Simone de Colle sd7ua@virginia

1. Enhancing the Credibility of Social Responsibility claims and reports:The role of Assurance Simone de Colle sd7ua@virginia.edu ISO WG on SR TG6 - Vienna, 7 November 2007

3. Assurance TG6 BIG QUESTION: How can organizations enhance credibility of SR claims and reports? • Key points for discussion: • What is Assurance in the SR field?(AA1000AS + a European definition) • The PURPOSE of SR assurance(Who assures-towards who?) • The SCOPE of SR assurance • (What is the focus of Assurance?) • What are the different LEVELS of Assurance? • (Assurance providers, experts, stakeholders…) • Can we see one EXAMPLE? (Yes! Novo Enzymes) ISO WG on SR TG6 - Vienna, 7 November 2007

4. Completeness Responsiveness Materiality “knowing your impact & what people think of you” “knowing what is important to you and stakeholders” “demonstrating adequate response” The Accountability Commitment ‘Inclusivity’ The AA1000 Principles - Applied to Assurance “accounting for stakeholders’ aspirations and needs” Principles

5. Q RES Definition of Assurance ASSURANCE - DEFINITION DEVELOPED BY THE INTERNATIONAL RESEARCH TEAM: Assurance is an internal or external evaluation, against a specified set of principles and standards, of the quality of specified reports and the systems, processes and competencies that deliver the associated information and underpin the reporting organization’s performance. Assurance includes the communication of the results of this evaluation to provide credibility to the subject matter for its users. Source: “Contributing to the convergence of CSR management standards in Italy, Germany, France and the UK by developing and promoting a common CSR framework, terminology and Management Tools”. Final Research Report. CELE, LIUC University, Italy, March 2005 (121 pp.).

6. Common Elements: Assurance • All frameworks advocate assurance in the particular sense that management of the organization needs to ensure that what it is doing is what it thinks it is doing, and in addition may wish to communicate this in a credibleway, inside or outside of the organizations. Then come some aspects of assurance that only overlap or are distinct between frameworks, as set out below: • The AA1000 Series includes a specialised “assurancestandard” (AA1000 Assurance Standard) that in many ways goes to the heart of its values and orientation; • ·SIGMA's approach to assurance is in many ways similar to the AA1000 approach for the simple reason that it has formerly adopted the AA1000 Assurance Standard as the 'Intel inside' approach to assurance it advocates; • ValuesManagementSystem‘s approach to assurance is based on a self-governanceapproach, which emphasises the role plaid by the organisations who voluntary adopt a self-binding CSR management standard like VMS. Nevertheless, the existence and effectiveness of VMS within an organisation can be verified by an external auditor on a voluntary basis; • Q-RES approach to assurance is twofold: the Q-RES Guidelines define excellencecriteria and auditingevidence for external verification concerning the adoption of Q-RES management tools by the organisation; the Q-RES Standard define a CSR management system based on a ISO-like model that could be certified. • “…the issue of assurance is a very controversial topic….being the field clearly still at its development stage. No single agreed approach to providing CSR assurance exist, and in the practice organizations often seek different forms of assurance from different assurance providers, from traditional financial auditors to specialised CSR consultants, to NGOs and respected individuals”. • “…Yet, it is widely recognised that withoutsome form of verification using a generally accepted framework, any CSR strategy - and its underlying management system – will not be seen as credible by the stakeholders community.

7. Why organizations need assurance? Assurance: Current approaches • Internally - To provide useful information to support management- To improve risk management • Externally - To meet stock market and supply chain requirements - To respond to stakeholder demands/claims - To obtain specific social and environmental labels Purpose Why is assurance obrtained? & Audience Who is assurance for? Source: The Future of Sustainability Assurance, by S. Zadek et al., ACCA Report n. 86, London, 2004 • ‘Indoor’ stakeholders - Management: want reliable information • ‘Front door’ stakeholders • Media, consumers: interested in social issues • ‘Back door’ stakeholders • Investors & Regulators: concerned of risk and legal breaches

8. Assurance: Current approaches The issue/organizational levelscope of Assurance • social issues - eg human rights, working conditions, diversity… • environmental issues - emissions, energy use, waste management… • economic issues - eg financial performance, multiplier effects Focus What issues are covered? & Application What level of the organisation is covered? Spurce: The Future of Sustainability Assurance, by S. Zadek et al., ACCA Report n. 86, London, 2004 • assurance may cover different organisational units: - Company level: the company or the group - Specific level: eg Suppliers; product level assurance; labelling

