NZBCSD
Sustainable Development Reporting:
            Case Studies




A report prepared for the Ministry for the Environm...
Dedicated to Making a Difference
What is the NZBCSD?
The New Zealand Business Council for Sustainable Development
(NZBCSD)...
Table of Contents
NZBCSD SDR Case Studies                                                    4
     Case studies for busin...
Case Studies

All NZBCSD businesses are required to produce a sustainable development report
within three years of becomin...
Case studies of businesses that had begun the SDR process
Case study: Sanford
Facilitator: URS

Introduction

Sanford Limi...
Profile of Sanfords Limited
Sanford is a large and long established fishing company. Its business is the
harvesting, farmi...
The economic section provided performance information
                          against financial indicators that highligh...
Planning (Policy, Indicators etc.)
It is recommended that Sanford develop a set of sustainable development policy
statemen...
certification of ISO 14001. Sanford currently use some measure of health, safety and
environmental performance to evaluate...
Relationship of Methodology to GRI and AA1000

Global Reporting Initiative
                         The report content and...
Case study: BP Oil New Zealand (BP NZ)
Facilitator: URS

Executive Summary

In New Zealand, BP’s core business is the supp...
recently, Burmah Castrol. The combined group has a market value of over $200
billion.

In New Zealand, BP’s core business ...
Future Direction and Methodology for SDR

Lessons Learnt To Date
BP NZ has a wealth of available corporate information on ...
To reflect this project culture, the SDR report needs to use
                          both narrative and quantitative per...
14. Agree on all BP NZ policy statements, narrative and quantitative performance
                      indicators and any ...
Case Study: Hubbard Foods
Facilitator: Landcare Research

Executive Summary

Hubbard Foods Ltd (Hubbards) have been commit...
Step 1: Review purpose of reporting

       Step 2: Determine scope of report

       Step 3: Perform a gap analysis on co...
Stakeholders
Stakeholders have been addressed in step 4 above. The aim of using stakeholders as a
driver for the sustainab...
are represented, rather than just shareholders. The Board members have not been
selected because of their representation o...
Identify Indicators
Collect Information
Analyse information, set targets and develop improvement plan


Audit and reportin...
The structure for the Hubbards report is:
   • CEO statement
   • Profile of the company
   • SD Performance – issue based...
Case Study: The Warehouse Group
Facilitator: Landcare Research

Profile of The Warehouse Ltd

The Warehouse Group was esta...
benchmark itself against other New Zealand companies.

In 2000 The Warehouse joined the pathfinder programme of The Natura...
•   Better manage corporate risk through a comprehensive assessment of social and
    environmental performance
•   Intern...
The Warehouse shares these issues with other members of the retail sector. Therefore by
publishing a comprehensive SD repo...
summarised below. The status of each activity at The Warehouse is shown in
brackets.
•   Ensure the top level commitment t...
in the context of any one issue.

The reporting team has considered the value in taking an issue-based approach to SD
repo...
survey is in progress on customer attitudes to sustainable development issues
•   Communities: surveys in relation to the ...
hazardous chemicals in its products? How effective are measures to reduce these?
What does the company’s “Zero Waste” goal...
obligation to report publicly, and that this accountability extends to all aspects of
performance covered by the SCI.

Sta...
development
o Benchmark the business against others reporting in the sector, nationally and
  around the world.

SDR exper...
will be reviewed as SDR progresses.


Looking Ahead

The following sets out a possible way forward for City Care’s SDR ove...
Key performance areas (KPAs)
High level performance areas have been set down in the SCI in consultation with the
sharehold...
Driver 4: Internal management

            What management systems exist         ISO14001 and ACC systems.
            and...
Support trade with the develop-ing
                                                   world (e.g. product sourcing)

     ...
investments, and in future, a cost-benefit analysis may be feasible for areas such as
training.

In this way the company w...
Decide on boundary issues and accountabilities for services provided by City
Care.
As a contract services provider City Ca...
Case Study: Interface Agencies
Facilitators: Landcare Research

Executive Summary

Interface Agencies Ltd (Interface) has ...
Description of process and next steps

The formality of the SDR process was reduced somewhat to take account of the size
o...
Throughout the entire process it is important to address changes that can be made to
existing processes, strategy, policy,...
NZBCSD Sustainable Development Reporting: Case Studies
NZBCSD Sustainable Development Reporting: Case Studies
NZBCSD Sustainable Development Reporting: Case Studies
NZBCSD Sustainable Development Reporting: Case Studies
NZBCSD Sustainable Development Reporting: Case Studies
NZBCSD Sustainable Development Reporting: Case Studies
NZBCSD Sustainable Development Reporting: Case Studies
NZBCSD Sustainable Development Reporting: Case Studies
NZBCSD Sustainable Development Reporting: Case Studies
NZBCSD Sustainable Development Reporting: Case Studies
NZBCSD Sustainable Development Reporting: Case Studies
NZBCSD Sustainable Development Reporting: Case Studies
NZBCSD Sustainable Development Reporting: Case Studies
NZBCSD Sustainable Development Reporting: Case Studies
NZBCSD Sustainable Development Reporting: Case Studies
NZBCSD Sustainable Development Reporting: Case Studies
NZBCSD Sustainable Development Reporting: Case Studies
NZBCSD Sustainable Development Reporting: Case Studies
NZBCSD Sustainable Development Reporting: Case Studies
NZBCSD Sustainable Development Reporting: Case Studies
NZBCSD Sustainable Development Reporting: Case Studies
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NZBCSD Sustainable Development Reporting: Case Studies

