The Amsterdam Global Conference on Sustainability and Transparency 7-9 May, 2008

Conference Report

Table of Contents

• Opening Plenary: The Critical Dimensions of Sustainability Reporting Today,

p.2

• Plenary: The Users’ Take on Sustainability Reporting Today - The Launch of

the Global Readers’ Survey Report, p.8

• Forum: SMEs and Supply Chain Reporting, p.10

• Arena Debate I: Civil Society and Labor Union’s Views on Sustainability

Reporting Today, p.11

• Forum: Selecting Relevant Indicators, p.12

• Academic Session - Carbon Disclosure, p.14

• Arena Debate II: Financial Market Views on Sustainability Reporting Today,

p.15

• Forum: Assessing Reports and Assurance, p.17

• Forum: Climate Change, p.18

• Academic Session: Stakeholder Engagement and Reporting Relevance, p.19

• Arena Debate III: Business Management and Corporate Governance Views

on Sustainability Reporting Today, p.20

• Forum: Sustainable City Management, Accountability and Reporting, p.22

• Forum: New Reporting Formats, p.22

• Academic Session - NGO Accountability, p.23

• Arena Debate IV: The Global Debate on Sustainability Reporting, p.25

• Academic Session: GRI as an Institution, p.27

• Forum: The Role of Governments - Policy and Accountability, p.27

• Forum: The Value of Sustainability Reporting for Investors, p.29

• Forum: Employee Motivation and Commitment, p.30

• Forum: What Readers Want: Practical Lessons from the Readers’ Choice

Awards, p.31

• Closing Plenary: What’s Next for Sustainability Reporting? p.32 For podcasts: http://www.globalreporting.org/NewsEventsPress/Conference2008/Podcasts/

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Wednesday 7 May Opening Plenary: The Critical Dimensions of Sustainability Reporting Today Master of Ceremony: Ernst Ligteringen, Chief Executive, Global Reporting Initiative Speakers: Job Cohen, Mayor of Amsterdam Mervyn E. King, Chairperson, Global Reporting Initiative Her Majesty Queen Rania Al-Abdullah of Jordan Bert Koenders, Development Cooperation Minister, The Netherlands Rajendra K. Pachauri, Director General, The Energy and Resources Institute (TERI) & Chairman, Intergovernmental Panel on Climate Change (IPCC) Cynthia Carroll, CEO, Anglo American Antônio Sérgio Oliveira Santana, Executive Manager, Petrobras GRI Chief Executive, Ernst Ligteringen, warmly welcomed the more than one thousand participants to the conference, noting that this was the second global GRI conference to be held in Amsterdam since the organization was established in the city in 2002. Job Cohen then officially welcomed participants in his capacity as Mayor of Amsterdam. Turning directly to the theme of the conference, he stressed the importance of placing sustainable development - people, planet, and profit - at the forefront of public policy. Looking at future sustainability challenges, he suggested that any city that wanted to play a global role would have to have a robust sustainability policy. This was one of the reasons why the City of Amsterdam had set itself the goal of being climate neutral by 2015 and was engaged in sustainability reporting. Mr Cohen then went on to identify some of the many initiatives Amsterdam was taking to reduce greenhouse gas emissions. These included: working with housing corporations to help citizens save energy; working with municipal services to measure and report on sustainability aspects (CO2, water, waste, transportation); using combustible waste to produce heating for district buildings; increasing freight by water and rail; and working with the IT sector to improve energy efficiency. Another initiative would be to create an ‘environmental zone’ in the city centre which would restrict movement by vehicles with high emissions. Sustainability reporting was important, he said, because it inspired both readers and authors to come up with new ideas, and to share these with other communities around the world. If we were to be successful in tackling climate change and other sustainability concerns, cities needed to emulate the successful initiatives, and learn from the unsuccessful ones. The Chair of the GRI Board, Mervyn King, then gave a short history of GRI’s development over the last decade. From a small joint initiative by CERES and UNEP in 1997, it had evolved to an organization which had issued thousands

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copies of its G3 Guidelines since their release in October 2006. There were now thousands of CSR or sustainability officers in companies, and reports using the GRI had become a requirement for companies owned by the Swedish government. In short, GRI was now playing a central role in the sustainability agenda.

For him, the power of the GRI lay in the fact that it responded to the vital need for a clear framework to establish dialogue with stakeholders. This dialogue was the defining characteristic of GRI. Businesses and other organizations could no longer afford to rely on just short-term financial data. It was now essential to look at social,

governance and economic issues – ‘warts and all’. The concept of ‘stakeholder’ had broadened to include researchers, investors, business, regulators, and activists. In this context, GRI played an important role in standardizing transparency, building trust and helping organizations to look ahead. Reporting, transparency and accountability were, in the view of Queen Rania Al-Abdullah of Jordan, ‘signature issues’. Past criticisms of sustainability reporting had themselves become ‘unsustainable’ she suggested. The Queen applauded GRI for helping organizations move from promises to performance. She went on to describe how companies could profit by creating solutions to social and environmental issues because transparency and accountability helped build integrity and trust, brand recognition and competitive edge. Markets were rewarding the more sustainable companies by buying their products, recommending them to friends, and investing in them: ‘Being a company with a conscience is cool’. Building on this, Queen Rania reminded participants of the ‘yawning gaps’ which existed around the world: in social and economic conditions, human rights and on environmental protection. Noting that our conscience should be our compass, she urged that sustainability efforts be also guided by global compassion. In her region, the challenges were stark. Sixty percent of the population was under thirty years of age. Six million children, many of them girls, were not in school. Five million new jobs needed to be created each year

to prevent growing unemployment. She was proud, however, that the Arab business world was now responding. While sustainable development still remained more of a concept than a culture, sixteen Arab businesses had recently announced the commencement of GRI reporting. An ‘Arab Sustainable Leadership Group’ (ASLG) had been established, and a project initiated to develop a responsible competitiveness index for the region. The Jordan River Foundation had become the first NGO in the region to produce

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a GRI report. Pointing to the low-cost, high-benefit initiatives of creating educational opportunities for children, she urged the private sector to let global compassion be its guide in building new and sustainable markets. ‘What you do after writing your sustainability report is most important’, she concluded. Quoting from The Police song ‘Every step you take’, Bert Koenders, Netherlands Development Cooperation Minister underscored the heightened transparency expectations facing modern organizations. ‘Every step you take, every move you make’, someone would be ‘watching you’. While GRI was certainly not the stalker featured in the song, it had been a ‘magnificent initiative’ in creating greater awareness about and transparency on sustainable development. With over one thousand five hundred organizations worldwide now using the GRI Guidelines, the Dutch government was proud to support GRI financially. Finance alone, however, would not be enough to solve poverty or sustainable development problems. Solving these complex problems would take a collective effort, involving business, governments, and NGOs. Pointing to a number of business/NGO partnerships, he called for greater effort to increase dialogue and cooperation on sustainability themes. GRI had shown that it was possible to bring many different players to the table. Climate change was a particularly pressing issue, where past experience was of limited value, and radical new approaches would be required. In this context, Mr Koenders encouraged enhanced reporting, dialogue and transparency. Reporting provided benchmarks for assessing the quality of sustainable reports, and created a positive stimulus for companies to identify best practices, compare results and ‘raise the bar’. Reporting also promoted dialogue based on accountability, which built trust. Dialogue around sustainability, as distinct from mere criticism, offered a unique chance for collaboration to bring about real results. One specific area where further attention was needed was the UN Millennium Development Goals (MDG). His government was working with the Dutch NCDO organization on a pilot ‘MDG scan’ to help companies measure their contribution to these important goals. The first part of the opening plenary concluded with a live presentation from New Delhi by Dr. Rajendra Pachauri, Chair of the Intergovernmental Panel on Climate Change (IPCC) and Director General of The Energy and Resources Institute (TERI). Summarizing the findings of the fourth IPCC Assessment Report, Dr. Pachauri said that the warming of the climate system was unequivocal. Moreover, this was ‘very likely’ the result of human actions. Projections for the future looked grim. The low end scenario saw a temperature increase this century of 1.8 degrees Celsius. The high end scenario could involve a 4 degree increase. These projections implied major impacts on sea level, fresh water availability, human

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health and extreme weather events. More flood and droughts were expected, as well as extinctions of more species. There would be ‘enormous negative effects’ and it was ‘in the interest of the human race to mitigate them’ as far as possible. Emissions could not be allowed to increase after 2015 if abrupt and irreversible climate change was to be avoided. There was, however, some good news. Mitigation had ‘co-benefits’, including positive impacts on poverty alleviation. The total cost of mitigation need not be high: an additional 0.12% of global GDP each year would be required. This would not exceed 3% of GDP by 2030. Mitigation policies would create new jobs, provide energy security, make buildings more energy efficient, provide better public transport, and generally encourage human behavior and lifestyles to move in the right direction. A key policy in achieving mitigation would be putting a price on carbon. ‘The world’, Dr Pachauri cautioned, ‘was pursuing a path of growth and development that is unsustainable’. Not just governments, but human society as a whole needed to change its values in order not to increase its carbon footprint. He concluded by citing Gandhi’s wisdom that one needed to ‘be the change you want to see’. In a round of questions that followed his presentation, Dr Pachauri:

• Agreed that the challenge of preventing further increases in emissions after was 2015 was daunting, but held out hope that new technologies such as carbon capture and storage could be scaled up rapidly.

