The Sustainable Company and
Sustainability Reporting
Sigurt Vitols
EWPCC WORKSHOP ON ‘FINANCIAL
ANALYSIS AND SUSTAINABILITY’ –
HAMBURG, 26 – 28 OCTOBER 2011
Agenda for this session
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What is sustainability?
What is the sustainable company?
What is sustainability reporting?
What does sustainability reporting mean for workers?
What is your definition of:
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Sustainability
● Durabilité
● Nachhaltigkeit
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Corporate Social
Responsibility
● Responsabilité sociale
des entreprises (RSE)
● Soziale Verantwortung
der Unternehmen
(CSR)
Corporate Social Responsibility
CSR: One Definition
The EU definition of CSR is:
A concept whereby companies integrate social and
environmental concerns in their business operations and in
their interaction with their stakeholders on a voluntary
basis.
-- Commission Green Paper 2001 “Promoting a European Framework
for Corporate Social Responsibility”
A new definition of CSR:
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“The responsibility of enterprises for their impacts on
society”
Respect for applicable legislation, and for collective
agreements between social partners, is a prerequisite for
meeting that responsibility.
To fully meet their corporate social responsibility,
enterprises should have in place a process to integrate
social, environmental, ethical, human rights and consumer
concerns into their business operations and core strategy
in close collaboration with their stakeholders
-- European Commission Communication, 25.10.2011
Sustainability
Sustainability – One Definition
"Sustainable development is
development that meets the needs of
the present without compromising the
ability of future generations to meet
their own needs".
-- UN Brutland Commission, 1983
Dimensions of sustainability: one definition
● Economic
Performance
● Environment
● Human Rights
● Labour practices and decent work
● Society
● Product Responsibility
-- Categories used by Global Reporting Initiative (G3 guidlines)
Battle of the models of corporate governance?
Postwar
stakeholder
model
1950
1960
1970
Shareholder
value
model
The
Sustainable
Company??
1980 1990 2000 2010 2020 2030
Triple crisis of shareholder value capitalism
25
23
Excluding capital gains
Including capital gains
21
19
17
15
13
11
9
7
1915
1925
1935
1945
1955
1965
1975
1985
Share of top 1% in US national income
1995
2005
Shareholder value capitalism: your opinion
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Does it work?
● Do we want an alternative?
● What would an alternative look like?
Our opinion
Shareholder Value Model of CG
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Core assumption: Share price best measure of company
value
Three main elements:
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Competitive market for investors
Top managers‘ pay tied to share price
Gatekeepers: auditors, regulators, independent directors
What does Share Price Measure?
Failures of Shareholder Value
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Weak correlation between share price and company
performance
● Externalities – share price doesn‘t measure social costs
● Sacrifice LT investment for ST performance
● Incentives for fraud by managers
● Conflict of interest of gatekeepers
Elements of the Sustainable Company
Stakeholder value
Sustainability
goals and
strategy
Stakeholder
voice
The
Sustainable
Company
Long term
responsible
investors
Disclosure of
social and
environmental
performance
Remuneration
oriented to
sustainability
The Way Forward: Key Challenges
● Binding
legislation
● Sustainability-friendly capital
markets
● Extending the role of trade unions
Many Initiatives on Sustainability and CSR
Allianz SE: International sustainability commitments
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Transparency International
● UN Global Compact
● UN Principles for Responsible Investment
● UN Environment Program: Finance Initiative (UNEP FI)
● World Business Council for Sustainable Development
(WBCSD)
● Carbon Disclosure Project (CDP)
● WWF
● EU Corporate Leaders' Group on Climate Change (EU
CLG)
Sustainability reporting: main types
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External: published reports
Internal: worker information rights
Private: rating agencies + index providers
Global Reporting Initiative
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Nearly 3,000 participants in about 70 countries
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Stakeholder involvement in governance
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Current consultation on new (G4) reporting guidelines
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Core Goals: Mainstreaming of disclosure on
environmental, social and governance performance
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Categories of Performance Indicators
● Economic Performance
● Environment
● Human Rights
● Labour practices and decent work
● Society
● Product Responsibility
Participation Rate: Europe vs. rest of world
GRI core indicators for labour practices and decent work
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LA1 Total workforce by employment type, employment contract, and region, broken
down by gender
LA2 Total number and rate of new employee hires and employee turnover by age group,
gender, and region.
LA4 Percentage of employees covered by collective bargaining agreements.
LA5 Minimum notice period(s) regarding operational changes, including whether it is
specified in collective agreements.
LA7 Rates of injury, occupational diseases, lost days, and absenteeism, and number of
work related fatalities by region and by gender.
LA8 Education, training, counseling, prevention, and risk-control programs in place to
assist workforce members, their families, or community members regarding serious
diseases.
LA10 Average hours of training per year per employee by gender, and by employee
category.
LA13 Composition of governance bodies and breakdown of employees per employee
category according to gender, age group, minority group membership, and other
indicators of diversity.
LA14 Ratio of basic salary and renumeration of women to men by employee category,
by significant locations of operation.
LA15 Return to work and retention rates after parental leave, by gender.
Volkswagen: social partnership in sustainability reporting
Important questions
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What kind of information do workers want?
How can they use this information?
Do they want to be involved in developing reporting
systems?
How aware are workers of current rights and reporting
practices?
Best strategy for improving rights and practices (internal
versus external reporting)?
THANK YOU FOR YOUR ATTENTION!!!!!!!!!!!!!!!!!