9. Levels of Assurance LEVEL 4. Evaluating Performance • LEVEL 3. Materiality and Risk • LEVEL 2. • Quality of Systems, Processes • LEVEL 1. • Reported Data Accuracy Assurance: Different levels => Control (audit) ofaccuracyof data and information reported => Evaluating theperformance on relevant issues; identifying areas for improvement => Evaluatingcompleteness and materiality of information reported => Evaluating thereliability of SR processes and systems

10. Assurance: Current approaches Assurance Providers • Professional Audit firms (KPMG, PWC…) • Quality Assurance firms (BVQI, DNV, SGS…) • Specific SR assurance providers (Just Assurance, Veritè, Solstice…) • Civil society assurers (WWF, Rainforest Alliance…) • Opinion leaders and NGO advisory panels (eg John Elkington of sustainsbility or Jonathon Porrit of The Natural Step). Providers Who provides assurance? & Competencies How are they able to offer assurance? Source: The Future of Sustainability Assurance, by S. Zadek et al., ACCA Report n. 86, London, 2004 Providing powerful assurance requires a good mix of: • Technical competencies (e.g. on auditing) • Process competencies (e.g. on stakeholder engagement) • Substantive/content competencies (e.g. on human rights issues)

11. A specific approach to Assurance Assurance: One example • How to choose the right assurance? A modular approach • The approach taken by an European medium-size pharmaceutical company to its SR Assurance is a ‘modular approach’, which can be synthesized as follows: • The basic idea is that in the field of SR Assurance different skills and competencies are needed, and different organizations can provide the best answer to different questions. • Therefore, the modular approach is articulated as follows: • When it is about seeking assurance over we relies on the work of hard DATA and FIGURES => professional ACCOUNTANTS • For assurance over social, ethical and, we seeks the dialogue with environmental ISSUES that are crucial => the representatives of all in the different business activities relevant STAKEHOLDERS; • When it is about assurance over the => we asks the opinion SYSTEMS concerning the overall SR strategy of SR EXPERTS. Spurce: Q-RES EU Project 2004

12. Operationalizing Social Responsibility ISO 26.000 - Clause 7 - Guidance onImplementingSR Stakeholder Engagement 7.2 Understanding the context of SR • Understanding an organization‘s profile • Analysing the boundaries and context of SR • Understanding stakeholder concerns 7.2 Understanding • 7.8 Enhancing the credibility of SR reports and claims • Benefit of relationships based on trust • Levels and forms of assurance • BOX of examples? • 7.3 Working with stakeholders • Identification process • Prioritisation of interests • Engangement process 7.8 Enhancingcredibility 7.3 Working with Stakeholders 7.4 Integrating SR • Adopting principles of SR and connecting them to an organization‘s statement • Developing objectives and strategies 7.4 Integrating • 7.7 Evaluating activities and practices of SR • Organizational self-assessment • Improvement options 7.7 Evaluating 7.5 Implementing 7.6Communicating 7.5 Implementing SR into daily practice • Raising awareness and building competencies • Establishing structure and reviewing operations against strategy • Setting targets for SR • Action plans, instruments and implementation 7.6 Communcating on SR • Types of communicating SR • Planning and selecting forms of communication and media • Stakeholder dialogue on communication about SR Stakeholder Engagement Annette Kleinfeld & Simone de Colle

13. ISO 26.000 - Clause 7 - Guidance onImplementingSR 7.8 Enhancingcredibility 7.8 Enhancing the credibility of the organization‘s social responsibility approach 7.8.1 Key considerations Organizations can enhance the credibility of their SR commitments [claims] and objectives [reports] by seeking appropriate forms of assurance[must be added in the definitions]. The purpose of assurance (which can be internal or external) is, in fact, to provide a reliable evaluation of how appropriate [effective] the organization‘s policies, decisions and actions are to create socially responsible outcomes. 7.8.2 Benefit of relationships based on trust Demonstrating that socially responsible behavior is integrated into existing organizational strategies, systems, practices and processes, facilitates the process of building relationships based on trust with all the organiza-tion‘s stakeholders. This, in turn, generates positive ourcomes in terms of reduced costs (e.g. of negotiations, contracting and monitoring) and increases the opportunities for mutually beneficial collaboration. Moreover, assurance enables organizational learning that facilitates performance improvements. 7.8.2 Levels and forms of assurance Assurance can be provided at different levels (e.g. DATA & INFORMATION communicated; Organizational CONDUCT; SR OUTCOMES [performance on SR issues]) and in different forms (e.g. internal self-audit; consultation with external experts and/or organization(s); stakeholder panel). It is important for each organization to choose the most appropriate level and form of assurance in relation to its context and the issues and objectives identified in its SR approach. - BOX of examples? Annette Kleinfeld & Simone de Colle