• Argued in favor of voluntary emissions reporting

by companies, using standards developed jointly by industry, government, academia, and NGOs. Measuring energy intensity was also a tool.

• Recognized the importance of a strong Indian contribution to measures

on climate change, and noted that the government would be coming out with a climate change policy shortly. He said it would be illogical to expect India to accept any commitments until developed countries had themselves reduced emissions as promised. If developed countries took the lead, emerging market economies would follow.

• Suggested that human behavior could be best changed through greater

government investment in infrastructure. The Netherlands was a great example of people using bicycles for transportation. However more public pressure was needed to counter vested interests.

Following a refreshment break, the opening plenary session continued with a presentation by Cynthia Carroll, the Chief Executive Officer of Anglo American. Ms. Carroll took as her theme the importance of integrating sustainability aspects into the business as a whole. Companies couldn’t expect to maintain their license to operate without being accountable. At Anglo American,

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sustainable development was ‘ingrained in everything that we do’. The main areas of focus were on improving stakeholder engagement, energy efficiency, education and training, safety and water usage at mining locations. Among the Anglo American initiatives profiled by Ms Carroll were:

• Participation in an extensive stakeholder engagement programme using third party intermediaries.

• Initiating an annual process to monitor social and ecological impacts at

60 sites in 16 countries. The process concludes with the publication of a report to stakeholders to demonstrate Anglo American’s accountability. Since this process began five years ago, it had been reviewed and developed further to be made more intensive.

• Supporting an antiretroviral therapy (ART) programme, which also

provides HIV counseling, education and testing for employees in developing countries.

However there were limits to what business could do alone. Governments had a key role to play in providing a sound regulatory framework. While her company was proud of its achievements, as with all sectors there was room for improvement within the mining industry. ‘The mining industry,’ she concluded, ‘needs to do much more with engaging labor unions, working with governments and the myriad of organizations that make up society, not just non-governmental organizations’. The role and responsibilities of the extractives sector was also the subject of remarks by Antônio Sérgio Oliveira Santana, Executive Manager of Petrobras. His company recognized, he said, that climate change was the result of human action. Everyone in society had an important role to play in achieving sustainable development. Since Petrobras began reporting with the GRI Guidelines in 2002, it had noticed an evolution in reporting. Not only had sustainability reporting become more mainstream, there was a wider recognition that ‘the reporting process can be used by management to provide action plans, and support the development of indicators to measure the outcomes’. In closing the plenary session, GRI Chief Executive Ernst Ligteringen suggested that in considering the future of the world humankind needed to ask itself the question ‘What are we going to do tomorrow?’ Reporting had a vital role to play. This went beyond the axiom ‘what gets measured gets done’. Activities that get measured took on a different quality and meaning. Reporting was the beginning of increased knowledge and empowerment, and an exploration of the true meaning of sustainability. Here, the GRI had a unique role to play. The GRI:

• Aimed to help global learning with a universal framework

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• Took in multiple views, changes and evolution of sustainability practices • Was a learning network, and • Had the help and backing of thousands of individuals from diverse

backgrounds. He noted that while the 2006 conference had focused on the business case for sustainability reporting, this conference would focus on creating a common

platform to contact the readers and obtain valuable feedback and informative perspectives to improve the GRI Guidelines. ‘After all,’ he concluded, ‘a good sustainability report is a means to an end … and can’t make a change unless it is read and used’. Thanking the high-level speakers, Ernst then closed the first day’s session and invited participants to join him, fellow Board members, staff and other GRI office bearers at the Gala Dinner and Readers’ Choice Awards ceremony to be held that evening.

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Thursday 8 May Plenary: The Users’ Take on Sustainability Reporting Today - The Launch of the Global Readers’ Survey Report Speakers: Sophia Tickell, Chair, SustainAbility Wim Bartels, Chair, KPMG Global Sustainability Services Panelists: Jeremy Hobbs, Executive Director, Oxfam International Guy Ryder, General Secretary, International Trade Union Confederation Robert Rubinstein, Head of Brooklyn Bridge – TBLI Group Björn Stigson, President, World Business Council for Sustainable Development;

Member, Board of Directors, GRI Jo Confino, Executive Editor, The Guardian Chair: Ernst Ligteringen, Chief Executive, Global Reporting Initiative The centerpiece of the session was the first public release of a survey of sustainability report readers. Entitled ‘Count me in: The readers’ take on sustainability reporting’; the survey was conducted jointly by KPMG and SustainAbility and covered almost 2300 readers and non-readers from around the world. Introducing the report, Wim Bartels gave the top line findings. Five key themes had emerged from the survey. The themes were: impact, stakeholders, core business, commitment, and trust. Of the readers group:

• 9 out of 10 considered that sustainability reports made a difference to their views and perceptions of a reporter

• 9 out of 10 stakeholders wanted to know more about who was engaged, and what the impacts were

• 8 out of 10 readers wanted to see a link between business strategy and sustainability

• Readers generally wanted to see both ‘good’ and ‘bad’ news, and believe reporters are likely to omit failures from reports

• A majority of readers fell assurance is important, both on sustainability reports and performance

• Two thirds of readers considered the GRI Guidelines to be the most important reporting framework.

‘Non-readers’ appeared not to read reports for three reasons, Mr Bartels continued. Either they had no time to navigate complicated websites or reports, were not aware of the value of reports or didn’t know how to use them, or they preferred to use other means to gauge a company’s performance. These included making direct contact with a company, using media sources, and asking contacts. The main result that could be taken from non-readers was that they needed convincing of the value to sustainability reporting.

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By and large, respondents wanted to know with whom the reporters engaged and how they do it, and wanted to see the views of critical stakeholders in the report. They also wanted to see how the feedback affected change in all levels including management, and a clear link to business strategy. Interestingly, there were no striking differences between the responses from civil society and business on this theme. Mr Bartels noted that the survey results would be made available digitally to all conference participants for their interest. Based on interest shown already, there were plans to undertake

another survey in the future. As a joint author of the report, Sophia Tickell said that SustainAbility had observed a complete transformation in business interest in sustainability reporting over the last eighteen months. A ‘huge’ development had been a renewed interest in the original wider meaning of ‘sustainability’, as distinct from ‘business sustainability’. Rather than just reporting on past activities and events, reports were now being used to set agendas and strategic goals, or as ‘a statement of ambition’. They described not so much where a company had been but where it wanted to end up. This seemed to reflect a desire to use reports to stand out as part of a re-branding or strategic re-positioning exercise. Following the introductory remarks the panelists were invited to share their thoughts. There was broad agreement in the panel discussion that:

• Sustainability reporting was important and should be continued • GRI was the ‘de facto standard’ in the market place • The current quality of reports was patchy and had to be improved if

reports were to be credible • Reports needed to ‘let in’ more diverse and dissenting voices • Independent assurance was also important to credibility.

Looking more widely, however, concerns were expressed about how far sustainability reporting could hope to address the scope and magnitude of the challenges ahead.

• Jo Confino argued that major change was urgently needed. This would require passion and intention, and ‘intention equals results’. There was a risk that sustainability reporting did not inspire deep change, but could become a dry bureaucratic diversion.

• Jeremy Hobbs stressed that sustainability reporting was a ‘floor, not a ceiling’. It seemed unlikely that

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all the organizations that needed to report, on all the data needed, would do so without regulation.

