The Data Dilemma

British Airways and PwC amongst other sustainability leaders are enhancing their business strategy by effectively managing big data.

By Ellen R Delisio, Ethical Corporation

 

When preparing for corporate sustainability reports (CSRs) and integrated reports, companies have no shortage of material, between internal and external sources, stakeholder and client concerns and data for regulatory agencies. As CSRs have become more sophisticated over the years, so has the need for more material and more specific data.

 

That has increased the challenge of compiling a comprehensive report that meets all requirements and provides more answers than questions. It can mean hacking through fields of data, at first with machete-like crudeness and then working down to the tweezer level to decide what bits of information are relevant.

 

Most companies want to submit their CSRs to the Global Reporting Initiative (GRI), which promotes the use of sustainability reporting as a means for companies and organisations to become more sustainable and contribute to a sustainable global economy. GRI says its mission is “to make sustainability reporting standard practice”. In fact, 93% of the world’s largest 250 corporations report on their sustainability performance, notes GRI.

 

GRI produces free Sustainability Reporting Guidelines so all companies and organisations can report their economic, environmental, social and governance performance and impacts.

 

Some companies produce integrated reports, which analyse the most material activities “to highlight risks and opportunities, focusing on those that are most important to its stakeholders and shareholders,” according to a consulting firm. A CSR provides a broader overview of corporate sustainability efforts and programmes.

 

And just when companies were getting comfortable with the current GRI system, change came. Companies that wish to submit their reports to the GRI will have to meet new GRI regulations called G4, which are effective for reports filed after 31 December 2015.

 

The new guidelines encourage businesses to focus on the issues most important to their organisation and the related economic, environmental and social impacts. In addition, there are new reporting levels. Standard disclosures are new or have been updated for ethics and integrity, governance and anticorruption. Greenhouse gas emission guidelines also have been revised.

 

Six essential elements to include in your G4 report

 

  • Choose the ‘in accordance’ option that is right for your organisation, and meet the requirements.
  • Explain how you have defined the organisation’s material aspects, based on impacts and the expectations of stakeholders.
  • Indicate clearly where impacts occur (boundaries).
  • Describe the organisation’s approach to managing each of its material aspects.
  • Report indicators for each material aspect according to the chosen ‘in accordance’ option.
  • Help your stakeholders find relevant content by providing a GRI content index.

 

Source: The Global Reporting Initiative (GRI)

 

Fanny Turi-Kovats, an assistant manager at financial services firm PwC in Sweden, which audits and reviews CSRs, says that as part of integrating G4, PwC is advising clients to do a thorough materiality analysis and identify their key issues. “Furthermore, they need to ensure that their key issues are approved or rejected by their stakeholders,” she says. In assessing G4 reports, “we will have more focus on our client’s materiality and their stakeholder engagement, to ensure that they have a good process in place to identify their key issues and activities”.

 

Industry-specific concerns

 

Certain industries, of course, have specific topics that dominate their reports. Since climate change is a key sustainability issue for the aviation industry, British Airways has a comprehensive programme of initiatives in place to reduce its impact on climate change and reports a wide range of data indicators on the subject, according to Andy Kershaw, British Airways’ environment policy manager. “British Airways and our parent company IAG follow the guidance of the Global Reporting Initiative (GRI v4) when assessing the data indicators to communicate in our reporting. Using GRI materiality assessments, we select the material sustainability aspects on which to base our report,” Kershaw says. “These include, among others, carbon emissions, noise, air quality, waste, training and responsible procurement.”

 

For certain subjects, it can be difficult to agree on a consistent definition and calculation methodology for data indicators, he adds. “Over time, we have enhanced the level of detail that we report and we have more robust processes for tailoring our communication to meet the needs of stakeholders.”

 

Some companies hire consultants to help them select data, prepare the reports and then review the final document to ensure all requirements are met before they are submitted.

