Presentation by Managing Principal William Newman at the 2011 Management and Information Business Shows sponsored by the Michigan Association of CPAs Management Consulting Task Force.
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Reporting for Sustainability Management
1. Reporting for Sustainability
Presentation to the Michigan Association of CPAs
Management Information and Business Show
June 9, Grand Rapids
June 29, Novi
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2. Sustainability Defined
The Landscape of Sustainability Frameworks
Types of Common Sustainability Documents
Reporting and Auditing
Resources and Links
Summary and Questions
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3. A Model for Sustainable Business
Economic Environmental Social
Triple Bottom-line Scorecard
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4. Corporate Drivers of Sustainability
The Dow Jones Sustainability Index (DJSI) created in 1999 represents over $US 9 billion in total
market capitalization. The DJSI STOXX40 has outperformed the nominal DJ STOXX50 by 7.5% to
date (and up to 15-20% during the period preceding the financial crisis).
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 Sustainability to guide
rating and investment decisions.
Source: SAM Sustainability Annual Review, September 3, 2009
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5. Benefits of Corporate Responsibility / Sustainability
Consumers
Behave To create
Ethically value for Shareholders
Host
Governments
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6. Sustainability in the Boardroom
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.
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7. Sustainability Defined
The Landscape of Sustainability Frameworks
Types of Common Sustainability Documents
Reporting and Auditing
Resources and Links
Summary and Questions
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8. Emerging Sustainable Frameworks
The University of
Oregon
Sustainability
Leadership
Program is
tracking over 50
emerging
standards,
guidelines and
frameworks in the
area of
sustainability.
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9. One Framework – The UN Global Compact
1. Businesses should support and respect the protection of internationally
proclaimed human rights.
2. Make sure that they are not complicit in human rights abuses.
3. Businesses should uphold the freedom of association and the effective
recognition of the right to collective bargaining.
4. The elimination of all forms of forced and compulsory labour.
5. The effective abolition of child labour.
6. The elimination of discrimination in respect of employment and
occupation.
7. Businesses should support a precautionary approach to environmental
challenges.
8. Undertake initiatives to promote greater environmental responsibility.
9. Encourage the development and diffusion of environmentally friendly
technologies.
10. Businesses should work against all forms of corruption, including
extortion and bribery.
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10. One Framework - The Natural Step
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11. Sustainability Defined
The Landscape of Sustainability Frameworks
Types of Common Sustainability Documents
Reporting and Auditing
Resources and Links
Summary and Questions
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12. The Range of Sustainability Documents
One of the challenges in the field of sustainability is the vast reporting and disclosure spectrum that
organizations – from small not-for-profit associations to F1000 global enterprises – may choose from.
Formality of Statement
Company
UN Global DJSI / 10K
Sustainability
Compact Statement
Plan
Code of Complex
GRI Report
Conduct
Simple
Statement of Intra-company Sourcing
Direction Scorecards Audits
Complexity of Disclosure
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13. Statement of Direction
A Statement of Direction – Similar to a 10K President’s Message – is a publically 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.
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14. Code of Conduct
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.
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15. Sustainability Defined
The Landscape of Sustainability Frameworks
Types of Common Sustainability Documents
Reporting and Auditing
Resources and Links
Summary and Questions
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16. Why consider a reporting approach?
Organizations may have several reasons for implementing a sustainability program. While the initial
or primary focus may be on fixing ―hygiene‖ problems, organizations may exploit the opportunity to
achieve more strategic objectives in corporate sustainability and corporate social responsibility.
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 response plans should these events occur
other reporting needs are cumbersome
Elevate profile of global corporate citizenship
Organizational accountabilities for and enhance competitive brand position
sustainability are unclear
Permeate sustainability initiatives and
Risk of being out of compliance with a culture of social responsibility throughout the
changing global regulations organization
No systematic way to respond to crisis or Improve efficiency of adjacent core processes
other unforeseen event (design, manufacturing, QA)
No alignment with overall corporate Incorporate sustainability in strategic planning
sustainability goals and enterprise performance management
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17. How do you interpret Sustainability?
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
Economic and
Company Environmental Social Accountability
Financial
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.
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18. How do you Enable Sustainability?
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
– Align to “pillars” and determine materiality The three “aspects” of program activities
– Determine strategic orientation
– Define areas, actions, ownership, roles, viability
Program
Assurance of Sustainability Programs Development
– Confirm roles, metrics, outcomes, ownership
– Assure program is “as advertised”
– Second-party corporate reporting
Monitoring Governance
– Third-party accreditations / certifications
Corporate
Sustainability
Enablement of Sustainability Programs
– Identification of source information
Program Program
– Definition of reporting cycles, metrics
Assurance Enablement
– Monitoring processes and governance Reporting
– Technology platforms, solutions, practices
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19. Reporting and GRI3
In 2006, the Global Reporting Initiative (GRI) was created to provide guidelines and audit
recommendations for organizations participating in corporate sustainability reporting (CSR) activities.
These guidelines ensure a level of consistency and governance in the practice of corporate sustainability.
How does GRI consider CSR?
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, – Political
with general guidelines based on the objectives of the – Others based on company program
Corporate 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).
