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Blog | Tuesday February 27, 2018

Next-Generation Private-Sector Collaboration for Sustainable Development: Q&A with Gavi

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This blog is part of a series of interviews on how the private sector contributes to sustainable development through collaboration. It is adapted from an interview with Moz Siddiqui, manager of global operational partnerships and health innovation at Gavi, as research for Private-Sector Collaboration for Sustainable Development, a new report from BSR and The Rockefeller Foundation.

BSR: What is Gavi, and why was it established?

Moz Siddiqui: Gavi, the Vaccine Alliance, is an alliance of UNICEF, the WHO, the World Bank, donors, recipient countries, civil society, the pharmaceutical industry, and other private-sector companies. It was established in 2000 to address declining coverage rates of vaccines and the huge disparity in access to vaccines for preventable diseases in the world’s poorest countries.

In 1998, the WHO, the WEF, UNICEF, health ministers, and the pharmaceutical industry convened to understand why children were still dying from basic preventable diseases. They realized that the key issue was affordability. At the time, sovereign donors supported states directly, and there was no coordination around vaccines. It became clear that solving the issue of vaccine affordability and access would require collaboration between the private and public sectors. In 1999, challenged by Bill and Melinda Gates, key UN agencies, leaders of the vaccine industry, representatives of bilateral aid agencies, and major foundations agreed to work together through a new partnership: Gavi was seeded.

BSR: How does Gavi work, and what have been your key achievements?

Siddiqui: Gavi believes that through vaccinations, one can build healthy societies and economies. Our model is to address the disparity in access to vaccines by aggregating and pooling the collective demand for vaccines in almost 70 countries. Gavi purchases vaccines and thus provides long-term, predictable demand for them. It ensures the appropriate supply of quality vaccines by minimizing their cost and ensuring that the highest quality requirements are met.

To date, thanks to its purchasing power, Gavi has been able to reduce the price for 10 essential vaccines (such as Hepatitis B and Measles) from US$950 to US$35. We’ve enabled vaccinations for 680 million children worldwide, and we’ve reached US$80 to US$100 million in economic savings through Gavi’s purchasing power, resulting in a knock-on effect of US$350 billion of economic savings.

BSR: How has Gavi evolved along the way?

Siddiqui: Over the years, Gavi has been able to scale and grow. But more essentially, Gavi has become a market creator and a market shaper. It is one thing to ensure an appropriate supply of vaccines in a country, but it is another to make sure that appropriate institutions and systems are in place to allow for products to be redistributed and reach the point of care. Gavi does that.

The Alliance has evolved into a collaboration that goes beyond ensuring the supply of affordable vaccines in developing countries to one that strengthens healthcare systems. This was enabled by understanding the role that the healthcare system plays in health. Very early on, Gavi realized that it was not enough to ensure access to products and “hand them over the fence,” but that there were systemic challenges for healthcare systems in low-income countries.

BSR: What are Gavi’s key success factors?

Siddiqui: First, it’s about governance and collective decision-making: Multistakeholder collaboration is in Gavi’s DNA, with very different actors coming together and engaging in collective decision-making. Second, it’s about acknowledging each organization’s core competencies: Gavi is a curious mix of public-sector, civil society, private-sector, and sovereign donors. The fact that the alliance has existed since 2000 is a testament to how well they acknowledge and leverage each other’s core strengths.

Third, it’s about creating shared value: Gavi is really good at aligning the incentives of different actors and providing market-based solutions. Recipient countries are the primary drivers of the collaboration. They pay a share of the cost of their Gavi-supported vaccines, and as a country’s income grows, its co-financing payments gradually increase to cover the full cost of its vaccines.

Predictable, long-term donor support is another cornerstone of our model. It provides the security for countries to adopt vaccine programs. It also makes it possible for manufacturers to make new investments in production capacity. As we purchase for 60 percent of the world’s birth cohort, Gavi has shaped the vaccine market for wider societal gain, too.

BSR: What would be the ultimate success for Gavi?

Siddiqui: Our vision is to immunize one billion children by 2020, saving millions of lives from preventable deaths. In order to do this, we need to build resilient heath systems and markets. So that we can continue focusing our efforts on the very poorest countries, it is our goal to transition 20 countries that have passed the benchmark of US$1,580 GNI per capita out of Gavi’s support and have them fully fund their vaccine purchases themselves by 2020.

