This is the fourth and final installment of a series covering crucial sustainability reporting issues on materiality, sustainability context, comparability and stakeholder inclusiveness.
Stakeholder Inclusiveness is one of the four core principles in the GRI G4 Guidelines that help to define report content that is material to the reporting organization and its stakeholders. Since GRI introduced the logic flow of how and when to use these four principles in the reporting process (first done in a Technical Protocol in 2011 and then only slightly amended for G4) it became clear that Stakeholder Inclusiveness means an ongoing and unstoppable process — in parallel and supporting the use of the other three report content principles. Clearly, stakeholder dialogue would not be useful for only creating an organization’s sustainability report.
And here lies the problem: That's exactly what is done in many reporting organizations. This is due to various reasons:
- There are other existing feedback instruments such as customer or employee satisfaction surveys. Sustainability seldomly gets included there; these survey services are often offered by external third parties and the sample of topics can’t be changed. Getting varying sustainability issues feedback through those surveys is difficult and the internal owners of these instruments are hard to convince that they should be changing or adding to what is “theirs” and already “cast in stone.”
- New product or service testing is mainly done when prototypes are out for market trials. Before that R&D is still mainly working behind closed doors; sustainability aspects are — if existing — mainly built in through regulation, internal design standards or specifications and potential customer reactions are only gathered when testing starts. Crowdsourcing is still in its infancy for many of those organizations that have built R&D fortresses, and it’s hard to conquer the walls of overestimation of one’s capabilities — the billions of dollars invested in know-how, brains and internal think tanks weren’t in vain, were they?
- Investor relations still don’t take sustainability into their analyst briefings and bulletins, and why should they? Nobody’s asking! These colleagues have to entertain a very specific stakeholder group, engrained in their own mental stereotypes of how markets function and reward. Dozens of sustainability indicators? Well, spare me the white noise — give me one or two!
- Top management wants information rather quickly: If somebody is asking difficult questions in an interview (the questions are mostly precooked) or if top management needs input for a speech, turnover time to serve with answers is often less than 48 hours, so better have handy all necessary data and sound bytes in or through the sustainability team.
- Finally, we hear so often that sustainability team members need to be careful, need to create step-by-step approaches, need to draw a fine line, need to be politically correct, need to know “the game” or “how it works” inside the company — risk-averse approaches are the consequence. Being one of the most important internal strategy or board advisors — a role we would wish for the sustainability department to have – is much different. Go ask some companies how often the head of sustainability meets the board or the head of strategy! Prepare yourself for some disturbing answers.
One consequence of these rather unsatisfying conditions is that a stakeholder dialogue process is often done just through the sustainability department and — even more disturbing — only for that one report. That again is input for some of the known rankings and ratings. Many sustainability department staff know the routine as they are both inviting and invited (to other company’s dialogue processes): annual data is collected through existing niche software (or through some ERP system modules) or certain identified colleagues (issue owners) get an Excel sheet into which they have to add data they are responsible for. Thank you, and until next year! Parallel to that, a questionnaire is sent out to identified external stakeholders (often also from other companies), and of course the other usual suspects, including some internal stakeholders. After a maximum 30 percent feedback rate, some statistics are pulled together. Usually, these are presented in one or several roundtables, sometimes in various countries (in the case of multinationals). Together with additional weighing factors, a materiality matrix is then drawn up. Programs are set in motion to decrease the most negative impacts, and there goes your report and the shoulder-clapping.
We expect that this sort of stakeholder dialogue process will be dead in about 2-3 years. There are many indications for that:
- Can this process convince you to support and carry out reliable stakeholder input to really find out what the material issues are? In our view, it can show tendencies or possibly trends, but would you truly tell your top management that this is a proper assessment of reality? As the availability of software and data is less and less of a threshold, one can demand a different quality and amount of data involved.
- Hardly any sustainability department has organized Stakeholder Inclusiveness in a way that it is an ongoing process. There is anecdotal evidence at certain moments during the year and some have tried out standing stakeholder expert committees or panels to bridge that gap, but will that be seen as enough? Members of these committees are changing over time, so how stable is that interim solution?
- Most corporate representatives are frustrated: Having received many invitations to such rounds of questionnaires and roundtables from other companies, there is little excitement to go there more than once. Seen it, done it, had it, too little benefit to be involved. It also dawns on them that their own process will most likely face the same problem.
- NGO representatives already face an “overflow error” syndrome. Think about the roughly 6,000 calls that Greenpeace will receive in 1-2 years based on the EU’s new Corporate Reporting Directive. No way! Same with most other NGOs, apart from the fact that they also already face the same frustration as mentioned above. Too little do they know what happened to their input and how far it will lead to any transformation.
