Author Archives: Gwen White

Cities and Sustainability Reporting Revisited

24012774975_78cf3c0727_z-2Chicago ‘L’

Photo by Michael White

I advocate often for cities to prepare sustainability reports. In a previous blog, “GRI Reporting for Cities,”  I made the case for cities to use the GRI G4 Sustainability Reporting Guidelines so cities can manage their progress in achieving environmental, economic, and social goals.

So is there more can I say on this subject? You bet!

The focus on cities as a vehicle to sustainable development keeps gaining traction. City governments face daunting economic, environmental, and social challenges. SustainAbility has published reports that make the case for focusing on cities as a critical approach for improving the Earth’s sustainability. Cities may well be the key to addressing the planet’s many challenges, but they cannot solve them alone. In its report Citystates II The Case for Corporate Leadership in Urban Sustainability, SustainAbility encourages public private sector partnerships. It is a compelling argument.

There is an urgent need, and a huge opportunity, for local and international stakeholders to prioritize the sustainability requirements of cities, and with them, broader sustainable development. Chief among these stakeholders is business, which has both the opportunity and responsibility to take a leadership role (and the chance to reap substantial benefits in the process), and without which cities will be unable to innovate and scale their efforts at nearly the required pace. Though there are many leading examples of cities and companies working together to accelerate progress on urban sustainability, this agenda is only beginning to enter mainstream business thinking, and overall city-business collaboration remains underdeveloped in aggregate and challenging in practice.

The last comment strikes me as quite interesting, “…this agenda is only beginning to enter mainstream business thinking, and overall city-business collaboration remains underdeveloped in aggregate and challenging in practice.”

What can be done to bring this along?

Cities need to publish sustainability reports. By doing so they would be better able to communicate their sustainability strategy, risks, and opportunities. Cities need to be transparent so businesses can decide whether to engage in a private public partnership or to relocate to the city.

Businesses analyze a variety of information to make decisions. A city sustainability report would be an important piece of the analysis. If a business is interested in building a new plant in a city, it may have concerns about the environmental health of the city.  A sustainability report would provide  information about a city’s greenhouse gas emissions, waste management, water quality, effluents, and transportation. The environmental health of a city would have impacts on its workers or its production processes. For example, water availability and quality may be essential to a company’s production processes or delivery of services. In the hospitality industry, water for cleaning, bathing, and cooking is a key part of providing services. City water sources and quality are important to the hospitality industry. Companies may think twice about building a hotel that would require their own large capital investments to insure sufficient water quantity and quality.

In addition, a sustainability report would provide information about the economic health of a city. Information about economic resources generated and disbursed by a city can indicate major economic issues facing a city. For example, a trend of decreasing tax revenues may affect how a city seeks to fund its services. Other sources of revenues such as public private partnerships may be on the rise. The disclosure of successful partnerships may encourage more. Without a sustainability report that discloses relevant economic metrics, a city may miss opportunities.

Cities can also help themselves be more efficient and effective by reporting. For example, reporting energy, water, and fuel usage enables a city to provide benchmarks. Targets can then be established to reduce future usage and costs. Reporting on the quality of services delivered through customer satisfaction feedback can provide information about a city’s effectiveness. Customer satisfaction would be a metric under products and services in the social category of a sustainability report. Cities can identify areas that need improvement. A well-run city can communicate its progress and effectiveness by disclosing relevant metrics in a sustainability report.

How can we convince cities how important sustainability report is to their future? Let me know what you think.

Will Accountants Save the World?

 

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NASA/Goddard/Arizona State University

As an accountant, I was thrilled to read that Peter Bakker, President of World Business Council for Sustainable Development , said, “Accountants would save the world.” This should make any accountant smile. The realist in me knows that it will take a big “village” to save the world, but accountants can play an important role.

At an experts panel discussion in Amsterdam, Marjolein Baghuis stated, “… the conclusion was that accountants can certainly play a role in making companies more sustainable, but the profession is not quite ready to deliver on this promise without further education.” I agree!

Accountants have a long history of providing information to decision makers. They have been in the business of providing information since the 15th century. Really! If you want to read a great book, I recommend The Reckoning: Financial Accountability and the Rise and Fall of Nations by Jacob Soll.  Accountants are big players in the fortunes of companies and nations. With their experience in providing information for decision-making, accountants can provide important sustainability information to companies, governments, and the public.

Sustainability reporting is unfortunately not currently recognized as an important topic in accounting education in the United States. In a curriculum crowded with courses in tax, auditing, financial accounting, and management accounting, training in sustainability reporting is viewed as nice but not necessary.

Why is this?

There are several reasons.

  1. It is not covered on the major certification exams such as the Certified Public Accountants (CPA) exam and the Certified Management Accountant exam.
  2. There is no demand for sustainability reporting skills in accounting public practice because there is no legal requirement to do it in the United States.
  3. Inside companies, accountants are not usually tasked with sustainability accounting and reporting.
  4. Accountants in small to medium sized public practices do not traditionally offer sustainability services.
  5. Most small to medium sized accounting firms do not know how to make the business case for sustainability reporting for their own firm or for their clients.

Over the years there have been attempts to include sustainability reporting as part of accountants’ education but with little progress. Other traditional accounting topics take precedence. Without the demand, change will be slow.

Once in practice, however, accountants who desire to learn about sustainability reporting can look to several professional organizations. The American Institute of Certified Public Accountants promotes the benefits of sustainability services and provides information to its members. The International Federation of Accountants (IFAC) offers information and resources. IFAC is actively engaged with  the Prince of Wales’ Accounting for Sustainability Project, the International Integrated Reporting Council, the Climate Disclosure Standards Board, and the Global Reporting Initiative (GRI). Accountants can attend GRI certified sustainability reporting training courses offered by GRI Training Partners such as the ISOS Group.