To ensure vaccines are distributed to areas where they are needed the most, health systems strengthening is required. Therefore, as an Alliance, we need create resilient health systems by addressing not only pricing, but also public health infrastructure, and we must continue to empower partner countries to accelerate their work.

Case Studies | Tuesday February 27, 2018

The Maritime Anti-Corruption Network: Argentina Collective Action

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The Maritime Anti-Corruption Network (MACN) is a global business network working toward the vision of a maritime industry free of corruption that enables fair trade to the benefit of society at large. The network promotes good corporate practices through the MACN Anti-Corruption Principles and collaboration with key stakeholders, including governments and international organizations, to identify and mitigate the root causes of corruption.

As one of its efforts, MACN pursued a collective action in Argentina, which resulted last year in the successful adoption of a new regulatory framework for dry bulk shipping that reduces corruption risks for the industry and elevates the country’s culture of integrity.

The Challenge

In 2014, MACN recognized through its anonymous incident reporting mechanism frequent recurring reports of financial demands made during the vessel clearance process in Argentina.

Every cargo ship entering Argentine waters must pass certain inspections, including those carried out by the Servicio Nacional de Sanidad y Calidad Agroalimentaria (SENASA), the government agency that guarantees the quality and healthiness of Argentine agricultural products. SENASA performs an important regulatory function. However, several problematic incentives converged to undermine the integrity of the system:

1. Inspections were at the discretion of the inspectors and not objective, as the criteria for rejecting a hold were unspecified and unclear.
2. Failing an inspection was costly, since it meant ships were considered off-hire. Depending on market conditions, port costs and commercial delays accrued from each extra day in port could amount to more than US$50,000 per day.
3. Inspections were recorded with paper records, which made data aggregation difficult or impossible.
4. The system lacked a reliable appeal or reporting mechanism to allow companies to seek redress for alleged non-compliance.

Together, these conditions facilitated bribery (where ships in bad condition would pay to obtain clearance) and commercial extortion (where officials would not provide clearance to ships in good condition without a facilitation payment). 

Our Strategy

To address this challenge, MACN sought to understand the root causes and devise solutions with a coalition of champions. MACN and local partner Governance Latam, in collaboration with other industry stakeholders, catalyzed a collective action program to investigate the root causes of the problem and support SENASA in reforming its procedures to tackle systemic corruption.

MACN and Governance Latam first interviewed more than 40 ship owners (MACN members), port agents, private surveyors, public inspectors, maritime lawyers, maritime insurance officials, representatives of grain houses, and public officials from the maritime sector. These interviews established that a mid-level public-private network of individuals was responding to a corruption-drive incentive structure. As a result of this dialogue, MACN defined the objective of the project as the modernization of the inspections system to be less discretionary, more transparent, and more accountable.

MACN and Governance Latam developed a broad coalition to develop and agree on the key points for a new system that would be both integrity-oriented and feasible, balancing the commercial interests of multiple stakeholders in the context of a process that remains critical to Argentina’s foreign trade.

In parallel, we also prepared for the implementation phase, seeking funding to support training and the development of communication materials to inform stakeholders of the new practices.

Our Outcomes and Impact

Following a series of public consultations on the new regulation, MACN’s collective action resulted in a new regulatory framework in Argentina that reduces discretion in the inspection of holds and tanks, establishes a system of cross-checks to increase integrity, provides an escalation process when disputes occur, and creates an e-governance system to underpin the framework. Inspections will be conducted by registered private surveyors, and, in case of conflict, bulk carriers will be able to request supervision of these inspectors from SENASA.

Moving to a system of inspections primarily conducted by private surveyors has great potential to reduce solicitation and extortion, as incidents may be resolved in an expedited fashion. Facing an improper demand from a private surveyor, a vessel’s master or its local agent can simply call the surveyor’s office, report the incident, and request intervention by SENASA, making the private inspector and its employer subject to sanctions and even disbarment.

MACN believes that these changes will increase the efficiency, integrity, and transparency of inspections, reducing the possibility of ship delays for unclear or unfounded reasons and facilitating the smooth passage of vessels to the benefit of frontline crew, global trade, and the Argentine economy.

Since implementation of the new system, MACN has provided information to industry, inspectors, and other stakeholders explaining the changes, including hotline contact details. Thanks to funding from the A/S D/S Orient's Fond, Governance Latam has also provided training to more than 400 local industry, private-sector, and public-sector stakeholders, and the course has become official government training material for SENASA staff.

