The future for sustainability reporting: trumped by the digital revolution?

Monday, December 05, 2011

18:00 - 20:30

The demand for transparency, unleashed by social media, may be the biggest enabler of the sustainable economy. Discuss.

If the industrial revolution gave power to the company, the digital revolution is returning power to the stakeholders. This is opening up a myriad of issues for how companies report their sustainability strategies, such as:

  • How transparent should companies be?
  • What is the role of the sustainability report?
  • Is “integrated reporting” the future?
  • How should companies measure the contribution to profit from sustainability?
  • And what sustainability data should management be looking at?

To guide us through these fast-changing sands we have a diverse group of experts, including:

Louise Tyson, Head of Corporate Reporting at BP.  Louise will give us her views on the art of sustainability reporting, with the experience of BP’s trust rebuilding programme since the Deepwater Horizon disaster. Having subsequently undertaken a major survey of sustainability experts, BP has launched a new sustainability section on its website with a wide range of information from community engagement to its view on the energy future. What does Louise think about mandatory and integrated reporting?

Dr Rory Sullivan is a reporting expert and author of 7 books including “Valuing Corporate Responsibility: How Do Investors Really Use Corporate Responsibility Information?” (2011). Rory will be looking at how investors use environmental and social data, and he will question whether integrated reporting really is the Holy Grail that John Elkington and others have argued for. Is there a better solution?

Adam Elman, Head of Delivery of Plan A, M&S. M&S has pioneered the measurement of profit from sustainability programmes, and it has been highly effective in gathering support for its sustainability programme. In 2010, Plan A contributed profits of £70m, the equivalent to 10% of M&S’s pre-tax profit. With many other companies looking to follow suit, Adam will explain how M&S measure its profit contribution and will chair a roundtable on the same topic afterwards.

Alan Mak, a generation Y leader. Alan is a remarkable person and a representative of generation Y’s thirst for transparency. The youngest person to address the Green Monday audience, he will tell us how the digital revolution is demanding transparency from businesses. Inherent in this are some profound questions about the future for sustainability reporting.

Speakers

Adam Elman Marks & Spencer

See bio

Alan Mak One Young World

See bio

Louise Tyson BP

See bio
Round Tables

Supply Chain

What is the future for tracking sustainability though their supply chain?

Write UP

The group examined the conditions required for successful innovation building on the themes of the plenary session.

The question was asked how do you innovate without demand? There was a perceived need to educate and lead customers to new choices in some industries. A case study was offered whereby the retail and FMCG industry has provided a clear demand signal to the manufacturers of HFC free refrigerators by a joint declaration of commitment to the new technologies through the consumer goods forum. This provides a solid base for investment: http://supermarketnews.com/news/green_pledges_1129/
It was also suggested that willing customers and capable suppliers are constrained in their ability to innovate by rigid procurement conventions around RFP’s. Some thought this was driven by risk aversion in procurement cultures and required personal bravery to overcome it. It was suggested that these gateways were mainly an issue for new suppliers whereas relationships developed into collaborations where innovation could flourish. Others felt that collaboration was becoming the norm but initially only with strategic suppliers. It was suggested that companies needed to be flexible enough to consider all perspectives of protection/price/ and opportunity when taking procurement decisions. At present price was under significant short term pressure with potentially constraining consequences.
The group confronted the implications of the plenary that innovation often happens around the edges, and explored whether to remain innovative large companies would therefore need to maintain a high diversity of suppliers and improve their collaborative abilities.


Prove a better sustainability performance
http://www.centriaperformance.com/education_center/white_papers.aspx
Collaborate to innovate http://www.goldenforsustainability.org/
Align with standards and market movements
http://www.verdantix.com/index.cfm/papers/Products.Details/product_id/60/case-study-better-place-electric-vehicle-system/-
Need for brave procurement, collaboration, supplier diversity and proof of performance in to innovate for sustainability.

Carbon Strategies

How do you communicate the value of an off-set programme to all stakeholders?

Write UP

The Carbon Management Strategies table engaged in a thought-provoking and challenging topic today. Communicating the value of carbon neutrality or offsetting to all stakeholders is challenging, given the range of options for offsetting programmes and the variety of stakeholders to communicate to.

