MIM 521/ BA 548 Evaluating and Measuring the Sustainability Performance for Global Organizations

1. MIM 521/ BA 548Evaluating and Measuring the Sustainability Performance for Global Organizations Some accounting tools, certification Day 3, June 28

2. Some accounting tools • Environmental accounting • A form of “activity based” accounting • Balanced score card • Opportunity costs, option costs • New accountings

3. What does “environmental” accounting mean? • From a traditional business sense, not much • It is a focus, using accounting tools • EPA accounting for costs

5. Accounting for the environment • Chemical A, $25K (toxic) or Chemical B, $100K (benign) • HazMat training (categorized as “Training”) • DEQ reporting (categorized as “Compliance costs”) • Antidotes (categorized as “Safety costs”) • Maintenance of settling pond (facilities costs) • Public relations (marketing/external relations) • Risk of spillage embedded in (interest costs) • …

6. Information matrix—Environmentally enabled accounting information system (form of activity based accounting) • What gets measured gets managed… (probably Peter Drucker) • Traditional view supposes only (primarily) economic information needs • We recognize risks, opportunities, imperatives driven by cultural, social, and business demands • How to create an information system that addresses these (other) needs • Develop a matrix to relate strategy, scope, and information

7. Information matrix

8. Information matrix—examples

9. Balanced Scorecard • Purpose for putting sustainability objectives into a BSC: • Translate sustainability actions to operational terms • Align organization to the actions • Make sustainability part of everyone’s everyday job • Mobilize leadership to support objectives

10. Components of a balanced scorecard • Developing a balanced scorecard addresses four perspectives that enhance achieving the sustainability objectives by • learning and innovation that helps improve (learning and growth) • internal processes needed to create (processes) • operational/managerial outcomes that lead to (customer) • sustainability (organizational) objectives (financial)

11. Designing balanced scorecards • Balanced scorecards are developed by designing “strategy” maps” • Strategy maps are designed from the top down by • determining sustainability objectives • identifying how to create business outcomes • determining the operational means for achieving those outcomes • defining the type of climate and culture necessary to support these objectives

12. Sustainability Objective Reduce GHG Reduce Energy Needs Reduce % Fossil Fuel Business Outcomes Use lighter components Purchase renewable energy Internal Perspective Evaluate teams on component weight Consider substitute materials Review energy contracts Include DfE experience in design teams Learning and Innovation Perspective Recruit designers with DfE training Fund research on component materials Train Purchasing re: Green energy

13. After the strategy map has been developed, the organization must identify key performance indicator (KPI) measures for each goal • The KPI provides a basis for monitoring goal performance • The KPI must be a metric. KPIs are values that can be quantified and compared across periods of time • Note, there are KPIs for all levels of the BSC • Example: Recruit designers with DfE training • Percent of designers who have DfE training • Percent of target schools with specific DfE curricula

14. Cost considerations • Opportunity cost—using resources to achieve one goal may mean that a different goal cannot be achieved—if I purchase locally grown organic vegetables, I cannot provide insurance to my workers • Option cost—using irreversible resources to achieve a current goal may mean that a future goal cannot be achieved—if I subdivide and build housing on a plot of land, I cannot use that land for wetlands

15. Other accountings • Accounting for biodiversity • What is the benefit of this? • Is it accounting? • Did it make any difference to the company? • What other accountings are possible?

18. Certification definitions • Standards—attributes to attain • Certification—signal of attainment • Accreditation—authorize to certify • Verification—check on the N (whatever is being certified)

19. Foundations of Independent Certification Systems • Governance—oversight over the entire process • Standardization—developing the standards • Accreditation—certifying the certifiers • Verification—certifying the subject • Tracking and Labeling—using the certification • Much of this is from a white paper by Metafore

20. Governance • Mechanisms and procedures for operating a certification system • Groups involved • How decisions are reached • Influence of parties • Procedures to ensure implementation • GRI

21. GRI Governance

22. Standardization • Developing, maintaining, and enhancing standards • May be guidance and/or performance requirements • Participation (public, industry, NGOs?) • Procedures for addressing disputes • Decision making process (consensus, majority?) • Who is represented, who reviews, who approves