Lessons Learned

To effectively address corruption from country to country, we have learned that it is critical to recognize different interests and drive ownership for sustainable change. The following lessons in particular stand out:

• Understand how corruption works in specific instances by answering questions like these:
  • Who is actually getting the illegal payments, and for doing what?
  • What are the economic drivers of the corruption scheme?
  • How do incentives work for each stakeholder?
  • Why has the corrupt scheme endured?
• Understand the good-faith commercial interests of each group of stakeholders, as well as the operational and practical limitations to regulatory change.
  • Commercial incentives and operational practices may be as or even more important than legal risks in determining the stakeholders’ behaviors.
  • The pursued reform should therefore be business-driven as well as integrity-driven: It should make sense in the context of business, either by making it easier or less costly for the stakeholders involved to do business.

Further, once the above facts are established, a successful anti-corruption initiative requires a coalition of the willing and local ownership from government, civil society, and local business networks. Companies are just one part of a larger system, and the entire system needs to be engaged in the process for change—raising the bar on efficiency, integrity, and good governance.

Finally, while local ownership is critical for implementation, support from international headquarters is essential to ensure that all business partners are aligned on expected integrity practices, from the maritime companies, port agents, and inspectors to the cargo owners whose products are being shipped around the world.

MACN’s work in Argentina is a model example of how stakeholders can work together to successfully combat corruption for the benefit of society at large.

Blog | Wednesday February 21, 2018

Collaboration for Impact: A Conversation

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This blog is the first in a series of interviews on how the private sector contributes to sustainable development through collaboration. It is adapted from a roundtable conversation conducted as research for Private-Sector Collaboration for Sustainable Development, a new report from BSR and The Rockefeller Foundation. 

Dominic Kotas: What is important for you when you consider joining a sustainability collaboration?

Chiel Seinen: For me, it is important that there is clarity. I can only sell it to the top of the house if there is a clear purpose, objective, and timeframe. I need to know when it would be a success, and I need a mandate; otherwise, failure is guaranteed, if you ask me. A clear vision, mission, timeframe, and objectives are 99 percent of the battle.

Moira Oliver: I think you also need to have some clear deliverables in the short, medium, and long term, otherwise people will just see it as a nice idea but with no real practical impact. Is it worth their time and investment if it is not going to deliver some actual impact for their business?

Seinen: I agree. You can of course have an open-ended working group, so to speak, but then at least you need to know what will be delivered, and whether there is a moment to evaluate and potentially exit or disband the collaboration.

Kotas: And what makes collaboration work over time?

Eric Anderson: When I look at potential collaborations, I like to think: Are we covering the ‘why,’ the ‘what,’ and the ‘how’ of this issue? It feels like the ‘why’ is covered if you have a clear purpose, as you mentioned. When it comes to the ‘how,’ as Moira said earlier, the governance is probably the most critical part in ensuring that we can work together.

In terms of the timeframe, I think that the ‘why’ gets you to the starting blocks, and the ‘what’ might get you into the first year. But actually delivering successful outcomes is all down to the ‘how.’

Yukako Kinoshita: The governance is important, I totally agree with what you have said, because I think there is also the issue of competition to resolve. At the end of the day, you will be working with your competitors, and good governance is what resolves that tension; it makes us feel safe working together.

Oliver: In addition, if you do not have a stakeholder in there who everyone regards as key, that can have a real dampening effect. So it depends a little on who you have within that group of early adopters.

Kotas: How does that evolve? Do you want to see a collaboration grow the number of members?

Kinoshita: I think there is a risk that as you gain more members, you lose the action and impact, and the collaboration becomes more of an information exchange platform. When you have a very small group, you have a specific purpose and you can make an impact.

Anderson: Yes, completely. As I mentioned earlier, if you have an emerging issue that you want to lead on and really drive, my belief is that you can have more impact by convening a smaller group that moves independently to a certain point. Then, when you are ready to scale, you will have a strong business case to share.

Oliver: For me there is also growth in terms of the agenda and maturity. Even if an initiative has been running for a long time, what I really want to see is that it adapts and moves on to another level; that it does not just stay static in terms of its agenda.

Kotas: And what are your views on the future of private-sector collaboration?