Opening up the discussion, we signalled which of the participants currently offset, which were considering offsetting, and which had no plans. The breakdown was as follows:
Currently offsetting – 2 (including myself)
Considering offsetting – 4
No current plans - 4 (2 participants were involved in advising clients)
Given that we had a table that was relatively inexperienced with offsetting and the communication of offsetting programmes, we first decided to establish whether we had a clear understanding of the terms offsetting and carbon neutral.
Around the table there was confusion as to what carbon neutral meant, and how offsetting worked. In particular, the zero carbon / carbon neutral homes discussion promptly a lot of discussion, and there was clearly confusion between corporate carbon neutrality and zero carbon homes.
Despite our relative lack of experience, we suggested the follow guidelines for how to communication / optimise a carbon offsetting programme;
- Engage stakeholders by matching the offset projects with the values and strategy of your company to improve the communication potential.
- Integrate offsetting / carbon neutrality into a sustainable long-term business strategy.
- Backup the offsetting programme with a strong and credible carbon management story.
- When government targets are set it drives behaviour. Reference was made to CRC, which strictly speak doesn’t require offsetting. However, EU ETS has an element of permit trading and is an applicable example.
- Set communications objectives up front, and deliver a clear message.
Conclusions
Around the table, 50% of the participants felt that their customers would be genuinely interested and would care about a carbon offsetting programme. So there is the beginning of a clear business reason for adopting an offsetting or carbon neutrality programme.
To maximise the chances of success, ensure you have a well planned communication programme underpinned by a strong carbon management story.

Finance & Corporate Sustainability

Sustainability Reporting 2.0 - How do you use digital media to communicate with stakeholders?

Write UP

Apparent difference between B2B and B2C businesses around the table with the use of digital/social media much more prevalent in B2C organisations compared to B2B. The B2C organisations strongly encouraged the B2B businesses to use digital/social media as a means of communication with their stakeholders over sustainability issues.

Twitter used extensively by B2C businesses, giving instantaneous indications of views, trends and opinions. One participant mentioned that twitter comments (?tweets) are quoted in reports to underline specific point that needs to be made internally.
For a B2C business with millions of customers and stakeholders twitter trending data is invaluable in developing insights into customer needs and opinions. This data is especially powerful when combined with targeted market research.

Twitter does pose risks requiring instantaneous response which may be made without the usual checks and balances associated with traditional media (e.g. press releases). This places significant responsibility on the individuals responding to twitter comments. The press office often assumes responsibility for twitter within organisations that may not be the most knowledgeable about sustainability issues.

Sustainability is a complex issue and a comprehensive argument is difficult to put over in a format such as twitter.
Digital media opens up the possibility to be much more imaginative with sustainability reporting and make it more interactive. A ‘light touch’ report understood by all could be posted but there would be the possibility to drill down into more detail for those who are interested.

Communications

What are the key sustainability metrics for persuading investors of the value of your sustainability strategy?

Write UP

The discussion was very interesting because it brought in a variety of different perspectives, from environmental researchers to local council representatives, strategic consultants and corporate representatives.
- Value should not only be defined as financial value. There are many different layers and dimensions: Short-term vs. long-term; financial vs. ESG, …
- Investors are also a disparate group with different needs and expectations: SRI vs. institutional vs. individual
- To meet the needs of investors, indicators need to answer three key questions: Will it help grow revenue? Will it help reduces costs? Will it help mitigate risks?
- The above three criteria (Revenue – Cost – Risk) are influenced by the following drivers which sustainability can influence: Brand differentiation; Innovation; Employee attraction and retention; Resource efficiency and productivity; Stakeholder engagement. Long-term resilience.
- Going forward, the development of sustainability performance indicators needs to focus more on exemplifying performance along the above dimensions

- PS: Focusing only on the needs of investors doesn’t give the whole picture. Communicating to others stakeholders can be a critical driver of value (Customers, regulators, NGOs,…)

It is possible to translate sustainability performance into a language and indicators that appeal to investors and conveys genuine performance, acknowledging how sustainability delivers value, both directly and indirectly. This may require making some assumptions about direct and indirect impacts, but that is how value is delivered.

Technology

The importance of accurate reporting to the Green Deal

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The Green Deal and other forms of performance contracting i.e. when the system/solution provider has to be responsible for an ongoing improvement in energy efficiency are fraught with difficulty. This discussion was intended to focus on the practicality of the Green Deal and how accurate reporting could support its implementation.

