TALLINN
UNIVERSITY OF
TECHNOLOGY SUSTAINABILITY
REPORTING
GUIDELINES Report Composers:
Meelika Koitjärv
EABM03
000502
Sandra Oisalu
EABM03
000484
Tallinn
2004
PREFACEThe
Board of Directors of the
Global Reporting Initiative (GRI) is
pleased to release the 2002 Sustainability Reporting Guidelines. From
an institutional perspective, it marks the
beginning of the
cycle of
release,
testing , review, and
revision under
GRIs new governance
structure.
The GRI
was launched in 1997 as a
joint initiative of the U.S.
non-governmental
organisation Coalition for Environmentally
Responsible
Economies (CERES) and United Nations Environment
Programme with the
goal of enhancing the
quality , rigor, and utility
of sustainability reporting.
The
first set of GRI Sustainability Reporting Guidelines appeared as an
Exposure Draft in 1999.
Following testing and public comment, the GRI
released the
June 2000 Guidelines.
The 2002
Guidelines
represent the GRI Boards view of a
consensus on a
reporting
framework at this point in time that is a blend of a
diverse range of
perspectives .
There are numerous ways to use the 2002 Guidelines. An organisation may
choose to simply use
them for
informal reference or to
apply the
Guidelines in an incremental
fashion .
CONTENTS
Preface………………………………………………………………………………………….3
Content…………………………………………………………………………………………4
Introduction ………………………………………………………………………………...5
GRI Guidelines…………………………………………………………………………….7
GRI Sustainability Report ………………………………………………………………….7
Performance Indicators…………………………………………………………………….8
Overview of the Global Reporting Initiative……………………………………………..11
Linkages between Sustainability and Financial Reporting……………………………….12
GRI Indicators ……………………………………………………………………………13
Summary………………………………………………………………………………….17
1. INTRODUCTION
The
Global Reporting Initiative (GRI) is a long- term , multi -stakeholder,
international process whose mission is to develop and disseminate
globally applicable Sustainability Reporting Guidelines. These Guidelines are for voluntary use by organisations for reporting on
the economic , environmental, and social dimensions of their
activities, products , and services . The aim of the Guidelines is to
assist reporting organisations and their stakeholders in articulating
and understanding contributions of the reporting organisations to sustainable development .
Trends
The key
trends during the last two years are:
Expanding
globalization – Expansion of global capital markets and
information technology continue to bring unprecedented opportunities
for the creation of new wealth .
Search
for new forms of global governance – Globalisation challenges
the capacity of existing international institutions to govern corporate activity .
Reform
of corporate governance – Pressures on corporations to
establish and maintain high standards of internal governance are
accelerating.
Global role of emerging economies – The same globalization, accountability , and governance trends evident in industrial nations
are taking root in emerging economies.
Rising
visibility of and expectations for organizations – The spread of the Internet and communications technologies is accelerating the
global transfer of information and amplifying the speed and force of
feedback mechanisms.
Measurement
of progress toward sustainable development – As sustainable
development has become widely adopted as a foundation of public
policy and organizational strategy; many organizations have turned
their attention to the challenge of translating the concept into practice .
Governments interest in sustainability reporting – When GRI was conceived
in 1997, governmental interest in integrated economic, environmental,
and social reporting was scant.
Financial
markets interest in sustainability reporting – The financial
industry slowly but steadily is embracing sustainability reporting as part its analytical toolkit.
Emergence
of next-generation accounting – The late 20th century saw worldwide progress in harmonizing financial reporting.
Benefits
of reporting
- Effective management in a global economy , where information travels at Internet speed, requires a proactive approach .
- Today ’s strategic and operational complexities require a continua dialogue with investors, customers, advocates, suppliers, and employees.
- Companies increasingly emphasize the importance of relationships with external parties , ranging from consumers to investors to community groups, as key to their business success .
- Sustainability reporting is a vehicle for linking typically discrete and insular functions for the corporation in a more strategic manner .
- The process of developing a sustainability report provides a warning of trouble spots – and unanticipated opportunities – in supply chains, in communities, among regulations, and in reputation and brand management.
- Sustainability reporting helps sharpen management’s ability to assess the organizations contribution to natural, human, and social capital.
- Sustainability reporting may reduce volatility and uncertainty in share price for publicly traded enterprises , as well as reducing the cost of capital.
