2011 macpa mibs show newman reporting for sustainability v fx

Newport Consulting Group, LLC 2011 MACPA MIBS Show Newman - Reporting for Sustainability vF.pptx ■ Page 0

Reporting for Sustainability

Presentation to the Michigan Association of CPAs

Management Information and Business Show

June 9, Grand Rapids

June 29, Novi


Sustainability Defined The Landscape of Sustainability Frameworks Types of Common Sustainability Documents Reporting and Auditing Resources and Links Summary and Questions


A Model for Sustainable Business

Economic Environmental Social

Triple Bottom-line Scorecard


Corporate Drivers of Sustainability

The Dow Jones Sustainability Index (DJSI) created in 1999 represents over $US 9 billion in total

market capitalization. The DJSI STOXX40 has outperformed the nominal DJ STOXX50 by 7.5% to

date (and up to 15-20% during the period preceding the financial crisis).

Source: SAM Sustainability Annual Review, September 3, 2009

The DJSI comprises publicly

traded organizations that

follow the Global Reporting

Initiative (GRI) for

Sustainability reporting

The investment community is

giving increased weight to

Corporate Sustainability to guide

rating and investment decisions.


Benefits of Corporate Responsibility / Sustainability

Behave

Ethically

To create

value for

Consumers

Shareholders

Host

Governments


Sustainability in the Boardroom

According to a survey of

global CEOs conducted by the UN

Global compact over 90% of those

surveyed considered sustainability

issues either important or very

important to the future success

of their business.

But what does

sustainability really mean? It

depends on your framework.


Emerging Sustainable Frameworks

The University of

Oregon

Sustainability

Leadership

Program is

tracking over 50

emerging

standards,

guidelines and

frameworks in the

area of

sustainability.


One Framework – The UN Global Compact

1. Businesses should support and respect the protection of internationally proclaimed human rights.

2. Make sure that they are not complicit in human rights abuses.

3. Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining.

4. The elimination of all forms of forced and compulsory labour.

5. The effective abolition of child labour.

6. The elimination of discrimination in respect of employment and occupation.

7. Businesses should support a precautionary approach to environmental challenges.

8. Undertake initiatives to promote greater environmental responsibility.

9. Encourage the development and diffusion of environmentally friendly technologies.

10. Businesses should work against all forms of corruption, including extortion and bribery.


One Framework - The Natural Step

http://www.youtube.com/watch?v=FFCNCQleCuk


The Range of Sustainability Documents

One of the challenges in the field of sustainability is the vast reporting and disclosure spectrum that

organizations – from small not-for-profit associations to F1000 global enterprises – may choose from.

Complexity of Disclosure

Form

alit

y o

f S

tate

ment

Statement of

Direction

DJSI / 10K

Statement UN Global

Compact

GRI Report Code of

Conduct

Intra-company

Scorecards

Sourcing

Audits

Simple

Complex

Company

Sustainability

Plan


Statement of Direction

A Statement of Direction – Similar to a 10K President’s Message – is a publically communicated intent

to address particular goals, mandates, or targets. This is generally non-binding and can be confused

with company ―green washing‖ of marketing efforts.

A Statement of

Direction is a

document intended

to convey to the

public, customers,

shareholders,

analysts and other

stakeholders the

position of the

organization and its

intent.


Code of Conduct

A Code of Conduct is a statement of policy which governs how the company will behave inside its

business ecosystem, as well as the individual behavior expectations of its employees and

stakeholders. Codes may be binding from a performance management perspective.

A Code of Conduct is

interpreted by

organizations abiding

by them in the form

of policies,

procedures and

guidelines.


Why consider a reporting approach?

Organizations may have several reasons for implementing a sustainability program. While the initial

or primary focus may be on fixing ―hygiene‖ problems, organizations may exploit the opportunity to

achieve more strategic objectives in corporate sustainability and corporate social responsibility.

Problems

Manual (spreadsheet-based) systems are siloed, error-prone, and do not reuse data in enterprise systems

Roll-up processes to support audits and other reporting needs are cumbersome

Organizational accountabilities for sustainability are unclear

Risk of being out of compliance with changing global regulations

No systematic way to respond to crisis or other unforeseen event

No alignment with overall corporate sustainability goals

Opportunities

Adopt a more proactive approach to supplier management

Anticipate and mitigate risk events; develop response plans should these events occur

Elevate profile of global corporate citizenship and enhance competitive brand position

Permeate sustainability initiatives and a culture of social responsibility throughout the organization

Improve efficiency of adjacent core processes (design, manufacturing, QA)

Incorporate sustainability in strategic planning and enterprise performance management


How do you interpret Sustainability?

Sustainability has Three Pillars — we find that while there may be an immediate focus on one key

area of Corporate Sustainability, attention must be given to how reporting and decision-making occurs.

This increases value drivers, reduces redundancy, improves operations, and manages costs.

