2011 MACPA MIBS Show Newman Reporting For Sustainability V Fx
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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
Newport Consulting Group, LLC 2011 MACPA MIBS Show Newman - Reporting for Sustainability vF.pptx ■ Page 1
Sustainability Defined The Landscape of Sustainability Frameworks Types of Common Sustainability Documents Reporting and Auditing Resources and Links Summary and Questions
Newport Consulting Group, LLC 2011 MACPA MIBS Show Newman - Reporting for Sustainability vF.pptx ■ Page 2
A Model for Sustainable Business
Economic Environmental Social
Triple Bottom-line Scorecard
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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.
Newport Consulting Group, LLC 2011 MACPA MIBS Show Newman - Reporting for Sustainability vF.pptx ■ Page 4
Benefits of Corporate Responsibility / Sustainability
Behave
Ethically
To create
value for
Consumers
Shareholders
Host
Governments
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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.
Newport Consulting Group, LLC 2011 MACPA MIBS Show Newman - Reporting for Sustainability vF.pptx ■ Page 6
Sustainability Defined The Landscape of Sustainability Frameworks Types of Common Sustainability Documents Reporting and Auditing Resources and Links Summary and Questions
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Emerging Sustainable Frameworks
The University of
Oregon
Sustainability
Leadership
Program is
tracking over 50
emerging
standards,
guidelines and
frameworks in the
area of
sustainability.
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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.
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One Framework - The Natural Step
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Sustainability Defined The Landscape of Sustainability Frameworks Types of Common Sustainability Documents Reporting and Auditing Resources and Links Summary and Questions
Newport Consulting Group, LLC 2011 MACPA MIBS Show Newman - Reporting for Sustainability vF.pptx ■ Page 11
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
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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.
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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.
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Sustainability Defined The Landscape of Sustainability Frameworks Types of Common Sustainability Documents Reporting and Auditing Resources and Links Summary and Questions
Newport Consulting Group, LLC 2011 MACPA MIBS Show Newman - Reporting for Sustainability vF.pptx ■ Page 15
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
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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.
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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
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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
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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.
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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
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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.
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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.
Newport Consulting Group, LLC 2011 MACPA MIBS Show Newman - Reporting for Sustainability vF.pptx ■ Page 23
Sustainability Defined The Landscape of Sustainability Frameworks Types of Common Sustainability Documents Reporting and Auditing Resources and Links Summary and Questions
Newport Consulting Group, LLC 2011 MACPA MIBS Show Newman - Reporting for Sustainability vF.pptx ■ Page 24
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!
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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/
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Sustainability Defined The Landscape of Sustainability Frameworks Types of Common Sustainability Documents Reporting and Auditing Resources and Links Summary and Questions
Newport Consulting Group, LLC 2011 MACPA MIBS Show Newman - Reporting for Sustainability vF.pptx ■ Page 27
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!
Newport Consulting Group, LLC 2011 MACPA MIBS Show Newman - Reporting for Sustainability vF.pptx ■ Page 28
Your Turn …
William Newman, MBA, CMC, SA
wnewman@newportconsgroup.com
Newport Consulting Group, LLC 2011 MACPA MIBS Show Newman - Reporting for Sustainability vF.pptx ■ Page 29
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
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Exhibit – Slide 7
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Exhibit – Slide 19
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Exhibit – Slide 20
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