GRI GUIDELINES
The GRI Guidelines
are a framework for reporting on an organisation’s economic,
environmental, and social performance. The Guidelines:
- present reporting principles and specific content to guide the preparation of organisation-level sustainability reports;
- assist organisations in presenting a balanced and reasonable picture of their economic, environmental, and social performance;
- promote comparability of sustainability reports, while taking into account the practical considerations related to disclosing information across a diverse range of organisations, many with extensive and geographically dispersed operations;
- support benchmarking and assessment of sustainability performance with respect to codes, performance standards, and voluntary initiatives; and
- serve as an instrument to facilitate stakeholder engagement.
The Guidelines
are not:
- a code or set of principles of conduct;
- a performance standard;or
- a management system.
The Guidelines
do not:
- provide instruction for designing an organisation’s internal data management and reporting systems; or
- offer methodologies for preparing reports, or for performing monitoring and verification of such reports.
GRI SUSTAINABILITY REPORT
The GRI
Guidelines organize “sustainability reporting” in terms of
economic, environmental, and social performance. This structure has
been chosen because it reflects is currently the most widely accepted
approach to defining sustainability. GRI recognizes that, like any
simplification of a complex challenge, this definition has its
limitations. Achieving sustainability requires balancing the complex
relationships between current economic, environmental, and social needs in a manner that does not compromise future needs. Defining
sustainability in terms of three separate elements can sometimes lead
to thinking about each element in isolation rather than an integrated
manner. GRI is committed to continually improving the structure and
content of the Guidelines in line with the evolving consensus on how
to best measure performance against the goal of sustainable
development.
PERFORMANCE INDICATORS
The performance indicators are grouped under three sections covering
the economic, environmental, and social dimensions of sustainability.
This grouping is based on the conventional model of sustainable
development and is intended to aid users of the Guidelines. However,
limiting performance indicators to these three categories may not
fully capture the performance of an organisation for a number of reasons . For example:
- changes in one aspect of economic, environmental, or social performance often result in changes to other aspects of sustainability;
- sustainability strategies often use one area of sustainability as a reference point when defining goals for another area; and
- advancing sustainable development requires coordinated movement across a set of performance measurements, rather than random improvement within the full range of measurements.
1) Economic Performance Indicators
The
economic dimension of sustainability concerns an organisation’s
impacts on the economic circumstances of its stakeholders and on
economic systems at the local , national and global levels. Economic
impacts can be divided into:
Direct impacts – The economic indicators on direct impacts are designed to:
- measure the monetary flows between the organisation and its key stakeholders; and
- indicate how the organisation affects the economic circumstances of those stakeholders.
The
aspects for this section are organised around stakeholder groups.
Each aspect includes a monetary flow indicator , which provides an
indication of the scale of the relationship between reporting
organisation and stakeholder.
For
example, under suppliers, the monetary flow indicator associated with
“cost of all goods , materials, and services purchased” provides
information on the scale of flows between the reporting organisation
and its suppliers. The performance indicator describes one facet of
the economic relationship between the suppliers and the reporting
organisation.
Indirect impacts - The total economic impact of an organisation
includes indirect impacts stemming from externalities that create
impacts on communities, broadly defined. Externalities are those costs or benefits arising from a transaction that are not fully reflected in the monetary amount of the transaction. A community can
be considered as anything from a neighbourhood, to a country , or even a community of interest such as a minority group within a society.
Examples of
externalities might include :
- innovation measured through patents and partnerships;
- economic effects ( positive or negative ) of changes in location or operations; or
- the contribution of a sector to Gross Domestic Product or national competitiveness.
Examples of
community impacts might include:
- community dependency on the organisation’s activities;
- ability of the organisation to attract further investment into an area; or
- the location of suppliers.
Environmental Performance Indicators
The
environmental dimension of sustainability concerns an organisation’s
impacts on living and non- living natural systems, including ecosystems , land , air and water. The environmental dimension of
sustainability has achieved the highest level of consensus among the
three dimensions of sustainability reporting.
It is particularly important to provide environmental performance
information in terms of both absolute figures and normalized measures . Both measures reflect important, but distinct , aspects of
sustainability. Absolute figures provide a sense of scale or
magnitude of the use or impact, which allows the user to consider performance in the context of larger systems.