  1. 1. NZBCSD Sustainable Development Reporting: Case Studies A report prepared for the Ministry for the Environment by the New Zealand Business Council for Sustainable Development, June 2001.
  2. 2. Dedicated to Making a Difference What is the NZBCSD? The New Zealand Business Council for Sustainable Development (NZBCSD), established in May 1999, is a coalition of leading businesses united by a shared commitment to sustainable development via the three pillars of economic growth, environmental protection and social progress. Membership of the Council is listed on page last page of this guide. The NZBCSD is a partner organisation to the World Business Council for Sustainable Development (WBCSD), a coalition of 150 international businesses with members drawn from more than 30 countries and 20 major industrial sectors. We also benefit from the WBCSD’s global network of 30 national and regional business councils and partner organisations, involving some 700 business leaders globally. Our Mission To provide business leadership as a catalyst for change toward sustainable development, and to promote eco-efficiency, innovation and responsible entrepreneurship. Our Aims Our objectives and strategic directions, based on this dedication, include: Business leadership – to be the leading business advocate on issues connected with sustainable development. Policy development – to participate in policy development in order to create a framework that allows business to contribute effectively to sustainable development. Best practice – to demonstrate business progress in environmental and resource management and corporate social responsibility and to share leading-edge practices among our members. Global outreach – to contribute to a sustainable future for developing nations and nations in transition. What is Sustainable Development Reporting? SDR is defined as public reports and information communicated by corporations that provide internal and external stakeholders with: 1.a clear picture of corporate values and principles 2.a transparent picture of performance information on economic, environmental and social dimensions 3.a description of the corporation’s contribution to the sustainable development of society 4.the management response to performance - the commitment to improvement. 2
  3. 3. Table of Contents NZBCSD SDR Case Studies 4 Case studies for businesses that had begun the SDR process 5 Sanford 5 BP NZ 11 Hubbard Foods 16 The Warehouse Group 22 Case studies for businesses with no experience in the SDR process 30 City Care 30 Interface Agencies 39 Telecom 44 Urgent Couriers 53 3
  4. 4. Case Studies All NZBCSD businesses are required to produce a sustainable development report within three years of becoming a member. To help businesses understand the process that should be undertaken, eight NZBCSD member businesses, including four that had not begun planning for a sustainable development report and four that had already started the process, were chosen as case-study businesses. These eight businesses were assisted by facilitators to reach the next in creating their own SDR plans. The case study group committed to ‘learning by sharing’ to help other NZBCSD businesses. NZBCSD businesses Landcare Research and URS were facilitators for the eight case study businesses and worked with them to scope the work required to reach the next stage of their SDR. The following, is the detailed case study reports from each of the businesses. 4
  5. 5. Case studies of businesses that had begun the SDR process Case study: Sanford Facilitator: URS Introduction Sanford Limited (Sanford) is a founding member of the New Zealand Business Council for Sustainable Development (NZBCSD) – a coalition of leading New Zealand companies with a shared commitment to balanced social, environmental and economic development. The NZBCSD was recently awarded funds from the Ministry for the Environment (MfE) to prepare case studies on eight New Zealand businesses preparing sustainable development reports. Sanford was one of the selected companies and this reports outlines the outcomes of the case study, completed during June 2001. The project objectives were to facilitate: • the initiation of SDR in more NZBCSD companies • progress on SDR within companies that had some experience. This was achieved by: • assisting with the next stage of facilitating SDR within a group of eight NZBCSD case study companies • sharing the SDR plans of these companies (by means of a half day workshop and case study report) so that other NZBCSD companies can learn and be assisted in creating their own SDR plans. Sanford prepared their first report in 2000 and are currently proceeding with development of their second SDR report for 2001. The main objective of the case study work was to provide input into the development of this second report. This was achieved through discussion with Sanford representatives and submission of a draft table of possible performance indicators and how these could be presented in report format. Recommendations were also made for completion of the process of report preparation, that had already been embarked upon by Sanford. Sanford’s business case for its report is multifaceted and includes: • Contributing to the sustainable management of New Zealand’s fish resources – New Zealand has a Quota Management System (QMS) based on proportional harvest property rights. An annual harvest right is generated from quota ownership based on the percentage of the Total Allowable Commercial Catch (TACC). Sanford commits to comply with the rules and regulations in respect to Fisheries and other relevant New Zealand Law. Sanford actively participates in the collection and analysis of data to ensure realistic and cost effective research programs are developed to underpin the sustainable utilisation and management of New Zealand’s marine resources • Supporting Sanford’s Sustainable Seafood Logo • Meeting Customer Expectations 5
  6. 6. Profile of Sanfords Limited Sanford is a large and long established fishing company. Its business is the harvesting, farming, processing, storage and marketing of New Zealand seafoods. Sanford has approximately 1,500 employees nationwide and has processing plants, aquaculture operations, fishing and freezer fleets and offices all over New Zealand. Sanford is also the only actively trading fishing/seafood company listed on the New Zealand Stock Exchange. Sanford supports the sustainable utilisation and management of seafood and wild fisheries f romNew Zealand’s unique marine environment. Sustainable Development Reporting Experience SDR Reporting History The first Sanford “Triple Bottom Line Report” was produced for the financial year 1999/2000 with some initial assistance from URS. The report was a standalone document and separate from the Annual Report for the same year. It provided information on Sanford’s economic, social and environmental performance, according to the following set of policy commitments: • Ensuring that operations are sustainable • Maximising positive social outcomes from both the employee and general community perspectives • Maximising the economic growth and prosperity of the company for the benefit of shareholders, staff, customers, suppliers and the general community. Sanford considered the report as an important first step towards incorporating sustainable thinking into its operations, performance evaluations and reporting. The report was divided into four sections namely:  Sustainable Seafood (explaining the company’s sustainable strategy  Environmental Sustainability  Social Sustainability  Economic Sustainability. The environmental and social sections provided an overview of historical initiatives and achievements in these areas. The economic section discussed financial sustainability (financial soundness and ability to foster the means of its own growth and renewal). The environmental section described the company wide Environmental Management System (EMS) implementation and certification to ISO 14001, and environmental sustainability initiatives for the three main operational areas (i.e. fisheries, aquaculture and processing). The social section described staff training programmes, employment levels, donations, health and safety and some community interactions. It included some social performance indicator data such as percentage of staff achieving NZQA unit standards, and the number and percentage of staff with superannuation plan membership. 6
  7. 7. The economic section provided performance information against financial indicators that highlighted recent economic performance, financial sustainability, and added value for stakeholders. Existing SDR Plan Sanford’s existing SDR plan is described in the “Triple Bottom Line Report” 1999/2000 as a Draft Sustainability Strategy. The first version of this Sustainability Strategy contained the company’s initial commitments with respect to future sustainability goals and potential indicators to measure whether these had been achieved. It was intended that both the goals and the indicators would be further developed in subsequent reports. Potential indicators were initially developed for the following five areas – representing the important elements of sustainability from Sanford’s perspective: • Corporate Governance • Shareholder Value • Stakeholder Satisfaction • Employee Orientation • Environmental Performance. Sanford has experienced widespread internal (boardroom through to staff levels) and external support for their initial Sustainable Strategy, and publication of their first report. In addition, more internal ownership and participation in the strategy has been experienced since the publication of the first report. The senior managers have developed a better understanding of sustainability principles and objectives for both the strategy and the report itself. Sanford is currently preparing their second report., A staff data collection questionnaire based on the performance indicators used for last years report, with the addition of several new indicators, is being developed. These performance indicators have been expanded further during this case study and, once agreed within Sanfords, will be used to update the proposed data collection questionnaire to staff. The questionnaire will be issued to area managers to obtain feedback on the report content, and data, as per the agreed indicators. Some of the output from this case study, including the revised and expanded draft Sustainability Strategy and the recommended methodology for report preparation, will be considered for Sanford to assist with internal preparation of their second report. Suggested Future Direction and Methodology for SDR Future Direction Findings from the case study highlighted a number of general SDR issues and some possible future directions that could be taken by Sanford to enhance incorporation of sustainable development into their business. These case study findings have been grouped into three key areas - planning (including development of policies and performance indicators), corporate governance and stakeholder engagement. 7
  8. 8. Planning (Policy, Indicators etc.) It is recommended that Sanford develop a set of sustainable development policy statements, performance objectives and indicators, that can then be communicated to stakeholders in the 2001 report. The initial set of sustainable development policy statements and possible indicators included in the first report (and entitled the company’s Sustainability Strategy) should be significantly updated and expanded upon to include: • Policy statements – including an overview statement and three sub-statements on environment, social and economic performance; • Performance objectives – both narrative and numerical objectives that are transparent and measurable. For example a project related narrative objective such as developing an environmental procurement programme or a numerical objective such as a reduction in water usage. • Performance indicators – providing a means of measuring and reporting on whether the performance objectives (and therefore the underlying policy commitments) are being met – on a year to year basis. Examples of performance indicators may include number of suppliers that have been screened on environmental grounds, or water used/tonnage of fish processed. One of the specific deliverables arising from this case study has been the further development of Sanford’s iniital Sustainability Strategy including sets of possible indicators for environmental, social and economic performance. A total of approximately 65 indicators have been submitted to Sanford (covering environmental, economic and social areas) for future consideration. Sanford propose to discuss these indicators internally and use this case study deliverable as a basis for finalising their Sustainability Strategy for incorporation into the 2001 report. For the purposes of this Case Study report, the following have been selected as examples of the environmental indicators developed for Sanford. The selected examples range from narrative, project type indicators through to specific numerical indicators that can be readily presented in graph format. Sustainable Harvest: • Research Programmes to determine total allowable catches • Number of NZ MSC Certifications • Percentage of fish product that is lost/converted to fishmeal/sold Resource Use (Energy, Water) • Diesel Fuel consumed/production volume • Staff training on energy efficiency Environmental Effects: • Reduction in oyster loss to sea; • Solid Waste emissions Corporate Governance Corporate Governance (or “making it happen”) is critical to the success of Sanford’s sustainable strategy. It requires embedding responsibilities and procedures into the company culture to ensure that the policy statements/commitments are met. Sanford has experience in embedding systems with the successful implementation and 8