Kinoshita: I am quite positive because of the SDGs—everybody is talking about them, and you feel like you can collaborate.

Anderson: I think there will be more collaboration in the future, but I think it might be more bespoke, issue-focused collaboration.

Seinen: My vision is that collaboration will be fully integrated into the way we run projects and the way we run business. And I think that while we will collaborate across geographies, not everything needs to be solved at a global level.

Anderson: I agree. We’ll need global perspectives, but the action will be increasingly tailored to local contexts.

To learn more about this topic and the upcoming report, please register for our Sustainability Matters webinar on February 28.

Blog | Tuesday February 20, 2018

Assessing Suppliers: Inclusive Business or Business as Usual?

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Many companies are beginning to evaluate their suppliers based on their social and environmental impacts, both positive and negative. Particularly when assessing suppliers’ claims to have a social impact through employment, it can be difficult to determine whether a supplier is an inclusive business, or just doing business as usual.

In January, the Global Impact Sourcing Coalition (GISC) visited one of our members’ operations in Kingston, Jamaica to learn from its approach to inclusive employment. Sutherland is a process transformation company whose services include contact center management. Like other members of the GISC, Sutherland has grown its operations through intentionally hiring and providing career development opportunities to people who otherwise have limited prospects for formal employment, thus reducing social inequality and contributing to the Sustainable Development Goals to provide employment and decent work for all.
 

Graduates from Sutherland Global Services’ Community Technology Centre in Kingston, Jamaica. Photo credit: Sutherland Global Services.

Our tour of Sutherland’s investments in inclusive employment in Jamaica demonstrated how inclusive suppliers are distinguished by three traits.

1. Intentionality: Inclusive businesses do more than just hire people from disadvantaged backgrounds. They do it with intent, assessing what barriers vulnerable populations have in securing employment and deliberately removing those barriers through their application and onboarding processes. They assess how they might best source new workers from their communities and set goals to improve their diversity and inclusion.
   
   For example, Sutherland supports a network of Community Technology Centers (CTC) in Jamaica to train young adults in at-risk communities in the hard and soft skills they need to secure their first job in a modern workplace. When the company evaluated how to improve the impacts of the program, it decided to make a commitment to ensure that at least 10 percent of CTC graduates find employment. As a result of this pledge, participation in the program spiked, and the company now benefits from a new pipeline of qualified, enthusiastic employees who would not otherwise have had the academic credentials for employment there. Sutherland Jamaica has also set internal goals to increase the number of youth it trains and sources from the CTC program.
    
2. Social impact focus: An inclusive business seeks to understand, measure, and continuously grow the social impact that it is having in its workplace and communities. It goes further than traditional workforce engagement to understand and provide for the needs of its employees and ensure that they are equipped with the training, resources, and life skills that they need to succeed and grow. It aims for continuous improvement to ensure a positive impact on employees, communities, and the business.
   
   When Sutherland launched the 'Earn While You Learn’ program for university students to work part-time to pay their way through college, its focus was not only on producing a qualified workforce, but also on increasing graduation rates at local universities, which had seen graduation rates plummet as students struggled to afford recently introduced tuition fees. The company partnered with the university to set up contact centers on campus grounds, created flexible part-time work schedules that enabled students to attend classes on a full-time basis, and assessed academic achievement in employee performance reviews to determine if they need more time off to attend to their studies. More than 400 people have found employment with Sutherland on campus, many of them unlikely to have been able to afford higher education otherwise.
    
3. Partnerships and collaboration: Finally, an inclusive business does not attempt to do it all on its own. It works in close partnership with other experts to identify areas of need, provide expertise, develop targeted services and interventions, and ensure that impacts are shared with the wider community.         

For example, Sutherland’s CTC program runs on partnerships with clients, governments, universities, youth training programs, churches, community centers, and civil society organizations to reach and train at-risk youth. On our trip, we heard stories from youth of the many actors in their communities—the pastors, community leaders, teachers, friends, and family members—who reached out to them to encourage them to participate in the program, and who share an equal role in their success. 

Of all of the company’s investments in inclusive employment, Country Head and Associate Vice President for Sutherland Jamaica, Odetta Rockhead-Kerr emphasizes, “Our clients are some of the most important partners. If they didn’t give us the business, they wouldn’t be able to impact lives. It’s their opportunity to be socially responsible.”