Target Focus of Sample Fortune 500 CSR Programs Survey of Selected Cross-section of Industries 2007-2009

Company Economic and

Financial Environmental Social Accountability

UPS Strengthen the Enterprise Protect the Environment Improve the Human

Condition

Starbucks Sustainable Coffee Prices Minimize Environmental

Impacts Local Community

Engagement

Kimberly-Clark Commitment to Ethical

Business Practices Environmental Stewardship Safety and Health

Lockheed Martin Perform with Excellence Eliminate Adverse Impacts

from Operations Safety of Every Employee

Source: CSR documents from each organization, selected from 2007-9 supplier manuals and other internal corporate documents.

Generally organizations focus on one particular domain of sustainability which needs

immediate attention, however understanding the strategic interaction of the other Corporate

Sustainability areas is essential and often required by reporting guidelines.


How do you Enable Sustainability?

Development of Sustainability Programs

– Align to “pillars” and determine materiality

– Determine strategic orientation

– Define areas, actions, ownership, roles, viability

Assurance of Sustainability Programs

– Confirm roles, metrics, outcomes, ownership

– Assure program is “as advertised”

– Second-party corporate reporting

– Third-party accreditations / certifications

Enablement of Sustainability Programs

– Identification of source information

– Definition of reporting cycles, metrics

– Monitoring processes and governance

– Technology platforms, solutions, practices

Three aspects of corporate sustainability programs have emerged: (1) development of corporate

sustainability as a profit-driven strategy, (2) assurance of the actions of the corporate sustainability

program, and (3) technology enablement of corporate sustainability for reporting and monitoring.

Reporting

Program

Development

Governance Monitoring

Corporate

Sustainability

Program

Assurance

Program

Enablement

Corporate Sustainability Programs The three “aspects” of program activities


Reporting and GRI3

In 2006, the Global Reporting Initiative (GRI) was created to provide guidelines and audit

recommendations for organizations participating in corporate sustainability reporting (CSR) activities.

These guidelines ensure a level of consistency and governance in the practice of corporate sustainability.

Sources: The Future of Corporate Sustainability Reporting, The Journal of Accountancy. The American Institute of Certified Public Accountants, 2006. Royal Dutch Shell, 2003 Corporate Sustainability Report (courtesy of AICPA).

CSR as a practice in accounting areas is still emerging, with general guidelines based on the objectives of the Corporate Sustainability program.

How does GRI consider CSR?

CSR “involves reporting financial and nonfinancial information to key stakeholders on the company’s operational, social, and environmental activities and its ability to deal with related risks.”

Considers the “triple bottom-line” of reporting – Economic Performance

– Social Responsibility

– Environmental Compliance

Considers broader set of stakeholders beyond shareholders – Financial

– Regulatory

– Political

– Others based on company program


Communicating Sustainability Principles

GRI reporting is a function of confirming that program initiatives, principles, and objectives are

tracked, monitored, and reported correctly. Some specific guidelines and a set of broad principles of

GRI have emerged, leaving management free to ―do what you say‖ from an auditor’s point of view as

long as it is verifiable. UPS is an exemplar in this area as shown by their reporting presentation.

Source: 2008 Corporate Sustainability Report, United Parcel Service (used with permission). Newport Consulting Group record of client interviews and feedback, 2009.

Overall graphic, such as a Venn

diagram, communicates the areas of

importance to various stakeholders.

Areas of CSR program called out,

then detailed against Key

Performance Indicators (KPIs) in

subsequent sections of the

sustainability report.

Interactive Web sites allow

stakeholders including shareholders

to create personalized reports,

graphics, and tables.


Ratings against GRI3

The GRI3 guideline provides a number of criteria whereby the organization pursues a self-

assessment, third-party review, and final grading. This is similar to self-reporting, compliance audit

and certification review followed by audit, assurance and assessment of other management systems.

Report Content Guidance Report Content Principles Report Quality Principles Report Boundary Setting

Profile Profile Profile Profile

Management Report Management Report Management Report Management Report

Performance Indicators Performance Indicators Performance Indicators Performance Indicators

Inputs and Outputs for Standard Reporting

Ou

tpu

ts

Source: GRI3 Standard Guidance Documents, 2006-2010.

Inputs


Assurance and Oversight

Key conclusions provided by assurance activities

on GRI3 and AA1000 AS (2008)

– Inclusivity: Does organization X engage with stakeholders and involve them in organizational decision making?

– Materiality: Does organization X identify the issues relevant and significant to it and its stakeholders and include these in its disclosures?

– Responsiveness: Does organization X respond to stakeholder issues and feedback through decisions, actions, performance and communication?

– An assurance statement for a Type 2 assurance engagement must also provide conclusions on the reliability and accuracy of specified performance information.

Additional observations, comments, and

recommendations are also provided in the

assurance report.

AA1000 AS (2008) has emerged as a guidance document in assurance circles with respect to

sustainability and corporate responsibility programs. This approach considers two levels of assurance

reporting: (1) dealing with organization behaviors and (2) behaviors in combination with KPIs, metrics.


Considerations for the Public Sector

International council for local environmental initiatives (ICLEI) – international association of local governments as well as

national and regional local government organizations who have made a commitment to sustainable development

– ICLEI provides technical consulting, training, and information services to build capacity, share knowledge, and support local government in the implementation of sustainable development at the local level.

