August 22-23, 2012                                                                          Mt. Pleasant, Michigan    Mich...
Speaker Introduction              William D. Newman, CMC, MBA                  •   Managing Principal, Newport Consulting ...
Discussion Points   • The Changing Global Environment   • Today’s Sustainability Mandate   • Types of Common Sustainabilit...
The Changing Global Environment           (cc) Library of CongressPage - 4
The Changing Global Environment           (cc) Elizabeth SwiderPage - 5
The Changing Global EnvironmentPage - 6
The Changing Global Environment                          Tier 1 Suppliers       Product Materials    Tier n Suppliers     ...
The Changing Global Environment                                                              The DJSI comprises publicly  ...
Discussion Points   • The Changing Global Environment   • Today’s Sustainability Mandate   • Types of Common Sustainabilit...
Today’s Sustainability Mandate                   The Challenge: A Real World Story            Photo: Sulekha.comPage - 10
Today’s Sustainability Mandate                   The Challenge: A Real World Story            Photo: Sulekha.comPage - 11
Today’s Sustainability Mandate               According to a survey     of global CEOs conducted by the     UN Global compa...
Today’s Sustainability Mandate      The University of   Oregon Sustainability    Leadership Program     is tracking over 5...
Today’s Sustainability Mandate   So, how are we doing? I thought you might ask…        Well, if you were to ask me the glo...
Discussion Points   • The Changing Global Environment   • Today’s Sustainability Mandate   • Types of Common Sustainabilit...
Types of Common Sustainability Documents   Formality of Statement                                                         ...
Types of Common Sustainability Documents   A Statement of Direction – Similar to a 10K President’s Message – is a publicly...
Types of Common Sustainability Documents   A Code of Conduct is a statement of policy which governs how the company will b...
Discussion Points   • The Changing Global Environment   • Today’s Sustainability Mandate   • Types of Common Sustainabilit...
Reporting and Auditing   Organizations may have several reasons for implementing a sustainability program. While the initi...
Reporting and Auditing   Sustainability has Three Pillars — we find that while there may be an immediate focus on one key ...
Reporting and Auditing   Three aspects of corporate sustainability programs have emerged: (1) development of corporate   s...
Reporting and Auditing   In 2006, the Global Reporting Initiative (GRI) was created to provide guidelines and audit   reco...
Reporting and Auditing   GRI reporting is a function of confirming that program initiatives, principles, and objectives ar...
Reporting and Auditing            GRI3 provides a number of criteria whereby the organization pursues a self-assessment, t...
Reporting and Auditing   AA1000 AS (2008) has emerged as a guidance document in assurance circles with respect to   sustai...
Discussion Points   • The Changing Global Environment   • Today’s Sustainability Mandate   • Types of Common Sustainabilit...
Links and References  •   Psycho-sustainability: A Model for Personal Sustainability, TEDxFlint, October 11, 2011  •   Inc...
Discussion Points   • The Changing Global Environment   • Today’s Sustainability Mandate   • Types of Common Sustainabilit...
Key Take-away Points   1. Sustainability is a growing field of business practice, winners and losers will      be chosen i...
Your turn!Page - 31
Thank you for participating.       Please provide feedbackon this session by completing a short              evaluation.  ...
