How to Read a Sustainability Report: Five Tips

September 22, 2013 by  
Filed under Solar Energy Tips

Five tips to help you make sense of the next sustainability
report you read

reading green reports.jpg

 
By Marc Gunther. This article was
first

published on Ensia.com.

Corporate sustainability reports have been around since … well, it’s
hard to say.  The first report may have been published by “companies in the chemical industry with serious
image problems
” in the 1980s, or by Ben Jerry’s in 1989 or Shell in 1997. No matter — since then, more
than 10,000 companies have published more than 50,000 reports,
according to CorporateRegister.com,
which maintains a searchable database of reports.

But who really reads them? As a reporter who covers business and
sustainability, I do. Maybe you do, too — as an employee,
investor, researcher or activist.

Here, then, are five tips to help you make sense of the next
report that lands on your desk or arrives via email. They were
developed with help from Steve Lydenberg of Domini Social Investments
— the principal author of How to Read a Corporate Social Responsibility
Report
,
an excellent 2010 study from the Boston College Center for Corporate Citizenship
— and Bill Baue, a consultant and leader of the
Sustainability Context Group, an organization working to improve
corporate reporting.

1. Pay attention to what’s in the report — and what’s left
out.
Lots of companies fill their sustainability reports
with anecdotes, but these are often off point. Chevron’s 2012 corporate responsibility report
says a Chevron executive in Angola is part of “a team that
protects endangered turtles that come ashore to breed, dig sandy
nests and lay their eggs on the beaches at Chevron’s Malongo oil
production facilities.” And we learn that the company has
partnered with the Wildlife

Conservation Society to “introduce passive acoustic
monitoring in the south Atlantic Ocean to assess humpback whale
breeding activity” as it explores for oil.

That’s nice, but environmentalists will want to understand what
the giant oil company (2012 revenues: $234 billion) is doing about
climate change, if anything. Figuring that out from the report is
hard, if not impossible. Chevron reports that its 2012 emissions
from operations were 56.3 million metric tons of CO2
equivalent, down by about 3.5 million metric tons from 2011, and
below its goal of 60.5 million metric tons. That sounds like
progress. But you have to read the footnotes to learn that the
decline was largely caused by the sale of one refinery in Alaska
and “decreased production” from a second refinery in Richmond,
Calif., where an August 2012 fire sent thousands of people to
hospitals and later led Chevron to pay $2 million in fines and
restitution.

What’s more, emissions from operations account for only part of
Chevron’s impact. The company’s report says, “combustion of our
products resulted in emissions of approximately 364 million metric
tons of CO2 in 2012, approximately 8 percent less than
the 396 million metric tons emitted in 2011.” Why the decline? Is
the fact that people are burning less gas and oil good for the
planet but bad for Chevron? The report doesn’t explain.

A good sustainability report should
focus on those company activities that have the greatest impact.
More

importantly, is Chevron trying to move away from fossil fuels and
develop cleaner forms of energy? It doesn’t seem to be, since the
word “renewable” appears nowhere in the body of the report.

2. Follow the (big) money. A good sustainability report
should focus on those company activities that have the greatest
impact. So, for example, what matters most in the financial
services industry is not paper consumption, LEED-certified work
spaces or direct greenhouse gas emissions, but lending and
investment practices. Citi’s most recent report says it opened 23
LEED-certified branches in 2012 — a data point that is hard to put
into context (since the report doesn’t say how many branches the
company operates) and not very meaningful, in any event. What we
want to know about Wall Street is how the big banks are taking
environmental issues into account in their lending and
investments. “No other industry has as much ability to affect the
environmental and social practices of other industries as
financial services does,” says Lydenberg.

Bank of America tackles the big question better than most. In its report, BofA says it has committed
$70 billion over 16 years to “address global climate change and
demands on natural resources,” and it describes the goal as “the
largest among our peers.” That’s helpful. The bank also tallies
where the first $21 billion of its climate-friendly financing has
gone. To its credit, BofA also tries to explain why it does
business with the coal industry in the face of criticism from
environmental groups. “If large financial institutions were to
unilaterally discontinue financing the coal industry, it would
have negative consequences for the U.S. and global economies,” the
BofA report says. The bank also notes, helpfully, that it supports
government policies to tax or regulate carbon emissions.