• Guy Ryder pointed to the danger that selection of indicators could define the agenda. This could result in approaches that were ‘sustainable’ in some respects only. As unions had experienced, there was often only a ‘tenuous’ connection between what reports said and what employees saw in the workplace.

• Robert Rubenstein reminded participants that for all the new non-financial data, financial data remained of paramount importance to business. He also noted that the issue of stranded assets was preventing companies from moving away from unsustainable practices.

• Björn Stigson underlined the management’s responsibility to report material information to shareholders, and the limits of adopting a ‘one size fits all’ approach. Legal and competitive factors also placed constraints on what was disclosed. Reporting would mainly be done if it improved a company’s competitiveness.

Forum: SMEs and Supply Chain Reporting Chair: Thomas Dodd, European Commission Panelists: Anna Fuster, Lavola Angels Cobo Puig, Cooperative Escaler Stefan Seidel, Puma William Hughes, Impahla South Africa Jurgen Hoppenbrouwers, Deloitte Consulting That Small and Medium-sized Enterprises (SMEs) faced unique challenges and opportunities in relation to sustainability reporting was a common theme throughout the forum discussion. The general sense was that the main challenges facing SMEs were the limited time, resources, and capacity that could be allocated to sustainability performance and reporting. There was often insufficient data collected, and SME managers were often unskilled in sustainability communication. Consultants were identified as a helpful and often necessary resource in this context.

Against this, however, there was a rising demand for sustainability information and transparency in the supply chain. Often driven by supply chain requirements from large corporate customers, the

measuring and reporting of social, economic and environmental performance was an increasingly important issue for SMEs. Many opportunities were available to the SMEs who produced sustainability reports. Besides the obvious benefits of brand enhancement and a better reputation, SMEs had noticed that

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sustainability reporting raised management awareness of waste levels and potential efficiency gains. SMEs in the transportation sector had found savings in fuel, maintenance, and labor costs by optimizing transportation opportunities. Social enterprises reporting saw reporting as a way to communicate their special values of their business model. Perhaps the biggest benefit to be had was the competitive advantage to be gained by differentiating the company through reporting and gaining awareness of global sustainability challenges. It was suggested that as multinational enterprises developed their own sustainability supply chain strategies, the SMEs that could meet these requirements and offer their own sustainability reports would prosper. Puma provided a good case and shared their view that suppliers can and should be supported to take their own responsibility to create transparency in the supply chain. This idea was embraced by several of their suppliers in South Africa and one supplier Impahla shared its challenges and opportunities with reporting at the session. In subsequent discussion, there was wide agreement within the audience that sustainability reporting was a growing trend within the SME sector, and that reporting could benefit SMEs as much as large corporations. There was also a general consensus that the social and environmental requirements of large buyers would have an increasingly significant impact on the sustainability performance of their suppliers. Arena Debate I: Civil Society and Labor Union’s Views on Sustainability Reporting Today Moderator: Mishal Husain, international broadcaster Panelists: Kumi Naidoo, Secretary General, CIVICUS: World Alliance for Citizen

Participation, Member, Board of Directors, GRI Filippa Bergin, Executive Secretary, Amnesty Business Group, Amnesty Sweden Malini Mehra, Founder and Director, Center for Social Markets Anita Normark, General Secretary, Building and Wood Workers’ International Wendy Arenas-Wightman, Representative, AVINA Columbia Gerd Leipold, Executive Director, Greenpeace International Building on the Users’ Take plenary session, this session focused on the perspectives of civil society. By and large, panelists agreed that GRI reports had an important role to play as an instrument for communicating non-financial information. Although reports were used to varying degrees, they could be excellent tools, particularly if all the material information was available. Although the external audience was relevant, a key element of the reporting process was internal management. Reporting was a way of promoting organizational change and innovation, and helping inform the policy setting agenda. As Malini Mehra noted, ‘There are lots of us (civil society organizations) that use information from reports. The bigger

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question is: Who is the audience? Sustainability reporting needs to be done for itself … for employees and consumers’. On the question of whether NGOs should also do sustainability reporting there were mixed views. Anita Normark’s view – that ‘when it comes to implementation, it cannot be solely up to the private sector’ – was generally agreed. All organizations should be transparent about their impacts and policies. However, the point was made that the issue of proportionality was also relevant. Several speakers argued that it was misleading and morally wrong to expect an NGO to meet the same standards of reporting as a large multinational company. Nonetheless, as Malini Mehra observed, NGOs needed to ‘lead by example’. Not all reports were good, however. Pointing to the common use of bright colors and pictures of nature, Gerd Leipold said that some companies gave the impression that they were ‘working in the Garden of Eden’. In reality, all the leading ecological indicators showed seriously negative trends. Most reports did not address this context, and data commonly showed increasing environmental degradation and greenhouse gas emissions. Reports should not be sustainable in name only. Building on this theme, Kumi Naidoo thought there was ‘a unique opportunity right now to make progress, as the global poverty agenda and global climate change agenda begin to find some common ground’. High quality reporting could be a tool for positive change. The role of governments in encouraging increased sustainability reporting was seen as crucial. There was a sense that governments were not sufficiently engaged in sustainability reporting. Governments needed to provide greater leadership, through mandating reporting, or by doing reporting themselves. It was noted that a small number of countries, including Sweden and China, were now beginning to require reporting. Forum: Selecting Relevant Indicators Chair: Aditi Haldar, Confederation of Indian Industry Panelists: Christian Berg, SAP Guillermo Catalan, Caja Navarra Eli Bleie Munkelien, DNV This session was primarily aimed at gaining insight into the process of how to select relevant indicators to report on an organization’s CSR performance. The session consisted of three presentations, followed by a round of questions and discussion.

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It was common ground that the selection of relevant indicators was not an easy or clear cut process. Rather, it was a dynamic learning process which was enhanced by consulting stakeholders and involving CSR experts from the relevant sector. The process of searching for relevant indicators could itself lead to the emergence of more appropriate indicators. Moreover, one could not just focus on quantitative indicators. In most cases these needed to be supplemented by qualitative indicators if readers were to get a complete view on a corporation’s performance. Surveys could also be useful in this context. Drawing on the business model of the Caja Navarra, a Spanish saving bank, Guillermo Catalan described the bank’s approach to ‘civic banking’. The bank had no shareholders, and sought to direct all profits to society. Civic banking implied a radical change in the relation between banks and its customers. Customers had the right to know in detail - and have a say in - how their money was invested. The bank’s performance indicators included the number of customers involved in decision making, the number of projects that were financed through its participatory mechanism, and the number of hours their employees volunteered in the projects financed by the bank. Christian Berg saw several possible ways of selecting relevant indicators. These included setting up a CSR expert advisory group to assist in the selection of appropriate indicators and to discuss these issues in a sector-wide context. Modern technology also allowed for interactive stakeholder dialogue, using a ‘Wikipedia’-like interface in which virtually anyone could participate. These processes had enabled his organization to identify key focal points. For her part, Eli Bleie Munkelien considered the selection of relevant indicators to be a matter of appropriate mapping of risks and opportunities. The challenge was to find material issues in which the organization could move beyond compliance, and combine both value drivers and stakeholder desires. Indicators were only relevant if the stakeholders considered them as important. Interaction with them was crucial for this reason. A key stakeholder group not to be overlooked was the employees. Reporting should be done with an eye on what people internally found important. Group discussion addressed several issues, including:

• Quantitative/qualitative indicators: Quantitative indicators alone were insufficient. Performance could not be measured by numbers alone, but needed to reflect the broader aspects. This implied the necessity to include seemingly immaterial indicators, reported in a narrative manner. Numbers could never reflect an organization’s core values, intentions and activities.

• Leading/lagging indicators: Leading indicators were typically narrative

in nature, and lagging indicators were often quantitative.

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• Risk/opportunity indicators: Indicators should not focus on risk reduction aspects, or only on performance optimization. They needed to be a combination of both.

• Successes/failures: In the context of building trust and credibility, it

was better to bring out your own ‘dirty laundry’ rather than let others do it for you.