What will be the alternatives? Sure, there’s one big vision already on the horizon: the possibilities of Big Data for stakeholder involvement. In the coming years, new data and information-based technologies will contribute to the development of new ways to collect, analyze and visualize bigger and so far unconnected sustainability data. Smart cities, infrastructure, sensors, the Internet of Things, portable and cognitive technologies, as well as new business models around Big Data will contribute to this development. Additionally, new interfaces between earth system science, satellite-based data and personalized technologies will emerge. IBM’s Watson and Smarter Planet are early examples of how enterprises prepare themselves for these changes. A bridge too far for the moment for most of us, we would say.
But there are also intermediate solutions available now. It all begins with a change of mindset. As already mentioned, we can be sure that stakeholders will more and more unsubscribe from the current approaches, simply because that sort of stakeholder ‘dialogue’ is not fulfilling. In combination with a) the growing data availability and b) a further integration into corporate strategy development, stakeholder dialogue needs to be replaced with “stakeholder collaboration.” That in our view is only possible if the different parts of the organization, those that are not yet connected (or willing to connect, see above), will tune in. Here’s how:
- Employee and customer satisfaction insight need more than questionnaires with some extra questions on sustainability. We need offers to contribute instant feedback, ideas, openings to focused discussion forums. It is clear that stakeholders want quick feedback, want to know what happened to their input, and how it was used to support change. That data can very well be used to indicate material sustainability issues.
- Crowdsourcing and crowdfunding are important, yet underestimated feedback instruments, not just to develop products & services, they are also indicators for the reputation of the organization on many fronts, the willingness to co-create and rethink by stakeholders, and the buy-in for potential new products and/or services developed and used by stakeholders. Best new recruits could stem from those sources.
- Investors need new and aggregated data that can quickly show the “ThriveAbility” of a company, both for investment decisions and for their own reputational buffer. The ThriveAbility Foundation has started the development of an aggregate ThriveAbility Index as well as a ThriveAbility Assessment (designed to check organizational capabilities to being thrival) and ThriveAbility Pathways (a tool to assess leadership capabilities for becoming thrival). Thrival in short means the ability to instigate a net positive value creation process, the future precondition to have a right to grow and to get fresh capital.
- Top management can get information instantly if new software tools such as VERSO Workbook are used — to our knowledge the first holistic plan-do-check-act support tool that covers data aggregation, workflow management, facilitated discussion on issue-specific communities, communication and publication of sustainability information as well as coverage and use of all mainstream social media tools for stakeholder involvement. Wouldn’t your top management enjoy having access and all relevant information just 2-3 clicks away?
- Sustainability departments can strengthen their role and need to be embedded in corporate strategy. The development of new qualities of materiality matrixes will be a growing field, but needs to be done differently. Virtual dialogue and online engagement platforms will increasingly fill this need, given the cost and carbon-intensity of in-person engagement, the scheduling nightmare of multi-party conference calls and webinars, and the inefficiency and isolation of individualized outreach to stakeholders. Convetit, the online stakeholder engagement platform co-founded by Bill Baue and Tom O’Malley, helps solve these problems by hosting asynchronous online dialogues. Most recently, Convetit introduced an interactive Materiality Matrix tool that enables stakeholders to plot the importance of material issues on a matrix that the platform then aggregates and averages to paint a collective picture of stakeholder sentiment.
Other new tools using Big Data approaches will be arriving on the market soon and will have promising propositions: Take e.g. the startup eRevalue, which analyzes external sources from the Internet and provides business intelligence to companies. Through objective output analysis — screening sources that were published by third parties — companies can make an informed decision as to what issues to focus on. This depends per sector, per region, per operational structure, supplier locations etc. Their software will help determine which sustainability issues are most relevant to a particular business. It uses a set of key topics (“semantic ontology”) related to environmental issues, social issues and corporate governance. This set of key topics creates a common language for companies to use for strategic decision-making.
It is time to get real on the new realities stakeholder collaboration demands. The earlier the new possibilities are used, the quicker we will see results. The technology is there, it will be polished, fine-tuned and upgraded by the growing amount of users. Together with the Big Data developments that are on the horizon, old-fashioned stakeholder dialogue for sustainability reports as we knew it will be history.
To get to know all of these players and more, don’t miss the Reporting 3.0 conference in Berlin, October 6-7.
Transparency disclaimer: Ralph Thurm is involved in VERSO and in that role has contact with a whole array of new tools for stakeholder collaboration. He is also curating the Reporting 3.0 Platform and is a Co-Founder and Technical Director of the ThriveAbility Foundation.