Hi.
I want to talk about two more reporting topics in this lesson.
First, I want to talk about how the typical sustainability report is structured,
what the main components are.
And second, I want to give you some hints
about how to read a sustainability report from two experts.
Knowing what experts look for will help you create a better report.
If you think that creating a sustainability report is a project you want to pursue
then you should look at what other companies have done,
reading or skimming reports from several companies.
Ideally, in the same industry as your company will give you a good idea
of what others have thought was important to convey.
In the meantime, let me tell you a little bit about what a typical report looks like.
Most reports start with a message from the CEO.
That can set the tone for the entire report.
If the CEO singles out a few very important issues
that the company is working on or needs to work on,
that suggests that she takes this process very seriously.
The body of the report is usually divided into three or four sections.
These will discuss how the company relates to people, so customers, suppliers,
and employees; the communities that it operates in,
this often involve volunteer work and charity gifts to local organizations;
third, the environment, greenhouse gas emissions, water use, pollutants, energy use,
those are common items in this section.
Sometimes, a company will have a section on its supply chain
or on its governance structure.
There's often an appendix with a lot of quantitative data to support smaller tables
that are published elsewhere in the report. If the GRI template is used,
there may be a page or two
that explains how the report relates back to the GRI categories.
Finally, if the report's been verified by a third party auditor,
there should be a letter from the auditor attesting to the report's accuracy.
If you did the B-lab assessment in the first class, then you know the categories
that smaller companies use to identify sustainability opportunities.
The Global Reporting Initiative (GRI) has a similar list of categories.
On the slide, you can see how they're organized.
You can see the three big categories: economic, environmental,
and social; so profit, planet, and people.
And then under social, there's a set of subcategories.
These categories give you a pretty good list of what the possible impacts
that a company might have, can be.
Some categories are relevant for some companies,
but probably, most companies should be reporting on the majority of these items.
When you look at some sustainability reports,
I think you're going to be surprised how many photographs they include.
This a little bit cynical but an awful lot of space is devoted to pictures.
In a paper I did with a couple of other people,
we looked at sustainability reports in several industries.
On average, companies devoted roughly the same number of pages to the environment
and to social topics in their sustainability reports.
For companies and controversial industries like tobacco, alcohol, gambling,
more pages were devoted to social topics --
people and communities, and to the environment.
We think that these sin companies, these controversial companies,
were trying to stress how good they were to people and communities;
to offset some of the harm that their products were doing to other people and communities.
So the structure of these reports can include some fairly nuance
or subtle ways of communicating.
Now, I want to shift gears and give you some guidelines
about how to read a sustainability report.
These are from two experts.
One is Mark Gunther who's a longtime observer and commentator on sustainable business.
The other is from Elaine Cohen
who writes often on sustainability topics in several internet blogs.
Now here's what Mark Gunther's list includes:
first, pay attention to what's in the report and what's left out;
number two, follow the big money.
These two points stress that a sustainability report
should focus on those company activities that have the greatest impact.
If you aren't sure what that might be, go to the SASB website
and see what the experts there think is important for that industry.
If a company isn't reporting on those topics, something's fishy.
It's easy to tell feel good stories but we really want to know
what the company's impact is in its core activities.
Three, think about context and I'll quote Mark Gunther here,
"When trying to understand a company's impact on climate or energy use or water,
a single number two won't help.
You need to look at absolute numbers, how much energy did that company use in total;
normalized numbers, so adjusting for acquisitions or divestitures;
and numbers that reflect energy or water intensity --
how much was used per unit of product or per dollar of revenues?
These numbers only become meaningful when they're accompanied
by year over year comparisons or when set against previous goals.
You can be confident that most companies present their data in the most favorable light.
The concept of context-based sustainability is designed in part
to cut through obfuscations and generate meaningful sustainability goals and targets.
The idea is elegant.
Companies should measure their impacts against science-based sustainability thresholds
and resource limits.
Is Coca-Cola only using its fair share of the water supply in India?
And what should Ford's carbon reduction target really be?" that's the end of the quote.
Number four on Mark Gunther's list: read more than one report at a time.
This is similar to the context comment, a statistic for one company
is difficult to interpret, so having two or three reports
from companies in the same industry lets you make comparison.
Does Coca-Cola or PepsiCo use more water per liter of soda pop produced?
Does FedEx or UPS use more fuel per ton of packages delivered?
Finally, number five on his list: look for all the news that's fit to print.
Good sustainability reporting, above all, needs to be credible.
One indicator of credibility, as we've already mentioned,
is whether companies are willing to post bad news along with the good.
Here are some other tips.
These are from Elaine Cohen.
She writes a column at csr-reporting.blogspot.
The model she used is called aim, AIM for authenticity.
She says that in quotes, "Authenticity for me includes balance,
accuracy, and completeness.
I look for targets and progress against stated targets." that's the end of the quote.
Impacts, this is the I.
Did the company identify impacts
rather than just presenting a shopping list of activities?
This means discussing the outcomes of what was achieved.
And the M, materiality, like Mark Gunther, she is interested in activities
with the greatest impact and expects to see those reported on.
Each year, she creates a list of 10 or 15 reports that she really likes,
and she explains in some detail why she likes each report.
It's really interesting reading her analysis of the reports.
It should tell you something about how to structure report
so that it's effective and credible.
Our assignment this week asks you review a sustainability report
so you'll have a chance to apply some of these hints.
Thanks.