Tools, methods and processes

– Clean Air and Climate Protection (CACP)

– Data collection templates

– Energy management standards

– Over 300 local government strategies, KPIs

– Knowledge base of best practices

ICLEI Five Milestone Approach for municipal and local governments provides a framework for public

sector organizations to address triple bottom-line initiatives, share best practices, and monitor

compliance for community outreach programs.


How to Get Started ….

Educate and Align Stakeholders

– Agreement on “what is sustainability” and what frameworks apply to your organization

– Assign budget to introduce sustainable practices, codes, behaviors

Facilities planning, corporate communications, finance, engineering, etc.

Craft a “Roll-in Strategy” based on your Culture

– Creation of a Sustainability Program Office (SPO)

– Creation of employee-driven “Green Teams”

– Uber-recycling programs, integrate with lean manufacturing activities

Do some Housekeeping

– Define what KPIs and targets are realistic.

– Determine who owns what data and information in your organization

– Figure out how best to report this (centralized vs decentralized)

– Conduct an initial assessment to know where you stand now.

Get help if you need it – don’t start something and watch it die!

Sustainability planning and reporting is a multi-year journey. There are several things an organization

can do to get started which will decrease the ―ramp up‖ time through the use of best practices.

Remember

some targets

may be

binding!


Some Helpful Resources

Global Reporting Initiative www.globalreporting.org

Social Accountability International www.sa-intl.org

Social Fingerprint www.socialfingerprint.org (Reference Code# Newport11R)

SCORE Assessment Framework

http://www.axisperformance.com/SCORE_overview.html

ICLEI – Local Governments for Sustainability www.icleiusa.org

The Sustainable Enterprise Fieldbook (Wirtenberg)

www.thesustainableenterprisefieldbook.net

Cradle to Cradle (McDonough) www.mcdonough.com

University of Oregon Sustainability Leadership Program

http://sustain.uoregon.edu/

http://www.globalreporting.org/

http://www.sa-intl.org/



http://www.socialfingerprint.org/

http://www.axisperformance.com/SCORE_overview.html

http://www.icleiusa.org/

http://www.thesustainableenterprisefieldbook.net/

http://www.mcdonough.com/

http://sustain.uoregon.edu/


7 Key Points to Take Home

1. Sustainability is a growing field of business practice, winners and losers will

be chosen in part by what organizations decide to do in this field

2. There is a compelling economic and financial incentive for pursuing

long-term sustainability strategies (5-7% increase in performance)

3. Each organization is different, therefore stakeholders need to

determine which frameworks, guidelines and approaches are applicable.

4. You can’t do everything – and if you say you will you will be held accountable

for binding statements. Determine your KPIs and goals realistically.

5. If you are going to embark on GRI3 reporting make sure the benefits outweigh

the costs (ROI calculation). Plenty of companies “ISO’d themselves out of

business” – the same can happen with GRI3 reporting.

6. Use assurance services judiciously and at the appropriate program time.

7. Celebrate your accomplishments, use success to create opportunities

elsewhere inside the organization!


Your Turn …

William Newman, MBA, CMC, SA

[email protected]


Author, professional speaker, writer and consultant - William (“Bill”) Newman serves as

Managing Principal of Newport Consulting Group, an independent management consulting

firm focused on strategy, operations, risk management, and technology. Mr. Newman has 25

years experience in a wide range of operations including manufacturing, IT, R&D, sales,

marketing, planning, human capital, service delivery and finance. His expertise spans service,

manufacturing (automotive, aerospace, life sciences, high tech, CPG), government, utilities,

transportation, and healthcare industries.

Mr. Newman’s service area focus is innovation, strategy, market growth entry, program design

and oversight, and corporate sustainability. He is a former executive of Volkswagen’s

technology division and has served in a number of professional and management positions at

Grant Thornton, KPMG/BearingPoint, and Booz & Company. Mr. Newman serves as an

outside advisor to the Sustainability Executive Advisory Council (EAC) of software maker SAP. He is an adjunct

professor at Northwood University in the field of management studies serving the Flint, Lansing and Troy program

centers, as well as a participant of the University of Oregon Sustainability Leadership Program.

Bill was granted the Certified Management Consultant (CMC) designation by the Institute of Management Consultants

in 1995 and has served on the IMC national board of directors and three regional boards across the USA for over 10

years. Mr. Newman is a qualified Trainer / Coach granted by the American Society for Quality (ASQ) since 2000, a

qualified consultant for Social Accountability International (SAI) in SA 8000 for social accountability since 1998 and the

Social Fingerprint® method for business improvement since 2011. Mr. Newman is an member of the Michigan

Association of CPAs (management consulting task force) and a registered expert witness with the Technical Advisory

Services for Attorneys (TASA).

Bill holds a Bachelor’s Degree in Aerospace Engineering with a minor in Economics from the Henry Samueli School of

Engineering at UCLA, and an MBA in Management and minor in International Business from the Conrad Hilton School

of Business at Loyola Marymount University (Los Angeles). Bill and his wife Teresa make their home in southeast

Michigan.

William Newman, CMC, MBA, SA


Exhibit – Slide 7


Exhibit – Slide 19


Exhibit – Slide 20