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Sustainability-Driven Innovation


Mining Unstructured CSRs


Understanding the Wide Open Landscape

In our earlier discussion of mining GRI-compliant CSRs to frame potential opportunities, we found the GRI framework provides some structure to how an organization reports their sustainability aspects and indicators, but is by no means a rigid set of definitions. Think of GRI as a set of guardrails for an organization, keeping it within some roughly defined boundaries. By comparison, we will see 10-K filings as a set of rails, allowing very little deviation by comparison.

Keeping those metaphors in mind, we could consider the unstructured CSRs as a wide open field. There are no rules, there are no criteria or standards to abide by, allowing organizations to refer to anything from a single page of PR to a full report as a "CSR." Understandably, this leads to a significant variance in data presented and how it is stated. So, our methods of analysis must flex accordingly to allow us to glean as much insight as possible within a given field of CSRs.

Of note in our discussion of structured (GRI, etc.) and unstructured CSRs: There is perhaps a misconception that GRI-compliant reports are superior in content and transparency to non-structured reports. This is not necessarily true for a few reasons:

  • Application levels vary significantly. GRI has six-letter grade Application Levels for filings, ranging from C to A+. Especially at the lower, non-audited levels of filing, the aspects an organization is required to report on can be a bit of a low bar to meet. Furthermore, only A and A+ require an organization to report on all aspects, meaning they could conceivably ignore swaths of topics and indicators and still be considered GRI-compliant.
  • GRI is not prescriptive. If there is a common misconception about many of the leading standards in sustainability, it is that they are prescriptive and in some way evaluate the quality of an organization's efforts. This is not true. GRI and ISO 14001 are reporting standards, requiring disclosure of philosophies, processes, and measurements (GRI), or processes, decisions made, and documentation (ISO). You may conclude that organizations making the effort to file a high-level GRI application do indeed have robust sustainability programs, but we will see this is not necessarily always the case.
  • Transparency is not mandated. Even if an organization does file a high level GRI report, this still does not necessarily mean they have disclosed everything in a full and transparent manner. Like a good lawyer, they may simply use the interpretations of GRI aspects in such a way to be of maximum benefit to the organization, and not necessarily provide full disclosure.
  • Organization size is a factor. There is some level of stratification of organization size in regard to filing standard selection. Many of the large, multinational corporations file with GRI because they are highly advanced and already reporting much of the information to shareholders. Mid-cap organizations are a mix of lower-level GRI, B Corp, and unstructured. Small-cap and non-profits tend toward B Corp and unstructured.

We have seen the level of Patagonia's sustainability work in prior lessons, and they not only do not file a GRI-compliant CSR, they don't file a CSR at all. They have addressed their rationale in response to the question, "Does Patagonia publish a Corporate Social Responsibility (CSR) report or social audit?" [Emphasis is mine]:

Patagonia as yet has not published a CSR or Sustainability Report that follows the guidelines of the Global Reporting Initiative (GRI) or other framework used by other companies.

We are committed to co-responsibility for decent treatment of workers throughout the supply chain. We publish our factory list online. You can access social audit report results for factories that make Patagonia clothes through the Fair Labor Association (FLA) website (we are an accredited member of FLA; they randomly audit a sampling of our factories every year). Our newly redesigned Footprint Chronicles site also includes social audit results from our supply chain.

To report on environmental responsibility, the Footprint Chronicles looks at some of the environmental impacts in our supply chain. The Footprint Chronicles allows us to talk about critical social and environmental stories with all our stakeholders – customers, the press, suppliers, employees and students – in unspecialized, everyday language. We give priority to the issues that challenge us the most – or that our stakeholders regard as a challenge and ask us to address. We highlight failures and ongoing challenges as well as incremental successes.

We inform our customers and the public on our progress in social and environmental responsibility in other ways too – in the Corporate Responsibility section of The Footprint Chronicles, in our annual Environmental Initiatives booklet, in the Environmentalism section of our website, and on our blog, "The Cleanest Line." We feel these are exciting, interesting, interactive and transparent methods to show our commitment to human rights, environmentalism and ethics.

In early 2012, we became the first company in California to become a Benefit Corporation (B-Corp) with the State of California. This certification process requires annual reporting.

The advantage to the reader/user of sustainability reports that follow the GRI framework is the ability to easily compare data from different companies. The disadvantage: a sustainability report, like an annual report, can be a dull read held forth in specialized language that clouds as much as it reveals. Because we recognize the advantages of easy comparability, we are investigating the possibility of importing data we collect for the Footprint Chronicles into a GRI framework (and with as much plain speaking as possible). Sustainability reports can be expensive for a company of our relatively small size to research and produce and can only supplement, not substitute, for the Footprint Chronicles. We want to continually raise rather than lower the quality of the conversation we've created with our stakeholders over the past years.