Academic session - Carbon Disclosure Chair: Jan Bebbington, University of St. Andrews Panelists: Ans Kolk, University of Amsterdam Matthew Kiernan, Innovest Craig MacKenzie, University of Edinburgh Carlos Larrinaga-Gonzalez, University of Burgos On the subject of carbon disclosure, there was general consensus among the panelists that carbon disclosure was essential, but not sufficient, to ensure that change occurred toward carbon reduction. The point was made that it was not known how much carbon was flowing through the economy, or what the carbon impacts were of products and services. Ultimately tracking the flow of carbon throughout the economy would result in a better understanding of ‘where the carbon was’. Organizations like the GRI and the Carbon Disclosure Project (CDP) were helping to provide the framing of standards for reporting on carbon emissions. In the view of Ans Kolk, the Kyoto Protocol was the main driver when talking about carbon and carbon disclosure, even though there were still disagreements on how it should be implemented. There were various schemes and initiatives that helped to put a price on carbon. These included the EU Emissions Trading Scheme, the Voluntary Chicago Climate Exchange, and the New South Wales Greenhouse Plan, among others. A market was emerging for carbon transactions. However carbon disclosure was not yet mature and was still primarily done on a voluntary basis around the globe. To her mind, the CDP provided the most specific and extensive coverage of carbon emissions by companies. Its growth (from only 35 investors in 2002, to 385 investors with

$57 trillion dollars in assets under management currently) was an indicator of the increased appetite for data on carbon risk. Carlos Larrinaga-Gonzalez argued that full-cost accounting - a sustainable account that involves the integrations of the entity’s internal and external costs - was the most effective way to

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account for and disclose carbon implications for the full consequences of actions on climate change. On the subject of climate change and investment risk, Matthew Kiernan spoke of the need for a systematic global economic restructuring that accounts for risk exposure, risk management, market-driven upside opportunities, and performance improvement vectors. He argued that pressure for increased disclosure, if not accompanied by information on relevance, would affect the ability to act on the information collected, and therefore have limited impact. The good news for investors and fiduciaries was that there can be a premium to be won from paying attention to carbon data. Companies that can handle the climate challenge better are likely to be better managed companies, and better managed companies are more reliable investments.

Craig MacKenzie followed with a presentation on research regarding reporting standards for carbon performance. In his view, voluntary disclosure had an important role to play. From a climate perspective, it was essential that in the next five years reductions in emission levels were achieved to avoid catastrophic climate change. Until reporting was mandatory, voluntary standards would remain key. Research on UK supermarkets developing benchmarks to compare companies in similar sectors revealed that better data quality, better standards, better regional reporting mechanisms, and better sector reporting were necessary.

In the ensuing discussion it was noted that accuracy of reporting remained a problem, with the temptation for companies to be as optimistic as possible, or to under-report. However, as Matthew Kiernan put it, carbon disclosure was ‘a partial solution that is not perfect, but it gets you part way there’. Reporting was ‘an indispensable precondition to action, but it is nowhere near enough; what is far more important is what one does with the information when they get it’. On the question of building infrastructure for verification and standardization in reporting, Julie Desjardins of the Canadian Institute of Chartered Accountants noted that the International Accounting Standards Board had announced its intention in 2006 to develop standards for how to do accounting on climate-related actions. Similarly, the International Auditing and Assurance Standards Board had committed to exploring how to provide assurance on greenhouse gas emission accounting. Arena Debate II: Financial Market Views on Sustainability Reporting Today Moderator: Mishal Husain Panelists: Mindy Lubber, President, CERES Denise Nappier, Connecticut State Treasurer James Gifford, Executive Director, Principles for Responsible Investment

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Andrew Howard, Executive Director, Global Investment Research, Goldman Sachs International

Rachel Kyte, Business Vice-President, Advisory Services, International Finance Corporation

The main focus of the panel was to explore the relationship between sustainability reports and financial materiality. While socially responsible investing (SRI) represents a growing trend, it was felt that environmental, social and governance (ESG) considerations needed to be better incorporated into mainstream investment decision-making. In the words of Andrew Howard of Goldman Sachs, better data and higher relevancy was required for incorporation.

Although it was agreed that sustainability issues impacted a company’s ability to provide shareholder value in the long-term, it was recognized that investors had different investment horizons. Denise Nappier explained that the State of Connecticut Treasury was so large that it could not buy and sell quickly. It had to adjust its portfolio infrequently and purposefully. As a consequence, long-term sustainability issues

were given greater weight. By contrast, many companies and private investors had a much shorter-term horizon. While some panelists considered sustainability issues to be relevant to current financial performance, others remained doubtful of impact on short-term value. Overall, there was a consensus that current sustainability reporting practices were moving in the right direction, although there were differences on whether sustainability reporting should be mandatory. The biggest problem for investors was how to compare companies in the same sector. Here, more clarity and consistency was needed from reports. It was also felt that stricter standards and guidelines would make third party auditing easier, something that financial markets required. There was wide support for the proposition that reporting companies tended to perform better financially. Several reasons were stated. Investors looked at emerging legislation and consumer pressures as two key risks directly impacting a company’s bottom-line. Good reporting helps to quell investor fears, and to strengthen share price. Moreover, it can be powerful in communicating the presence of responsible management, capable of handling new issues. In closing, panelists were asked what GRI should change to make the GRI-based reports more relevant to financial markets. Responses included suggestions:

• to reduce the amount of information included in reports, making them more focused on material issues

• to increase indicator consistency to enable investors to rank companies and to identify sector leaders for investment

• to increase forward-looking information and assessments.

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Forum: Assessing Reports and Assurance Chair: Judy Kuszewski, SustainAbility Panelists: Greg Tucker, Aegon Alan Knight, AccountAbility Jermyn Brooks, Transparency International Nancy Kamp-Roelands, FEE Greg Tucker introduced the session by asking the central question: How do we verify information? Judy Kuszewski framed the discussion by saying that the majority of report readers believed assurance was important, not only for reporting but also for performance. Assurance, however, was a complex matter in that there were many different types of assurance, each type helping to make different decisions. In general, assurance helped to ensure the reliability of data systems, management, and performance. Assurance came in a variety of forms including certification statements for meeting standards, product labeling, expert opinions on performance, reporting, management and stakeholder opinions (e.g. community advisory panel). On the question of how reporters can make good decisions, there was general agreement that assurance was not just about collecting data but also about doing the right thing. Alan Knight reflected that assurance should be driven by principles and not just accuracy of data. There was then a discussion about who the audience was for reports. Internal assurance was important to build a sense of credibility within an organization, and external assurance was important to build public credibility. The view was expressed that the role of assurance providers had to be professionalized, with documented independence and competency as key elements. Jermyn Brooks saw assurance as being at the ‘pre-prototype, pre-conceptual’ stage. The problem was that there was often no link between strategic statements and actions. The challenge was to find a framework that was more understandable for the reader, while remaining comprehensive and complete. Referring to his organization’s associating with the Shell company, feedback it received said it needed to talk more openly about the global climate change crisis and its involvement with it. In the view of Nancy Kamp-Roelands, the completeness of sustainability reporting was an integral part of assurance. Stakeholder engagement had to be a part of the assurance process from the beginning. Successful reporting had to be understandable and reliable. This could be evaluated by its completeness, accuracy, and balance. Reporting should be relevant and comparable. Asked the question ‘what do you think adds value to the reports?’ participants responded with the following points:

• A description of the stakeholder engagement process and how it related to practices down the supply chain

• Clarity, consistency and comparability

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• Honesty about problems increased credibility • Analysis of systems, as opposed to simply indicators • Assurance should be an ongoing process and integral to the disclosure

process. Forum: Climate Change Chair: Paul Simpson, Carbon Disclosure Project Panelists: David Russell, Dow Chemical Company; & GRI Technical Advisory Committee James Barlow, PepsiCo UK & Ireland Beth Ginsberg Holzman, CERES On the subject of climate change reporting, disclosure and adaptation, there was consensus among the panelists on the need for companies to engage in climate accounting and reporting. This was an undertaking that should be carried out throughout a company’s supply chain. Identified as a key leverage point to making significant change in any industry, active supplier engagement would also allow for more rigorous analysis of the risks and opportunities in climate change adaptation and mitigation. To assist greater transparency and accountability, The Carbon Disclosure Project (CDP) was working closely with GRI to see where the G3 Guidelines and the CPD complemented each other, and to identify where there were gaps. Until government policy mandated reporting, the GRI and CPD were playing a vital role in standardizing and enabling greater corporate transparency and accountability on climate change action. There were many management opportunities to deal with enormous climate change challenges, noted Beth Ginsberg Holzman. These included:

• Boards providing direction and oversight of carbon management issues • CEOs embracing climate change as a priority issue for their firm • Management capacity to respond to emerging mandates, and • Public disclosure and actual reporting of progress.