By participating in the GISC, client companies are able to identify and partner with suppliers that have made real commitments to inclusive employment, contributing to the sustainability and social development of the communities they source from. Visit http://gisc.bsr.org to learn more about how your company can start an Impact Sourcing program.

Blog | Thursday February 15, 2018

Why We Need a Loud (and Consistent) Business Voice on Policy Issues

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In our recent report, Redefining Sustainable Business: Management for a Rapidly Changing World, we outlined new directions for companies as they manage sustainability through their business strategies, with ever greater impact.

Our “Act, Enable, Influence” framework represents a comprehensive approach from business, in which it is not merely an actor implementing rules and regulations, but instead an active participant in shaping its operating environment. 

As my colleague Alison Taylor put it when we released the report, “Companies should influence the policy and legal environment via vocal support for sustainable business. Silence on key policy issues is no longer an acceptable stance: The public—and your employees—wants to see more concrete evidence of business values and want business to take a more active role in shaping policy for the long term.”

The World Economic Forum in Davos last month provided one opportunity for business to engage with government leaders. Interestingly, conversations there about how to achieve the Sustainable Development Goals (SDGs) focused heavily on all-important Goal 17, which calls for partnerships across all sectors of society. 

In discussions on how to realize the vision of the Paris Agreement, companies called for policy frameworks that create the right kind of incentives. With more than 70 heads of state and heads of government present at Davos, it was sometimes hard to tell who was who: The CEOs just as often called for policy solutions to pressing global challenges as the political figures did.

Why is this crucial, and why now?

The world is changing ever more rapidly around us, and business—the source of many of the innovations that are generating many of these changes—has expertise on a number of key topics that tomorrow’s policy frameworks will need to address. Because global companies have an essential appreciation of the international business implications of things like free trade agreements, privacy and data protection laws, and materials disclosure requirements, it is crucial that their expertise and perspective inform smart regulatory frameworks. Businesses are well placed to speak, for example, to the listing rules that promote short-term decisions at the expense of investments in employees and climate-resilient infrastructure. They are also essential to involve in conversations about the human rights implications of new technologies.

In an era when leadership is badly needed and trust is in short supply, business leaders should work to ensure that the incentives created by governments align with high levels of ethical, environmental, economic, and social ambition. It is clear that the lowest-common-denominator approaches that have been the default position of traditional business associations in the past are no longer fit for purpose: Business must be part of the solution to our shared challenges.

Moreover, in a hyper-transparent world, discrepancies between the arguments companies make in hushed tones in the offices of their representatives and the aspirations they express in the colorful pages of their sustainability reports are not, to put it lightly, sustainable.

There is also an important incentive for business to promote effective and consistent frameworks. In recent years, we have seen a welter of frameworks develop on reporting and transparency, supply chain due diligence, and other topics. Companies operating globally do not benefit from an inconsistent set of rules and regulations; such a system incentivizes compliance, rather than creativity. It is therefore valuable for companies to support consistent policy frameworks across jurisdictions. Otherwise, the core objectives of advocacy—business certainty and predictability—are unlikely to be realized.

There is often a high degree of skepticism about where corporate interests lie, so this model only works if there is both transparency in how business engages and alignment in the public and private interests companies address. 

This is a point to be heeded. But it should be reason to participate in public policy the right way, not a reason to stay away from it altogether. Just as in past years it became untenable for companies to ignore labor conditions in their supply chains or the impacts of their products and services on the environment, we are at a time when any company aspiring to sustainability leadership will be judged not only on its performance, but also on how it shapes the rules of the game.

Ultimately, businesses press for policy changes on all sorts of issues: Why should sustainability be any different?  

Reports | Wednesday February 14, 2018

New Models for Sustainable Procurement

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While the first two decades of the sustainable procurement field focused on codes of conduct, supplier compliance, and auditing, procurement professionals in the vanguard today are looking to do much more with their sustainable procurement efforts, as major forces of change—such as climate change and automation—are poised to impact supply chains in uncertain and possibly unprecedented ways.

This paper captures three key developments that BSR's Procurement Leadership Group tracked, explored, and discussed in 2017: supply chain transparency, supplier engagement, and responses to shifts in trade and globalization.