23. EPEAT-Standard participants • Pitney Bowes Corporation - Dave Gallaer • Sharp Electronics Corp. - Frank Marella • Silicon Valley Toxics Coalition • State of Massachusetts - Eric Friedman • State of Minnesota - Garth Hickle • State of Oregon - Gayle Montgomery • The Center for a New American Dream - Naomi Friedman • Tufts University - Patricia Dillon • U.S. Department of the Interior - James Weiner • U.S. EPA - Oliver Voss • U.S. EPA - Viccy Salazar • U.S. Government - John Howard • United Recycling Industries, Inc. - Lauren Roman • University of Tennessee - Socolof • Waste Management - Bobby Farris • Zero Waste Alliance - Larry Chalfan • • Apple Computer - Dave Cassano • • California Integrated Waste Management Board - Terri Persons • • City of Seattle - David Matthews • • Dell Computer - Mark Schaffer • • Electronic Industries Alliance - Holly Evans • • GATX Inc. - Ronalda Meson • • Hewlett Packard - John Burkitt • • IBM - Tim Mann • • INFORM - Sarah O¹Brien • • Intel Corporation - Allen R. Wilson • • International Assn of Electronics Recyclers - Peter Muscanelli • • New Jersey Institute of Technology - Reggie Caudill • • Noranda Recycling Inc. - Steve Skurnac • • Northeast Recycling Council, Inc. - Lynn Rubinstein • • Panasonic Matsushita Electronics Corp. - David Thompson

24. IEEE Standard 1680 • determined through stakeholder consensus • contained in the IEEE 1680 Family of Standards for Environmental Assessment of Electronic Products

25. Accreditation • Authorizing an individual or entity as capable of certifying the subject item • Certifying the certifier • Application • Evaluation (by some ‘certifying’ body) • Reporting • Attention to non-conformance • Decision (not by the evaluator) • Monitoring

26. Forestry Stewardship Council • Entity submits application to be a certifier • FSC Review team assess the application • Values consistency over globe • Competent • Processes • Review team office audit, review prior evaluations • In absence of non-compliance, separate team makes decision • Regular monitoring • Re-accredited every 5 years

27. Verification • Confirming that organization/product/process meets the requirements of the certification system • Credibility for certification comes here • Pre-assessment • Main assessment • Decision making • Monitoring

28. Verification schemes First party—internal Second party—external, with stake in organization being verified Third party—external, independent

29. Fair Trade • Application form -- will be informed if you qualify. • Application Pack with how to continue with your application—500 Euros.. • You are audited for Fairtrade compliance • FLO-CERT (third-party certifier, global) certification manager will plan an on-site audit • Auditor will visit site and check against compliance criteria. • Certifier may highlight non-compliance • Once compliancy is determined a certificate will be issued

30. Tracking and Labeling • Labels • indicators of certification • provide information to observers • Tracking • method of transparency • auditing the certificate (not certification)

31. Food Alliance (Labels) • Labels (Food Alliance) • Food Alliance Certified • Products • Handlers • Producers • FAC Grassfed • Made with FAC ingredients (50-79% FAC)

32. Wood Products (Tracking) • Tracking (wood products) • Chain of custody (FSC) • Product level activities • Physical separation • Batch model—certifies temporally • Mixed certified and not • Sustainable procurement (SFI) • Business level practices

33. GRI • Create reporting standards • Element of certification, of reporting but not performance

34. GRI Reporting Principles

36. Part C of the Guidelines comprises five sections • 1. Vision and Strategy – description of the reporting Organization’s strategy with regard to sustainability, including a statement from the CEO. • 2. Profile – overview of the reporting Organization’s structure and operations and of the scope of the report. • 3. Governance Structure and Management Systems – description of Organizational structure, policies, and management systems, including stakeholder engagement efforts. • 4. GRI Content Index – a table supplied by the reporting Organization identifying where the information listed in Part C of the Guidelines is located within the Organization’s report. • 5. Performance Indicators – measures of the impact or effect of the reporting Organization divided into integrated, economic, environmental, and social performance indicators.

37. Report content (GRI-guidelines) CEO statement Profile of reporting organisation Executive summary and key indicators Vision and strategy Policies, organization and management systems Performance: • environmental • economic • social

38. GRI guidelines—principles and indicators • Principles • What information to report • Quality of reported information • Accessibility of reported information • Indicators: • Economic • Social • Environmental

39. Global Reporting Initiative

40. Global Reporting Initiative

42. The Guidelines Foundation for GRI Technical protocols Measurement guidance The Guidelines Energy Water Child labour Sector supplements Sector-specific indicators Resource Documents Topical and user-specific supporting material Automotive Financial Tourism Mining SMEs Productivity HIV/AIDS

43. Specifics and supplements • Core and “additional” indicators…economic, environmental, social equity • Multiple aspects • Both performance and process • Supplements • Focus on performance indicators for sector-specific issues • Provide: • Commentary on existing GRI indicators • New performance indicators

45. Certification attributes

46. General Notes—from GRI • 1. Boundaries: • 2. Use of technical protocols: • 3. Metrics: • 4. Time frames and targets: • 5. Absolute/normalized data: • 6. Data consolidation and disaggregation: • 7. Graphics: • 8. Executive summary: