Barriers to strengthening

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
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THE PRESENTATION

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

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AN INFLUENTIAL FRAMEWORK

• Formally used in 1,296 reports (2009)
• Adopted by more than ¾ of the worlds 250
  largest companies
• Mentioned in the 2002 WSSD Plan of
  Implementation
• Praised by global leaders
• Changed the language and structure of
  non-financial reporting

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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)
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THE GRI AS AN ORGANIZATION

• Multi-stakeholder network (Board of directors,
  stakeholder council, technical advisory,
  organizational stakeholder)
• Funded by governments, foundations, companies,
  individuals, and GRIs 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

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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)
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GRI G3 FRAMEWORK
Principles for defining contents Materiality Sta
keholder inclusiveness Sustainability
context Completeness Principles for defining
quality Balance Clarity Accuracy Timeliness Comp
arability Reliability
Principles for defining boundaries
Source GRI (2006)
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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)
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GRI G3 FRAMEWORK
Application Level System
?
Approaches (1) Self-declaration (2) Assurance,
and (3) GRI check
Source GRI (2006)
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GRI G3 USE
Application level of GRI Reports in 2009
(n1,296)

• 25 externally assured (A, B, C)

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GRI G3 USE
The geography of GRI reports in 2009 (n1,296)
Canada, 2.78 (36 reports)
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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

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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

?
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ACADEMIAs CONCERN

1. Aras, G. and Crowther, D. (2008), "Corporate
   Sustainability Reporting A Study in
   Disingenuity?", Journal of Business Ethics, Vol.
   87, pp. 279-288.
2. 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.
3. Baue, B. (2006), "Sustainability reporting
   improving, but not necessarily contributing to
   true sustainability.", available at
   http//www.ethicalcorp.com/content.asp?ContentID4
   723ContTypeID (accessed June 30, 2009).
4. 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.
5. 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.
6. 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.
7. 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.
8. 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.
9. Laine, M. (2005), "Meanings of the term
   "sustainable development" in Finnish corporate
   disclosures", Accounting Forum, Vol. 29, pp.
   395-413.
10. 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.
11. 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.
12. 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.
13. 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.
14. 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.
15. 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.

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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
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COMMON CRITICISMS

• 2. GRIs 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
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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
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FILLING THE GAPS
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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

Group Interviewee Profile Quan-tity Code
GRI-certified Training Consultancies Experienced and certified GRI reporting trainers with in depth-knowledge of the framework. 5 CC
International Consultancies Senior consultants on corporate sustainability tools and strategies, including sustainability reporting. 5 IC
Research Institutions PhD holders with extensive knowledge on corporate sustainability evaluations and reporting. 5 RI
Large Mining Companies Practitioners Managers and directors of Corporate Responsibility or Sustainability who hire and/or coordinates GRI-based reporting. 5 MP
Among them are 1 co-founder of GRI, 2 members of
GRIs Stakeholder Council and Board of Directors,
and 7 representatives of GRIs Organizational
Stakeholder
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MOTIVATIONAL BARRIERS

• Voluntary nature of sustainability reporting
• Current GRI G3 framework is already perceived as
  demanding
• GRIs imbalanced governance (predominance of
  business organizations)
• Path dependence in GRI mission

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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?)

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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 (Isnt context the same as
  materiality?)

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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

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BARRIERS TO FACILITY-LEVEL SUPPLEMENT

• Capacity-building at sites
• Lack of interest from local stakeholders
• Unclear cost-benefits
• Increased information management
• Excessive corporate exposure

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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

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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.

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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.

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THANK YOU
Alberto Fonseca Department of Geography
Environmental Management 1-519-804-4046 adfonsec_at_u
waterloo.ca