Like most banks, however, BofA doesn’t provide an accounting of
its loans to or investments in fossil fuel companies. (According to the Rainforest Action Network,
BofA finances Coal India, one of the world’s biggest coal mining
companies, which has displaced forest communities and destroyed
critical tiger habitat.) How do Bank of America’s investments in
fossil fuels, which aggravate climate change, compare to the $70
billion it has pledged to finance, in part, climate solutions? Is
the bank making the climate crisis better or worse? Good luck
finding out.

You can be confident that most
companies present their data in the most favorable light.

Sustainability.jpg

3. Think about context.  When trying to understand
a company’s impact on climate or energy usage or water, a single
number or two won’t help. You’ll need to look at absolute numbers
(how much energy did the company use, in total), normalized
numbers (adjusting for acquisitions or divestitures), and numbers
that reflect energy or water intensity (how much was used per unit
of product or dollar of revenues). These numbers only become
meaningful when they are accompanied by year-over-year
comparisons, or when set against previous goals. You can be
confident that most companies present their data in the most
favorable light.

The concept of context-based sustainability is designed, in
part, to cut through obfuscations and generate meaningful
sustainability goals and targets. The idea is elegant: Companies
should measure their impacts against science-based sustainability
thresholds and resource limits. Is Coca-Cola only using its fair
share of the water supply in India? What should Ford’s carbon
reduction target be? These aren’t easy questions, but Baue and
Mark McElroy of the Center

for Sustainable Organizations — leading advocates of
context-based sustainability — say answers can be found.
Companies, for example, could for reporting purposes be allocated
a share of greenhouse gas emissions based on their contributions
to gross national product; they would then set emissions reduction
targets that are deep enough to meet global climate goals, and
report on their progress against those targets.

Several companies are experimenting with context-based
sustainability, including the Vermont dairy company Cabot Creamery
Cooperative, EMC and Mars. BT (British Telecom) has developed a methodology
to determine its share of GHG emissions, as has the California
software company Autodesk, which makes its tool, called C-FACT

(Corporate Finance Approach to Climate-Stabilizing Targets),
available for free.

4. Read more than one report at a time.  How many
glasses of water does it take to brew a gallon of beer? I have no
idea either, so reading that New Belgium, a Colorado brewing company,
wants to reduce its water use per barrel to 3.5 to 1 by 2015
doesn’t tell me much. In 2011, the ratio was 4.22 to 1.

New Belgium has a well-deserved reputation for sustainability but
when it comes to water, the brewer lags behind its bigger
competitors. MillerCoors’ latest sustainability report says it
achieved an average water-to-beer ratio of 3.82 to 1 across its
major breweries, while the world’s biggest beer company,
Anheuser-Busch InBev, does even better, reporting a water-to-beer production ratio of
3.5 to 1
.

Good sustainability reporting,
above all, needs to be credible.
Reading the Coca-Cola and
PepsiCo reports side by side is more enlightening than reading one
at a time. The same with UPS and FedEx. But be aware that
peer-to-peer comparisons are inexact. New Belgium explains that a
practice called “dry hopping” has increased the water intensity in
the brewing process. A bottle of Fat Tire is not the same as a Bud
or a Coors Light, as any beer drinker knows.

5. Look for all the news that’s fit to print.  Good
sustainability reporting, above all, needs to be credible. It’s
not easy to decide whether to trust what a company is telling us,
but one sign is whether companies deliver the bad news along with
the good. In the Chevron report, the refinery fire in Richmond, as
well as a fire on an offshore oil-drilling rig near
Nigeria, get only a passing mention. “These incidents do not
reflect the expectations we have of ourselves,” the report says.
We should hope not.

By contrast, Gap has been more willing than most companies to air
its dirty linen (pun intended). The company has been forthcoming about what
it calls “the severity of worker safety issues in Bangladesh”
since 2010. When it comes to the environment, the company is clear
about where it will exert its influence — over its supply chain
and its own operations — and where it will leave the problems for
others to solve.

At the end of the day, the most important thing to know about
corporate sustainability reports may be that they almost inevitably
raise more questions than they answer. A report cannot, by itself,
be relied upon to explain a company’s environmental impact. It’s a
useful starting point, at best.


Marc Gunther writer for Fortune, GreenBiz and Sustainable Business
Forum
co-chair, Fortune Brainstorm

Green 2012 and a blogger at www.marcgunther.com.  His book, Suck It
Up: How capturing carbon from the air can help solve the climate
crisis
, has been
published as an Amazon Kindle Single. You can
buy it here for $1.99.

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