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Valuing Sustainability Reporting

Valuing Sustainability Reporting. Overview of this Presentation. Background of Regulatory Instruments Intergovernmental Benchmarks and Guidelines The National Governments’ Regulatory Level Non-Governmental Regulatory Tools The Way Forward. Background of Regulatory Instruments.

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Valuing Sustainability Reporting

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  1. Valuing Sustainability Reporting .

  2. Overview of this Presentation • Background of Regulatory Instruments • Intergovernmental Benchmarks and Guidelines • The National Governments’ Regulatory Level • Non-Governmental Regulatory Tools • The Way Forward

  3. Background of Regulatory Instruments

  4. In the mid 1990s, Robert Reich in his capacity as the American Secretary of Labour has asked the International Labour Organisation (ILO) to develop a social label that would certify to consumers which products comply with the ILO labour standards. • The ILO has limited itself to establish minimum standards for working conditions and these have been agreed to by numerous governments. • The Organisation for Economic Cooperation and Development (OECD) had issued guidelines for multi-national corporations (MNCs). They were also entirely voluntary in nature.

  5. “It is against this background of weak instruments and failed initiatives at the international level that NGOs have begun to target MNCs with increasing frequency and vigour in recent years”, (Newell, 2002:910).

  6. The growth of global CSR engagement can also be viewed in the context of thebusiness developments within the international trade law: • For instance, a number of bilateral and regional trade agreements were entered into force in North American and European countries. They contained such provisions about the inclusion of labour, human rights and environmental standards in trade agreements. • However, the World Trade Organisation (WTO)did notnecessitate the countries to conform to any product labelling standards,

  7. Intergovernmental Benchmarks and Guidelines

  8. International Labour Organisation • ILO promotes dialogue between government, workers’ and employers’ organisations. • It provides assistance and tools to better understand the labour dimension of CSR (ILO Helpdesk Url., 2013).

  9. The Organisation for Economic Cooperation and Development • The Organisation for Economic Cooperation and Development (OECD) promotes policies which improve the economic growth and social cohesion. • OECD guides policy makers, regulators, and market participants in improving their legal, institutional, and regulatory frameworks. • OECD’s principles have shown an acceptable level of adaptability in varying legal, economic, and cultural contexts as they have served as the basis in various reform initiatives by different governments and have been taken up by the private sector in different countries (Jesover and Kirkpatrick, 2005).

  10. Basic Principles of Corporate Governance (Source: Jamali et al. 2008 ; OECD, 1999)

  11. European Union’s Recommendations (I) • According to the EU Commission Expert Group (2012), non-financial reporting enables investors to contribute to a more efficient allocation of capital, and to better achieve longer-term investment goals. • It can also help to make enterprises more accountable and contribute to higher levels of citizen trust in business. • Several experts have supported the idea of a principles-based approach, rather than a detailed, rules-based one.

  12. European Union’s Recommendations (II) • The experts stressed that improving materiality of reports is useful to address the comparability issues. • They advocated that the companies' boards should have ownership on reporting, in order to make it relevant and effective. • There are significant differences in mentalities across different member states, and within economic sectors (EU Commission, 2011).

  13. The National Government Regulatory Level

  14. Actors and Exchange Arenas (Source, Midttun, 2009)

  15. The Relational Framework • There are different expectations and perceptions within each stakeholder relationship, which have to be addressed to develop an appropriate CSR policy (Albareda et al., 2008). • Essentially, this relational approach is based on the idea that recent changes and patterns affecting the economic and political structure may transform the roles and capacities of various social agents (Albareda et al., 2009).

  16. “Our approach is to encourage and incentivise the adoption of CSR, through best practice guidance, and where appropriate, intelligent (soft) regulation and fiscal incentives”. (UK’s Department of Business Innovation and Skills, 2012).

  17. Non-Governmental (NGOs) Regulatory Tools

  18. Non-Financial Accountability Standards (I) • The social and environmental accountability standards represent voluntary predefined norms and procedures for organisational behaviour and are often valid on a global level (Rasche, 2010; Smith, 2002:21). • Such accountability standards reflect a shift towards a ‘quasi-regulation’ which are based on substantive and reflexive law approaches (Rasche et al., 2008). • A ‘substantive’ (outcome-based) law approach is regulated by prescribing predefined outcomes; • A ‘reflexive’ (process-based) law approach is regulated by prescribing procedures to determine outcomes in a discursive way (see Hess, 1999, 2001). *

  19. Non-Financial Accountability Standards (II) • Performance-oriented standards are more generic in their approach: • Such standards focus on specific areas such as human rights, labour standards, environmental protection and the like (see Jamali, 2008). • Many NGOs are providing a certification for compliance with proposed rules and guidelines as they incorporate their own independent monitoring systems (see Berkhout et al., 2008; Koenig-Archibugi, 2004). • Process-oriented standards are applied across particular industries.