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MACPA 2012 Small Practitioner Conference - reporting for social responsibility_newman_v3

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Presentation to the Michigan Association of CPAs in August, 2012 - Reporting for Corporate Responsibility

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MACPA 2012 Small Practitioner Conference - reporting for social responsibility_newman_v3

  1. 1. August 22-23, 2012 Mt. Pleasant, Michigan Michigan Association of CPA’s Small Practitioner ConferenceReporting for Social Responsibility?Exploring the Sustainability Reporting ProcessWilliam Newman, MBA, CMC – Managing Principal, Newport Consulting Group
  2. 2. Speaker Introduction William D. Newman, CMC, MBA • Managing Principal, Newport Consulting Group • Member, SAP Sustainability Executive Advisory Council • Certified Management Consultant (since 1995) • Over 25 years in industry, professional services • Adjunct faculty, Northwood University (International Management) • Adjunct faculty, University of Oregon (Sustainability Leadership) • Management Consulting Taskforce (Michigan Assn. of CPAs) • Professional Speaker (American SAP User Group, SAP Insider, TEDx, Sustainable Business Forum, Michigan Assn. of CPAs) TEDx talk at http://www.youtube.com/watch?v=8BmLVpdWvFk • Numerous articles on program oversight, stakeholder engagement, strategy, sustainable supply chain, social media • Twitter (@william_newman) • Google+ (+William Newman)Page - 2
  3. 3. Discussion Points • The Changing Global Environment • Today’s Sustainability Mandate • Types of Common Sustainability Documents • Reporting and Auditing • Links and References • Key Take-away Points • Summary and DiscussionPage - 3
  4. 4. The Changing Global Environment (cc) Library of CongressPage - 4
  5. 5. The Changing Global Environment (cc) Elizabeth SwiderPage - 5
  6. 6. The Changing Global EnvironmentPage - 6
  7. 7. The Changing Global Environment Tier 1 Suppliers Product Materials Tier n Suppliers What do they make? Social Performance How do they make it? Quality and Price Product Materials What do they make? Social Performance How do they make it? Quality and Price What do I make? How do I make it? Product Materials What do they make? Social Performance How do they make it? Quality and Price Brand / OEM Manufacturer Product Materials What do they make? Social Performance How do they make it? Quality and PricePage - 7
  8. 8. The Changing Global Environment The DJSI comprises publicly traded organizations that follow the Global Reporting Initiative (GRI) for Sustainability reporting The investment community is giving increased weight to Corporate Responsibility and Sustainability measures to guide rating and investment Source: SAM Sustainability Annual Review, September, 2011 decisions.Page - 8
  9. 9. Discussion Points • The Changing Global Environment • Today’s Sustainability Mandate • Types of Common Sustainability Documents • Reporting and Auditing • Links and References • Key Take-away Points • Summary and DiscussionPage - 9
  10. 10. Today’s Sustainability Mandate The Challenge: A Real World Story Photo: Sulekha.comPage - 10
  11. 11. Today’s Sustainability Mandate The Challenge: A Real World Story Photo: Sulekha.comPage - 11
  12. 12. Today’s Sustainability Mandate According to a survey of global CEOs conducted by the UN Global compact over 90% of those surveyed considered sustainability issues either important or very important to the future success of their business. But what does sustainability really mean? It depends on your framework.Page - 12
  13. 13. Today’s Sustainability Mandate The University of Oregon Sustainability Leadership Program is tracking over 50 emerging standards, guidelines and frameworks in the area of sustainability. Source: University of Oregon, Sustainability Leadership ProgramPage - 13
  14. 14. Today’s Sustainability Mandate So, how are we doing? I thought you might ask… Well, if you were to ask me the global 1,000 corporations, you know, how many of them are sincere and seriously about sustainability and long-term value creation, our own implementation survey and other leading think tanks would probably suggest we are probably at 15 percent. - George Kell, Director United Nations Global Compact Source: American Public Media, Marketplace Morning Report (April 18, 2012)Page - 14
  15. 15. Discussion Points • The Changing Global Environment • Today’s Sustainability Mandate • Types of Common Sustainability Documents • Reporting and Auditing • Links and References • Key Take-away Points • Summary and DiscussionPage - 15
  16. 16. Types of Common Sustainability Documents Formality of Statement Company UN Global DJSI / 10K Sustainability Compact Statement Plan Complex Code of Conduct GRI Report Simple Statement of Intra-company Sourcing Audits Direction Scorecards Complexity of DisclosurePage - 16
  17. 17. Types of Common Sustainability Documents A Statement of Direction – Similar to a 10K President’s Message – is a publicly communicated intent to address particular goals, mandates, or targets. This is generally non-binding and can be confused with company “green washing” of marketing efforts. A Statement of Direction is a document intended to convey to the public, customers, shareholders, analysts and other stakeholders the position of the organization and its intent.Page - 17