- Members were very sceptical about the whole Green Deal model
- It is not suited to the commercial building market where the private sector and market forces are more likely to drive energy efficiency improvements. However, there may be some fairly limited take-up in the residential sector
- The Green Deal is a ‘woolly concept’ and the Golden Rule is proving almost impossible to define in practical terms and therefore will hamstring the whole process. The Golden Rule states that the repayments must be less than or equal to the energy savings achieved
- Subsidies like FiTs and the Renewable Heat Incentive do work – less clear rewards like Green Deal are less influential
- Consumers still do not value energy efficiency and although energy costs are rising they are not rising dramatically enough to force clients to focus on it as a business imperative
- Reporting is directly relevant to the Green Deal and there will be a need for independent experts to provide the data
- New technologies have already made a difference and more solutions will emerge to develop the energy saving market
- The free market will create a dynamic for energy improvements not the Government
- There are plenty of buildings for the market to target as many are in such a bad state they simply must have work done and that creates an energy and renewables opportunity – go for the easier ones first
- There must be a business imperative for an energy saving programme; either a clear cost benefit or a potential new revenue stream. Sort out your business case first.

Energy Effeciency

How should you report on carbon efficiency in 2012, given the changing political fortunes of carbon?

Corporate Strategies

What should investors be looking for in sustainability strategies?

Write UP

What should investors be looking for in sustainability strategies? Sustainability should be linked to value, investors need to be informed of material sustainability issues and why they are important
A focus on one stakeholder group to the exclusion of others may mean that the key value drivers of sustainability strategies are missed. The rationale for sustainability strategies include access to governamrnt contracts and other large corporate contracts; differentation from comptetitors and risk management. Other benefits identified through key sustainability programmes over the past few years have identified improved staff morale; ability to attract best talent who buy into the company values, creating brand and reputational credibility to move in a different direction. If these benefits are harnessed they will directly influence company value.

The value and benefit of many sustainability measures are not visible on a quarter by quarter basis. In fact it is difficult for a CEO or CSO of a large corporate to have any immediate impact on quarterly results - their time horizon is of neccessity longer term. Companies need to understand the value of their sustainability strategies and communicate them in terms that their internal financial and investor community understand. This means linking the sustainability strategy to value, guiding investors as to what to expect to see by when, also educating investors on the key issues and why they are important so they have a more rounded view of what is important to business success.

Energy Policy & Strategy

What can we expect of energy policy in 2012, and how should companies be preparing?

Write UP

This roundtable considered the key policy areas that delegates were looking for progress on in 2012 and activities they are taking internally as a result. Table members comprised both end-users and generators; the policy areas we covered were: energy reduction, renewables, Green Deal and adaptation. The plenary had focussed on the need for transparency in reporting; this roundtable concluded that there was also a need for transparency, simplification and certainty in energy policy next year.


- On the CRC Energy Efficiency Scheme, the main expectations for 2012 were around the introduction of a cost of carbon and consultation on the simplification proposals. Those covered by the Scheme did not feel that the proposed changes will go far enough to rectify the damage that the u-turn on revenue recycling has done; participants are now treating CRC as a tax rather than a driver for behavioural change or a boardroom issue.
- On ROCs and FITs, it was felt that the policies around renewables are complicated and rates of return fail to provide sufficient incentive for investors, particularly now that a precedent to change tariffs at short notice has now been established. Further policy change is anticipated for 2012; attendees wondered whether other approaches e.g. reducing national insurance contributions could be more effective at encouraging renewables.
- On the Green Deal, attendees raised queries about the current consultation and the way that the scheme has been designed. Although clarification of these issues is expected in 2012, attendees were not convinced that this will be enough for the Green Deal to deliver; the outstanding uncertainty and pitfalls may make other financing options preferable.
- On climate change adaptation, attendees discussed a gap in standards for, and so the consistency of, establishing, prioritising and reporting the risks that climate change presents. Organisations typically engage a different group of people to tackle adaptation than to respond to the policies above which will affect the way that a company prepares.
- Key asks for energy policies in 2012 were consistency, certainty and simplification.
- Attendees also expressed a need for greater transparency around energy pricing, including expected long term prices, so that organisations can plan effectively and incorporate future price profiles into business cases.
- In preparing to deal with policy uncertainty and the changes anticipated, organisations are considering how to quantify the risks, how to explain them, how to communicate them and how to gain buy-in so that action is taken.
- Some positive, advances are anticipated in 2012; for instance the RHI which recently opened for applications.

Energy Effeciency

How to demonstrate the resource efficiency and security opportunity for your business and value your current efficiency intiatives.

Write UP

Discussion focused on the drivers for a company to improve its resource efficiency and the links between strategic and operational drivers. The table concluded that improvements will only be pursued if they are integrated within that business’s ordinary business practice, that they are primarily driven by operational imperatives (rather than the investor or consumer), and that there is no one-size-fits-all approach to metrics or prioritising areas for improvements.