  9. 9. certification of ISO 14001. Sanford currently use some measure of health, safety and environmental performance to evaluate their business units. It is recommended that the potential for more formal quantitative measures of selected individual and business unit performance, based on sustainable development objectives, be evaluated. It is also recommended that Sustainable Development issues be formally incorporated into Board and Management Team meetings and specific responsibilities are assigned for specific areas. Stakeholder engagement Sanford’s first report was compiled with some internal discussion but limited external stakeholder dialogue. At this stage, the second reporting process does not include definitive plans for stakeholder engagement. A focussed, structured stakeholder engagement programme will provide Sanford with more information on what their stakeholders wish to have included in the report and why. For the 2001 report, it has been recommended that Sanford consider some limited stakeholder dialogue, perhaps with a few key customers and shareholders. Following preparation of the 2001 report, Sanford should carry out a scoping exercise on stakeholder engagement. This would included a clear analysis of the intended objectives and benefits and the ensuing, targeted programme. Methodology The following methodology or programme for moving to the next stage in the SDR process is recommended: 1. Refine Corporate Governance Policies and performance targets for board, management and individuals. 2. Agree on scope and boundaries for the report (e.g. internal only, not suppliers, contractors) based on an analysis of the sectors which Sanford has jurisdiction or other influences over. 3. Discuss all proposed policy statements, performance objectives and indicators with Management Team to establish collective “buy-in” and provide education on the range/types of parameters that data is required for. 4. Consider some discussion of the policy statements, performance objectives and indicators with other key stakeholders, in particular shareholders and overseas customers. 5. Edit staff questionnaire according to agreed list of parameters established from management feedback and targeted stakeholder discussions. 6. Circulate questionnaire and compile data. 7. Present data in recommended format that clearly links policy, performance objectives and actual data. 8. Prepare remaining sections of the report according to the general GRI format (CEO statement, Profile of Reporting Organisation, Vision and Strategy, Policies, Organisation and Management Systems, Performance) 9. Evaluate benefits of verification and options for completing this exercise. 10. Print report and circulate with an attached stakeholder feedback form 11. Depending on stakeholder engagement achieved during 2001, develop targeted stakeholder consultation programme for 2002. 9
  10. 10. Relationship of Methodology to GRI and AA1000 Global Reporting Initiative The report content and format recommended by URS to Sanford generally complies with that recommended in the GRI Guidelines. The report would therefore include sections for the CEO statement; Sanford profile; executive summary; vision and strategy; policies, organisation and management systems; and performance. The recommended performance indicators relate specifically to a stated objective and at a more general level, to an overriding environmental, social or economic policy statement. As such, URS have not recommended the distinctions used by GRI for performance indicators, including those defined as “systematic” or “cross-cutting”. AccountAbility 1000 The overall SDR process of planning, embedding, auditing and accounting which is described in this standard is being developed by Sanford. This process is already well established for the company’s environmental performance (implementation of EMS) whilst the company’s social performance is less structured with no auditing currently used. There is also a need to align social and community activities with the company’s corporate values. It has also been recommended that a more targeted programme of stakeholder engagement is established by Sanfords , as is indicated by AA 1000. 10
  11. 11. Case study: BP Oil New Zealand (BP NZ) Facilitator: URS Executive Summary In New Zealand, BP’s core business is the supply, distribution, and marketing of fuels and lubricants as well as convenience retailing. The New Zealand operation, including Castrol, employs approximately 300 staff and generates a turnover of 1.5 billion. There is a network of over 400 BP/Castrol petrol stations throughout the country and the company accounts for just over 25% of the market share, on total products. BP NZ sees the development of an SDR as a way of harnessing their long-term business vision and as a way to approach the many issues and competing demands that arise in its business, in a holistic manner. SDR began globally for BP in 1998 and in 1999 was integrated into the financial report for that year. BP is now committed to yearly reporting on its Health, Safety and Environment and social performance as well as its financial performance. BP report in two ways: against policies and by location. BP NZ have been working on the development of the New Zealand location report for some time and are proposing to have the document finalised and published in October this year. An analysis of the difficulties encountered by BP NZ in completing the SDR process identified a number of lessons to be learnt. These include the clear establishment of a report scope and boundaries from the outset, the relevance of key global issues for location reports, the selection of both narrative and quantitative performance indicators and the importance of non-technical performance indicators. Findings from the case study highlighted possible future directions that could be taken by BP NZ to enhance their SDR development. These have been grouped into three key SDR processes - planning (including development of policies and performance indicators), corporate governance and stakeholder engagement. A methodology has also been recommended to facilitate preparation of BP NZ’s first SDR. Comparison of the proposed report content and SDR process against the GRI Guidelines and AccountAbility 1000 standard, respectively, has been made. The report content and overall format currently used by BP generally complies with that recommended in the GRI Guidelines whilst the overall SDR process of planning, embedding, auditing and accounting which is described in the AA1000 standard is a system that is already part of the BP culture. Profile of BP New Zealand Limited BP is one of the three largest integrated energy companies in the world. The main global activities are exploration and production of crude oil and natural gas; refining, marketing, supply and transportation; manufacturing and marketing of petrochemicals; and a growing activity in solar power generation. Following a series of mergers and acquisitions, the BP brand now brings together the former British Petroleum, Amoco Corporation, Atlantic Richfield (ARCO), and most 11
  12. 12. recently, Burmah Castrol. The combined group has a market value of over $200 billion. In New Zealand, BP’s core business is the supply, distribution, and marketing of fuels and lubricants as well as convenience retailing. The New Zealand operation, including Castrol, employs approximately 300 staff and generates a turnover of 1.5 billion. There is a network of over 400 BP/Castrol petrol stations throughout the country and the company accounts for just over 25% of the market share, on total products. Sustainable Development Reporting Experience SDR Reporting History BP has a strongly embedded culture of health, safety and environmental performance, coupled with responsiveness to community and staff needs. BP NZ’s business case for developing a SDR initiative is summed up by the following quote from the CEO: “Our objective is to bring a creative, progressive, distinctive and responsible approach to sustainable development challenges, and to do so in an ethical way in line with our core values and business policies. In particular we regard the greater transparency and accountability associated with sustainability as an opportunity for leadership and innovation.” BP NZ sees the development of an SDR as a way of harnessing their long-term business vision and as a way to approach the many issues and competing demands that arise in its business, in a holistic manner. SDR began globally for BP in 1998 and in 1999 was integrated into the financial report for that year. BP is now committed to yearly reporting on its HSE (progress made towards policy goals of no accidents, no harm to people and no damage to the environment) and social performance (progress made towards the commitments in ethical conduct, employees and relationships policies) as well as its financial performance. BP report in two ways; against each of the policies and by location. The policy reports are prepared by functional teams. To ensure consistency of data reported across the organisation, guidelines (e.g. Environmental Reporting Guidelines) are produced to help the business units report data. The location reports address the relevant business issues in each location. So far this year location reports have been prepared for operations in Australia, China, South Africa, Scotland and Texas. Existing SDR Plan BP NZ have been working on the development of the New Zealand location report for some time and are proposing to have the document finalised and published in October this year. An initial draft report was prepared in 1999. One of the deliverables from this case study has been an annotated table of contents to use as a basis for revising the original draft and preparing the final report. 12
  13. 13. Future Direction and Methodology for SDR Lessons Learnt To Date BP NZ has a wealth of available corporate information on sustainable development practices and reporting. Nevertheless, the company has had a draft SDR available internally for nearly one year and has found difficulty in completing the reporting process. Lessons learnt from an analysis of this situation, which occurred as part of this project, are listed as follows: • The scope and boundaries of the NZ report must be clearly established from the outset, and reflect the NZ operations as opposed to trying to fully cover all of the global environmental and social issues, for example greenhouse gas emissions • Despite the restricted scope with respect to specific policies and performance indicators, the report must reference key global issues, and summarise BP’s policy, actions in relation to these. Examples include climate change, alternative fuels • Once the scope and boundaries of the report are defined, a list of narrative and quantitative performance indicators should be selected • Non-technical performance indicators (e.g. corporate governance) are as important, perhaps more important, than the technical indicators (e.g. emissions) • Internal resources need to be clearly defined to enable policies and performance indicators to be established and reported on. Future Direction Findings from the case study highlighted possible future directions that could be taken by BP NZ to enhance their SDR development. These have been grouped into three key SDR processes - planning (including development of policies and performance indicators), corporate governance and stakeholder engagement. Planning (Policies, Indicators etc) The policies and performance indicators used for the BP NZ report will be defined by an analysis of “how New Zealand operations fit in the global picture”. BP New Zealand will need to clearly state in the report: • The scope of the New Zealand operations and how these differ from the global picture – for example, company owned retail stations are a large part of BP’s New Zealand operations, whereas some of the offshore operations will be dominated by large production facilities • How the company uses the overall corporate policy statements to define targets and indicators that are relevant to the New Zealand operations. The performance indicators that are chosen should parallel the corporate reporting requirements, for example, the use of data collection systems that are already in place within the company. During the case study process and a review of BP NZ’s draft SDR a number of performance measures previously unconsidered by BP NZ were identified namely corporate governance, environmental procurement policy and BP’s Design for the Environment concept. Corporate Governance BP already has an embedded “Project” (or “Just Do It”) Culture within its orgranisation and this will ensure that the behaviour of the company “on the ground” will align with the policies described within the SDR. 13