  18. 18. Types of Common Sustainability Documents A Code of Conduct is a statement of policy which governs how the company will behave inside its business ecosystem, as well as the individual behavior expectations of its employees and stakeholders. Codes may be binding from a performance management perspective. A Code of Conduct is interpreted by organizations abiding by them in the form of policies, procedures and guidelines.Page - 18
  19. 19. Discussion Points • The Changing Global Environment • Today’s Sustainability Mandate • Types of Common Sustainability Documents • Reporting and Auditing • Links and References • Key Take-away Points • Summary and DiscussionPage - 19
  20. 20. Reporting and Auditing Organizations may have several reasons for implementing a sustainability program. While the initial focus may be on fixing “hygiene” problems, organizations may exploit the opportunity to achieve more strategic objectives in corporate sustainability and social performance reporting areas. Problems Opportunities  Manual (spreadsheet-based) systems are  Adopt a more proactive approach to supplier “siloed,” error-prone, and do not reuse data in management enterprise systems  Anticipate and mitigate risk events; develop  Roll-up processes to support audits and other response plans should these events occur reporting needs are cumbersome  Elevate profile of global corporate citizenship and  Organizational accountabilities for sustainability enhance competitive brand position are unclear  Permeate sustainability initiatives and  Risk of being out of compliance with changing a culture of social responsibility throughout the global regulations organization  No systematic way to respond to crisis or other  Improve efficiency of adjacent core processes unforeseen event (design, manufacturing, QA)  No alignment with overall corporate  Incorporate sustainability in strategic planning and sustainability goals enterprise performance managementPage - 20
  21. 21. Reporting and Auditing Sustainability has Three Pillars — we find that while there may be an immediate focus on one key area of Corporate Sustainability, attention must be given to how reporting and decision-making occurs. This increases value drivers, reduces redundancy, improves operations, and manages costs. Target Focus of Sample Fortune 500 CSR Programs Survey of Selected Cross-section of Industries 2007-2009 Company Economic and Financial Environmental Social Accountability Improve the Human UPS Strengthen the Enterprise Protect the Environment Condition Minimize Environmental Local Community Starbucks Sustainable Coffee Prices Impacts Engagement Commitment to Ethical Kimberly-Clark Business Practices Environmental Stewardship Safety and Health Eliminate Adverse Impacts Lockheed Martin Perform with Excellence from Operations Safety of Every Employee Generally organizations focus on one particular domain of sustainability which needs immediate attention, however understanding the strategic interaction of the other Corporate Sustainability areas is essential and often required by reporting guidelines. Source: CSR documents from each organization, selected from 2007-9 supplier manuals and other internal corporate documents.Page - 21
  22. 22. Reporting and Auditing Three aspects of corporate sustainability programs have emerged: (1) development of corporate sustainability as a profit-driven strategy, (2) assurance of the actions of the corporate sustainability program, and (3) technology enablement of corporate sustainability for reporting and monitoring. • Development of Sustainability Programs Corporate Sustainability Programs The three “aspects” of program activities • Align to “pillars” and determine materiality • Determine strategic orientation • Define areas, actions, ownership, roles, viability Program Development • Assurance of Sustainability Programs • Confirm roles, metrics, outcomes, ownership • Assure program is “as advertised” Monitoring Governance • Second-party corporate reporting Corporate • Third-party accreditations / certifications Sustainability • Enablement of Sustainability Programs Program Program • Identification of source information Assurance Enablement • Definition of reporting cycles, metrics Reporting • Monitoring processes and governance • Technology platforms, solutions, practicesPage - 22
  23. 23. Reporting and Auditing In 2006, the Global Reporting Initiative (GRI) was created to provide guidelines and audit recommendations for organizations participating in sustainability reporting activities. These guidelines ensure a level of consistency and governance in the practice of corporate sustainability. How does GRI consider Sustainability?  CSR “involves reporting financial and nonfinancial information to key stakeholders on the company’s operational, social, and environmental activities and its ability to deal with related risks.”  Considers the “triple bottom-line” of reporting – Economic Performance – Social Responsibility – Environmental Compliance  Considers broader set of stakeholders beyond shareholders – Financial – Regulatory CSR as a practice in accounting areas is still emerging, with – Political general guidelines based on the objectives of the Corporate – Others based on company program Sustainability program. Sources: The Future of Corporate Sustainability Reporting, The Journal of Accountancy. The American Institute of Certified Public Accountants, 2006. Royal Dutch Shell, 2003 Corporate Sustainability Report (courtesy of AICPA).Page - 23