Discussion of corporate examples of companies implementing reporting mechanisms included those of Nike, Dell, Dow Chemical and PepsiCo. James Barlow described how PepsiCo had developed a new program with the Carbon Trust on package labeling regarding carbon emission reduction. Because of the estimated 59% emissions in supply chain, it was not enough to concentrate solely on the company’s operations. The company accepted that it needed to work with supply chain and product delivery to reduce carbon emissions to avoid losing the label. Working with the supply chain was logical: ‘the more heads the better’.

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David Russell outlined Dow’s ten-year sustainability goals, which included various elements of energy efficiency, bio raw materials supplies, and the ambition to cap carbon emissions by 2025 and begin an absolute reduction program. He set this in the context of the company’s belief that sustainable development would be a major driver of new business. ‘If the world’s people are going to continue to increase standards of living, they are going to demand more and more products; we need to find different ways to provide those’. On the issue of investor pressure on companies to better report on their climate change activities, Paul Simpson noted that investors were increasingly engaging on these issues. He expected that eventual governmental regulation would result in carrots and sticks, but this would still take some time. James Barlow added that companies had a responsibility to their shareholders. While laws didn’t currently encourage companies to do the right thing, it was important to have ‘performance with purpose’. He suggested that companies should target their efforts in the areas where they could make the most difference. Noting the climate change issue had been mentioned throughout the US primaries, Beth Ginsberg Holzman expressed the hope that the USA would agree and enact national climate change legislation. Sections of the US business sector were already leading. ‘More and more companies’ she said, were ‘disclosing carbon impacts and are getting smarter by using these tools’. Paul Simpson wrapped up the session by encouraging closer contacts between the scientific and corporate communities. He also appealed to the business sector to use its ‘carbon influence’ to support and force governments to make a global deal on climate change strategies. Academic Session: Stakeholder Engagement and Reporting Relevance Chair: Ian Thomson, University of Strathclyde Panelists: Jan Bebbington, University of St. Andrew’s David Owen, University of Nottingham Colin Dey, University of Dundee Georgios Georgakopoulos, University of Amsterdam The session accepted the proposition that stakeholder engagement was something readers wanted, but noted that currently it was the least developed component of reporting. To address this weakness, panelists discussed a few guiding principles that reporters could follow. Before beginning, it was vital for reporting organizations to understand why they were engaging stakeholders and, equally, why stakeholders might want to engage with them. When selecting whom to engage, it was common ground among panelists that the presence of ‘non-capital’ stakeholders was important. Current governance structures were designed to address shareholder and regulatory needs. In the stakeholder context, this was problematic. An

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important caveat was noted: not all stakeholders were equal, but should be treated equally. Alliances with one or other stakeholder group should be avoided. Consideration needed to be given to how stakeholders might be involved, e.g. through advisory committees. How stakeholders engaged in the reporting process was critical to its success. If stakeholders won’t come to the table, it might be necessary to go to theirs. Various methods of engagement were possible. All engagement processes were different: there was no single approach that worked in all circumstances. As a general rule, NGOs and employee organizations should be consulted early in the report development phase, e.g. by being invited to comment on relevant aspects of un-edited reports. Emphasis was placed by speakers on the need to consider the trade-offs between disclosure and reputation risk costs. Although stakeholder engagement could appear to cost more money and time, the potential benefits of avoiding the risks down the road was invaluable. The ideal stakeholder engagement would involve an open and on-going dialogue with stakeholders to increase learning and accountability. While concepts of ‘ideal’ and ‘real’ often clashed, it would be wrong to abandon visionary goals. As Jan Bebbington put it, ‘we need an end point that is utopian, but it must also be tangible’. Arena Debate III: Business Management and Corporate Governance Views on Sustainability Reporting Today Moderator: Nik Gowing, international broadcaster Panelists: Aron Cramer, President and CEO, BSR Mahendra Chouhan, Global Advisory Board, Asian centre for Corporate Governance Roxanne Decyk, Corporate Affairs Director, Shell International Jermyn Brooks, Director, Transparency International Fadi Ghandour, CEO, Aramex Björn Stigson, President, WBCSD While sustainability reporting was maturing rapidly, it was to be likened to ‘a very capable teenager not yet in university’, according to Aron Cramer. Nonetheless, help was definitely needed in moving towards transparency and sustainability. There were three key areas in reporting – transparency, strategy, and balance. Traditionally, environmental and social responsibility had been left to the public sector. One major concern was the risk of ‘greenwashing’ because of time spent on reporting rather than on action. The issue of materiality was a theme that ran throughout the debate. Björn Stigson stressed that the link between materiality and value creation had to be explored further. An important issue in emerging countries, such as India, was a lack of leadership and ‘champions’ practicing sustainable business activities.

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However, as Mahendra Chouhan noted, Indian companies were beginning to recognize the importance of sustainability reporting. This was being driven by the increased awareness of these issues on the part of institutional investors. Other speakers also referred to growing Chinese government awareness of the need to report on sustainability issues. Progress was being made but needed to be accelerated. India and China were simply too big to ignore: they had to be brought on board with sustainability reporting if the world hoped to ever be sustainable. Another theme addressed was the assurance process of sustainability reports. Here, there was wide agreement that expert panel reviews offered was an attractive option. Roxanne Decyk described how Shell’s new expert panel review process had helped the company to integrate its sustainability thinking better into its core business strategy. This had been possible as a result of the increased dialogue involved with the panel process, which helped the company think harder about the links between sustainability and business opportunities and risks. Interaction with the committee had sparked a different type of thinking: ‘we were encouraged to say things that we thought were obvious (but were not to our readers) and to work harder on some things that we thought we would do later’. For example, the committee had pushed Shell to explain why it was not going to adopt CO2 emission targets after its current CO2 target expires in 2010 and to explain the reasons for the company’s current investment levels in renewable energy. Other speakers who had been part of this type of review process agreed that the process was positive. Half of the member companies of the World Business Council for Sustainable Development had also used the expert panel discussion process in their sustainability reporting, suggesting that it had become a trend in assurance. There was a general agreement among the session participants that sustainability should be embedded into overall company strategy, operations and culture. On the role of governments, there was also agreement that business should be more active in educating policy makers. In related debate around government’s responsibility for encouraging or enforcing sustainability reporting, there was support for greater initiative by government in order to scale up and speed up sustainability reporting. However, price inflation and the ‘resource crunch’ were seen as the most likely drivers of sustainability and sustainability-oriented innovation within the business sector over the coming 4 to 5 years.

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Forum: Sustainable City Management, Accountability and Reporting Chair: David Cadman, ICLEI Panelists: Adrian Atkinson, New Synergies and Development Nic Frederiks, City of Amsterdam Wendy Arenas-Wightman, AVINA Foundation Oded Grajew, Ethos and Movement Our Sao Paolo The Forum on Sustainable City Management, Accountability and Reporting explored the ways that sustainability reporting influenced management and behavior at the city level. The message ‘we can do it’, coined by David Cadman, was the overriding message of the forum. It was recognized, however, that there was a lot of work to do yet. Considering the large numbers of people moving into cities – in 2007 for the first time in human history more people lived in cities than in the countryside – it was imperative to focus on ways to reduce cities’ ‘footprints’. Cities used a very large amount of energy. People in cities used more energy than people in the country. A vision of a sustainable city might include practices such as locally grown food, increased use of public transport, hybrid vehicles, and fossil-fuel-free buildings using geo-thermal energy. Prosperity in the 21st Century would have to be better shared. The way in which targets were set and reductions were made would be the key to success. Strides had been made in cities such as Amsterdam, Bogotá, and Sāo Paulo in the areas of city management, accountability, and reporting. Strategic planning, reliable reporting, and adapting related processes were the main lessons to be learned. It was also important to identify where strategic partnerships could be made to involve and empower community members in the process, and to commit to a culture of accountability. By including these elements in its management, a city could achieve a great deal in the way of being transparent and sustainable. Forum: New Reporting Formats Chair: Leontien Plugge, Global Reporting Initiative Panelists: Sean Gilbert, Global Reporting Initiative Estevan Pereira, Report Comunicacao Roger Cowe, Context On the subject of reporting formats, GRI recognized that the presentation of reports was evolving dramatically. A diverse array of mediums and formats was