  14. 14. To reflect this project culture, the SDR report needs to use both narrative and quantitative performance indicators, splitting them up to cover projects and on-going trends respectively. Detailed cumbersome procedures that can arise from sustainable development commitments (and provide little value) must be avoided as these will not take hold in a “hands on” culture. A better approach will be clear assignment of staff responsibilities whilst promoting a culture of “no blame” incident reporting. BP employs a rigorous individual, management and business unit performance evaluation system which includes specific reference to Health, Safety and Environmental Performance. This system should be maintained and some consideration given to expansion into community or any other stakeholder related areas of performance that are covered by the SDR but not yet by the performance evaluation system. Stakeholder Engagement BP NZ has access to a significant volume and breadth of information regarding stakeholder analysis. Extensive stakeholder analysis projects have been completed globally and very recently in Australia. Additional New Zealand specific analysis is considered unlikely to be able to provide significantly more information to contribute to the BP NZ report. The development of the SDR would, however, provide an opportunity to commit to a brief evaluation of the global and Australian information, from a New Zealand perspective. In the longer term (for example during the preparation for BP NZ’s second report), the scope of an “appropriate” stakeholder engagement programme should be evaluated and decided upon. BP NZ is already very “connected” to the community. The public are aware of the brand and the product and the retail stations are high profile in many communities. The objectives of any stakeholder engagement programme should not be restricted to the collection of information about relevant issues, concerns, suggestions etc. The stakeholder programme, if scoped well, could also provide an opportunity to enhance trust between the company and its customer base. The establishment of what is an appropriate stakeholder engagement programme for BP NZ (i.e. “divisional” vs corporate practices) is an important issue and is not addressed by AA1000. Methodology The following methodology for moving to the next stage in the SDR process is recommended: 12. Establish an internal project team and agree on the methodology to be used (including any need for stakeholder input), resource requirements, overall timeline, need (if any) for external input 13. Agree on the scope and boundaries for the report 14
  15. 15. 14. Agree on all BP NZ policy statements, narrative and quantitative performance indicators and any targets that can be committed to 15. Allocate sections of the report to individuals 16. Prepare the draft report 17. Prepare the scope of verification by a third party. The verifier should be asked to ensure that: –The report presents a comprehensive evaluation of BP NZ economic, environmental and social data –The policy statements and performance commitments appropriately reflect the underlying management philosophy, culture and behaviours of BP NZ staff –The information and data provided is accurate 18. Obtain independent verification of the report 19. Print the report and circulate within BP NZ with an attached feedback form 20. Depending on stakeholder engagement achieved during 2001, begin developing a targeted stakeholder consultation programme for 2002. Relationship of Direction and Methodology to GRI and AA1000 Global Reporting Initiative The report content and overall format currently used by BP generally complies with that recommended in the GRI Guidelines. The recommended content includes CEO statement; BP NZ profile; executive summary; vision and strategy; policies, organisation and management systems; and performance are all included in the report format. URS has recommended the use of both narrative and quantitative performance measures to reflect the project nature of many of BP NZ’s operations. AccountAbility 1000 The overall SDR process of planning, embedding, auditing and accounting which is described in this standard has been recommended to BP NZ by URS and is a system that is already part of the BP culture. It has been recommended that a programme of stakeholder engagement is considered by BP NZ. Although development of this programme is at an early stage it is likely that it will differ from that described in the standard as the issue of what is an appropriate level of engagement for divisional operations is not covered by the standard. 15
  16. 16. Case Study: Hubbard Foods Facilitator: Landcare Research Executive Summary Hubbard Foods Ltd (Hubbards) have been committed to preparing a Sustainable Development (SD) report for two and a half years and the NZBCSD project has provided them with the resources and pressure to prepare it. Through the short project period (3 weeks), Hubbards have made significant progress toward the report. The Hubbards team have displayed extensive commitment to the process. Profile of Hubbards Hubbards is a privately owned company that has been making cereal since 1988. The company employs approximately 100 staff and currently manufactures all its cereal from its factory in Mangere. The company turnover is approximately $27 million and it manufactures a wide range of breakfast cereal, which is sold in New Zealand, the United Kingdom, Asia and Australia. The profile of its CEO and founder, Dick Hubbard has been synonymous with social responsibility. This has impacted on the reputation of the company and is reflected also in the company’s membership and representation at the executive of Businesses for Social Responsibility and the New Zealand Business Council for Sustainable Development. SDR experience to date Hubbards will be releasing its first sustainable development report on the 31 July 2001. Hubbards’ decided they would prepare a TBL report two and a half years ago. Since this time, they have commissioned engagement with their stakeholders through the Murphy Stakeholder Audit Model. They have also undertaken an environmental audit through the Auckland Environmental Business Network (AEBN), and have had a CO2 emissions audit conducted by Landcare Research. Some of this information has been used in the preparation of the sustainable development report. Facilitator’s feedback on existing sustainable development report plan Although there was an intention to report, there was no detailed plan in place and therefore there was nothing on which the facilitator could provide feedback. Description of process and next steps The proposed process for preparing the sustainable development report is reproduced below. Step 4 focuses on identifying the area to be reported upon, before selecting the indicators for each performance area. The method uses a Key Performance Area Driver model to ensure that all sustainability issues are identified, even the tough issues. The facilitator believes this is important to ensure that the report shows a balanced view, rather than a too rosy picture of the company, or one driven by readily available data. 16
  17. 17. Step 1: Review purpose of reporting Step 2: Determine scope of report Step 3: Perform a gap analysis on corporate values, mission, and policy, to highlight where sustainable development principles are not reflected. Step 4: Review the Key Performance Area Drivers (using the Key-PAD model below) to determine the content of the ‘performance’ section of the report. Step 5: Determine the way the KPA will be addressed in the sustainable development report. a) Acknowledge but no measure – plan to address in future b) Acknowledge may be an issue but don’t know for sure – plan to check. c) Acknowledge and measure d) Acknowledge and tell story. Step 6: Develop KPIs for those KPAs that will be measured. Step 7: Targets and accountabilities It has been a challenge setting targets before knowing what information the organisation has on each of the key performance areas selected. Step 8: Develop measurement systems Step 9: Decide on structure of report Step 10: Verification and credibility issues Step 11: Practical report issues – web, distribution etc. Step 12: Feedback – address how feedback on report will be obtained. Step 13: Embed learning and continue to learn and improve Throughout the entire process described above it is important to address changes that can be made to existing processes, strategy, policy, vision etc to better reflect the triple bottom line. The approach described above is not linear. The timing of the different components is different for every organisation. This is evidenced by the fact that Hubbards completed steps 1 to 5 and 9, 10 and 11 during the case study period. This leaves steps 6-8 and 12 to complete later. 17
  18. 18. Stakeholders Stakeholders have been addressed in step 4 above. The aim of using stakeholders as a driver for the sustainable development report is to ensure that the report is relevant to the stakeholders. Much reporting in the past has included what the organisation considered important with little consideration for what was important to the readers. What Hubbards’ want to know is what is important to each stakeholder group in relation to the company’s performance. They may also want to know the stakeholders’ perception of Hubbards’ performance in each area, and possibly to be involved in the development of KPIs for the report. The facilitator and reporting team went through the process of identifying Hubbards’ stakeholders, and which of these stakeholder groups will be engaged for the report in question. Where Hubbards are not dialoguing with a group, the justification for such exclusion was discussed. This is contained in the table below. It is particularly interesting that as a small company, Hubbards conducted some of the stakeholder dialogue in-house as opposed to using outside experts. However, the company did engage the Murphy Stakeholder Audit Model to conduct some research on perceptions in 2000, some of which has been relied on as evidence of important issues to some classes of stakeholders. Stakeholder Will we include in Will we dialogue with this 2001 SD report? stakeholder group now Customers - consumers Yes No – we know what is important to them through previous research Customers - trade Yes No – next year – we have anecdotal evidence only Employees Yes Yes Shareholders No Justification – Dick Hubbard is representative of their interests Local Community No Justification – deal with in subsequent report -although stories of community involvement will be included Suppliers Yes No – we know what is important to them already through previous research Governance Hubbards has established a Board in the last few months. Its relevance to the SD reporting process and its distinction from public boards is interesting. Part of the rationale for establishing the Board was to ensure all stakeholder interests 18
