Thursday, December 31, 2009

What about corporate sustainability reports (CSR)?


A few weeks back I read a comment from an industry representative questioning the value of corporate sustainability reports - the CSR. Over the past few years (specially as I have been preparing materials for my course on sustainable manufacturing and directing students to sources of information and data on industry performance) I've been impressed with two things.  One is the tremendous evolution of these reports in the past few years from "few and far between" to widely used. And, second, is the impressive increase in information, data and details presented in many of these reports as companies have understood their purpose better and gotten their arms around how to collect, organize and represent the data.

The CSR has its roots in the Global Reporting Initiative ( or GRI - see http://www.globalreporting.org/Home) which describes itself as "a network-based organization that has pioneered the development of the world’s most widely used sustainability reporting framework and is committed to its continuous improvement and application worldwide." They offer a framework that lays out "what to report" and "how to report it." I am not sure how many corporations use this framework in constructing their reports but the goal of transparency and accountability is the major objective.

In my experience, the CSR (whether GRI based or not) has a number of important roles to play in our discussion of green manufacturing and, longer term, our efforts towards sustainability. In no particular order these are:

- education (these documents, freely available, offer a tremendous resource for students, the public, analysts, and so on, to look into an organization to see what is estimated to be the impact, and progress, of their business towards sustainability)
- comparison with others (benchmarking is always useful; one must always read any report that is "self generated" with caution but the CSR offers a convenient way for an organization to measure itself with respect to its competitors, or the industry in general)
- accountability within organization (the CSR offers a convenient vehicle for communicating and empowering various units in to the organization with respect to their piece of the whole picture and what role they play in the - overall impact of the organization (and this is an important one - the CSR, if properly done, will show the magnitude of the challenge facing the organization; it marks the "present state" of sustainability)
- mark progress (if  you know where you are today, and then re-assess where you are tomorrow or next year, you can use the difference, positive or negative, to chart your progress or note where additional effort or better data is needed.)

I'm sure you could add a few additional items to this list.

In my use of the CSR as an educational tool over the last 3-4 years I've noted positive changes in their complexity (meaning the extent to which they represent more and more of the organizations activities - essentially more scopes), transparency, level of detail, and, importantly, the level of "science" and deterministic measures/assessments made in constructing the reports. To me, this is very good. I am also sure this is expensive.

There have been some excellent studies comparing the "quality" of CSR's based on unique scoring schemes. One of the more interesting, and, to me, comprehensive, comparisons has been done by the Roberts Environmental Center at Claremont McKenna College in California (see http://www.roberts.cmc.edu/psi/whatthescoresmean.asp). It is called the Pacific Sustainability Index (PSI), is calculated based on on-line information only and is computed with the following weighting:

Environmental
- Accountability (3%)
- Management (12%)
- Vision and Policy (12%)
- Resources utilizations & emissions data (13%)

Social
 - Accountability (3%)
- Vision and Policy (8%)
- Management (8%)
- Labor issues (22%)

Human rights
- Principles (18%)

Total (100%)

There is a carefully defined scoring criteria that is based on the transparency in the company's public discussions "independent of success in making improvements." My interpretation is that even if you are not doing so well, you get points for being honest about the issues you are confronting (the antidote to 'greenwashing'!).

There is a schema for reporting on both qualitative and quantitative topics. For example, under quantitative - the five measures used in scoring include  i.  discussion on the topic, ii. putting the discussion in an external context, iii. including one or more explicit numerical goals, iv. including at least one previous measure of performance for the topic (and additional point for more than one previous measure - that is, more history). Under the category of environmental reporting the company is given credit for illustrating how their performance relates to that of peer industries or industry standards. Please see the above link for the full explanation. The derived PSI score is represented as a letter grade (this is an academic institution after all!) such as A+, A, A-, B+, etc. but the scores are normalized to the highest scoring company in the same sector. The website says they "grade on the curve."

Now comes the (more) interesting part - the comparisons across sectors using the PSI. You can find the scores by sector and score type (meaning overall PSI score or individual environmental or social components) at an interactive webpage (http://www.roberts.cmc.edu/currentsectordata.asp). The sectors are quite specific - for example, aerospace and defense, government institutions, telecommunications, networks and peripherals, all the way to utilities, gas and electric.  You can "drill down" to each company or institution on the chart displayed to see their individual "grade" and when the latest assessment was published with spider charts representing the scores for the various components.

The information used is from publicly available sources - so if your favorite is not included tell them to get on it! I was chagrined to find that my own institution, University of California Berkeley, is only current up to 2005 (and doesn't get a very good grade! I'm composing the letter to our chancellor right now.) The only redeeming observation is that Cal's arch rival, Stanford, doesn't show up at all! (Go Bears!!)

The best ranked educational institution is Williams College with lot's or A+'s - well done.

Take some time and play around with this informative site and its rankings. The methodology and inclusiveness is most interesting. Of course the scores are nice too! Here's hoping your organization or alma mater rank well!

Happy New Year!

1 comment:

  1. Hello David,

    Congratulation to you. It is very nice article that you have posted in this blog. This is the perfect blog for anyone who wants to know about this topic. You know You definitely put a new spin on a subject that's been written about for years. Great stuff, just great!

    Thanks!
    Ryan Matthew

    Outsourcing Manufacturing

    ReplyDelete