How will demand for sustainability reporting be created? Here are some possibilities.

Mandatory reporting – Nothings creates a demand for services like a legal requirement. Examples abound – auditing, tax, Sarbanes-Oxley Act compliance.

Demand by financial institutions – As part of the evaluation of companies, lending institutions could require a sustainability report. This report would enable banks to do an expanded risk assessment. This would include a company’s environmental and social risks, which are directly tied to their economic risks.

Demand by local governments – Local governments might consider requiring sustainability reports from companies within the city limits. This would be beneficial to cities in assessing a company’s economic, environmental, and social risks. By complying, organizations would be demonstrating their good citizenship and assessing their own risks.

What do you think?

 

 

 

 

 

GRI Reporting for Cities

Chicago as night falls

Chicago as night falls
Photo by Michael White

Cities are getting a lot of attention for taking action on climate change. With cities having over 50 percent of the planet’s population and creating 75 percent of greenhouse gas emissions, this action is born out of necessity.

By 2050, cities will be even larger; it is estimated that they will have 70 percent of the planet’s population. With this expectation, cities are compelled to respond to increases in waste, housing demand, poverty, effluents, water demand, traffic congestion, and air pollution, just to name a few challenges. One of the ways they are responding is by sharing lessons learned with other cities. As a vehicle to share their stories, numerous cities are joining networks such as C40, ICLEI, and ANSI Network on Smart and Sustainable Cities.

In addition to joining networks, cities are preparing sustainability plans and progress reports. The plans typically state goals and targets for carbon emissions, economic initiatives, and waste management. These plans are assessed over time using periodic progress reports comparing actual results to targets. In most instances, cities use whatever reporting format they want. These reports are good for presenting what is working and what is not. Yet are unstandardized formats optimal for better management, transparency, and communication? 

I think cities  would be better served if they used the Global Reporting Initiative (GRI) Sustainability Reporting GuidelinesThe GRI guidelines are used by 83% of the 250 largest corporations. So what does this have to do with cities? As the most widely used framework, it is known by many investors, governments, and NGOs. This means more people would be able to understand the cities’ GRI reports.

At a recent World Bank Group Webinar, I presented how the GRI Sustainability Reporting Guidelines can benefit cities. What are the benefits? The GRI G4 guidelines focus on an organization’s economic, environmental, and social dimensions. All three are necessary to measure a city’s progress toward sustainable development. The GRI G4 guidelines enable a city to report only what is important to that city. Cities have many challenges in common, but not all challenges are equal across them. In some cities, social issues such as human rights are more pressing whereas in others environmental issues such as air quality need immediate attention. By using a well-known, standardized framework, cities and stakeholders can monitor their progress from period to period. Does using the GRI framework allow for direct comparisons across cities? I do not think any two cities are directly comparable but using a standardized framework would make it easier to share the lessons that have been learned.

Another benefit is that GRI sustainability reporting metrics provide input for an integrated report. Integrated reporting shows how organizations create value in the short, medium, and long terms. This is especially relevant for cities as they plan for the future. An integrated report is intended to connect an organization’s environmental, social, and economic concerns.  For example, if a city invests in electric buses powered with cheaper renewable energy, this investment creates value for the city in many ways. The city’s assets have increased because it purchased the buses. It now has a fleet of electric buses that will create value for the city by reducing yearly fuel and maintenance costs. Using electric buses powered by renewable energy reduces pollutants and carbon emissions which in turn improves air quality. With better air quality, the city improves the health of its citizens. As a result, health care costs are reduced. As shown by the electric bus example, an integrated report can explain how sustainability metrics are connected to creating value.

Cities need to prepare GRI reports as they plan for a sustainable future. Take a look at some pioneering cities that have adopted the GRI framework. The list includes Chicago, Atlanta, Melbourne, Dublin, and Warsaw.

Webinar – Sustainability Reporting for Cities with the World Bank Group

Join us for An Integrated  Reporting Community of Practice Event with the World Bank Group

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Sustainability and Integrated Reporting

Tuesday, November 10, 2015
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Stranded Assets

Stranded Assets

Stranded Assets

Fossil fuel deposits are being called stranded assets. Bankers and investors consider them a high-risk source of energy. What happens when companies continue to make products that really do not have a future in a reduced fossil fuel economy? If they do not plan, companies themselves will face being stranded without viable alternatives.

Countries around the world are coming to grips with how to slow human caused climate change. Future legislation to control carbon emissions will dramatically affect fossil fuel dependent industries. This will not happen overnight, but companies need to prepare for this change.

Can sustainability reporting help? If used properly, it is a major risk management tool. It has to be more than a PR communication. If a company embeds sustainability goals into its mission and strategy, it can look at the longer-term risks facing its operations. If it is dependent on fossil fuels for raw materials or transportation, this is a major risk. Sustainability planning can assist a company as it seeks to make transitions to alternative raw materials or modes of transportation. Recognizing these risks and planning for them can help a company avoid the stranded asset problem.

For this to work, sustainability reporting needs to be transparent and integral to the operations of the business. Otherwise, this valuable tool does little to benefit the company in the long run. VW may have learned this lesson too late in the game. Their diesel engines are not performing as promised; this may well destroy the company. The strategy of making an engine with high environmental and power performance was a great one, but results were not real. Had they reported the actual performance early on, they would have been better positioned to develop alternative options. Now, they are in severe damage control mode. This will be far more costly than if they had scrapped the diesel engine that was too good to be true.