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20. Communicating Sustainability Principles
GRI reporting is a function of confirming that program initiatives, principles, and objectives are
tracked, monitored, and reported correctly. Some specific guidelines and a set of broad principles of
GRI have emerged, leaving management free to ―do what you say‖ from an auditor’s point of view as
long as it is verifiable. UPS is an exemplar in this area as shown by their reporting presentation.
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). Newport Consulting Group record of client interviews and feedback, 2009.
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21. Ratings against GRI3
The GRI3 guideline 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.
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22. Assurance and Oversight
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 assurance
engagement must also provide conclusions on the
reliability and accuracy of specified performance
information.
Additional observations, comments, and
recommendations are also provided in the
assurance report.
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23. Considerations for the Public Sector
ICLEI Five Milestone Approach for municipal and local governments provides a framework for public
sector organizations to address triple bottom-line initiatives, share best practices, and monitor
compliance for community outreach programs.
International council for local environmental
initiatives (ICLEI)
– international association of local governments as well as
national and regional local government organizations who
have made a commitment to sustainable development
– ICLEI provides technical consulting, training, and
information services to build capacity, share knowledge,
and support local government in the implementation of
sustainable development at the local level.
Tools, methods and processes
– Clean Air and Climate Protection (CACP)
– Data collection templates
– Energy management standards
– Over 300 local government strategies, KPIs
– Knowledge base of best practices
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24. Sustainability Defined
The Landscape of Sustainability Frameworks
Types of Common Sustainability Documents
Reporting and Auditing
Resources and Links
Summary and Questions
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25. How to Get Started ….
Sustainability planning and reporting is a multi-year journey. There are several things an organization
can do to get started which will decrease the ―ramp up‖ time through the use of best practices.
Educate and Align Stakeholders
– Agreement on “what is sustainability” and what frameworks apply to your organization
– Assign budget to introduce sustainable practices, codes, behaviors
Facilities planning, corporate communications, finance, engineering, etc.
Craft a “Roll-in Strategy” based on your Culture
– Creation of a Sustainability Program Office (SPO)
– Creation of employee-driven “Green Teams”
– Uber-recycling programs, integrate with lean manufacturing activities
Remember
Do some Housekeeping some targets
– Define what KPIs and targets are realistic. may be
binding!
– Determine who owns what data and information in your organization
– Figure out how best to report this (centralized vs decentralized)
– Conduct an initial assessment to know where you stand now.
Get help if you need it – don’t start something and watch it die!
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26. Some Helpful Resources
Global Reporting Initiative www.globalreporting.org
Social Accountability International www.sa-intl.org
Social Fingerprint www.socialfingerprint.org (Reference Code# Newport11R)
SCORE Assessment Framework
http://www.axisperformance.com/SCORE_overview.html
ICLEI – Local Governments for Sustainability www.icleiusa.org
The Sustainable Enterprise Fieldbook (Wirtenberg)
www.thesustainableenterprisefieldbook.net
Cradle to Cradle (McDonough) www.mcdonough.com
University of Oregon Sustainability Leadership Program
http://sustain.uoregon.edu/
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27. Sustainability Defined
The Landscape of Sustainability Frameworks
Types of Common Sustainability Documents
Reporting and Auditing
Resources and Links
Summary and Questions
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28. 7 Key Points to Take Home
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. If you are going to embark on GRI3 reporting make sure the benefits outweigh
the costs (ROI calculation). 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!
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29. Your Turn …
William Newman, MBA, CMC, SA
wnewman@newportconsgroup.com
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30. William Newman, CMC, MBA, SA
Author, professional speaker, writer and consultant - William (“Bill”) Newman serves as
Managing Principal of Newport Consulting Group, an independent management consulting
firm focused on strategy, operations, risk management, and technology. Mr. Newman has 25
years experience in a wide range of operations including manufacturing, IT, R&D, sales,
marketing, planning, human capital, service delivery and finance. His expertise spans service,
manufacturing (automotive, aerospace, life sciences, high tech, CPG), government, utilities,
transportation, and healthcare industries.
Mr. Newman’s service area focus is innovation, strategy, market growth entry, program design
and oversight, and corporate sustainability. He is a former executive of Volkswagen’s
technology division and has served in a number of professional and management positions at
Grant Thornton, KPMG/BearingPoint, and Booz & Company. Mr. Newman serves as an
outside advisor to the Sustainability Executive Advisory Council (EAC) of software maker SAP. He is an adjunct
professor at Northwood University in the field of management studies serving the Flint, Lansing and Troy program
centers, as well as a participant of the University of Oregon Sustainability Leadership Program.
Bill was granted the Certified Management Consultant (CMC) designation by the Institute of Management Consultants
in 1995 and has served on the IMC national board of directors and three regional boards across the USA for over 10
years. Mr. Newman is a qualified Trainer / Coach granted by the American Society for Quality (ASQ) since 2000, a
qualified consultant for Social Accountability International (SAI) in SA 8000 for social accountability since 1998 and the
Social Fingerprint® method for business improvement since 2011. Mr. Newman is an member of the Michigan
Association of CPAs (management consulting task force) and a registered expert witness with the Technical Advisory
Services for Attorneys (TASA).
Bill holds a Bachelor’s Degree in Aerospace Engineering with a minor in Economics from the Henry Samueli School of
Engineering at UCLA, and an MBA in Management and minor in International Business from the Conrad Hilton School
of Business at Loyola Marymount University (Los Angeles). Bill and his wife Teresa make their home in southeast
Michigan.
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