In
reporting on environmental indicators, reporting organisations are
also encouraged to keep in mind the principle of sustainability
context. With respect to the environmental measures in the report,
organisations are encouraged to relate their individual performance
to the broader ecological systems within which they operate.
3) Social Performance Indicators
The
social dimension of sustainability concerns an organisation’s
impacts on the social systems within which it operates. Social
performance can be gauged through an analysis of the organisation’s
impacts on stakeholders at the local, national, and global levels. In
some cases, social indicators influence the organisation’s
intangible assets , such as its human capital and reputation.
Social
performance measurement enjoys less of a consensus than environmental
performance measurement. Through its consultative process, GRI has
selected indicators by identifying key performance aspects
surrounding labour practices , human rights , and broader issues affecting consumers, community, and other stakeholders in society.
The
aspects of labour practices that relate to human rights have been
incorporated into the latter category . This decision was made to
avoid treating “labour rights” as something different from, or
less important than, “human rights”. The decision reflects the strong sentiment that an organisation’s contribution in the area of
labour practices should not be simply to protect and respect basic rights; it should also be to enhance the quality of the working environment and value of the relationship to the worker .
Several of the social performance indicators differ considerably in nature from other economic and environmental performance indicators in the
Guidelines. Many of
the social issues that are the subject of performance measurement are
not easily quantifiable, so a number of social indicators are qualitative measures of the organisation’s systems and operations,
including policies, procedures, and management practices. These
indicators relate not to general, overarching policies but to
specific, narrowly defined social aspects such as forced or
compulsory labour, or freedom of association .
The
social performance indicators that appear in this document represent
a significant step forward from the previous version of the
Guidelines in
identifying core issues that are applicable to most organisations.
However, GRI social indicators will be continually enhanced over time
as the field of performance measurement progresses and GRI receives
further feedback on the Guidelines.
OVERVIEW OF THE GLOBAL REPORTING INITIATIVE
GRI is making rapid progress toward establishing the institutional framework to support its work in the future.
- The permanent GRI was officially inaugurated in early April 2002 at the United Nations in New York City.
- Following an open nomination process that netted more than 100 nominations, a distinguished nominating committee selected a 14- person Board of Directors to guide GRI’s future development.
- GRI has taken initial steps to establish a Stakeholder Council . The Council will be the formal policy forum within GRI, where stakeholders will be equal partners in helping to chart the future course of the organisation.
- In late 2002, GRI will establish a Technical Advisory Council to guide the Board of Directors and the Secretariat on technical matters relating to reporting on economic, environmental, and social performance.
- At a basic level of engagement, GRI has registered more than 1,800 individual stakeholders from 77 countries in 2001-2002.
GRI has revised the Guidelines
and initiated work on developing sector supplements and protocols to
add to the rigour and robustness of the reporting framework:
- In support of the revisions process, GRI undertook a Structured Feedback Process that gathered input on the Guidelines from 31 companies.
- Recognizing the intense debate around assurance of reports, GRI established a Verification Working Group as a forum for discussing how verification should be addressed in the GRI framework.
- In 2001, GRI established the Measurement Working Group to develop recommendations on performance indicators for inclusion in the 2002 Guidelines.
- The Revisions Working Group—a group of 12 individuals representing a broad range of constituencies and geographic areas —worked for six months to propose revisions to the Guidelines.
- GRI is developing sector supplements that will identify and address sector-specific issues that are not reflected in the core Guidelines for inclusion in sustainability reports.
- GRI has begun developing its first technical protocols to support specific indicators.
- GRI also plans to produce issue guidance documents that will guide reporting organisations that wish to organise their reports along thematic lines.
LINKAGES BETWEEN SUSTAINABILITY AND FINANCIAL REPORTING
Sustainability
Information and Internal Business Analysis
Two key components of internal business analysis are:
External Environment - Analysis of the external environment focuses on issues such as product, labour, and capital markets and regulatory structures . These issues, in turn , relate in part to the risks and opportunities associated with management of the economic, environmental, and social aspects of the business. Overlaps and synergies exist between the conventional indicators used for analysis of the external environment and those used for measuring economic, environmental, and social performance. For example, social indicators related to the composition and status of the workforce may be used to highlight opportunities for expanding the firm ’s intellectual capital.
