Closing the context gap: sustainability reporting is failing us

This article was first published on the Guardian Sustainable Business Blog on April 9, 2013.

Sustainability reporting has only shown which companies are “less bad” when what we really need is a minimum standard

When Deloitte Netherlands published the results of its first zero impact growth monitor (ZIG-M) last year, the press and social media response was overwhelmingly positive. Finally, a methodology to measure the quality of a company’s performance against a “north star” benchmark. And where zero impact growth is not seen as the end point of sustainability, but as the minimal target that all industries, with support from civil society and governments, need to maintain human well-being.

If zero impact growth is to be seen as the gateway to a green and inclusive economy, any adaptation plan must involve parties sharing a world view and accepting their specific roles and responsibilities. Instead of the vertical silo-per-silo perspective shown in the first version of the World Business Council for Sustainable Development’s Vision 2050, a more horizontal process would instigate cross-fertilisation and innovation between industries, still the most untapped resource given the potential of new technologies, ongoing innovation in IT and the availability of big data.

Lack of minimum standards

Most of the technology we need to survive as a human race on a finite planet has already been developed, it’s the human brain that needs a higher level of consciousness to understand how to use it. A north star approach, starting with zero impact growth would be a systemic and culturally-adapted start towards a net-positive impact world. If we can fly to the moon, we should be able to agree on how to safeguard our very own existence.

Apart from various gaps that the ZIG-M showed, one aspect became clear – information available through sustainability reports and websites only tells us who is less bad. We seem completely in the dark when it comes to knowing what is minimally good enough. A north star benchmark like zero impact growth would allow exactly that – a good context of sustainability performance, balancing both reduction of negative impacts and increase of positive impacts.

And why don’t we read more about sustainability context and long-term targets, legacies and scenarios in sustainability? The inconvenient truth is because companies often don’t have them, don’t want them, and sometimes hate them given the accountability pressure involved. There are more than enough excuses offered: an increasingly complex world, changing industry landscapes, a shift in world trade, disruptions in the financial markets, the unforeseen reactions from stakeholders, the list continues.

Wriggling out of full sustainability reporting 

The most used reporting framework, GRI 3/3.1, allowed companies to sneak away from sustainability context through the simple use of legal boundaries for their reports, meaning that impacts in the value chains, both up and downstream, remained out of scope over the years. Also, when G3 was released, GRI itself was not able to agree on at least a couple of indicators that would inhale micro-macro comparisons (the performance of an organisation against all sorts of planetary limits and/or aspects of well-being). What we have and will continue to have, are efficiency-driven relative indicators, good enough for rankings and ratings, but less useful to put the individual performance into the necessary context.

While we need to acknowledge that GRI at the time of the release of G3 guidelines simply wasn’t able to deliver indicators that allowed for more contextual information (all indicators must be globally applicable and globally accepted to be used in the guidelines), there was hope that with the forthcoming G4 guidelines the sustainability context gap could be closed. Unfortunately, GRI’s work on the indicators was limited mainly to the areas where alignment to other international standards was necessary.

Surprisingly enough the draft G4 guidelines didn’t present any context-based indicators in areas like carbon, water, biodiversity; areas in which the outcomes of the work of the Global Footprint Network or TEEB would have been given considerable backbone, considering their work as globally accepted and applicable as well. Also, on the social side, while the Ruggie framework is now built in, the indicators don’t reflect sustainability context. GRI has all the instruments built into the reporting process to start with impact and/or context-based indicators – the boundary setting, the disclosures on management approach, the omissions option, the multi-year target-setting option (allowing companies to start small and then take the learning to scale). None of that was taken into account. Looking at the urgency with which certain sustainability issues have to be solved, we now need to ask the question: what do we do with a new generation of GRI guidelines, given that they will be in place until 2020, and with no prospect in sight for further revisions that will finally close the sustainability context gap?

Putting sustainability context into reporting

There is the argument that sustainability context would be too difficult to implement through indicators. Well, heavyweights in sustainability reporting, management and governance areas have shown the GRI in their response to the G4 draft public comment period how it can work, using carbon and water as examples. We shouldn’t be ridiculed by the cynics that argue there’s no sense in knowing that company X exploits 0.0000000000001% of the world’s freshwater resources. Clearly sustainability context can be global, but it’s also regional and local. So far, the Sustainability Context Group has not received any answer from GRI on how they plan to respond to that essential challenge.

Who will now pick up the challenge of inserting sustainability context inclusion into reporting? Recently, the Global Initiative for Sustainability Ratings (GISR) opened to public comment on framework principles, and “context” is included in principle 12: “Context – A ratings framework should assess performance within the wider context of the company’s sustainability impacts at various geographic scales, referencing widely accepted thresholds, limits, targets or norms applicable to such impacts.”

What counts for a rating framework also counts for reporters, and it remains to be seen if GISR will support the principle through feasible indicators, a promise that GRI hasn’t been able to deliver on so far.

Ralph Thurm is the founder and managing director of A|HEAD|ahead, a management consultancy. Thurm is also one of the founders of the ThriveAbility Consortium; he tweets at @aheadahead1.