Patagonia's sustainability reputation is well known, but many other organizations filing unstructured CSRs may not be as well known. Unfortunately, for some organizations lower in supply chains, its customers may require GRI reporting simply because it is well known and these customers do not have the resources to deeply understand an unstructured CSR. So they require what is standardized and accessible.

Philosophies for Finding Opportunity in Unstructured CSRs

While the examination of GRI-compliant CSRs may feel more like forensic accounting or auditing, finding opportunity in unstructured CSRs tends to have a less methodical, more aggressive approach. I would describe it as almost a feeling of legal discovery or journalism, as it is far less process-driven and more about considering overarching storylines and finding leads. We all have our own approaches and preferred tactics, but I will say this: When dealing with unstructured CSRs, it can be useful to stay loose and step back from the CSR often to consider the larger story and strategy. Because there are fewer clear points of comparison, unstructured CSRs can have a tendency to lead you where they want to go.

You may find that adaptations of the GRI analyses covered earlier can certainly be adapted and applied to the research of unstructured CSRs, but here are a few philosophies to consider:

  • What information surrounds the CSR? In our search to unearth strategies in the CSR, it can be useful to compile non-CSR information from the same period, anything from press releases to LinkedIn posts to interviews. We want to understand where an organization is moving strategically, how sustainability fits, and our opportunity.
  • What is the organization's context? If a local dairy created a 10-page unstructured CSR, it would be both rare and commendable... if Ben & Jerry's did the same, it would be both out of character and highly questionable. Because the breadth of circumstances and complexities is so wide with unstructured CSRs, we must always be conscious of context. For example, if we are an organization attempting to strengthen a strategic relationship with a customer based on its sustainability goals, we must consider that a smaller company may not have the resources to share all of its sustainability goals in a CSR, let alone pursue them all at once. If we seek to strengthen our relationship with PepsiCo, there is probably a high probability that staying within the stated goals of their CSR will serve us well, as those goals have likely been through rounds of refinement and expertise.
  • What are they proud of? This may sound a bit odd, but where does the company seem to get a little twinkle in their collective eyes? What do they seem especially proud of? Do they have a pet project or product line? In engaged organizations taking on innovative projects, it can be hard for them to suppress their own excitement, especially in interviews and PR. This is also true for sustainability reports. Where do they tell the most stories and put the most effort?
  • What might they not be talking about? Are there omissions from the discussion that would otherwise seem obvious? Are there areas which you might expect to warrant considerable attention in the CSR which seem to be glossed over? There may be something more to the story. If an automotive manufacturer issues a 120-page CSR and there are two sentences on fleet fuel mileage, chances are something is off.
  • Are there embarrassments? Are there areas where the organization has come under scrutiny from customers, mass media, social media, or NGOs? Did they address it in the CSR, and if they did, how did they address it? There are some fairly inspiring examples out there of organizations taking embarrassments head-on in CSRs, and there are also some which completely ignore anything negative. We can learn from both.
  • How do they compare to peers? Because two peers may have significantly different levels of unstructured filings, we need to take a more holistic view. Does the company's level of strategy and intent in sustainability generally match, trail, or exceed other initiatives in the organization? Are they a young program showing great promise and innovation in what they are able to do, or are they generally floundering? When examining drastically different peers, we need to find some way to normalize to gain a better view.
  • Where are the over- and understatements? Is the report loaded with overstatements and greenwashing, or does the filing have a certain feeling of "duck feet"... that is, a serene and somewhat understated public appearance with furious effort not visible to the casual observer? The companies that tend to have that duck-like appearance may have far larger strategies and plans in the works, while those overstating tend to have far less happening beneath the surface. (If you are curious about where the 'duck foot metaphor' comes from, here is an example of the source material.)

As we begin to be able to critically analyze both GRI-compliant and unstructured CSRs, we will be able to understand not only the spaces in which we wish to innovate, but also the strategies and tactics that true innovators undertake to find opportunity to grow sustainability as a core business imperative. Much as in our earlier example of Van Gogh's color theory, our goal is to be able to deconstruct the work of others so we may be able to find our own philosophies and construct our own ideas. Being able to deconstruct sustainability filings will be a centerpiece of this effort.

Five word summary - Finding opportunity in unstructured filings