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now being used by reporters. To address the need to communicate reports, journalistic style magazines, posters, videos, and colorful websites were becoming popular forms. This prompted the question of what was the connection between ‘communication’ and ‘reporting’. It was important to distinguish the two, while recognizing their relationship. In both cases, credibility depended on substance and accuracy. Reporters seemed to agree that once internal reporting was finished, the collected data-set was most effectively used if communicated externally in different ways, tailored to different audiences. This meant better understanding who these audiences were, and what they wanted. Examples were provided from Brazil, where the communication methods included employee reports, consumer reports, summary reports, and teleconferences. On the question of formats, it was noted that there was sometimes pressure for tangible data-sets in Excel or other data sheets, especially from the investor community. Reporters are increasingly looking for a balance between narrative information and quantitative data and the different channels to communicate this. In general, readership declined with the complexity and length of reports. Discussions also raised concerns over the timing and frequency of reporting, whether it should be annual or quarterly, and the reality (and even desirability) of ‘24/7’ reporting. A large number of sustainability reporters in the session agreed that it was critical to balance the positive and negative stories in reports, however difficult this was, as stakeholders demanded it. At the end of the day, as Roger Cowe put it, ‘when you start using different formats … don’t loose the rigor that is needed in sustainability reporting’. Most agreed that there is a strong need to have one place were all necessary sustainability data of an organization is accessible in order for the stakeholders to make informed decisions. Academic session - NGO Accountability Chair: Brendan O’Dwyer, University of Amsterdam Panelists: Jeffrey Unerman, Royal Holloway, University of London Gloria Agyemang, Royal Holloway, University of London Robert Lloyd, One World Trust Jamie Munn, Humanitarian Accountability Partnership (HAP) International Naoko Kubo, Global Reporting Initiative

It was noted that in several other sessions of the conference, NGOs had been asked what they were doing to be more transparent and to be accountable. The increasing power and presence of NGOs had led to mounting interest in the area of NGO accountability. In response, NGOs had pointed to the launch in 2006 of an International NGO Accountability Charter, and to the commencement of negotiations of a Non-Profit Sector GRI Supplement. This was expected to become available in 2010.

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Jeffrey Unerman started the session by setting a conceptual framework for NGO accountability. He distinguished two different types: ‘hierarchical’ accountability (reporting about activities and expenditure to donors) and ‘holistic’ accountability (which also included downward accountability to beneficiaries). Panelists generally considered that holistic accountability was more important than hierarchical accountability. There were many reasons for NGOs to improve accountability. In the absence of accountability to beneficiaries, donors’ funds may not be spent effectively. This was illustrated with a case study from Ghana by Gloria Agyemang. The discussion then turned to accountability tools. It was noted that initiatives such as the Humanitarian Accountability Partnership (HAP) could help NGOs become more accountable to all their stakeholders, and not only to donors. HAP offered a certification system with a focus on quality management. The session also heard that One World Trust (OWT) had developed a methodology to measure the accountability capabilities of powerful organizations from across the public, non-profit, and private sectors. The research results were published each year in the Global Accountability Report. According to OWT’s findings, NGOs were a lot stronger on participation than companies and intergovernmental organizations. They were not so strong however when it came to the handling of complaints. External complaints were often not dealt with appropriately. The OWT had identified three challenges for NGOs:

• Translating accountability mechanisms into accountability practice • Balancing ‘accountability as compliance’ with ‘accountability for

learning’, and • Reconciling standardization with flexibility: cultural differences needed

to be considered in reporting. The issue of ‘one size fits all’ accountability was also discussed. Some studies had identified the potential for inappropriate NGO accountability mechanisms to damage, rather than enhance the social and environmental benefits. For small local NGOs in particular, the resources needed for implementing sustainability reporting systems could damage their capacity to deliver their mission effectively. If NGO responsibilities were different in many ways from the responsibilities of the business sector, forms of accountability might need to be different as well.

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Friday 9 May 2008 Arena Debate IV: The Global Debate on Sustainability Reporting Chair: Nik Gowing, BBC World News Panelists: Sir Michael Rake, Chairman, BT Group Maud Olofsson, Minister for Enterprise and Energy, Deputy

Prime Minister, Sweden Alex Sink, Chief Financial Officer, Florida Alessandro Carlucci, President and CEO Natura Gerd Leipold, Executive Director Greenpeace International Bruno Prior, Director, Summerleaze The final Arena Debate was recorded by BBC World News for transmission globally the following week. In framing the discussion, moderator Nik Gowing posed the three broad questions:

• How accountable is business • Should companies also have to reveal details of their impact on the

environment and society; and • Can openness and profitability go hand in hand?

On the general issue of the accountability of business, there was agreement among most panelists that there were increased societal and political demands for greater accountability. This was being driven both internally (by management and employees, and shareholders, who wanted to see their companies managing risks and responding to opportunities), and externally (by investors, consumers, media who

wanted business to use its power for good, and be accountable for wrongs). There was also a shared sense among panelists that sustainability reporting was an important element in the demands for greater accountability. Mike Rake said that ‘the world was changing’. Companies had to be more accountable to recruit and retain the best staff, to innovate and to grow the customer base. While he thought there was too much complexity in reporting standards and formats, sustainability reporting was here to stay. Maud Olofsson agreed, saying that governments could use reporting both to help build healthy markets and respond to sustainability challenges. This was why the Swedish government now required state-owned companies to do GRI based reporting.

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Alessandro Carlucci went further, saying that ‘the only way to build a good business (was) to share everything’. Companies had to report both their successes and their failures, together with their vision for the future. This was essential to developing a constant dialogue with its stakeholders, and crucial for two-way learning. Alex Sink emphasized the importance that investors attached to sustainability reporting. Investors needed access to more information to make better investment decisions. Investors didn’t want to invest in companies that manufactured ‘electric typewriters’: they wanted to find ‘the companies of the future, not those of the past’. While supporting the need for sustainability reporting, Gerd Leipold expressed concerns on a number of fronts. First, not nearly enough companies were reporting. The majority of companies were still not doing sustainability reporting. Second, many reports lacked content and consistency. They often were little more than ‘glossy brochures’ that ignored the fact that the world faced urgent and dramatic problems. It was irresponsible to suggest that things were getting better. Critical data, such as on greenhouse gas emissions, was usually lacking. Finally, it was important to note that there was not always a ‘business case’ for making change. Reporting did not automatically amount to a change of attitude or behavior. Maud Olofsson agreed that things were not getting better, but argued that at least now we were getting the data necessary to act. Bruno Prior challenged the proposition that reporting was the way forward. In his view, reporting enabled companies to ‘manipulate and dress up’ data, without actually contributing to sustainable development. A less bureaucratic and more effective approach of tackling climate change would be to put a price on carbon. The challenge was less that of getting everyone to do sustainability reporting than ‘to bring external costs onto the bottom line’. Both Alex Sink and Mike Rake expressed frustration with the current complexity of non-financial reporting approaches. In Alex’s opinion it was ‘all over the board’. On the issue of voluntary versus mandatory reporting, there were mixed views. Some panelists thought that mandated reporting was necessary, while others thought a voluntary approach was more valuable. Mandatory reporting was most likely to come in relation to specific issues, such as climate change, rather than as an across-the-board approach. On social issues, for example, it would be harder to agree on core issues to report on, since these varied by sector and region. Alex Sink expressed the hope that the US Securities and Exchange Commission would make provision of non-financial information mandatory, but thought that this was still a long way off. Looking to the future, Maud Olofsson and Alessandro Carlucci expressed optimism for rapid change. They saw stakeholders playing an increasingly active role, whether as consumers, voters and citizens. Information was important to them, and they would use it. Governments had a role in supporting this trend. Businesses, especially in emerging economies, could use this to ‘leapfrog’ to new technologies and business models.