  20. A Non-Exhaustive List of Standards and Reporting Instruments:

  21. Accountability (AA1000) • AccountAbility's AA1000 series are essentially ‘principles-based’ standards to help organisations become more accountable, responsible and sustainable. • They are aimed at addressing particular issues affecting governance, business models and organisational strategy, as well as providing operational guidance on sustainability assurance and stakeholder engagement.

  22. British Assessment (OHSAS 18001) • The non-governmental organisation, namely; ‘British Assessment’ developed the Occupational Health and Safety Management System,(OHSAS, 18001). • OHSAS maintain that they clarify the organisations’ impact on health and safety issues, as well as providing assistance to reduce the risk of accidents and any breach in legal requirements. 

  23. Eco-management and Audit Scheme (EMAS) • EMAS may be considered as an important instrument for both the‘sustainable consumption’ and for the ‘production and sustainable industrial policy’ action plans. ‘ • EMAS promotes continuous improvementsin the environmental performance of organisations through the establishment and implementation of environmental management systems for organisations.

  24. Fair Labor Association (FLA) • FLA promotes adherence to international and national labour laws as it advocates for greater accountability and transparency. • Its mission is to address any abusive labour practices by offering tools and resources to businesses, delivering training and conducting due diligence through independent assessments.

  25. Global Reporting Initiative (GRI) • GRI promotes economic sustainability. It produces standards for sustainability reporting: (also known as the ‘ecological footprint reporting’, the ‘environmental social governance’ (ESG) reporting, the ‘triple bottom line’ (TBL) reporting, and the ‘corporate social responsibility’ (CSR) reporting). • Essentially, a sustainability report is an organisational report that sheds light about economic, environmental, social and governance performance.

  26. International Standards Organisation ISO 26000 - Social Responsibility • This standard assists organisations in their efforts to operate in a socially responsible manner. • ISO 26000 entails voluntary guidance; therefore it is not for use as a certification standard (unlike ISO 9001 and ISO 14001). • This standard suggests that in order for businesses to be sustainable; they must operate in a socially responsible manner.

  27. International Standards Organisation (ISO14001) – Environmental Management System • ISO 14001 provides guidance about how organisations may identify aspects of the business which may potentially impact on their surrounding environment. • ISO 14001 facilitates the understanding of the relevant environmental laws that are specific in the businesses’ particular situation. Through effective management programmes, this standard aims for continuous improvement in the area of environmental management.

  28. Social Accountability (SA8000) • SA8000 is a global standard for decent working conditions, developed and overseen by Social Accountability International (SAI). • The organisation offers training in workplace standards to managers, workers and auditors. This standard includes: • Policies which address forced labour, health and safety issues, freedom of association and the right to collective bargaining, discrimination, discipline, working hours, compensation and management systems.

  29. The United Nations Global Compact • It is a United Nations voluntary initiative which is intended to encourage businesses to adopt sustainable and socially responsible policies, and to report on their implementation. • Essentially, the Global Compact is also a principles-based framework for businesses. The United Nations Global Compact consists of ten principles in the areas of human rights, labour, the environment and anti-corruption.

  30. The Way Forward

  31. Creating Shared Value through Regulation • Governments can play a pro-active role by setting the regulatory social and environmental standards. • The introduction of standards, phase-in periods and utilisation of innovative technologies can bring operational efficiencies and cost savings to the businesses. • Such measures may improve the environment, and increase the organisations’ competitiveness, simultaneously (Porter and Kramer, 2011; Van der Woerd and Van Den Brink (2004)).

  32. Key Recommendations • Governments may assist businesses by fostering the right type of environment for responsible behaviours; through various incentives (e.g. grants, tax relief, sustainable reporting guidelines, frequent audits et cetera). • The proposed regulatory changes can involve theefficient and timely reporting of sustainable (responsible) practices. • The reporting may be primarily aimed at the larger businesses. • Of course, the governments will have to providestructured compliance procedures (and support where necessary). • The CSR practices and their measurement, their reporting and accreditation should be asclear, concise and understandable as possible for the businesses. • The governments’ reporting standards and guidelines may be drawn from international reporting instruments (e.g. ISO, SA, AA, and GRI). • Businesses should be given adequate and sufficient time (and resources) to comply with the governments' requirements.