Competitive advantage – is built through cost leadership and product/service differentiation and, increasingly, through the formation and retention of intellectual capital. Sustainability performance indicators can serve as a vehicle to help companies understand and measure the degree to which their economic, environmental, and social performance contributes to competitive advantage.
- Cost Leadership - Increased process efficiency is an example of a proven sustainability strategy for decreasing costs and improving profitability, and thereby gaining cost leadership.
- Costs and Risks - Cost analysis can be greatly enhanced by a holistic approach to assessing risks and uncertainties. In some industry sectors, key risks and uncertainties have strong links to environmental and social concerns.
- Product Differentiation - Sustainability initiatives and strategies also provide opportunities for product differentiation—a key component of competitive advantage. Many leading companies are repositioning their products as services as part of their attempt to reduce their environmental or social impacts. The environmental and social performance of companies can also have significant affect on intangible assets such as brand image and consumer goodwill, which are recognized as key to company reputation and trust .
- Intellectual Capital Formation - Other intangible assets such as intellectual capital, the ability to innovate, investment in research and development, and networks and alliances are integral to analyzing a company’s financial prospects.
Sustainability
Indicators and Financial Reporting and Communications
In addition
to providing insights to support internal financial analysis,
information on sustainability performance also has a place in
mainstream financial reports. Despite the growing overlaps between
sustainability and financial reporting, the greatest challenge in
bridging financial and sustainability reporting lies in translating
economic, environmental, and social performance indicators into
measures of financial value. As a rule, financial analysts are
interested in information that is:
- material to the business (representing a measurable change in income or revenue in a business segment );
- provided in financial measures; and
- forward looking (can provide insight into trends in business performance).
Performance indicators used in sustainability reporting often do not
directly meet all of these criteria. One critical reason for linking
sustainability performance indicators with conventional financial
reporting is to provide data in denominations and terms that are
consistent with financial reporting.
GRI INDICATORS
Purpose of GRI Indicators
The function of GRI performance indicators is to provide information
about the economic, environmental, and social impacts of the
reporting organisation in a manner that enhances comparability
between reports and reporting organisations. In the case of GRI, the
indicators are designed to inform both the reporting organisation and
any stakeholders seeking to assess the organisation’s performance.
To achieve these goals, performance must not only be defined in terms
of internal management targets and intentions, but also must reflect
the broader external context within which the reporting organisation
operates.
GRI
Indicator Framework
Category:
The broad areas, or groupings, of economic, environmental, or social
issues of
concern to stakeholders (e.g., human rights, direct economic
impacts).
Aspect:
The general subsets of indicators that are related to a specific
category. A
given category may have several aspects, which may be defined in
terms of issues,
impacts, or affected stakeholder groups.
Indicator:
The specific measurements of an individual aspect that can be used to track
and
demonstrate performance. These are often, but not always,
quantitative. A given
aspect (water) may have several indicators (e.g., total water use, rate of water
recycling , discharges to water bodies). The balance between
quantitative and
qualitative indicators will vary by aspect depending on a range of
factors. Indicators
have been aligned to the maximum degree possible with existing
international
conventions and agreements.
Indicator
Classifications
GRI does
not seek to divide performance indicators into types based on the
content or nature of the indicator, but rather generally organises
according to the relevance of the issue to stakeholders. GRI
performance indicators are classified along the following lines:
- Core indicators, in general, are: 1) those relevant to most reporters; and 2) of interest to most stakeholders.
- Additional indicators are viewed as one or more of the following: 1) leading practice in economic, environmental, or social measurement, though currently used by few reporters; 2) providing information of interest to stakeholders who are particularly important to the reporting entity; and 3) deemed worthy of further testing for possible consideration as a future core indicator.
Qualitative
vs. Quantitative Indicators
GRI
recognizes the value of both qualitative and quantitative
information, and views both as complementary and necessary to
presenting a balanced and reasonable picture of an organisation’s
economic, environmental, and social performance. Where possible, GRI
employs quantitative indicators. However, certain topics,
particularly in the field of social performance measurement, do not
readily lend themselves to quantification.
Reporting
Indicators: Absolute Figures and Ratios
Reporting
organisations should present raw performance data in terms of
absolute figures, and for a given period of operation (most often a
year). These absolute figures might be expressed in a currency or in physical units (such as tonnes, cubic metres, or gigajoules).
