Energy Management

Industry benefits from CSR and sustainability reporting

Sharing priorities and progress inspires business and environmental initiatives.

By Sheila Kennedy, Contributing Editor

The values of corporate social responsibility (CSR) and sustainability are becoming ingrained in how companies operate, even when they are not actively pursued. Leading manufacturers and utilities are not only embracing these concepts, but publicly sharing their successes, failures, and goals in annual sustainability reports.

Managing CSR processes and benchmarking sustainability data allows companies to document their stewardship and performance progress, improve operational efficiency and profitability, and comply with voluntary guidance standards such as ISO 26000 and the Global Reporting Initiative (GRI) framework. Advancements in analytics and the Internet of Things (IoT) are improving reporting ease and opportunities.

General Motors and Exelon are among the companies that have implemented data collection and management systems to help them communicate their CSR and sustainability progress. Because they so strongly believe in the business, environmental, and societal benefits, they are eager to share their goals, approaches, and recommendations with those embarking on this path.

Reporting objectives

“GM’s sustainability strategy is about creating long-term value for the company and for the communities in which it operates. That is the framework for everything we do. There are exciting, measurable benefits on both the environmental and business side that we see from telling this story, and being authentic and transparent in how we tell it,” says Jasper Jung, sustainability manager at General Motors Company (GM).

“Our annual sustainability report and disclosure efforts help us to build relationships and trust around our work in the communities where we operate. We see that reflected not only in goodwill and in terms of strengthening our corporate reputation, but we also see that directly translated into business benefits in terms of attracting new customers, increasing sales, and increasing trust in our brand,” he explains.

“At a foundational level, reporting on Exelon’s sustainability initiatives allows the company to comprehensively tell its own story about its sustainability priorities and progress,” says Bruce Alexander, senior manager of strategic environmental analysis at Exelon Corporation.

“Among other things, our report helps to address our customer, community, shareholder, and current and prospective employee’s interest in Exelon’s approach to sustainability. It is also used to communicate on issues related to sustainability with elected and appointed government officials and other policymakers,” he explains.

{pb}

Recognizing the full audience scope and addressing their concerns is essential to reporting success. “Your stakeholders are not just your stockholders but also your neighbors, who in many cases are downstream of your effluent, as well as various government and non-governmental organizations (NGOs),” says Bill Leedale, Senior Advisor at IFS.

“A company’s biggest challenge is finding out what its stakeholders care about. This requires inviting both internal and external stakeholders to participate in defining what you will report – not just your friends, but all levels of employees and even NGOs that may not like your company very much. In many cases, it is these individuals who will help make your reporting useful and relevant,” explains Leedale. “Organizations that have been most successful with their CSR initiatives all have various levels of internal and external participants; think of firms like Nissan, IKEA, Unilever, and Diageo.”

Benefits of transparency

“Benchmarking performance is one of the fundamental ways that Exelon identifies top-level performance and drives towards that level in our operations,” says Alexander. “Exelon identifies what the top quartile or top decile performance levels are, and we then set goals to achieve or exceed them. For example, we use the Edison Electric Institute (EEI) as our cohort for benchmarking safety performance. In 2014, Exelon achieved its best-ever performance and surpassed the EEI top-decile, corporate-wide performance for OSHA Recordable Incident Rate and Days Away, Restricted, or Transfer (DART) Rate.”

Benchmarking also informs Exelon’s strategic view on relevant issues. “We annually conduct a stakeholder review of our performance and strategic approach to material sustainability issues, and use the feedback to refine our responses and plans,” explains Alexander.

“One of the things GM is committed to as a company is to support and strengthen the communities where we live and work. Our environmental sustainability efforts are a big part of that, and our employees are at the core of making that positive impact on the community a reality,” says Jung. “You see employees inspired every day by having the opportunity to work for a company that shares their environmental and social values, and that’s what we want to reflect through our sustainability reporting efforts internally. It also helps to attract the next generation of talent. We see this as a competitive advantage.”

GM’s waste management effort is a prime example of an achievable business benefit. “We have 122 landfill-free facilities worldwide, and that’s not possible unless you share your best practices both internally and externally like we did,” says Jung. “There are all kinds of challenges associated with eliminating waste streams and diverting waste from landfills, and you can’t just keep that information siloed in a particular site. You have to share it.

“Setting up the data collection and management systems to where you can share those best practices will, in turn, lead into better environmental performance, reduced operating costs, and even an opportunity to generate revenue. I think on average we generate close to $1 billion every year as a result of our waste reduction and recycling efforts alone,” remarks Jung.

“More than 10,000 points of data are gathered every month just in regard to all of our waste streams,” adds Sharon Basel, communications manager for environment, energy, and sustainability at GM. “Every waste stream and every bit of waste in our operation globally is reported through our system. That enables us to identify best practices and unique initiatives in one facility, such as a U.S. transmission plant, and pretty quickly establish the same types of initiatives at other transmission facilities around the world because we operate on a global manufacturing system. It enables us to scale for greater impact and greater reductions overall.”