- The focus of investors is on profitability and often they will not focus on metrics of resource use unless something goes wrong that draws their attention to this as a risk.
- Businesses have to integrate resource efficiency into day-to-day operations – if it doesn’t make business sense it won’t be done. But this doesn’t just mean financial sense – consumer and investor perceptions are important, as are security of supply and competitive advantage.
- Business risk and security of supply is increasingly important in focusing corporate attention on resource use, and can be used to help justify longer-term investment decisions (i.e. where payback is greater than 3-5 years).
- Because environmental resources aren’t properly valued in product prices, not only are there not always drivers to make improvements but the indicators that are appropriate are different in different parts of the world.
- There aren’t always strong business cases for some of these things – sometimes it is a matter of faith and a senior person to drive change from the top.
- It’s important to be able to measure an impact even if you can’t easily put a financial value on it. Water is much harder to value than carbon, for example, but water impacts are much easier to see and tackle locally.
- Consumers care about sustainability until you add the cost of it onto the price of a product – they don’t walk the talk. Businesses at the lower end of the market feel this pressure most of all – the cost of using Fair Trade cotton can double the price of a cheap t-shirt for example.
- Businesses can actually make significant changes without any consumer pressure. In fact using consumer concerns as a driver can cause problems because their position on issues can change quite quickly.
- Pressure for resources will escalate massively in the coming years. Your competitor won’t necessarily be in the same industry as you but they will be using the same raw materials.
- Reputational damage is a driver. Nowadays you really need to watch what’s going on in social media as a reputation can be damaged globally in seconds.
- You have to get the finance guys on your side.
- A good sustainability performance is important for recruitment and retention of good people.
- Sustainability has to be core to business practice and embedded in staff actions.
- It’s important to look at the overall footprint of a product or service to help determine priorities and avoid expending effort on resource savings which may be “obvious” but are actually insignificant.

- A focus on resource efficiency is a core part of good business practice for the most successful businesses, not a bolt on.
- Actions to tackle resource use are generally driven from within the company by reason of operational efficiency and not by external pressures from consumers or investors
- The drive has to come from the very top of an organisation. There may not always be a proven business case to do something differently so sometimes the business case must be made during implementation and this requires a leap of faith and/or a clear perspective on longer term business risks.
- No one size fits all in terms of indicators or interventions.

Corporate Strategies

What should investors be looking for in sustainability strategies?

Write UP

What should investors be looking for in sustainability strategies? Sustainability should be linked to value, investors need to be informed of material sustainability issues and why they are important
A focus on one stakeholder group to the exclusion of others may mean that the key value drivers of sustainability strategies are missed. The rationale for sustainability strategies include access to governamrnt contracts and other large corporate contracts; differentation from comptetitors and risk management. Other benefits identified through key sustainability programmes over the past few years have identified improved staff morale; ability to attract best talent who buy into the company values, creating brand and reputational credibility to move in a different direction. If these benefits are harnessed they will directly influence company value.

The value and benefit of many sustainability measures are not visible on a quarter by quarter basis. In fact it is difficult for a CEO or CSO of a large corporate to have any immediate impact on quarterly results - their time horizon is of neccessity longer term. Companies need to understand the value of their sustainability strategies and communicate them in terms that their internal financial and investor community understand. This means linking the sustainability strategy to value, guiding investors as to what to expect to see by when, also educating investors on the key issues and why they are important so they have a more rounded view of what is important to business success.

Energy Policy & Strategy

What can we expect of energy policy in 2012, and how should companies be preparing?

Write UP

This roundtable considered the key policy areas that delegates were looking for progress on in 2012 and activities they are taking internally as a result. Table members comprised both end-users and generators; the policy areas we covered were: energy reduction, renewables, Green Deal and adaptation. The plenary had focussed on the need for transparency in reporting; this roundtable concluded that there was also a need for transparency, simplification and certainty in energy policy next year.