  33. References • Accountability (2011). AA1000: Stakeholder Engagement Standard (AA1000SES). Url: http://www.accountability.org/about-us/publications/aa1000-1.html accessed online on the 30th March 2012. • Albareda, L, Lozano, J.M., Tencati, A., Midttun, A. and Perrini, F. (2008). The changing role of governments in corporate social responsibility: drivers and responses. Business Ethics: A European Review, 17, pp. 347–363 • Albareda, L., Arenas, D., Lozano, J., (2009). The role of NGOs in CSR: Mutual perceptions among stakeholders. Journal of Business Ethics, 88, pp. 175–197. • Berkhout, F., Hertin, J., Wagner, M. and Tyteca, D. (2008). Are EMS Environmentally Effective? The Link between Environmental Management Systems and Environmental Performance in European Companies. Journal of Environmental Planning and Management, 51(2), pp. 259–283. • British Assessment (2011). OHSAS 18001 Certification. Url: http://www.british-assessment.co.uk/ohsas-18001-certification-services.htm accessed on the 3rd December 2011. • Department for Business, Innovation and Skills - UK (2012). Url:http://bis.ecgroup.net/Publications/BusinessLaw/CorporateGovernance/041112.aspx accessed on the 3rd February 2012. • EMAS (2009). EU Eco-Management and Audit Scheme. Url: http://ec.europa.eu/environment/emas/index_en.htm accessed on the 25th February 2012.European Commission (2011). A renewed EU strategy 2011-14 for Corporate Social Responsibility. Url: http://ec.europa.eu/enterprise/newsroom/cf/_getdocument.cfm?doc_id=7010. • EU Commission Expert Group (2012). Sustainable and responsible business European Expert Group on corporate social responsibility (CSR) and SMEs. Url: http://ec.europa.eu/enterprise/policies/sustainable-business/corporate-social-responsibility/sme/european-expert-group/index_en.htm accessed on the 12th January 2012. • Fair Labor Association (2012). Url: http://www.fairlabor.org/about-us accessed on the 4th May 2012. • Global Reporting Initiative (GRI) (2009). Url: https://www.globalreporting.org/Information/about-gri/Pages/default.aspx accessed on the 3rd November 2009. • Hess, D. (1999). Social Reporting:  A Reflexive Law Approach to Corporate Social Responsiveness. Journal of Corporation Law, 25 (1). pp41-84. • Hess, D. (2001). Regulating Corporate Social Performance:  A New Look at Corporate Social Accounting, Auditing, and Reporting. Business Ethics Quarterly, 11 (2), pp. 307-330.   • International Labour Organisation,(2012). Resource guide on CSR. http://www.ilo.org/public/english/support/lib/resource/subject/csr.htm accessed online on the 23rd April 2012. • International Standards Organization - ISO 26000 (2012). Guidance Standard on Social Responsibility. Url: http://www.iso.org/iso/social_responsibility accessed on the 4th February 2012. • International Standards Organization - ISO 14001 (2012). Environmental Management System. Url: http://www.british-assessment.co.uk/iso-14001-certification services.htm?gclid=CI_osdPUoLACFYt-fAodaR8lYQ accessed on the 4th February 2012. • Jamali, D., Safieddine, A.M. and Rabbath, M. (2008). Corporate Governance and Corporate Social Responsibility Synergies and Interrelationships. Corporate Governance: An International Review, 16, pp. 443–459. • Jesover, F. and Kirkpatrick, G. (2005). The Revised OECD Principles of Corporate Governance and their Relevance to Non-OECD Countries. Corporate Governance: An International Review, 13, pp. 127–136. • Koenig-Archibugi, M. (2004). Transnational Corporations and Public Accountability. Government and Opposition, 39, pp. 234–259. • Midttun, A. (2009). Strategic CSR Innovation - Serving Societal and Individual Needs. Research Report 2/2009 Norwegian School of Management Department of Innovation and Organizational Management Nordberg.Url: • http://web.bi.no/forskning/papers.nsf/b63c43a0385ff61dc1256e620043c6b0/2893041b91f4e4fcc12575690042d6d9/$FILE/2009-02-midttun.pdf accessed online on the 4th March 2012. • Newell, P. (2002). From Responsibility to Citizenship: Corporate Accountability for Development. IDS Bulletin, 33(2) Making Rights Real: Exploring Citizenship, Participation and Accountability. Brighton. OECD (1999). • Organisation for Economic Cooperation and Development, Directorate for Financial and Enterprise Affairs, Url: http://www.oecd.org/document/49/0,3343,en_2649_34813_31530865_1_1_1_1,00.html accessed on the 2nd Janaury 2012. • Porter, M.E. and Kramer, M.R. (2011). Creating shared value: How to reinvent capitalism - and unleash a wave of innovation and growth. Harvard Business Review, (January/February), pp. 62-77. • Rasche, A., Baur, D., Van Huijstee, M., Ladek, S. and Naidu, J. (2008). Corporations as Political Actors – A Report on the First Swiss Master Class in Corporate Social Responsibility. Journal of Business Ethics, 80 (2), pp. 151-173. • Rasche, A. (2010). Collaborative Governance 2.0. Corporate Governance, 10 (4), pp. 500–511. • Smith, D. (2002). Demonstrating Corporate Values – Which Standard for your Company? Institute of Business Ethics, London. • Social Accountability International (2011). Url: http://www.sa-intl.org/index.cfm? Accessed on 3rd June, 2010. • United Nations Global Compact (2012). Url: http://www.unglobalcompact.org/AboutTheGC/TheTenPrinciples/index.html accessed onthe 20th March 2012. • Van der Woerd, F. and Van Den Brink, T. (2004). Feasiblity of a responsive business scorecard – a pilot study. Journal of Business Ethics, 55(2), pp. 173-86.

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