laboratory- Golden, CO • Ford Motor Company - Dearborn, MI • Louisiana Pacific- Wilmington, NC • Qimonda- Richmond, VA • New Hampshire Ball Bearings- Peterborough, NH • Rockwell Collins- Dallas, TX • Harwood Products- Branscomb, CA • YSI, Inc.- Yellow Springs, OH • Louisville & Jefferson County Metropolitan Sewer District, KY • Lockheed Martin- Manassas, VA • New York Organic Fertilizer Company- South Bronx, NY YES! Successful pilot tests 

16. But. . . is FRP being adopted as a transparency standard for “next generation” regulation in the US? • Not quite yet. . . • FRP pilot tests with “performance track” facilities were funded in part by US EPA to evaluate the benefits of improved environmental measurement and reporting. But no commitment to the FRP framework as yet. • Additional EPA funding forthcoming—indicative of continuing interest • State leadership programs appear to be more flexible • Facility-level information is increasingly part of organization-level reports from CSR “leader” companies

17. Thank-you for your attention! FOR MORE INFORMATION mstoughton@cadmusgroup.com http://www.ceres.org/sustreporting/frp.php(www.facilityreporting.org-- being updated) FRP coordinator: Beth GinsbergManager, Corporate Accountability ProgramCeres99 Chauncy Street, 6th Floor, Boston, MA 02111 USAtel: +1.617.247.0700, ext. 21; fax: +1.617.267.5400