It has been a while since my last post on Earth Day 2020. A lot has happened in that time. In the future, I hope to be more timely in my posts.
In the past year, sustainability reporting has been getting more press. As investors demand more information from companies about their sustainability impacts, reporting frameworks are in the spotlight.
In December 2020 KPMG published its 11th edition of the KPMG Survey of Sustainability Reporting. The results of the survey are based on the sustainability reports from 5,200 companies in 52 countries and jurisdictions. They found that 96% of the world’s largest 250 companies (G250) report on their sustainability performance. Among the largest 100 firms in 52 countries (N100), 80% of these 5,200 companies do so. The dominant sustainability reporting framework was the GRI Standards. Almost three-quarters (73%) of the G250 and two-thirds (67%) of the N100 now use GRI.
It is amazing to see increased interest during the past year in sustainability reporting. This has been great for me as I have been busy as a trainer and consultant with the ISOSGroup. My courses include CDP Climate Change, the Global Reporting Initiative Sustainability Standards, ESG Foundations and Sustainable Development Goals. These are online courses that work quite well. Our live sessions allow us to interact directly with participants throughout the course. Without having to travel to the trainings, our carbon footprint has gone down considerably.
Last week I received an email inquiring about my experience with the GRI Standards Exam. This reminded me that several years have passed since I wrote about my experience with the GRI G4 Exam.
Definitely time for an update!
Things to consider about the GRI Standards Exam
Although completing the GRI Certified Standards Course is not a prerequisite, GRI recommends that exam candidates take the course. I agree because I have experience taking the GRI Standards Exam and am a trainer with the ISOSGroup that delivers GRI’s Certified Training. I know how the course can help you to understand the standards and to apply them. If you have taken the course, GRI gives a 20% discount off the exam fee.
After completing the course, you should study for the exam by reading the standards carefully and taking notes. Understanding how to apply the standards is important. I studied, and it paid off.
Once you register for the exam, you will be given access to sample questions. This helps to understand the format and type of questions to expect.
GRI’s Online Learning Platform administers the exam. This allows the convenience of taking the exam from any location with Internet access. You need a webcam and microphone because you will be recorded while taking the exam. If you have not used a similar test platform, you definitely will want to understand the setup details before hand. This involves making sure that your equipment is compatible with the platform and you are comfortable with the instructions.
You have 60 minutes to answer 40 questions. During the exam you have access to a non-searchable pdf of the consolidated set of standards. Don’t waste much time scrolling through the pdf document looking for answers. As with any timed exam, you need to pace yourself.
1.1 By 2030, eradicate extreme poverty for all people everywhere, currently measured as people living on less than $1.25 a day
1.2 By 2030, reduce at least by half the proportion of men, women and children of all ages living in poverty in all its dimensions according to national definitions
1.3 Implement nationally appropriate social protection systems and measures for all, including floors, and by 2030 achieve substantial coverage of the poor and the
1.4 By 2030, ensure that all men and women, in particular the poor and the vulnerable, have equal rights to economic resources, as well as access to basic services, ownership and control over land and other forms of property, inheritance, natural resources, appropriate new technology and financial services, including microfinance
1.5 By 2030, build the resilience of the poor and those in vulnerable situations and reduce their exposure and vulnerability to climate-related extreme events and other economic, social and environmental shocks and disasters
1.a Ensure significant mobilization of resources from a variety of sources, including through enhanced development cooperation, in order to provide adequate and predictable means for developing countries, in particular least developed countries, to implement programmes and policies to end poverty in all its dimensions
1.b Create sound policy frameworks at the national, regional and international levels, based on pro-poor and gender-sensitive development strategies, to support
accelerated investment in poverty eradication actions
These targets are ambitious, and businesses have an important role to play in achieving them! Many businesses are already doing so, and there are many examples.
So your next questions are why and how would my business get involved?
…we must invest in people – in education, skills development, health care. This will help equip people for decent jobs and incomes. It will boost purchasing power. The virtuous cycle between human capital, jobs and income is central to building healthy local markets and a healthy world economy. It is good for people and good for business.
Evaluating your entire value chain (i.e., the full lifecycle of your products and services) can help identify areas that can reduce your negative impacts and improve your business simultaneously. Your business decisions about things such as employee wages, working conditions, product pricing, or raw material sources have impacts on people in poverty.
You can measure your direct impacts on the local economy. What proportion of your spending is on local suppliers at significant locations of operations? To illustrate how UPS affects the local economy, here is an excerpt from its 2015 sustainability report.
In 2015, UPS spent approximately US$943 million in procurement with small and diverse businesses in the United States.
A third-party study on the economic impact of our spending with small businesses, as well as minority-, women-, veteran-owned, and other diverse suppliers in 2015, found that UPS contributed more than US$2.3 billion to the U.S. economy (U.S. GDP) and sustained more than 14,200 jobs in the supply chain and local communities. A breakdown of that US$2.3 billion includes US$941 million in direct economic benefit from suppliers’ operations and activities; US$639 million in indirect impact from the economic benefit and employment supported in the suppliers’ respective supply chains from procuring goods and services; and US$743 million in community impact from the wider economic benefits that arise when the suppliers’ employees and those in their supply chains spend their earnings. Overall, for every million dollars that UPS spends with small and diverse suppliers, 15 jobs are created with those companies in their local communities.
If supply chains are a significant part of your business, evaluating them not only on economic criteria but also on social criteria can be an effective risk management tool. Do you have policies to screen for suppliers that adhere to international and your company-specific human rights and labor standards? You can have a positive influence by demanding adherence to these standards. This is a proactive approach that is much less costly than a reactive one.
How you are investing in the economic well being of your employees has a direct economic impact on poverty alleviation. Lower incomes reduce access to adequate housing, quality education, social networks, and social status among others. Evaluating the wages paid along with how they compare to the minimum wages in the local area puts a focus on a company’s economic impact on workers. For example, Abengoa, a Spanish company that applies technological solutions in the energy and environment sectors, disclosed in its 2015 sustainability report the percentage paid to its workers above the local minimum wage.
How does your company change the productivity of organizations, sectors, or the whole economy?
Is your company involved in economic development in areas of high poverty?
Does your company’s economic impact in a particular location improve or deteriorate social or environmental conditions?
What is the availability of your products and services for those on low incomes?
What should you do with your answers to these questions and your evaluation of your business? You can incorporate these issues into your business strategy. You can set targets for improvement. You can publish a sustainability report to measure your progress.
Baxter International is an example of a company that has set targets and reported them its sustainability reports. In its 2015 report, Baxter pledged to increase it spending with diverse suppliers by 50%, from 4% of relevant spending in 2015 to 6% in 2020. These published targets are public commitments that reveal the company’s sustainability strategy and implementation plans.
To be a part of the solution to end poverty, your business can be involved; it can measure its impacts, set targets, and report its progress in a sustainability report.
The next blog will examine how your business can help achieve SDG Goal 2 Zero Hunger.
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.
It is not covered on the major certification exams such as the Certified Public Accountants (CPA) exam and the Certified Management Accountant exam.
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.
Inside companies, accountants are not usually tasked with sustainability accounting and reporting.
Accountants in small to medium sized public practices do not traditionally offer sustainability services.
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.
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.