Blog | Monday February 12, 2018

Event Summary: Ethics, Human Rights, and Artificial Intelligence

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Blog | Monday February 12, 2018

The 5 Stages of Materiality Grief

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Ask a sustainability practitioner what happens after mentioning the word materiality to a colleague for the first time, and she may likely tell you, “wide-eyed bewilderment.” And once that same colleague begins the materiality process, his or her bewilderment often transforms into grief. It is important to understand that materiality—much like grief—is a journey.

It is a journey worth taking, since materiality analysis is an extremely valuable business tool, helping companies like Sanofi bring a diverse set of internal and external stakeholders together in dialogue, Unilever help drive consensus around what topics to prioritize and where to invest resources, Starbucks determine where to focus goal-setting, or Telenor set expectations and boundaries on what information to report. Perhaps even more importantly, materiality can also indicate where not to focus limited resources and attention.

So how to get from grief to value? Here are BSR’s tips to navigate the five stages of materiality grief.

• Denial—We don’t need this. When you begin a materiality process, the first reaction from your colleagues may be closed-fist denial. Materiality can be as much an awareness-raising tool as a change management process, and those new to it may initially resist change. It’s important in this phase to be as transparent as possible about what materiality entails, how individuals will be involved, and how the outcomes will be used.
• Anger—Don't add to my workload! Once you have broken through the initial denial, colleagues may react with anger to the very suggestion of adding to their workloads, claiming that materiality is not their job or is even a waste of time. The best tactic here may be patience, but it’s also worth sharing testimonials and case studies from other internal or external stakeholders to help your colleagues see the value in their participation.
• Bargaining—Fine, but let's do the minimum. At this stage, colleagues accept to be involved in a materiality process but under certain conditions. It helps to understand what colleagues are willing to commit in terms of time and resources, as well as their expectations of what they will receive in return.
• Depression—But I don’t see my function listed as a priority. Once materiality is underway and initial results have been produced, depression may set in. While that may be too strong a word, there are traces of this emotion as colleagues begin to see where their areas or functions appear on a materiality map. They may fear that their function is being de-prioritized or stands to lose resources. Here, it’s important to remind them that all issues, functions, and individuals consulted during materiality are already considered high priority; otherwise, they would not have been included.
• Acceptance—Alright, this actually makes sense. Finally, you reach the end goal of acceptance. After being informed, consulted, and in some cases involved in workshopping the results of the materiality process, colleagues have accepted the outcomes and recognize that the analysis describes a reality they may not have understood before. The real work to drive the results forward begins here.

Thankfully, leading companies are finding ways to avoid the grief altogether—by more closely linking materiality to business drivers from the outset. We see three distinct ways this is happening:

1. Integration of sustainability-oriented materiality assessments into enterprise risk management processes. Companies that have a well-developed enterprise risk management (ERM) process are far better at managing sustainability issues. There is an opportunity for ERM processes to utilize the outputs of sustainability-oriented materiality assessments, and for those two processes to be much more closely aligned. Risk is a key factor in defining priorities for companies like Lockheed Martin, which seeks to reduce the risk of negative impacts to the business, the planet, and society while cultivating long-term, responsible economic and social growth.
2. Prioritization and support for global agendas, such as the Sustainable Development Goals (SDGs). Companies recognize that succeeding in the long run today requires a well thought-through sustainability strategy that aligns with the global risks and opportunities related to business continuity. To that end, the SDGs, while not designed as a business framework, are increasingly applied to company strategy. The SDGs and materiality assessments in many ways complement each other. Conducting a rigorous materiality assessment linked to the SDGs can help companies identify and make the greatest impact on those goals that are most closely aligned with their business models and strategic priorities. Companies like Vattenfall are demonstrating what this looks like in practice.
3. Identifying new value creation opportunities for the organization, such as the allocation of capital. In many ways, materiality is an attempt to express where companies stand to create the most value for their internal and external stakeholders. Companies like Hitachi Chemical approach materiality as a method to maximize value for stakeholders and use it as a key element of their value creation stories.

Are you looking to leverage your materiality process to create a more resilient business strategy? Read our new report, Redefining Sustainable Business: Management for a Rapidly Changing World.

Blog | Monday February 5, 2018

Three Hot Debates in Sustainability Reporting Today

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In 2017, we spoke with more than 50 sustainability leaders from our member companies and other leading organizations to shape our thinking about the future of sustainable business.