GM’s energy efficiency initiatives are also producing substantial financial benefits, not only from global operating cost reductions, but also from reducing the company’s carbon footprint.

“Benchmarking may help in determining strategies and policies. However, your corporate governance has much more do to with how to best pursue continuous improvement in the various areas of the U.N. Global Compact and how to present the firm as a good corporate citizen,” suggests Leedale. “Zero landfill is a great goal for many companies, but for some firms it will not be possible or even reasonable, for example. It is much more important to be clear and honest in the reporting, and to describe your successes and failures, too. Your stakeholders will see though anything less.”

{pb}

Data collection and reporting

Leedale believes that enterprise business and asset management solutions such as ERP and EAM/CMMS contain much of the data needed to support reporting for the four main areas (ten principles) of the U.N. Global Compact: human rights, labor relations, the environment, and anti-corruption.

“You already have a wealth of data that can be turned into good reporting information. The most important thing is to start reporting,” says Leedale. “By utilizing different areas of existing software, you can show how you audit your suppliers for their compliance as well as your own internal compliance. You can use your human resources software to track the status of your employees, wage rates, and their grievance procedures. In your EAM/CMMS package, you can track the decommissioning and disposal of assets, and address the three R’s: reduce, reuse, and recycle. In some software, you can track the carbon footprint of your products. Using various traceability methods in your software can help you to avoid using conflict minerals.”

Prior to 2012, Exelon companies collected environmental performance data locally using spreadsheets. As the company grew, it became necessary to adopt a central platform for collecting and analyzing this data.

Now, Exelon uses an environmental management information system (EMIS) to track relevant corporate-wide environmental performance in areas relating to compliance, risk, resource stewardship, and value creation. Other operational areas, such as supply, corporate giving, human resources, and risk management have similar centralized systems for tracking performance data. “We use this information to drive performance improvement, support sustainability communications, and respond to corporate surveys such as the Dow Jones Sustainability Index,” explains Alexander.

“Whenever a new business is acquired, Exelon uses a proven integration model for establishing alignment and linkages with that business and the rest of the company,” adds Alexander. “For example, we track and report our greenhouse gas emissions, and as additional assets are acquired, their emissions profiles are integrated into the Exelon Greenhouse Gas Inventory, which is managed through our EMIS platform.”

GM’s global data collection and management platform leverages a combination of proprietary tools developed internally and services provided by third parties and consultants, which are aggregated and tailored directly to what the company views as the most material impacts of its operation. “As a global company with as many facilities and operations as GM has, there are a lot of challenges in creating data collection and management systems and making sure the information is as accurate and complete as possible,” says Jung.

“It’s all just driven by the idea that you can’t manage what you don’t measure. For GM, energy, water, and waste are important material impacts from both an environmental and business performance standpoint. We implemented a system that is continuously evolving and improving in order to help us prioritize, measure, evaluate, and manage these material impacts,” explains Jung.

Recommendations to industry peers

Leaders in CSR and sustainability reporting openly share their words of wisdom because of their firm belief in the value of widespread adoption.

“Based on Exelon’s experience with corporate sustainability initiatives and reporting since 2000, we find it is valuable to make the upfront investment in time and analysis to identify those aspects of the organization’s sustainability profile that are most relevant to the business and stakeholder interests,” says Alexander. “It’s important to validate them through deliberate interaction with shareholders, management, customers, employees, and other interested parties.

“For those dimensions that are not determined to be relevant, monitor interest over time. For those that are relevant, conduct benchmarking to identify what top-level performance looks like and set performance metrics for establishing performance baselines, setting goals, and measuring ongoing progress,” he adds.

“Consider carefully how to communicate performance in a transparent fashion and be candid about describing areas of performance that are not necessarily well developed. In other words, own the success and the shortcomings. Demonstrating that the organization has taken a thoughtful approach to performance improvement helps build credibility,” recommends Alexander. “Lastly, engage senior leadership to ensure alignment and build ongoing support for improving performance.”

GM is convinced it is worth the effort. “There are a lot of companies that might find sustainability reporting daunting, but I think the opportunities and benefits of reporting far outweigh the challenges,” says Jung. “There’s real long-term business and environmental value in reporting. You have to take a step back and think about that, because reporting is a big part of environmental and social responsibility management.

“Use your long-term value as a guideline for identifying your most important priorities, for you as a company and for your communities. Determine your most important material impacts, including your environmental impacts. Establish performance goals. Then, decide how to measure and report on those goals,” suggests Jung. “There are plenty of best practice products and services available to help you develop the appropriate systems for measuring and managing to your performance goals.”

“Be very selective when benchmarking sustainability and CSR-type data, processes, and reports,” advises Leedale. “The target of your reporting is your stakeholders, who may be very different than the stakeholders of your benchmark organization. It is more important to find out what your own stakeholders expect and to report using some standard such as G4 from the Global Reporting Initiative. Then, you should establish a plan on how you will report and show improvements year over year.

“Fortunately, much of the data that is required to create a good report is already contained in your business software, and it should be easy to get key measures out of your ERP, EAM/CMMS, and similar solutions,” adds Leedale.