How to start the new data collection conversation
How to start the new data collection conversation
It is data collection season in the world of sustainability. The reports and questionnaires are due in a few months, and corporate social responsibility professionals are tapping internal data owners for information updates.
This year, however, the arduous company-wide data collection process that occurs is becoming more dynamic for companies making the move to the G4 Guidelines. Specifically, the new requirements for the Disclosure on Management Approach (DMA) in GRI G4 are shifting the course of conversation.
For many companies, the internal process of gathering information for a report section typically was completed by asking data owners for two key elements, the policies and programs in place and the data to demonstrate performance. For example, a disclosure on local spending would identify the definition of “local” used in the corporate policy, and then describe activities and programs implemented over the year to increase the amount of money spent on local suppliers.
For long-time reporters, the data collection process almost runs itself. Data owners for a particular topic expect to be asked for an update and are in the habit of flagging any changes or anomalies in the data. The new information is inserted in the report and the company demonstrates progress over time wherever possible.
One concern about this reporting output (especially from investors) is that the reader gains little, if any, context for how and why particular efforts are underway. There may not be clear connections between these and other activities — especially those associated with the corporate business strategy.
It's all about context
According to Mike Lombardo, senior sustainability analyst at Calvert Investments and member of the Sustainable Investment Research Analyst Network (a working group of US SIF), “Companies can no longer get away with flashy sustainability brochures that do not tell a meaningful story and lack substance."
At the end of the day, he added, an investors’ valuation of a company is based on how well it is managing its sustainability risks and opportunities. Companies can help investors — and themselves — by clearly articulating material sustainability impacts, as well as management’s approach to sustainability impacts. Lombardo said that means including the return on investment wherever possible, along with concrete data and goals outlined in a standardized report, such as the GRI G4.
Two important changes this year relate to the data gathering process outlined in G4. One change is the expectation that companies do a materiality assessment that engages both internal and external stakeholders to prioritize the topics (or Aspects) the company should manage — what is most material.
If done thoroughly, the internal conversations will help engage key leaders who understand the overall business strategy. These leaders are in a position to identify which issues are likely to surface as the company executes its strategic plan and meets related objectives.
A thorough materiality assessment also will prompt conversations about whether sustainability considerations can provide efficiencies, uncover opportunities, mitigate risks or proactively manage communications on these topics. The activities performed as a part of the materiality assessment can set the tone for the internal management assessment needed within some key disclosures in the final G4 report — the DMA.
Finding the 'why'
The second important change to the GRI G4 Guidelines are new requirements outlined within the DMA. The DMA in G4 requires more specific disclosures regarding each material topic. In addition to describing the company’s current activities (how the topic is being managed — policies, programs and progress), the DMA asks companies to explain why the topic is important and why it is important to actively manage the topic.
Under G4, a DMA on local spending would need to provide the definition of "local," describe activities and programs implemented and provide supporting data. Companies also must provide an explanation of what the company hopes to gain or avoid by implementing a program.
It’s an interesting shift, and one that data owners may find unusual and uncomfortable. The environment is shifting from one where the sustainability professional’s main objective was to find any data to avoid leaving a bland response on a ratings, rankings or investment firm questionnaire to explaining why the company is collecting and actively managing the data.
Because the G4 framework emphasizes the importance of understanding why data is being tracked, why programs are needed and why the company’s performance matters for each topic, these new conversations will help companies explore the value of the company’s sustainability efforts.
For example, discussions about what counts as significant, and local, during data collection for G4-EC9 (proportion of spending on local suppliers at significant locations of operation) turn into an evaluation of previous assumptions and an attempt to identify the best definition based upon the intended purpose of measuring local spending.
More specifically, if the value of using local suppliers is the decreased emissions from transport, the definition of significant might be narrowed to only production materials and the definition of local might be limited to a certain number of miles traveled. If the value is to support the national economy, the definition of local may be country of origin and vary by location of operations.
Good questions start good conversations
The DMA changes make for much more robust and strategic conversations while facilitating more engagement and buy-in from management and the internal reporting teams. The changes also echo the concerns raised by investors about the need to understand how and why topics are being addressed. What made this topic an issue? What value are you getting from your efforts?
Once the company is clear on what it is trying to gain by managing a specific sustainability topic, it is easier to provide meaningful answers to the final set of questions in the G4 DMA, which specifically ask for a self-evaluation of the management approach.
If you know what your company hopes to gain through its efforts, it is easier to develop measures of success. In the case where local spend is tied to an emissions objective, the evaluation will include questions about whether the right purchase types (those that most successfully driving down emissions from transport) are included in the scope of the project.
By 2016, every company reporting to GRI will be expected to use G4 regardless of which reporting option (Core or Comprehensive) is chosen. Every company also will be expected to disclose the management approach for material topics.
Because data owners or other internal resources may not be in the habit of providing this type of information during the reporting process (or perhaps never have been interviewed as a part of the reporting process), they may be difficult to engage. Internal data sources accustomed to providing only numbers may look at you with a blank stare when asked to explain and evaluate how the topic is managed. They may need clarification as to what counts as management and may even think, “We measure it! That’s how we manage it!”
The G4 guidelines provide some insightful talking points that can be used to facilitate valuable internal conversations. We at BrownFlynn have distilled these into a DMA checklist that essentially offers prompts to help get your data source to state and evaluate the company’s management approach to specific topics.
Using the prompts in this checklist, a company can answer all three difficult questions needed for a G4 DMA while reaping the benefits of this continuous improvement process. You can download the PDF directly from BrownFlynn.