- On the CRC Energy Efficiency Scheme, the main expectations for 2012 were around the introduction of a cost of carbon and consultation on the simplification proposals. Those covered by the Scheme did not feel that the proposed changes will go far enough to rectify the damage that the u-turn on revenue recycling has done; participants are now treating CRC as a tax rather than a driver for behavioural change or a boardroom issue.
- On ROCs and FITs, it was felt that the policies around renewables are complicated and rates of return fail to provide sufficient incentive for investors, particularly now that a precedent to change tariffs at short notice has now been established. Further policy change is anticipated for 2012; attendees wondered whether other approaches e.g. reducing national insurance contributions could be more effective at encouraging renewables.
- On the Green Deal, attendees raised queries about the current consultation and the way that the scheme has been designed. Although clarification of these issues is expected in 2012, attendees were not convinced that this will be enough for the Green Deal to deliver; the outstanding uncertainty and pitfalls may make other financing options preferable.
- On climate change adaptation, attendees discussed a gap in standards for, and so the consistency of, establishing, prioritising and reporting the risks that climate change presents. Organisations typically engage a different group of people to tackle adaptation than to respond to the policies above which will affect the way that a company prepares.
- Key asks for energy policies in 2012 were consistency, certainty and simplification.
- Attendees also expressed a need for greater transparency around energy pricing, including expected long term prices, so that organisations can plan effectively and incorporate future price profiles into business cases.
- In preparing to deal with policy uncertainty and the changes anticipated, organisations are considering how to quantify the risks, how to explain them, how to communicate them and how to gain buy-in so that action is taken.
- Some positive, advances are anticipated in 2012; for instance the RHI which recently opened for applications.

Resource Efficiency

How to demonstrate the resource efficiency and security opportunity for your business and value your current efficiency intiatives

Write UP

Discussion focused on the drivers for a company to improve its resource efficiency and the links between strategic and operational drivers. The table concluded that improvements will only be pursued if they are integrated within that business’s ordinary business practice, that they are primarily driven by operational imperatives (rather than the investor or consumer), and that there is no one-size-fits-all approach to metrics or prioritising areas for improvements.


- The focus of investors is on profitability and often they will not focus on metrics of resource use unless something goes wrong that draws their attention to this as a risk.
- Businesses have to integrate resource efficiency into day-to-day operations – if it doesn’t make business sense it won’t be done. But this doesn’t just mean financial sense – consumer and investor perceptions are important, as are security of supply and competitive advantage.
- Business risk and security of supply is increasingly important in focusing corporate attention on resource use, and can be used to help justify longer-term investment decisions (i.e. where payback is greater than 3-5 years).
- Because environmental resources aren’t properly valued in product prices, not only are there not always drivers to make improvements but the indicators that are appropriate are different in different parts of the world.
- There aren’t always strong business cases for some of these things – sometimes it is a matter of faith and a senior person to drive change from the top.
- It’s important to be able to measure an impact even if you can’t easily put a financial value on it. Water is much harder to value than carbon, for example, but water impacts are much easier to see and tackle locally.
- Consumers care about sustainability until you add the cost of it onto the price of a product – they don’t walk the talk. Businesses at the lower end of the market feel this pressure most of all – the cost of using Fair Trade cotton can double the price of a cheap t-shirt for example.
- Businesses can actually make significant changes without any consumer pressure. In fact using consumer concerns as a driver can cause problems because their position on issues can change quite quickly.
- Pressure for resources will escalate massively in the coming years. Your competitor won’t necessarily be in the same industry as you but they will be using the same raw materials.
- Reputational damage is a driver. Nowadays you really need to watch what’s going on in social media as a reputation can be damaged globally in seconds.
- You have to get the finance guys on your side.
- A good sustainability performance is important for recruitment and retention of good people.
- Sustainability has to be core to business practice and embedded in staff actions.
- It’s important to look at the overall footprint of a product or service to help determine priorities and avoid expending effort on resource savings which may be “obvious” but are actually insignificant.

- A focus on resource efficiency is a core part of good business practice for the most successful businesses, not a bolt on.
- Actions to tackle resource use are generally driven from within the company by reason of operational efficiency and not by external pressures from consumers or investors
- The drive has to come from the very top of an organisation. There may not always be a proven business case to do something differently so sometimes the business case must be made during implementation and this requires a leap of faith and/or a clear perspective on longer term business risks.
- No one size fits all in terms of indicators or interventions.

Plenary roundtable - 1

How do you report in an era of transparency?

Plenary roundtable - 2

How should organisations measure the profit contribution of a sustainability programme? Chaired by Adam Elman, M&S

Venue Detail

Bank of America Merrill Lynch: King Edward Hall

King Edward Hall | 2 King Edward Street | London | EC1A 1HQ

Directions

Bank of America's offices are a very short walk from St Paul's tube station (Central Line). Exit the station at Cheapside/Newgate Street. Go past the BT centre, with it on your right-hand side and take the first available right down Edward Street. Continue down this road for 80m and the entrance to the venue is on your left-hand side.

Do not go to the main reception desk at their offices when you arrive. You are looking for an entrance that leads you directly into the King Edward Hall.