 

Gareth Manning, director of sustainability for DNV-GL, a global certification body that, among other services, works with businesses preparing CSRs, says GRI G4 guidelines can serve as a useful framework for businesses. “Some companies get stuck reporting data points that are not relevant to the business, simply to tick the compliance box for that particular standard,” Manning says. “We spend time helping companies make sure they are reporting on the right thing.”

 

Stakeholder engagement is an effective way of identifying what material issues and data to include in CSRs – and companies often rely on consultants to act as independent third parties to facilitate this process on their behalf, Manning says. “We work with the company to take the stakeholder views and feedback and then through a materiality assessment, establish which issues the company should be addressing.”

 

Too much information

 

DNV-GL sometimes catches some of its clients falling into the trap of disclosing lots of data, with the intention of being as transparent as possible, Manning says. This can create confusion and can turn readers off. “We’re a firm believer in ‘less is more’,” he says. “We’d advise that once a company has determined its most important sustainability issues, it must critically evaluate

the reason for reporting a particular data point. Does it link to a specific key performance indicator (KPI), or meaningfully enhance a stakeholders’ understanding of the company’s performance?

 

“Disclosing data alone is usually not sufficient; the company must provide a narrative to explain the data,” Manning adds. “If this is not possible, or the context or reasons behind the performance aren’t available, then the data point probably isn’t worth publishing.”

 

Staff should define KPIs linked to specific goals for each of their material issues. “The data points that make it into the report should be those that are linked to these KPIs and can assist the reader in evaluating the company’s performance in each area,” Manning says. “Any data points that don’t help to articulate the company’s performance against material issues, whether positive or negative, should be reported somewhere else.”

 

Companies need to report on the issues that are most important to their businesses, and disclose relevant and meaningful metrics related to these. “For example, if water is a material issue for the company, it should consider how best to disclose this information in a meaningful way,” Manning says. “This could be through an infographic depicting areas of water stress and the company’s consumption in these regions, or as a graph showing performance over time against an established target. Commitments or targets are often forgotten by companies, but are essential in tackling and actually driving meaningful change.”

 

The companies considered to be employing best practice in selecting data are those that report their performance using specific KPIs against specific, measurable, achievable, relevant, time-bound

(Smart) targets, Manning says. The companies explain the reason for the data trends, and depict

their progress against their targets using a traffic light system, or the “on track,” “behind target,” or “ahead of target” system. “This simplicity, combined with absolute transparency, makes it easy for the reader to understand at a glance the company’s performance with respect to each material issue.”

 

Most importantly, a company’s sustainability report should be able to be compared with past and future reports, Manning stresses. “It is therefore important to disclose consistent data points over the years, to enable readers to compare results, and to help the company itself to evaluate performance over time.”

 

Among the reporting challenges for some companies is juggling data from multiple sources and the increasing interest among stakeholders in non-financial data.

 

“One of the hardest aspects of data reporting for many companies is not the initial selection of data. Rather, it is the gathering of robust, accurate and comparable data from multiple sites, globally,” according to Manning. “We see the best results when we can work with our clients in a collaborative way over a number of years, as this gives us the inside knowledge to push their approach to stay ahead of the reporting curve.”

 

More clients understand the importance of non-financial data and they also have more pressure from their stakeholders to report on this data,” Turi-Kovats says. “Since the focus on non-financial data has increased, companies work harder to ensure the accuracy and completeness of the data they are reporting on… We believe it is positive to highlight the non-financial questions to get a better basis for decisions about the company’s overall risks and opportunities.”

 

To make that easier, companies have to work with their internal review process; that is, validate their numbers and data and ensure they have good internal controls in place before presenting the data, Turi-Kovats says. “Many companies focus on the financial direction to set up an internal control framework to ensure the quality of their figures and data. However, many companies still document their non-financial data in Excel, which makes the process person dependent, and there is a greater risk of human errors.”

 

When the process is completed, companies have a valuable planning and assessment document. Turi-Kovats says: “I am convinced that sustainability [reporting] helps companies identify, measure, monitor and ultimately work with significant sustainability issues, as in ‘what gets measured gets managed’.”

 

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