  19. 19. are represented, rather than just shareholders. The Board members have not been selected because of their representation of a particular stakeholder group however, they have been expressly instructed to take into consideration the needs of all stakeholders equally. This can be compared to the Board of a public company who are legally required to look after just the interests of the shareholder. As the Board of Hubbards is only a few months old, it will be interesting to observe the role it plays in protecting the diverse needs of stakeholder groups. Rationale of process suggested and deviation from existing plan The process outlined above has been developed as a result of work with other New Zealand organisations preparing TBL reports, and the facilitator’s experience on their own sustainable development report. It has integrated AA1000 where it adds value and has added a number of dimensions that add value to the process. Relationship of process suggested and changes made to AA1000 The AA1000 process is outlined below. Planning Commitments Identify stakeholders Define/review values Accounting Identify issues Determine process scope 19
  20. 20. Identify Indicators Collect Information Analyse information, set targets and develop improvement plan Audit and reporting Prepare report Audit report Communicate report and obtain feedback Embedding Establish and embed systems The process recommended by the facilitator differs from AA1000 in two major ways: AA1000 is focused on producing a report, with internal management processes being considered, but only briefly. The recommended process is broader and is designed for organisations to not only produce a report but also to use it as an internal tool for change. For example, stakeholders are just one of eight drivers for content in the process outlined below, whereas AA1000 relies very heavily on stakeholders to determine content. Secondly, AA1000 is a very rigorous standard when it comes to stakeholder engagement. The recommended process acknowledges the size of many New Zealand businesses in that formal stakeholder engagement is sometimes difficult to do given resources available. In the case of Hubbards, significant stakeholder research has been undertaken to determine issues of most importance to stakeholders. However, involving stakeholders in the development of key performance indicators, as is required by AA1000 is not on the horizon. The facilitator strongly supports the stakeholder stance taken in AA1000 and encourages organisations to follow it as much as they can where their size enables them to invest significant resources in stakeholder dialogue and involvement. Relationship of process suggested and changes made to the GRI guidelines GRI is a valuable content standard for organisations preparing SD reports. Hubbards have used GRI in two ways: firstly in determining the SD report structure ie: • CEO statement • Profile of reporting organisation • Executive Summary and Key Indicators • Vision and Strategy • Policies, Organisation and Management Systems • Performance Hubbards have considered this as a framework for the content of the report and have decided to adopt some of it. The reason for not using it all is reflective of the size and ownership structure of the business. 20
  21. 21. The structure for the Hubbards report is: • CEO statement • Profile of the company • SD Performance – issue based (rather than in the 3 ‘silos’ of social, environmental and economic). • Credibility statements (to be confirmed) • Feedback collection piece Some discussion of policies, vision, values and management systems will be included in the CEO statement. 21
  22. 22. Case Study: The Warehouse Group Facilitator: Landcare Research Profile of The Warehouse Ltd The Warehouse Group was established in 1982. It now comprises three trading operations: • Warehouse Stores (74 stores, the “Red Sheds”) selling general merchandise in New Zealand • Warehouse Stationery (since 1991; 32 stores selling small office and home office products) • Australian business (acquired on 1st Aug 2000, Clints and Sollys are two discount variety stores; 116 stores). The Warehouse marketing approach is based on two brand statements: “where everyone gets a bargain” and “where quality is affordable”. This approach is backed by a “money-back” guarantee. The product range in New Zealand exceeds 90,000 lines, reflecting a very large number of individual suppliers both domestic and overseas. The company sells a number of own-label products, together with an increasing range of international brands. The Warehouse and Sustainable Development The Warehouse and its founder, Stephen Tindall, and both are household names in New Zealand. Early in 2001, Greg Muir became Chief Executive Officer, and Stephen Tindall moved from his role of Managing Director to that of Founder of The Warehouse. Stephen Tindall has maintained an active role and continues to act as champion for sustainable development initiatives, along with the company’s environmental coordinator, Richard Morley-Hall. Within The Warehouse a number of initiatives have reflected the Founder’s commitment to sustainable development. People First was adopted as a philosophy, focusing attention on the five key stakeholder groups: customers, team members, suppliers, shareholders, and the community. This philosophy is supported internally by “The Warehouse Way” – a written policy. In 2000 this philosophy was extended to “People First Everywhere”. A Supplier Code of Conduct was introduced in 2000, which, in addition to dealing with the rules of commercial engagement, begins to impose standards of environmental and social performance on suppliers. The company recognises that the Code is an initial step in this direction, and that verification of supplier performance will be required. A “Zero Waste” philosophy exists in the company. “Reverse logistics” have been developed to return packaging, store, and product waste through the company’s distribution system to central sorting points. From those it is sent to recycling operations or to landfill, as appropriate. In this way the company has brought the majority of its stores into line with the zero-waste goal, removing the waste skips and local disposal costs. In 1999 the company was a founding member of the NZ Business Council for Sustainable Development (NZBCSD), which is promoting the present case study work on SD reporting. Since late 2000 Stephen Tindall has been the chairman of the NZBCSD and contributed to the work of the World Business Council for Sustainable Development. In 1999 the company joined the Annual Survey of Corporate Environmental Responsiveness, a programme run by Delyse Springett of Massey University. This has focussed attention on environmental policies and performance, and enabled the company to 22
  23. 23. benchmark itself against other New Zealand companies. In 2000 The Warehouse joined the pathfinder programme of The Natural Step, along with around ten other New Zealand organisations, thus becoming part of an international movement to implement the four system conditions for sustainability set down by The Natural Step. In the same year the company joined the Redesigning Resources (RR) conference group of six organisations putting their progress towards greater sustainability under the public spotlight. Conference workshops in Christchurch exposed the company to the scrutiny of others and brought forward suggestions about how it could improve its performance. The most significant goals for The Warehouse were identified as influencing the supply chain to improve its performance, and driving greater consumer demand for sustainable development. Arising from the RR conference was a Triple Bottom Line (or sustainable development) workshop series led by Landcare Research. This series aims to take those organisations along the pathway to reporting by the time of the next RR conference in 2002. The Warehouse takes part in those workshops and has made significant progress towards comprehensive reporting. The Warehouse has supported the NZ eco-labelling scheme, Environmental Choice since its inception, and carries a number of products which have certification under this programme. The Warehouse has also supported the community in a number of ways including a tree-planting scheme through its credit card points programme, “Clean-up New Zealand”, Project Kiwi, and support for schools and national organisations, e.g. Plunkett and Surf Life-Saving. The Warehouse is highly regarded and has won national awards for its energy efficiency management. The company has had its greenhouse gas emissions assessed by the Landcare Research Ebex21 programme with a view to linking energy efficiency to investment in the restoration of native biodiversity. The company commissioned a “values audit” by Social Audit NZ. Australia presents new challenges and opportunities in relation to sustainable development. The Warehouse and SDR What have they done? The company’s annual reports have included 1-2 pages on environmental initiatives since 1998. These reports have not included performance measures or data. Where are they now? The company is now committed to SD reporting, and is developing a report structure and deciding upon priorities for content, as described below. They recognise that for many aspects of SD performance data may not yet exist, and measurements will need to be established. Some areas will therefore be discussed at this stage until performance data become available. Why do more? The opportunities presented by SD Reporting are to: 23
  24. 24. • Better manage corporate risk through a comprehensive assessment of social and environmental performance • Internal discipline, influencing what the company does, and forcing it to do better • Provide a platform for influencing stakeholders, especially others in the New Zealand business community, to improve their own contribution to sustainable development • Build enduring stakeholder support for The Warehouse through shared values, trust, and demonstrated integrity • Build brand awareness and reputation in a society where values are shifting towards greater sustainability • Show how The Warehouse itself has benefited by implementing sustainable development thinking and technology • Acknowledge issues of concern to stakeholders, and talk about what The Warehouse is doing to address them • Achieve greater resource-use efficiency and reduced operating costs • Encourage innovation in product and service lines and marketing to enhance to company’s advantage gained from applying SD principles • Benchmark the business against others reporting in the sector around the world. Issues for The Warehouse in Adopting SDR Board and Executive commitment: need to achieve buy-in from the senior management team. As Founder of The Warehouse, Stephen Tindall is strongly committed to SD reporting and has driven many of the initiatives recorded above. The Board is committed to sustainable retailing. Senior management and Board members have different levels of awareness and understanding of the concepts of sustainable development and reporting. Developing a reporting team with a champion and suitable representation. The SDR project is led by the Company Secretary assisted by the Environmental Coordinator. Departmental heads are being called upon for data, but are not directly represented on the reporting team. At this early stage in comprehensive SD reporting, the company may need to establish a reporting team with wider representation. Few models exist for the retail sector. Unlike manufacturing, the retail sector worldwide has provided few examples of SD reporting. In terms of SD performance, however, The Warehouse has learnt from the practices of several organisations. For example, B&Q, the UK do-it-yourself retailer, has provided models for reducing packaging and the use of sustainably-harvested timber sources. The risks in SDR. SDR is an opportunity to build stakeholder trust and support through an honest account of both successes and those areas where performance needs to be improved. The Warehouse is committed to a “warts and all” report of its performance. The company has a very high public profile in NZ and is establishing a higher profile in Australia. Any reporting on corporate SD performance is likely to attract significant attention. The large-scale discount retailing sector has attracted criticism in many countries, not least NZ, for its impacts on society. The perceived problems include the impacts of opening such stores on local communities, the encouragement of consumerism and family debt, poor working conditions and child labour in the supply chain, and the increased volumes of waste from packaging, etc. 24
