Third Time's the Charm

What a swell party it was. The first week of October saw a crowd of 1,150 people from 65 countries rubbing shoulders in the Netherlands, including royalty (in the form of HRH the Prince of Orange), politicians (including former Vice President Al Gore and Margot Wallström, VP of the European Commission), titans of industry (like Gerard Kleisterlee, CEO of Royal Philips Electronics, and Sir Mark Moody-Stuart, chair of Anglo American), and the heads of multilateral agencies (among them Achim Steiner, the new United Nations Environment Program executive director). What brought this motley crew together? The launch of "G3," the latest version of the Global Reporting Initiative's Sustainability Reporting Guidelines.

As we scoop up a fistful of passing canapés, Full Disclosure's authors must swallow hard and admit that we have been deeply involved in the roller-coaster ride of the GRI's development -- and in some aspects of its governance. Through it all, we have remained staunch fans of both the institution and its work. Still, with the G3 launch taking place in below-sea-level Amsterdam (where the GRI secretariat has its headquarters), we found ourselves thinking of that little Dutch boy trying to hold the sea back by putting his finger in a hole in an endangered dike. If memory serves, that story turned out fairly well, but is corporate reporting really making a marked difference in global sustainability efforts in the face of the century's challenges? And -- thanks, we'll take the champagne -- will the G3 accelerate things in a material way?

In some ways, the GRI already has raised the reporting bar. The GRI's vision today is "that reporting on economic, environmental, and social performance by all organizations becomes as routine and comparable as financial reporting." We drink to that. And even with a swimming head, it's clear that the GRI's framework has become the de facto standard for sustainability reporting. This is key, because transparency and disclosure, or so the logic flows, enable stakeholders to hold companies to account -- which in turn drives improved sustainability performance.

But in the near-decade since the GRI was launched as a project of Ceres, have adequate numbers of companies taken up the challenge to "come clean" -- or does the GRI, like that shivering little boy, stand pretty much alone?

As ever, the story has its bright and dark sides. In a world with more than 50,000 multinational corporations, the GRI counts just over 1,700 companies using its guidelines in some way -- and far fewer reporting "in accordance," which requires comprehensive reporting against the GRI's core indicators, plus CEO or board-level sign-off. The GRI's close partner in the reporting world, the U.N. Global Compact -- which accepts GRI reporting as evidence of signatories making progress against their Compact commitments -- claims some 3,000 members, of which around 2,500 are companies. So at best, we're probably looking at 1 percent of globally operating companies currently reporting along GRI lines.

Just prior to the G3 launch, a UNEP-commissioned study of the future of GRI-type reporting suggested that a plateau has been reached. The implication is that corporate reporting might get stuck -- or, worse, shift into reverse as momentum fades. The challenge for the boy with his finger in the leaking sea barrier was how to get the word to others that the dike had a sprung a leak without abandoning his post and letting the sea rush in. For the GRI (and UNEP), the trick may lie in staying at the current post while working out how to help companies shift from CSR strategies to a new focus on scalable, entrepreneurial, and, yes, reportable solutions to sustainability challenges. This is already on the international business agenda, with, for example, "scaling up sustainable solutions," one of the core themes for the ski-slope crowd at next year's World Economic Forum in Davos.

Putting our optimists' hats on, we see considerable progress in reporting -- and huge progress since SustainAbility began its surveys of the field in 1992. Every two years, we publish the Global Reporters benchmark survey, which identifies and assesses best practice in corporate sustainability reporting worldwide. This fall, we've partnered once again with UNEP and Standard & Poor's to produce our seventh benchmark survey, and the fourth focusing on sustainability reporting. While the full results of "Global Reporters 2006" will not be available until November, we have completed most of our research. As in 2004, the best reporters we can find all make some reference to the guidelines, while nearly half report "in accordance." So it is blindingly clear that the GRI has both inspired people to act and shown them how to get started. The survey concludes that, whether or not they directly mention the GRI guidelines, most leading reporters are using them to some degree.

Still more good news is out there: perhaps counter-intuitively, leading global companies are finding value in reporting far more information on their sustainability performance than the GRI currently demands. Far from fretting about a plateau (although this is a clear present and future danger), we think the launch of the G3 guidelines will boost societal interest in the business impacts of sustainability issues like climate risk. In the process, the spotlight will likely move well beyond annual, stand-alone, "in accordance" sustainability reports.

Companies such as Novartis are integrating their sustainability reporting into their annual reports. Whole industries face new requirements for public reporting, such as the pharmaceutical industry requirement for the disclosure of clinical trial data. Investors like those participating in the Carbon Disclosure Project are congregating in greater numbers -- and, now that the CDP community represents over $30 trillion of funds under management, enjoying greater clout in demanding that Global 500 companies disclose critical sustainability performance data.

So, unlike the boy at the dike, who waits through a full day and night before help arrives, the GRI may not be so alone. A new wave of reporting is building, one better linked to and more influential over corporate strategy and which does more to explain (with specific targets and clear performance indicators) where the company is going and how. This wave has the potential to help add and account for value right across the triple bottom line.

Recent reports from companies such as BP, BT, Gap, GE, and Nike are really exciting; all are linking their sustainability reporting more closely to their mainstream business. As an example, consider BP's commitment to invest $5 billion-plus in alternative energy and grow this investment five- to tenfold in the next 10 years. (Yes, yes, we know about BP's current operational challenges, but we have seen instances in the past where such reverses become powerful drivers for future action, and we hope this will be the case here.)

So what comes next? We see the agenda following a number of trajectories. Reporting will be only one component of continuous, customized corporate communication, drawing data from entire value chains, addressing hard issues (e.g., carbon emissions) in quantitative terms, offering more coverage of issues of consequence to emerging economies, and mutating from encyclopedic reports designed to win awards to prospectuses designed to attract investment and other forms of support.

As some parts of the agenda become too important to be left to CSR departments, the spotlight will increasingly shift to board level, to CEOs, CFOs, and the financial markets. Once the party is over, picture CEO, CFO, and COO fingers being thrust into the leaking, trembling stonework. It's sad that this will leave only one hand free for the cocktails. But hey, it takes a (global) village to raise a standard.