  24. 24. Reporting and Auditing GRI reporting is a function of confirming that program initiatives, principles, and objectives are tracked, monitored, and reported correctly across specific areas. Some guidelines for GRI reporting have emerged, leaving management free to “do what you say” as long as it is verifiable. Areas of CSR program called out, then detailed against Key Performance Indicators (KPIs) in subsequent sections of the sustainability report. Overall graphic, such as a Venn diagram, communicates the areas of importance to various stakeholders. Interactive Web sites allow stakeholders including shareholders to create personalized reports, graphics, and tables. Source: 2008 Corporate Sustainability Report, United Parcel Service (used with permission).Page - 24
  25. 25. Reporting and Auditing GRI3 provides a number of criteria whereby the organization pursues a self-assessment, third- party review, and final grading. This is similar to self-reporting, compliance audit and certification review followed by audit, assurance and assessment of other management systems. Inputs and Outputs for Standard Reporting Inputs Report Content Guidance Report Content Principles Report Quality Principles Report Boundary Setting Profile Profile Profile Profile Management Report Management Report Management Report Management Report Outputs Performance Indicators Performance Indicators Performance Indicators Performance Indicators Source: GRI3 Standard Guidance Documents, 2006-2010.Page - 25
  26. 26. Reporting and Auditing AA1000 AS (2008) has emerged as a guidance document in assurance circles with respect to sustainability and corporate responsibility programs. This approach considers two levels of assurance reporting: (1) dealing with organization behaviors and (2) behaviors in combination with KPIs, metrics. • Key conclusions provided by assurance activities on GRI3 and AA1000 AS (2008) • Inclusivity: Does organization X engage with stakeholders and involve them in organizational decision making? • Materiality: Does organization X identify the issues relevant and significant to it and its stakeholders and include these in its disclosures? • Responsiveness: Does organization X respond to stakeholder issues and feedback through decisions, actions, performance and communication? • An assurance statement for a Type 2 engagement must also provide conclusions on the reliability and accuracy of specified performance information. • Additional observations, comments, and recommendations are provided in an assurance report.Page - 26
  27. 27. Discussion Points • The Changing Global Environment • Today’s Sustainability Mandate • Types of Common Sustainability Documents • Reporting and Auditing • Links and References • Key Take-away Points • Summary and DiscussionPage - 27
  28. 28. Links and References • Psycho-sustainability: A Model for Personal Sustainability, TEDxFlint, October 11, 2011 • Increase Supplier Compliance with Sustainable Business Networks, GRC Expert (July 18, 2011) • Best practices for managing sustainable supply chains, searchManufacturingERP.com (July 14, 2011) • Mastering the IT demands of a sustainable supply chain, searchManufacturingERP.com (July 7, 2011) • A Framework for Social Media in Sustainability Programs, Sustainable Business Forum (February 22, 2012) • Strategic Intent for Green Marketing and Disclosure using Social Media, Sustainable Business Forum (March 30, 2012) • Leverage ERP for a Greener Supply Chain, Sustainable Business Forum (January 14, 2012) • Sneak Peek: Sustainable Procurement as an Embedded Process in Supplier Management Activities , GRC Expert (December 1, 2010) • Comply with the EPA’s MRR Standard with SAP Carbon Impact OnDemand, GRC Expert (January 7, 2011)Page - 28
  29. 29. Discussion Points • The Changing Global Environment • Today’s Sustainability Mandate • Types of Common Sustainability Documents • Reporting and Auditing • Links and References • Key Take-away Points • Summary and DiscussionPage - 29
  30. 30. Key Take-away Points 1. Sustainability is a growing field of business practice, winners and losers will be chosen in part by what organizations decide to do in this field 2. There is a compelling economic and financial incentive for pursuing long- term sustainability strategies (5-7% increase in performance) 3. Each organization is different, therefore stakeholders need to determine which frameworks, guidelines and approaches are applicable. 4. You can’t do everything – and if you say you will you will be held accountable for binding statements. Determine your KPIs and goals realistically. 5. Even if you do “low-effort” GRI3 reporting, make sure the benefits outweigh the costs. Plenty of companies “ISO’d themselves out of business” – the same can happen with GRI3 reporting. 6. Use assurance services judiciously and at the appropriate program time. 7. Celebrate your accomplishments, use success to create opportunities elsewhere inside the organization!Page - 30
  31. 31. Your turn!Page - 31
  32. 32. Thank you for participating. Please provide feedbackon this session by completing a short evaluation. Learn more year-round at www.michcpa.org
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