  25. 25. The Warehouse shares these issues with other members of the retail sector. Therefore by publishing a comprehensive SD report, the company is taking the opportunity to lead the retail sector in addressing these issues collectively. But by putting itself forward as being committed to sustainable development, with “People First Everywhere”, “Affordable Quality”, and “Zero Waste” ethics, The Warehouse will put its own performance under the spotlight. Stakeholders will make their own judgements about the completeness and transparency of the company’s reporting. For any organisation there are risks, perhaps greater risks, associated with not recognising or disclosing sensitive matters. These risks include uncontrolled disclosure by other parties, and exploitation by the media and competitors. Decision on the phasing of content. It is normal that companies work up to full SDR over a period of years. This reflects the time taken to both identify the issues of importance to stakeholders, and gather meaningful and reliable data. The Warehouse has been reporting upon SD projects over the past 2-3 years. A much more comprehensive framework is being proposed for the next annual report. Decisions will be needed on subsequent content, especially in those sensitive areas discussed above, where reliable data is not yet available and will be harder to access. Multiplicity of SD initiatives in TWL. The Warehouse has engaged in a number of sustainable development initiatives. These reflect both the commitment of Stephen Tindall to supporting SD in NZ, and on the diversity of approaches to SD that have sprung up in NZ in recent years. While some see this diversity as a strength, for others it has the potential to cause confusion. The SD report will need to show how the different approaches complement one another. The financial costs of reporting. There can be significant costs associated with SDR, in terms of stakeholder engagement, data gathering, and preparation of material. However, the Warehouse expects these costs to be offset by cost-savings resulting from monitoring and reporting performance across the business. The Warehouse does not expect to establish dedicated reporting systems, but rather to integrate SD data gathering into standard management reporting, like health & safety, and financial measures. The Warehouse’s policy statements. The reporting team recognises that some areas of policy are under development or yet to be addressed. The Reporting process will help to identify and prioritise these, and can provide guidance, from international practice, on closing the gaps. The SDR Process Reporting team The reporting process is led by the Company Secretary, who is responsible for annual reporting. He is supported by the Environmental Coordinator. The main thrust for SD reporting comes from Stephen Tindall. An SD reporting team, with committed representatives from different departments, has not yet been established. This may need to be addressed as the process begins to source new types of performance data from across the business and require detailed understanding of the rationale and implications of SD reporting. Overview of approach The Warehouse is a member of the Redesigning Resources group of organisations taking part in a Triple Bottom Line (SD) reporting workshop series, led by Landcare Research. The approach they have followed to date, towards their next report, is 25
  26. 26. summarised below. The status of each activity at The Warehouse is shown in brackets. • Ensure the top level commitment to SD reporting and allocation of the necessary resources. (Done) • Select the SDR champion. (Done) • Prepare a system for documenting the decision process and activities in producing the SD Report (this is essential preparation for external verification). (Incomplete) • Decide upon the reporting entity, scope, and time period covered by the report. (Done) • Identify stakeholders and what they would expect of the report. Develop a programme for engaging key stakeholders which clearly indicates which groups will be engaged, when, and the reasons for including or excluding specific groups. (Incomplete) • Identify key performance areas on which to report using the Key Performance Area Driver model or similar framework (see “Report content”) • Document the reasons for selecting the Key Performance Areas (KPAs) on which to report, as below. (Incomplete) a) Acknowledge KPA, report performance. b) Acknowledge KPA, plan to address in future. c) Unsure about KPA, plan to assess its importance. • Assign key performance indicators to the key performance areas, ensuring balance, comprehensiveness, and objectivity. (Incomplete) • Build upon existing scorecards and performance measures but avoid presenting a report skewed towards internal priorities. (Incomplete) • Document internal management processes and identify gaps in policies, accountabilities, planning, and monitoring. (Incomplete) • Where appropriate set performance targets for the next reporting period. (Incomplete) • Select approach to report verification and stakeholder comment. (Incomplete) • Develop the report content, format, illustration, and dissemination, taking care to reflect the values of the company (e.g., use of recycled/recyclable materials, gender and ethnic depiction, use of jargon, invitation of feedback, contact points, etc). (Incomplete) Use of International Reporting Standards Global Reporting Initiative (GRI) guidelines GRI is to be used extensively as a checklist of report content and candidate Key Performance Indicators. However, as with other organisations in the NZBCSD, there are likely to be two areas where The Warehouse’s approach differs from the GRI format. Influencing potential “Influencing potential” is seen by Stephen Tindall to be a major part of the company’s strategy for contributing to sustainable development both in New Zealand and overseas. For example, improved performance can be demanded in the supply chain, and customers can be introduced to the concepts of SD and helped to implement measures such as waste reduction, selection of products with a better SD profile, etc. But the GRI does not yet offer measures of influencing potential. GRI presently focuses on the direct impacts of an organisation’s activities. It is expected that GRI will develop in this direction, and that The Warehouse’s experience in developing relevant measures of “influence” will be of international importance. Integrated performance In the second area of divergence, GRI tends to consider social, environmental and economic performance in distinct “silos”. Integration of indicators is limited to rather simplistic context-setting by using ratios (e.g., carbon dioxide emissions per $ turnover). This approach omits the linkages between social, economic, and environmental performance 26
  27. 27. in the context of any one issue. The reporting team has considered the value in taking an issue-based approach to SD reporting. This means that once key performance areas have been identified, they will be analysed in terms of their social, economic, and environmental components. Take solid waste as a simple example. This is a key performance area for The Warehouse, which has a Zero Waste goal. Solid waste has: • Economic dimensions (for example, cost of disposal, cost of product returns, staff time costs in handling both, relative costs of reverse logistics, cost of providing recycling facilities for customers, liability for higher waste charges pending future legislation, etc) • Social dimensions (for example, influencing staff and customer behaviour to reduce solid waste, effectiveness of training and other approaches, acceptance of waste sorting, recycling, etc) • Environmental dimensions (for example, landfill demands, additional greenhouse gas emissions from producing new versus recycled material, environmental contamination from hazardous wastes (e.g. batteries), etc). That example demonstrates how the three dimensions of SD are woven together. Only when those linkages are made explicit does the reader gain a comprehensive understanding of the significance of the organisation’s performance in relation to that issue. GRI is valuable, however, in selecting the individual performance measures to be used in telling the story. AccountAbility (AA1000) process AA1000 is a process standard dealing with the engagement of stakeholders in the full cycle of SD reporting, from establishing vision, values, and goals, through planning, implementation, monitoring, review, reporting, and embedding in the organisation. The company’s “People First Everywhere” vision puts stakeholder engagement in the spotlight for The Warehouse. If reporting is not to be a one-way communication from the company to stakeholders, how can the company engage them in a cost-effective manner? Similarly, the company’s desire to embed SD thinking throughout its management processes and staff raises the need for an effective mechanism. AA1000 provides such a mechanism. It is used internationally, but the approach is unfamiliar in New Zealand. As accredited consultants become available, the Warehouse will review the use of the standard and what value it offers to their reporting. Report Content Scope, entity, and timeframe Reporting will cover The Warehouse Ltd, only. It is still to be decided of the report will be stand-alone or integrated with the Annual Report. The activities, performance, and policies of suppliers and contractors may be included in later reports, but only inasmuch as they are influenced directly by The Warehouse as part of its supply chain management policy. Stakeholders The reporting process and the content will strongly reflect the key stakeholder groups and their interests. Key stakeholders have been identified as follows: • Shareholders: no plan for engagement beyond the usual interactions • Staff: views recently surveyed by Social Audit NZ, but not so as to develop KPAs and relevant indicators • Customers: views recently surveyed on levels of customer service in the stores, and a 27
  28. 28. survey is in progress on customer attitudes to sustainable development issues • Communities: surveys in relation to the sites of new stores • Suppliers: informal contact in relation to implementing the Supplier Code of Conduct. No plan for further engagement in relation to reporting. Key performance areas (KPAs) A process of identifying KPAs has begun, based on the following approach, provided by the facilitators. The KPA driver model developed by Landcare Research, reflects: • International standards for reporting (such as GRI, AA1000) • Frameworks for sustainable development (such as Agenda 21, the CERES Principles, and The Natural Step) • Report assessment criteria used by organisations such as SustainAbility and ACCA in the UK. This approach “throws a net out” for matters that should be reported upon, based on a number of KPA drivers, described below. In each case one or more examples illustrate the KPAs on which The Warehouse will consider reporting. However, these examples may not reflect the final choices of The Warehouse. Key Performance Area drivers 1. Visions, values and goals - Given the company’s stated vision, values and goals, what areas of performance would stakeholders expect to see reported upon? For example, The Warehouse’s ethic of “People first everywhere” creates an expectation that the report will assess the positive and negative impacts of The Warehouse’s business on people in all of its stakeholder groups everywhere, both within and outside the company. The report may explain what the company means by “people first” and how its performance matches that vision. 2. Stakeholders - Given their own values and needs, what performance areas would the stakeholders expect to see addressed? For example, customers may wish to see information concerning product quality and value; staff may wish to see investment in training and its impact on career development and remuneration reported; local communities may want to have a balanced assessment of the impact of a new store on their social, economic, and environmental welfare. 3. Risk management - How does the company identify and manage risk in its environmental and social performance, and the potential impact of environmental and social issues upon itself? For example, what does The Warehouse do to manage the risks to its business associated with trading as a mixed mass merchandise discount retailer? How does the company manage risk associated with product safety? 4. Internal management - What management systems exist and how well do they perform in translating the vision, values, and goals of the company into sustainable performance? For example, how comprehensive and effective are The Warehouse’s policies for environmental management in ensuring high levels of staff performance and desired outcomes? 5. Global issues of sustainable development - What impacts does the company have on the major global issues, and what impact do those issues have upon the company, both now and in the future? For example, what is The Warehouse’s production of greenhouse gases and solid waste, use of ozone depleting substances, and other 28
