© Imperial College London 2013
Efficacy of Corporate Sustainability
Reporting and Strategies
Nikzad Oraee-Mirzamani LLB, MSc, DIC
Babak Tadayyon Tahmasebi BSc, MSc
Behdeen Oraee-Mirzamani BEng, MSc
Zen A Makuch BA, MSc, LLM, LSUC, JD
Global Sustainability Institute Conference
15 May 2013
Importance of Reporting
• Research to show that the inherent loopholes of two sustainability
frameworks allow “greenwashing” to replace real sustainability measures
• Business Sustainability: generate economic profits in light of everincreasing environmental and resource constraints, in order to continue
business in the long term (based on UN definition of Sustainable Development)
• Transparency is one of the main aspects of business sustainability
• Sustainability Reporting is important due to the way in which stakeholders
rely on information from companies
• Stakeholders: Institutional shareholders and immediate community
• Chosen two frameworks: GRI and RepRisk
• Both aim to shed light on sustainability agendas, but conflicting results
• Sustainability agenda of two firms examined in relation to GRI and RepRisk
© Imperial College London 2013
Rio Tinto Plc.
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Mining company, with international scale of operations
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71,000 employees and Total Assets of $23.7 billion, B2B type of company
•
Due to size of operations, has huge implications on stakeholders:
• Positive:
• Advancement of technology
• R&D investment of $120 million in 2012
• Total of $100 million in carbon reduction technologies
• Negative:
• Labour rights breaches (bad working conditions)
• Human rights abuses (rights of indigenous people)
• Environmental contamination (pollution of air, water and soil, and biodiversity)
•
Subject to vast array of criticism from environmental and rights NGOs
•
Lack of consideration for environmental constraints led to adverse social
and economic implications in Mozambique, $3 billion Assets write-off
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Veolia Environnement
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Environmental Services company, international scale of operations
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331,000 employees, Total Assets of $44.6 billion, B2B type of company
•
Due to size of operations, has huge implications on stakeholders:
• Positive:
• Advancement of technology; R&D investment of $104 million in 2012
• Ground-breaking technologies and processes
• New formulae for direct and indirect carbon and water footprinting
• Technologies often sold to other businesses, multiplier effect in benefits
• Negative:
• Human rights abuses (rights of indigenous people)
• Few environmental concerns
•
Little publicity of Veolia. But negative publicity on activities for Israel
•
Overall, Veolia’s main concern going forward is to cultivate relationship
with key stakeholders based on improved environmental services
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Global Reporting Initiative – GRI
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GRI is the leading global reporting standard, observed by just under
14,000 institutions
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Based on Triple Bottom Line theory: Environmental, Social, Economic and
Governance issues
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Adoption of GRI and extent of disclosure are completely voluntary
•
GRI has Application Level grades: Rio Tinto: A+ (highest), Veolia: B+
• Face value: Veolia should have A+ and Rio Tinto B+
•
Grades simply based on extent of GRI application, not the extent of
disclosure or content disclosed
•
GRI grades are deceptive
•
Voluntary nature leaves reports susceptible to greenwashing
•
Does not indicate effects of business on environment, because the firm
decides what to disclose
© Imperial College London 2013
RepRisk
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Private organisation, objective to quantify reputational risk from
environmental, social and governance issues (mostly private corporations)
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Gathers daily information related to around 35,000 institutions
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Data is codified, fed into algorithm, and quantified. Accumulate numbers,
produce Index to show risk level, and compared to industry standards
•
Rio Tinto’s risk index is 51 (high), Veolia’s is 20 (low)
• Veolia Transport, most contentious division of Veolia has RepRisk Index of 16
•
Completely opposite outlook of firms than what is shown by GRI
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Potentially open to bias – partially mitigated by monitoring
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Reputational damage only, and based on past/current activity
•
Should reflect risk posed to business subsequent to environmental change
and market conditions for added reliability
© Imperial College London 2013
Thank You!
© Imperial College London 2013