New Metrics
Mark McElroy on What's Wrong with Sustainability Reporting

While it's great to see so many companies embracing sustainability reporting, most aren't giving us the whole picture, says Mark McElroy, founder of the Center for Sustainable Organizations (CSO). Mark is no armchair critic, however. CSO has spent the past three years developing a new reporting standard called the Social Footprint, currently being piloted by such forward-thinking companies as Ben & Jerry's. In this SLM interview, Mark discusses the philosophy behind the framework and explains why the Global Reporting Initiative doesn't go far enough.

SLM: Mark, how did you first become involved with sustainability reporting?

Mark: I became very interested in the idea of triple bottom line (TBL) reporting in the late 1990s, when the concept was first introduced by John Elkington in the U.K. It seemed that many businesses and in fact whole industries were (and are) operating in an unsustainable way, but I began to wonder, "How do we know these businesses are unsustainable?" "Do we even have the kind of rigorous methods necessary to measure companies' sustainability performance?" I found that the answer to that question was - and still is - no. While the concept of TBL reporting was very appealing, there seemed to be a major methodology gap that was (and still is) preventing business from actually measuring sustainability performance.

SLM: What about the Global Reporting Initiative? Companies seem to have rallied around that standard in recent years.

Mark: The Global Reporting Initiative is a good example of a solution that takes a step in the right direction but doesn't go far enough. It's really a "triple top line" framework because it requires companies to report top-line impacts only, without measuring their performance against real conditions in the real world. For example, a company might report how much fresh water it uses each year and compare that level of usage from one year to the next as a way of assessing sustainability. But those numbers fail to take into account the fact that global fresh water supplies are shrinking each year.

The fact is, even if a company's consumption of natural resources is declining from one year to the next, their actual sustainability performance could in theory be worsening, not improving. You need to measure use of natural resources against their availability to get an accurate picture. The same kind of thinking applies to social and economic performance.GRI actually recommends that companies provide context for their sustainability reporting, but the standard doesn't require it. As a result, most of what passes for mainstream sustainability reporting is context-free - I've never seen sustainability context included in a GRI report. These reports therefore fail to do precisely the thing they purport to do, which is to make it possible for people to understand and draw conclusions about a company's sustainability performance.

At the Center for Sustainable Innovation, we're trying to put context back into sustainability reporting where it belongs - and without which there can be no truly meaningful sustainability reporting.

SLM: So how do you provide guidelines for providing context? A lot of these environmental issues - for example, the availability of fresh water - are a matter of some debate.

Mark: If debatability were legitimate grounds for not including a particular piece of data in a report, there could be no corporate reporting at all. The quality of the data is always an issue. As a reporter, you simply have to begin at the beginning: Familiarize yourself with the issues, do some research, try to identify the data that will establish context, and do the best you can. If the alternative is to report on sustainability without any context at all then I think we're wasting our time.

SLM: Aren't some companies concerned that "doing the best they can" won't be enough to head off criticism from environmental activists and watchdog groups?

Mark: Be prepared to defend the contextual choices you make, but remember that there's nothing wrong with being open to debate. The corporate position should be: "At least we made the effort - we deserve some credit for that. If people want to challenge the accuracy or the relevance of the context that we have provided, then let's have that conversation. If there's a better way to contextualize this particular indicator, we'll incorporate it next time around.

"Of course, if a company cherry-picks contextual factors to present their numbers in the best light, then they're really exposing themselves to legitimate criticism. If you choose to game the system, be prepared for the consequences. (My advice? Just don't do it.)

SLM: Why do you suppose GRI hasn't offered guidelines on providing sustainability context?

Mark: Well, I can tell you firsthand that it's a relatively difficult thing to do. Over the past three years the Center for Sustainable Organizations has focused primarily on developing a corporate sustainability measurement and reporting structure called the Social Footprint, which aims to provide context for all three bottom lines - social, environmental, and financial. We've just now completed phase one of the project, in which we piloted the Social Footprint with companies such as Ben & Jerry's and Cabot Creamery.

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