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Academic Session: GRI as an Institution

Chair: Frank Bierman, VU University, Amsterdam Speakers: Rob van Tulder, Erasmus University of Rotterdam Dror Etzion, IESE Business School, Spain Halina Szejnwald Brown, Clark University, United States Philipp Pattberg, VU University, Amsterdam The session covered a number of different perspectives on the GRI and institutional development. GRI was praised for its mission of providing access to standardized information, in order to empower civil society, labor, and financial markets to consider sustainability issues. It was also recognized for its legitimacy, clear concepts, and for taking sustainability issues mainstream. It was not perfect, however, and some challenges were identified. Among the many challenges facing GRI were how to:

• differentiate between partial and full coverage of an indicator • eliminate the practice of misleading reporting • discourage selective reporting • evolve in a field with no competitive pressures • make report data more material to readers • give a louder voice to un- or under-represented actors, such as NGOs,

SMEs, civil society, and mainstream financial markets • Ensure that over-represented actors such as large companies and

consultants were not allowed to dominate Assurance was identified as a vital issue for the legitimacy of GRI as an institution. Unfortunately, assurance practices and expectations varied from country to country, with different levels of government involvement. Forum: The Role of Governments - Policy and Accountability Chair: Angela Cropper, UNEP Panelists: Elisabeth Dahlin, Swedish Partnership for Global Responsibility, Ministry for

Foreign Affairs, Sweden Michèle Pappalardo, Ministry of Ecology and Sustainable Development, France Richard Howitt, Member of the European Parliament for the East of England Ibrahim Alzubi, Knowledge and Human Development Authority, Government of

Dubai Roel Nieuwenkamp, Ministry of Economic Affairs, The Netherlands Teresa Fogelberg, Global Reporting Initiative

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It was noted at the outset of the session that many participants at the 2006 GRI conference felt that governments had not been well represented. For this reason, the present forum had been specifically organized to address the role of government in sustainability reporting and accountability.

Following the presentations there was a lively debate on how governments could encourage companies and other organizations – including public agencies – to be more accountable. While some panelists and participants agreed that a better regulatory framework

was needed, others noted that corporate responsibility took different forms in different cultures. Participants from Islamic countries, for example, highlighted the importance of religion as a driver for sustainability reporting in their cultures. There was consensus among the panelists about the importance of governments as leaders in the field of sustainability. ‘Leaders are meant to lead, and so we should’, said Richard Howitt. In his opinion, it was the responsibility of governments to help companies to redefine the materiality of sustainability issues. It was noted that some countries were already actively promoting the GRI. In Sweden, all state-owned companies were now required to file an annual sustainability report based on the GRI G3 Guidelines. France was currently engaged in a review with stakeholders of a law that required publicly-listed companies to report on their sustainability practices. Both panelists and participants thought that governments should do more to encourage sustainability reporting and accountability, whether by using their mandating, facilitating, endorsing or partnering powers. In this regard, the GRI was seen as a strong tool for governments to use as an integral part of national sustainability policies. Other useful tools cited by some participants included the OECD Guidelines for Multinational Enterprises. There were, however, different views on whether there should be a mandatory approach to increased corporate accountability. While acknowledging that there was a ‘governance gap’, several panelists saw problems with a mandatory approach. This did not mean a voluntary approach was not valuable. As Roel Nieuwenkamp noted ‘economies are global, but governance is still local. CSR can help to bridge the global governance gap’. On this issue, Elisabeth Dahlin cautioned that whatever action was taken to promote reporting and observance of international CSR standards ‘CSR should not be used as a tool for protectionism’. For its part, the GRI said it warmly encouraged increased government support for sustainability reporting, and was committed to increasing its dialogue with

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governments. For this reason, it had recently decided to establish a government advisory board. Forum: The Value of Sustainability Reporting for Investors Panelists: Rob Lake, APG Investments Frans Beckers, van Gansewinkel Birgitta Kramer, PricewaterhouseCoopers Matthew Kiernan, Innovest Claudia Kruse, Environmental, Social and Governance Research, JP Morgan An important area of discussion focused on the format of sustainability reporting for investors. Panelists noted that investors didn’t have the time to look through all the information contained in sustainability reports. This meant that it was important to keep disclosed information concise and relevant, and in a form that was understandable by investors. Other relevant aspects included the terminology used. Many investors had traditional mind frames, and needed to be convinced of the need for change. Birgitta Kramer saw four important areas that should be considered when companies were reporting on sustainability for investment purposes. These were:

• companies should perform materiality analysis on their entire value chain

• companies needed to use appropriate format and terminology that was recognized by investors

• companies should be aware that the gap between financial reports and sustainability reports need to be bridged

• companies should be aware of the importance of assurance Claudia Kruse highlighted that the most useful type of sustainability reporting for investors was related to the company’s overall strategy. This meant going beyond the company’s ESG strategy, and include reporting on the activities and thinking of the board. Current sustainability reporting was too often backward-looking, providing only past data and trends projection. Increasingly investors wanted forward-looking information to understand where the company was planning on going, and what steps they would take to get there. Additional information sought by investors included: management incentives and how these linked to strategy; segment reporting; how the management team viewed their company’s core product; and the company’s regional focus. Investors also demanded a credible assurance process to verify that the data and information received was accurate. More attention was also being given to companies’ value chains. Matthew Kiernan noted that how companies managed sustainability was increasingly by investors seen as an indicator of superior management.

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Forum: Employee Motivation and Commitment Chair: Hamish Wilson, Impact International Panelists: Niek Hoek, Delta Lloyd Mizue Unno, SO-tech consulting Jo Appleby, Impact International Hamish Wilson set the goal of the session as being to discover how to inspire and motivate people; how to tell employees and stakeholders about your sustainability initiatives and their impacts; and how to get them on board in making your company more sustainable. How can you use your sustainability report? For Niek Hoek, the main route was to get core values embedded in the company. This was essential to safeguard the company’s financial future as well as to motivate and inspire employees. The two were mutually reinforcing. Every big corporation nowadays had core values. The key question was whether they were really embedded in the ‘genes’ of the company. Often they were just empty words at the start of an annual report. That didn’t motivate people. Delta Lloyd put a priority on getting its core values – among others integrity, team spirit, open communication, responsibility and commitment – internalized in all its employees. It carried out a yearly appraisal to score employees on their adherence to these values. Employees with low scores didn’t get promoted. Those in breach were required to leave. In 2007, 87% of the employees complied with the core values.

Mizue Unno’s presentation related to the CSR policy of the Japanese company Brother towards its 7,000 (mainly female young workers) Chinese employees. It was important for Brother to implement its core values, not only in Japan but also in China. This was not easy, due to differences in cultural, legal and socio-

economic circumstances. To motivate staff, local managers were trained to internalize the company’s core values themselves, and then to pass these on to employees. Workshops were held in the factories to hear from employees what they considered important values for the company. These comments were posted in Brother’s CSR reports. The report was also used to explain the core values to employees in China and translated into Chinese. In the same manner, CSR posters were developed interactively, bottom up, and posted around the factories. In her view, time spent on creating awareness on the company’s values did lead to improvement. In her presentation, Jo Appleby described how her organization went about building high performing teams and developing inspirational leaders. CSR was also about the fabric of an organization. To achieve any goal, one needed to motivate people. There was no ‘one size fits all’ method: a level of

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experimentation was required with a variety of measures. Workshops and training were often useful. When people were motivated they worked better. Among the positive outcomes on this investment was a low staff turnover rate and extremely high employee motivation. On the question of how to ensure that sustainability initiatives were inspiring for employees, discussions suggested that a ‘bottom up’ approach was essential. In addition, the projects selected should relate directly to the profile and expertise of the company, and offer a chance for employees to get personally engaged. In their final remarks, the panelists drew the follow lessons:

• Aim low. Do not do everything at once. Start a few pilot initiatives. Evaluate. Build on what you learn.

• Find champions. Individuals in your company are passionate about sustainability. Find them. Empower them to share their ideas.

• Believe in your values. Do not expect instant impacts: continuous commitment leads to continuous improvement.

• Invest. It is worth some expenses to embed values. • Celebrate. Let people show what they have done and share that through

your sustainability report. It will inspire others. Forum: What Readers Want: Practical Lessons from the Readers’ Choice Awards Panelists: José Luis Blasco, KPMG Sustainability Spain Taryn Brucia, Edelman Michael Muyot, CRD Analytics Jorge Daniel Taillant, CEDHA William D’Alessandro, Victor House News Company Nicholas Robinson, BP Discussion centered on the findings of the Readers Choice Awards Survey on what readers wanted from sustainability reporting. It was recalled that four key findings of the survey were:

• Sustainability reports generated positive perceptions by the reader of the reporting company

• More stakeholder participation was required in the writing of reports • Companies were not reporting on failures • Increased assurance and confidence in reports is required

Based on these findings, the key recommendations for reporting companies are:

• Derive value from your sustainability practices • Produce respected and trusted sustainability reports • Maximize stakeholder relationships • Provide news and information, not press releases.