  29. 29. hazardous chemicals in its products? How effective are measures to reduce these? What does the company’s “Zero Waste” goal mean in practical terms? 6. Strategic elephants - What are the most uncomfortable issues of sustainable development for the company and how is it addressing its performance at home and overseas? For example, how does The Warehouse perceive and implement its responsibilities for overseas supply chain management? 7. Influencing potential - What opportunities does the company take to lead its stakeholders towards sustainable development, and how effective is that leadership? For example, outcomes can be achieved by engaging customers and other stakeholders in the company’s “Zero Waste” goal? What is being achieved by engaging the retail sector in discussion of sustainable development? 8. Compliance, checklists, and existing frameworks - What regulations must the company meet, and what existing checklists, scorecards, or other frameworks can be used in reporting upon its performance? For example, to what extent has the company met the requirements of resource consents and other mandatory performance targets? Indicators and data issues The Warehouse is working to develop a range of performance indicators from the different SD initiatives in which it is engaged (e.g. Triple Bottom Line reporting with Landcare Research, The Natural Step, the NZ survey of corporate environmental responsiveness, Social Audit, etc). Verification The Warehouse intends to include stakeholder commentary and/or an official verification statement in its SDR. This is seen as a way of ensuring credibility, as with financial accounts. Presentation and Media for Dissemination A final choice is to be made between a stand-alone sustainable development report and the inclusion of 4-8 pages in the next annual report. The report will be available on the web. Case studies for businesses with no experience in the SDR process Case Study: City Care Facilitator: Landcare Research A Profile of City Care City Care was formed as a Council-owned Local Authority Trading Enterprise in December 1999, having previously been a Unit of Christchurch City Council. The principal objective of City Care is to operate a profitable, sustainable, and innovative business so as to maintain a strong market presence in all areas of construction and maintenance of the infrastructure and amenity assets owned by the shareholder, Christchurch City Council. The second objective is to grow the business profitably with other customers and in other regions. Why Publish a Report? The CEO and Board agree that as a publicly-owned entity, City Care has an ethical 29
  30. 30. obligation to report publicly, and that this accountability extends to all aspects of performance covered by the SCI. Statement of Corporate Intent (SCI) The need to manage against the principles of sustainable development are set out in City Care’s SCI: • Operate the business in a way which generates strong financial returns and dividend streams to the shareholder • Be a good employer in providing a work environment that recruits, fosters, and retains competent, motivated, committed, and productive employees • Be committed to excellence in health and safety management • Be a good corporate citizen in the community meeting our social obligations • Act in an environmentally responsible manner and progressively implement environmentally sustainable practices to its method of operation • Ensure all business activities comply with all legal requirements. Moves by the Shareholder The company’s owner, Christchurch City Council, is also beginning to plan and report its performance against similar principles. Hence City Care’s move towards sustainable development and SDR is timely. The NZ Business Council for Sustainable Development City Care joined the NZBCSD so as to learn from the experience of other organisations and contribute to the implementation of sustainable development principles by NZ business. In joining the NZBCSD, the company committed to publishing an sustainable development report within the next 1-2 years. Opportunities presented by SDR The CEO sees the principal value in SDR as discharging a public accountability. SDR will be comprehensive and integrated, setting out the objectives set for the year and the levels of performance achieved. Based on that reporting function, the CEO believes the sustainable development report provides opportunities to: o Build enduring stakeholder support for City Care through shared values, trust, and demonstrated integrity o Better manage corporate risk through a comprehensive assessment of social and environmental performance o Build brand awareness and reputation in a society where values are shifting towards greater sustainability o Develop new markets for City Care by demonstrating the contribution of its services to sustainable development o Promote innovative thinking and technology as solutions to the challenges of sustainable development o Show how City Care itself has benefited by implementing such innovative thinking and technology o Acknowledge issues of concern to stakeholders, and talk about what City Care is doing to address them o Influence stakeholders to improve their own contribution to sustainable 30
  31. 31. development o Benchmark the business against others reporting in the sector, nationally and around the world. SDR experience This will be the first sustainable development report produced by City Care. Where are they now? City Care is at an early stage in the NZBCSD case study. The CEO has prepared a draft set of performance indicators based upon the SCI and influenced by the World Business Council for Sustainable Development’s work on eco-efficiency indicators. These indicators cover the following areas: • Economic performance (for example, revenue, net profit, return on equity) • Environmental performance (for example, energy consumed, greenhouse gas emissions, total waste) • Social impact (for example, indicators for staff, community and suppliers) • Relationship with key stakeholders • Organisational health (for example, innovation, quality of management systems) What is the goal? City Care will produce its first sustainable development report in 2002. The principal tasks are to confirm the key performance areas and indicators, and to gather data against them. The company will also seek an appropriate level of stakeholder engagement in the reporting process. Reporting team The CEO is driving the process, with assistance from relevant staff. Use of International Reporting Standards WBCSD The World Business Council for Sustainable Development guidelines for reporting are generally valuable for the manufacturing sectors and provide useful indicators of resource consumption per unit of trade (eco-efficiency indicators). Global Reporting Initiative (GRI) guidelines GRI is being used as a checklist of report content and candidate Key Performance Indicators. GRI guidance is particularly helpful in the introductory parts of the report (CEO statement, reporting entity, management structures, etc). It is also useful in providing us with standardised measures for economic, environmental, and social performance which will allow us to benchmark ourselves against other organisations. AccountAbility’s AA1000 process AA1000 is a process standard dealing with the engagement of stakeholders in the full cycle of SDR, from establishing vision, values, and goals, through planning, implementation, monitoring, review, reporting, and embedding in the organisation. AA1000 is not seen as an appropriate tool at this stage for an organisation of the size and resources of City Care. However, it does provide a checklist which is useful in planning the level of stakeholder engagement which suits City Care. This decision 31
  32. 32. will be reviewed as SDR progresses. Looking Ahead The following sets out a possible way forward for City Care’s SDR over the next 1-2 years, based on the work done by the facilitator with other organisations. It does not reflect any commitment on the part of City Care to report on these matters or in this way. Top level commitment and overview An introduction and overview written by the CEO. In addition to profiling the business highlights, this section may introduce SDR and the rationale for City Care’s reporting. City Care and Sustainable Development Because of its direct involvement with infrastructure, City Care’s business touches several areas where Christchurch has become widely known for sustainable development initiatives. SDR provides an opportunity for the company to discuss its role in solid waste management, parks and waterways maintenance, and roading. Specific themes may be discussed relating to the company’s business activities, such as the impact of its fleet on city air quality, greenhouse gas emissions, the use of hazardous chemicals, and commercial interaction with solid waste recycling schemes. A central theme of the company’s strategy promotes innovation. This may be discussed in relation to sustainable development, with some examples of what has been achieved. City Care, through its relationship with the City Council, and dominant position as a provider of contract services, is also in a position of significant influence. The company may report on how that influence is exerted and to what effect. Scope, entity, and timeframe The report will cover the entire City Care operation. The activities, performance, and policies of sub-contractors may be included, but only inasmuch as they are influenced directly by City Care as part of its supply chain management policy. The report will be integrated with the Annual Report. Stakeholders The reporting process and the content will strongly reflect the key stakeholder groups and their interests. Key stakeholders have been identified as follows: • City Councillors as shareholders • City Council officers as customers • Other non-Council customers • Staff • Community (but not as customers) • Suppliers and partners 32
  33. 33. Key performance areas (KPAs) High level performance areas have been set down in the SCI in consultation with the shareholder. The KPA driver model developed, by Landcare Research, will also be used to identify other KPAs. This model reflects: 1. International standards for reporting (such as GRI, AA1000) 2. Frameworks for sustainable development (such as Agenda 21, the CERES Principles, and The Natural Step), 3. Report assessment criteria used by organisations such as SustainAbility and ACCA in the UK. This approach “throws a net out” for possible report content, based on a number of KPA drivers. KPA drivers KPA drivers are those things which dictate that an aspect of an organisation’s performance is of especial importance. In the following tables the driver is described on the left and City Care’s progress or plans are described on the right. For most companies certain KPAs recur under different drivers. This repetition in itself is a measure of their importance. Driver 1: Vision, values and goals Given the company’s vision, values Reporting expected upon: and goals, as stated in the SCI, Financial returns and dividends. what areas of performance would Good employer. stakeholders expect to see reported Health and safety. upon? Corporate citizenship. Environmental performance Driver 2: Stakeholders Given their own values and needs, Shareholder expectations are what performance areas would the broadly reflected in the SCI. stakeholders expect to see A plan may be developed for addressed? engaging other stakeholders in setting KPAs and KPIs. Driver 3: Risk management How does the company identify Report on ISO14001 and ACC and manage risk in its certification of environmental and environmental and social accident risk management. performance, and the potential impact of environmental and social Assessment to be planned for other issues upon itself? risk factors. 33