Absolute figures provide information on the size of an impact, value,
or achievement .
Relative
figures are ratios between two absolute figures of the same or
different kind. Ratios allow comparisons of similar products or processes . They also help relate the performance and achievements of
one firm, business unit , or organisation to those of another. Ratio indicators provide information on the efficiency of an activity, on
the intensity of an impact, or on the quality of a value or
achievement.
Need
for Reporting Absolute Figures
Absolute
figures provide information about the magnitude of the reporting
organisation’s contribution to an overall effect . They are essential to any assessment of carrying capacity, ceiling, or limits —a core principle of sustainability. For example, the total
amount of phosphorous (in tones) released to a river by a particular operation enables users to consider these releases relative to the
river’s carrying capacity (the total amount of phosphorous the
river could carry without showing a certain effect, such as eutrophication ).
In sum, absolute figures on economic, environmental, and social
issues enable data users to:
- consistently track data;
- sum various releases into a total impact; and
- form additional ratios other than those already reported.
Need
for Reporting Ratios
Ratio
indicators serve to:
- relate two aspects to each other;
- make relationships visible and interpretable; and
- enable comparison of different scales of operation relative to a specific activity.
Ratios
help illuminate linkages across the economic, environmental, and
social dimensions of sustainable development. Ratios also can be
particularly useful for comparing two organisations of different
scales. Organisations should form ratios with their performance data
that make sense for their business and support their decision-making.
They should select ratios for external reporting that allow better communication of their performance to their stakeholders, and will
help inform stakeholders’ decisions .
Types
of Ratio Indicators and Their Application
Productivity/efficiency
- ratios relate value to impacts. Increasing ratios reflect
improvements in the amount of value received per unit of impact.
Examples of
productivity/efficiency ratios include:
- labour productivity;
- resource productivity;
- process eco-efficiency;
- functional eco-efficiency of products or services; and
- financial efficiency ratios.
Intensity
Ratios - Intensity ratios express an impact per unit of activity
or unit of value. A declining intensity ratio reflects performance
improvement.
Examples of
intensity ratios include:
Percentages
- Organisations regularly use ratios expressed in percentage terms. A
percentage indicator is a ratio between two like issues, with the
same physical unit in the numerator and denominator.
Examples of
percentages that can be meaningful for use in performance reports
include:
- input/output ratios;
- losses ;
- recycling percentages ;
- fractions;
- quotas; and
- financial performance ratios.
SUMMARY
In Estonia many company’s are joining with ISO
9000 and ISO 14 000. ISO 9000 is a quality performance reporting
and ISO 14 000 is environmental performance reporting. New
programm is Responsible Care, wich is a program adopted by the ICCTA
(International Council of Chemical Trade
Associations) intended to constantly improve health, safety and
environmental issues on a company level. The system
can also be
used as a tool when building up quality systems under ISO 9000 or ISO
14000. Responsible Care is certified by independent auditors. The
joining is voluntary and needs some extra work, because in each
company has to be one employee , who deals with this auditing. Quality
Management System is needful for improving the system, where the main
purpose is to increase customer satisfaction.
The true
value of a company is not always contained in its financial report.
Significant market value derives from intangible assets such as
reputation, capacity to innovate, and commitment to social
well-being. Preparing a sustainability report based on the GRI
Guidelines will help to identify various components of a company’s
value that are not always apparent when simply assessing its
financial performance.
While
sustainability information is typically treated separately, ample
opportunity exists to translate it into a form that speaks to the
needs of financial analysts. As the business case for sustainable
practices becomes increasingly clear , sustainability reporting offers real value to those whose business is to assess the current financial
health of companies and anticipate future performance. At present,
the content of sustainability reports tends to appear in forms and
units that are not readily convertible into financial terms. But
rapid advances in areas such as environmental management accounting,
valuation of intangible assets, and value reporting promise to make
sustainability information useful to the financial community.
With
mounting pressures to strengthen corporate accountability in all its
dimensions, the cross -over and convergence of sustainability and
financial reporting looks increasingly evident and likely. Full
integration in the form of single reports that depict performance
along all dimensions—conventional financial, economic,
environmental, and social—is already practised by a handful of
leading companies. The combination of better analytical methods and
rising stakeholder demands for richer disclosure is likely to
continue this movement toward a new generation of one-stop
performance reporting.
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