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 Certification; GRI; Social Metrics Day 4, June 30

2. I expect the deliverables will, to some extent: • articulate the question and the scope of the project work, • discuss and/or identify best practices in the domain of the question, • address the City’s/PSU’s current status in relation to this question, • identify methods or frameworks that could be brought to bear on the question, • identify the data needed, the data-capture process (in some detail), how the data will be reported, and • propose things that the City/PSU might do to help them understand, evaluate, and/or report about this question.

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

4. 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

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

6. GRI Governance

7. 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

8. 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

9. EPEAT: IEEE Standard 1680 • determined through stakeholder consensus • contained in the IEEE 1680 Family of Standards for Environmental Assessment of Electronic Products • Bronze, Silver, Gold

10. 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

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

12. 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

13. Verification schemes First party—internal EPEAT Second party—external, with stake in organization being verified some GRI Third party—external, independent FSC

14. Fairtrade • 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) certification manager will plan an on-site audit • Auditor will visit site and check against compliance criteria. • Certifier may highlight non-compliance • Once compliance is determined a certificate will be issued

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

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

17. 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

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

19. GRI Reporting Principles

21. 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.

22. 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

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

24. Global Reporting Initiative

25. EN17. Other relevant indirect greenhouse gas emissions by weight. • 1. Relevance • Greenhouse gas emissions are the main cause of climate change and are governed by the United Nations Framework Convention on Climate Change (UNFCC) and the subsequent Kyoto Protocol. For some organizations, indirect greenhouse gas emissions are significantly greater… • 2. Compilation • 2.1 Identify the greenhouse gas emissions resulting from indirect energy use. Exclude … as these are covered by EN16. • 2.2 Additionally, identify which of the reporting organization’s activities cause … • When deciding on the relevance of these activities, consider whether emissions: • Are large compared to other activities; Are judged to be critical by stakeholders; • Could be substantially reduced through actions taken by the reporting organization. • 2.3 Report the sum of indirect GHG emissions identified in tonnes of CO2 equivalent. • 3. Definitions • Indirect emissions • Carbon dioxide equivalent • CO2 (Carbon Dioxide) equivalent is the measure used to compare emissions from various greenhouse gases based on their global warming potential (GWP). The CO2 equivalent for a gas is derived by multiplying the tonnes of the gas by the associated GWP. • 4. Documentation • Information can be obtained from external suppliers of products and services. For certain types of indirect emissions such as business travel, the organization may need to combine its own records with data from external sources to arrive at an estimate. • 5. References

26. Global Reporting Initiative

28. 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

30. Certification attributes

31. 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:

32. Social Indicators • Difficulty • Morally thick

33. Social return on investment • Evaluation of social benefit resulting from variety of inputs • REDF—pretty much the gold standard, by default… • We will also look at work by the New Economics Foundation • formerly Roberts Enterprise Development Fund

34. Concept behind SROI proposed by REDF • Historical Non-profit capital: • Charity based • Process measures • Directed to funders needs, financial accounting • Current Non-profit capital: • Investment based • Outcome measures • Internal operations focused, MIS

35. REDF—SROI calculations Economic Socio-Economic Social • Based on enterprises with multiple functions, economic and social • Omit solely Social… • Blend Economic and Socio-Economic

36. Adapted from REDF’s SROI Analysis (2001)

37. Enterprise value • Project enterprise cash flows • Time horizon • Assumptions of future performance • Income, adjust to cash • Investments and repayments • Calculate terminal value • Standard valuation methods • Discount the cash flows

39. Complete enterprise value • Discount cash flows • Use some model (Capital Asset Pricing Model) to determine cost of equity • Risk free rate + risk premium * industry beta + small business premium = Cost of equity • Use Weighted Average Cost of Capital (WACC) to determine discount rate

40. The importance of discount rate • Determines the value of the out-year cash flows • Too high, implies too much risk, undervalues the cash flows • Too low, implies too little risk, overvalues the cash flows • Huge issue in trying to establish distant benefits when compared with current costs… • 10 years @ 5%, 10%, 20% (.61, .39, .16) • 25 years @ 5%, 10%, 20% (.29, .09, .01)

43. Calculate social purpose value • Project social cash flows • Time horizon • Assumptions of future performance • Cost savings adjusted to cash • Calculate terminal value • Standard valuation methods • Discount the cash flows

46. Blended value

49. From New Economics Foundation • Become increasingly sophisticated • Understanding accounting • Activity based accounting/costing • Segregate costs by activity

50. Expenditure v. capital • ROI is generally thought of as on invested capital • SROI may well be on continuing revenues as well