  34. 34. Driver 4: Internal management What management systems exist ISO14001 and ACC systems. and how well do they perform in Training programmes. translating the vision, values, and External financial audit. goals of the company into sustainable performance? A plan to be developed for auditing internal policies, structures, and accountabilities against sustainable development principles and identifying gaps. Driver 5: Global issues of sustainable development What impacts does the company Assessment may be made of KPAs have on society and the in relation to key sustainable environment in terms of the major development issues: global issues? Poverty (e.g. minimum salaries) What impact do those issues have upon the company, both now and in Community health (e.g. use of the future? hazardous chemicals) Community welfare (e.g. local sourcing of labour) Biodiversity (e.g. waterways maintenance) Protection of ecosystems (e.g. solid and liquid waste) Protection of the atmosphere (e.g. emission of greenhouse gases, ozone depleters) Protection of natural resources (e.g. use of water, fossil fuel, soil) Ethnic minorities (e.g. staff diversity, cultural identity at work, community involvement), 34
  35. 35. Support trade with the develop-ing world (e.g. product sourcing) Change consumption patterns (e.g. recycle own materials) Minimise waste and hazardous materials (e.g. design services for recycling, use of renewables). Driver 6: Strategic elephants What are the most uncomfortable To be assessed. issues of sustainable development for the company and how is it addressing its performance? Driver 7: Influencing potential What opportunities does the The company may report upon: company take to lead its stakeholders towards sustainable Purchasing policy (suppliers). development, and how effective is that leadership? Stakeholder education on sustainable development. Innovation for more sustainable development services. Measures of change in stakeholder behaviour. Driver 8: Compliance, checklists, and existing frameworks What regulations must the Statement of Corporate Intent company meet, and what existing Local Government Act checklists, scorecards, or other GRI, AA1000, WBCSD, etc. frameworks can be used in ISO14001, ACC reporting upon its performance? Indicators and data issues The company may set performance targets alongside KPIs and ensure they are related to meaningful goals. In this or future reports, dollar values may be put on environmental and social 35
  36. 36. investments, and in future, a cost-benefit analysis may be feasible for areas such as training. In this way the company will start to integrate indicators across the three themes of social, economic, and environmental performance. Under ISO14001, the company may consider adding data for number of incidents, complaints, etc, and include a measure of legal compliance. Resource use data could include water usage and waste water production. This assumes that equipment cleaning is a big water user and that the waste water is contaminated with oil, etc. Staff indicators may include information about Equal Employment Opportunity policies and performance, diversity, gender, etc. The company may consider including objective measures of code of conduct, especially in relation to tendering. Report Verification Verification enhances the readers' trust in not only the data, but also the management statements and qualitative information. City Care is considering the value to be added by verification. The CEO believes that the company's certification under ISO 14001, ISO 9001, tertiary level ACC, and financial auditing, together ensure many aspects of company performance are already authenticated. What Issues does SDR Raise for City Care? Shareholder commitment: need to achieve buy-in from the board. There has been strong support for the approach by the Board, who will need to sign off the final report. Key staff need to be familiarised with principles of sustainable development and its implications for corporate sustainability. An initial report can be driven by the CEO but embedding sustainable development thinking requires wider buy-in. This could be achieved by one or more internal seminars involving external business representatives who have made the commitment, and bring their own experience. This is a topic addressed by AA1000. On what issues of Sustainable Development can City Care have greatest influence? City Care is proud of its track record of innovation. Infrastructure companies overseas have been innovative in the areas of City Care’s business. For City Care, innovation requires an effective partnership with the client. Tender specifications which set environmental and/or social performance criteria serve to stimulate innovation. City Care will be able to discuss such issues in its report as one way of influencing stakeholders. 36
  37. 37. Decide on boundary issues and accountabilities for services provided by City Care. As a contract services provider City Care sees the principal customer as the contracting agent (e.g., the City Council) rather than the general public who benefit from the service. The CEO believes that it is appropriate therefore to use the Council as a proxy for the views of the public, and not to engage them as a stakeholder in preparing the sustainable development report. Decide on the phasing of content (what in first, second, third report, etc). It is normal that companies work up to full SDR over a period of years. This reflects the time taken to both identify the issues of importance to stakeholders, and gather meaningful and reliable data. City Care has some data on its operations and has also engaged in communication with staff and the shareholder. It can therefore expect to cover a limited range of issues in its first sustainable development report. Prepare the audience/stakeholders through consultation on the issues, report content, medium of presentation, etc. The intention to produce an sustainable development report has not yet been widely communicated. Because of the significance of this type of reporting to stakeholders it is the CEO’s intention to consult with their representatives during the preparation of the report. 37
  38. 38. Case Study: Interface Agencies Facilitators: Landcare Research Executive Summary Interface Agencies Ltd (Interface) has proceeded some considerable way down the path of preparing a sustainable development report in the short space of this project. The company is grateful for the support of the NZBCSD through this project, as it has encouraged the company to make a time-based commitment to reporting. The outcome of this is the aim of releasing the first sustainable development report on the 31 August 2001. Profile of Interface and background Interface is a flooring importer and distributor and is the smallest member of the NZBCSD with just eight employees. It is a privately held company owned by Robb and Christine Donze. The relationship between Interface and Interface Inc is one of agency only. The international company has no ownership in the New Zealand company. Further, Interface distributes flooring products manufactured by three other companies in addition to Interface’s Lonseal and Tuftmaster products. Interface Inc operated a subsidiary in New Zealand for three years prior to Interface taking over the agency. The subsidiary operations had not been financially viable. Indicative of the changes that came with changing from subsidiary to agency is freight costs. When it took over from the US subsidiary, Interface employed an operations manager who managed freight costs amongst other operational activities. Freight savings more than covered the cost of the Operations Managers salary in the first year. The company’s commitment to sustainable development is a result of the personal beliefs of its CEO, Rob Donze. The small size of the business makes it easy for this value-set to permeate the whole company. An extremely important concern for Robb is the risk of ‘green-washing’ the company through the SDR process. This has impacted on the process and content of the sustainable development report. In particular, the sustainable development report must show a fair picture of the company – the good with the bad, ’warts and all’. The CEO has a strong desire to provide leadership in particular in the construction industry regarding sustainable development and he intends this sustainable development report to support such leadership. It is therefore important to him that this process seems accessible to those organisations thinking about going through the process. SDR experience and plan Interface committed to preparing a sustainable development report when it became a member of the NZBCSD. However, the company had no detailed plan about how it would progress the report. 38
  39. 39. Description of process and next steps The formality of the SDR process was reduced somewhat to take account of the size of the business and the keenness of the company to not ‘over-process’ things. The company has been ingenious in its desired process of reporting, coming up with ways of making progress with the minimum amount of cost and time. The ‘keep it simple’ rule has permeated the process with Interface. Step 1: Review purpose of reporting Step 2: Determine scope of report Step 3: Perform a gap analysis to highlight where SR is not reflected Step 4: Review the Key Performance Area Drivers to determine the content of the ‘performance’ section of the sustainable development report. Note that this step includes the stakeholder engagement. See below for a detailed discussion of stakeholders. As a small company it was also important to include areas where the company already had measures so as to make the process attainable as well as include issues that are a ‘stretch’ for the organisation. Step 5: Determine the way the KPA will be addressed in the sustainable development report. a) Acknowledge but no measure – plan to address in future b) Acknowledge may be an issue but don’t know for sure – plan to check. c) Acknowledge and measure d) Acknowledge and tell story. Step 6: Develop KPIs for those KPAs that will be measured. Step 7: Targets and accountabilities Step 8: Develop measurement systems Step 9: Decide on structure of report Step 10: Verification and credibility issues Step 11: Practical report issues – web, distribution etc. Step 12: Feedback – address how feedback on report will be obtained. Step 13: Embed learning and continue to learn and improve This process is not linear. The timing of the different components is different for every organisation. 39
  40. 40. Throughout the entire process it is important to address changes that can be made to existing processes, strategy, policy, vision etc to better reflect the triple bottom line of sustainable development. Stakeholders We have addressed stakeholders in step 4 above. The aim of using stakeholders as a driver for the sustainable development report is to ensure that the report is relevant to the stakeholders. What we want to know in particular is what is important to them in relation to our performance. We may also want to know what their perception is of our performance in this area and possibly involve them in the development of KPIs for the report. The organisation went through the process of identifying who the stakeholders were whom the company impacted most significantly. And then which of these stakeholder groups would be engaged with for the first report. And where we are not dialoguing with a group justification for such exclusion. This is contained in the table below. Stakeholder Will we include in Will we dialogue with this 2001 TBL report? stakeholder group now Staff and their families Yes Yes Customers Yes Yes Suppliers No No Stakeholder engagement in a small company It is important that SDR processes take into consideration resource limitations in all senses of small businesses. In particular, stakeholder engagement cannot be a highly formalised affair, as the resources both financial and people-based do not exist. For example in Interface, engagement has been committed to with two stakeholder groups; customers and staff and their families. The process for conducting this engagement with one of these groups, staff and their families was as follows: Step 1 - Find out what the purpose of engagement with each stakeholder group is. For example the purpose of engaging with staff and their families is: • To help them think about sustainability • To influence other organisations as to how you prepare sustainable development reports • Document a system in the business to allow for employee input in a structured way • To find out what is important to staff • To find out what their concerns are, assuming informal dialogue misses some issues Step 2 - Once the company and the facilitator had a thorough understanding of the purpose, the facilitator drew up an interview questionnaire where there was the opportunity for employees to provide feedback to a third party 40

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