Reflecting on these findings, panelists highlighted the importance of making sustainability reports more heartfelt and creative. They agreed that the place for

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inspirational text was in the CEO’s covering letter. Included in almost every report nowadays, this letter was an opportunity to communicate the organization’s mission, aspirations, and recent achievements. Another topic addressed was the inclusion of social impacts in sustainability reporting. The question was asked whether reporting could reference impacts on fundamental human needs. An NGO participant thought that framing social implications in this way could be very beneficial. Moreover, it was felt that ‘socially responsible’ reporting should come from the heart and should be communicated as such. Trust building was also identified as an area that required improvement. Journalists were often extremely critical of companies, as were NGOs. By outlining some of the lessons learned from failures of sustainability initiatives, credibility could be earned by the reporting company. Trust could also be built by incorporating diverse stakeholders in the reporting process. NGOs would be much more receptive to information if other NGOs had been involved in writing it. Another perspective was that it was more beneficial for reporters to ask readers ‘what don’t you want to read’. By making reports more relevant and concise, the important information was communicated. In the main, the session considered that much more work needed to be done to make sustainability reports more interesting. They were, however, moving in the right direction. The companies that listened best to what readers wanted would produce the best reports, and realize the biggest benefits. Closing Plenary: What’s Next for Sustainability Reporting? Master of Ceremony: Ernst Ligteringen, Chief Executive, Global Reporting Initiative Speakers: Maud Olofsson, Minister for Enterprise and Energy, Deputy Prime Minister,

Sweden Lars Josefsson, CEO, Vattenfall Georg Kell, Executive Head, UN Global Compact Alessandro Carlucci, CEO, Natura Angela Cropper, Deputy Executive Director, UNEP and Assistant Secretary

General, UN Michèle Pappalardo, Commissaire General au Dèveloppement Durable, Ministry

of Ecology and Sustainable Development, France Mervyn E. King, Chairperson, GRI There was broad consensus in the final conference session that more information was always better. Most speakers thought that it was now well accepted that information, such as the type provided through GRI reports, was increasingly influencing decisions. However three aspects emerged above all others: the need to make reports trustworthy, balanced and reliable.

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Noting the scale of the sustainability challenge, Maud Olofsson observed that it was ‘easy to paint a dark picture’. She preferred, however, to see ‘a golden opportunity’. Sustainability gave us a chance to change our lifestyle. This was an opportunity we couldn’t afford to miss. She firmly believed that there was a business case for sustainable development, for both large and small companies. This applied in the developing world as much as in the developed. Ms. Olofsson acknowledged that there was a need for governments to take leadership. She was proud that Sweden had become the first country in the world to require its state-owned companies – worth some

€84 billion – to do sustainability reporting. She noted that three out of the 4 companies that had won Swedish sustainability awards in 2007 were state-owned. For sustainable growth, sustainable companies were needed. Sustainability reporting had a major part to play in this context. While government leadership was important, leadership was also required from business and civil society organizations, and by individuals. Speaking as the CEO of a state-owned company, Lars Josefsson welcomed the increased status of sustainability reporting that the requirement implies. His company had a plan to reduce emissions by 50% by 2030. Climate change was the overriding issue of our time: the task of responding to it would be with us for decades. As an energy company, Vattenfall was exploring all possible routes to reducing the carbon content of energy. Promising technologies included wind and wave power, as well as carbon capture and storage. One problem was that while everyone wanted electricity, no one wanted to know how it was produced. That was changing however, and it was vital now to have dialogue with stakeholders. Vattenfall had chosen to use the GRI framework because of its credibility, transparency and comparability, and because it helped the company work internally as much as externally. Georg Kell declared himself to be a ‘believer in GRI’ and what it stood for. It shared a mission with the UN Global Compact and had many common experiences. The two organizations were ‘brothers and sisters’ working in the same direction. The Global Compact had also seen rapid growth, from 50 companies in 2000 to over 5,000 currently, from 120 countries. The challenge was not just to grow the membership, but also to deepen the quality of engagement. This was one of the reasons why the organization had moved to require members to issue communications on progress in advancing the Compact’s ten principles and to de-list those that were not in compliance. He estimated that 30% of Global Compact communications on progress used the GRI. Mr Kell then went on to describe how the Compact’s ‘Caring for the Climate Initiative’ was helping add momentum to efforts to prevent climate change, and to reflect on some of the other dangers facing the world. Among these, he saw the possibility of a resurgence of regulation and protectionism working against an open and

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inclusive international system, and the temptation to impose standards on others that weren’t observed domestically. Alessandro Carlucci agreed that humankind faced unprecedented challenges. These included climate change, hyper-consumption and species extinction. There was a need for radical change and innovation. Education was the key to change, which was why reporting was so important. In his view, GRI was ‘the major reason for change in corporate behavior’. However, reporting was not an end in itself. It was a learning process that required more diversity of engagement and more listening. In his view, a more ‘democratic’ kind of report was necessary, where stakeholders themselves reported on an organization. This would not be easy, as companies needed to be convinced that there was a business case for openness. After recalling UNEP’s historic role in the creation of GRI and the rise of sustainability reporting over the last decade, Angela Cropper noted that important information was still missing. Sustainability reporting had to be as relevant to investors as financial reports were. The informed consumer also demanded process indicators. This begged the question whether sustainability reports were a suitable source for proof of how well the process was improving. Were organizations expected to review these reports and recognize the gaps in them in order to work to fill those gaps? The approach of the GRI, being a gradual and phased approach, was in her opinion both comprehensible and achievable. ‘The GRI is not adding complexity to something already complex’, it was acting as a guide to navigate the complex movement towards a sustainable society. Michèle Pappalardo believed that an important evolution had been in relation to the role of government. The French government’s approach was to advance sustainability through its policies and programs, and to work along side all stakeholders in ‘co-creating’ a consensus pathway to sustainable development.

By reaching agreement among stakeholders, there was a higher chance that the agreed outcomes would be achieved. In France, stakeholders were directly involved in developing information needs. What was wanted was coherent, reliable, and comparable information. Only if this were provided could the consumer be expected to make good decisions. Above all, a shared vision was important if progress were to be made. A further issue that needed to be addressed was that of sustainable production and consumption. There was a need to reduce the impact of

production, where reporting could help in measuring emissions. On the consumption side, effective consumer responsibility was facilitated by greater information about products, their production, and their ‘footprint’. GRI Chief Executive Ernst Ligteringen welcomed the many suggestions that had been made throughout the conference about how the GRI might be improved. He hoped that participants had learned as much as the GRI had learned, and thanked all participants for their support and ideas.

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In closing the Global Conference, the last words fell to GRI Chair Mervyn King. Reflecting on what he had heard over the last three days, Mr King saw a few key messages emerging. First, it seemed clear that the users did read the reports, that reports were taken seriously, and that report preparers had an opportunity to get points across to stakeholders. Second, it was clear that reports should reflect both the positive and negative aspects. This meant that we really did need to be transparent and material in our reporting. Reports that offered less than this would not be credible. Finally, reports that contained long-term sustainability strategies would be of most value to both reporters and readers. The concept of responsible business conduct had evolved from philanthropy, through to CSR, to an ‘added value’ stage. It was now recognized that if long term sustainability factors were not included in business strategy, it was ‘not a good strategy’. Shareholders and other stakeholders wanted to see how a company made its money, to see it act as a decent citizen in the process. With these remarks, Mr King thanked all speakers and participants for their active involvement, GRI staff for their excellent organization, and declared the conference closed.

This report was written by Paul Hohnen, Senior Adviser to the GRI. It was based on reports on all sessions prepared by a volunteer drafting team consisting of the following people: (in alphabetical order) Alaya Boisvert, Bart Slob, Erin Romanchuk, Joeri Scholtens, Karen Stroebel, Nick Blandford, Sarah Cheevers and Timothy Nash. The GRI Secretariat is deeply appreciative of the team’s contribution.

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Conference Photos’ Selection