These interviews informed our new report, Redefining Sustainable Business: Management for a Rapidly Changing World, which provides a blueprint for company strategy, governance, and management fit for our sustainable development challenge. Included in this blueprint is our point of view about how companies can report sustainability information in ways that enable improved sustainability performance and catalyze action beyond a company’s own boundaries.

Also during 2017, we had the opportunity to learn from the work of our Future of Reporting collaborative initiative. These discussions informed our Practitioner’s View of Sustainability Reporting, which shares insights about the future of sustainability reporting from those who are closest to it.

However, we were struck by three questions throughout these conversations where opinions were often sharply divided.

Does sustainability reporting distract attention from sustainability strategy?

One interviewee complained to us that, “Sustainability teams need to be story-makers, not storytellers, yet too often reporting reduces bandwidth for half the year and prevents us from doing our jobs.” Indeed, it often becomes too easy for the sustainability team to prioritize responding to external requests and producing an annual report at the expense of shaping the strategic direction of the company.

However, others argued that the discipline of publishing information in the public domain creates a powerful incentive for performance improvement, helps socialize sustainability across the organization, and helps focus strategy on the issues of greatest importance to company success. As one interviewee put it, “Reporting has an effect to solidify program management. There is a difference between high quality and low quality, and this pushes higher quality outputs.”

We believe that strategy and reporting are both essential and should not be viewed in competition. Both outcomes shouldn’t necessarily be pursued by the same team, though—just as the company strategy function doesn’t write the annual report, so the company sustainability function shouldn’t necessarily write the sustainability report.

Should we move toward more real-time sustainability reporting and disclosure?

Advocates of real-time reporting argue that it would bring the twin benefits of engaging a wider range of people in the sustainability agenda and enabling more timely decision-making on important sustainability issues. Opponents judge that sustainability is the ultimate long-term challenge; it is inconsistent to argue that short-term decision-making by investors is damaging to sustainability, while at the same time advocating for more real-time performance information and updates on sustainability.

We believe that the discipline of the annual reporting cycle is essential to maintain, as it allows analysts to make year-on-year comparisons and identify forward-looking trends. However, we think that companies should also communicate about sustainability using the full suite of today’s social media tools to engage relevant audiences. It makes sense for companies to look at new formats where real-time sustainability data can inform decision-making by external stakeholders—for example, sustainability information about products could be made available in real time to consumers—but this is not the same as sustainability reporting.

Should companies stop using the term “materiality” outside the investor relations context?

Some argue that using the term “materiality” outside of the investor relations context creates confusion for report users, who may be unclear about what definition of material is being used, and whether certain issues are of material concern to investors or not. One interviewee commented, “People get tired of hearing that all sustainability issues are material to the business.” Outside the investor relations context, companies could use other terms, such as “relevance.”

On the other hand, the concept of materiality is the threshold at which issues become sufficiently important that they should be reported to a target audience. In financial reporting, materiality is the threshold for influencing financial decisions made by investors; in sustainability reporting, materiality is the threshold for influencing a wider set of decisions, made on a wider range issues, by a wider range of stakeholders.

The financial reporting discipline does not have a monopoly on the term “material,” and applying such a proven concept in the sustainability reporting discipline substantially increases its value for report readers. Provided the company is clear about the definition of materiality being used and the process applied to define material issues, then using the term “materiality” should not, in theory, create problems.

Yet the fact remains that, in practice, the dual use of the term is confusing. Ultimately, the substance of the materiality principle in sustainability reporting matters more than the term that is used, and we believe that companies can use other terms—such as relevance or prioritization—in the context of sustainability reporting targeted at non-investor audiences.

Our Future of Reporting collaborative initiative is a group of companies that share reporting best practices with each other and use these insights to inform the future of sustainability reporting. If you are interested in participating in the group during 2018, please contact us.

Reports | Monday February 5, 2018

A Practitioner’s View of Sustainability Reporting: Challenges and Solutions

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Sustainability reporting practitioners possess excellent insights into the challenges faced when writing sustainability reports and other sustainability disclosures. They navigate the complex mix of reporting standards, meet the needs of a diverse range of report users, tell the company’s sustainability story, and use the power of reporting to help improve company performance. Along the way, they learn many lessons in how to do this effectively. 

This briefing document supplements our 2016 Triangles, Numbers, and Narratives report with insights gained from meetings of BSR’s Future of Reporting collaborative initiative during 2017.