Bob Massie is executive director of the Coalition for Environmentally Responsible Economies (CERES).

Monday, 18 Sep 2000

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OVER THE ATLANTIC

It is Monday morning and I am currently sitting on an airplane zooming eastward seven miles above the Atlantic Ocean. Over the next two weeks I will be attending meetings in Paris, London, Delhi, and Bombay, most of which will focus on the Global Reporting Initiative, an immense collaborative project convened by the Coalition for Environmentally Responsible Economies three years ago to develop harmonized disclosure guidelines for multinational corporations on their social and environmental performance.

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I suppose I should begin this diary for Grist with the observation that this is certainly not a typical week for me. Though I travel a good deal, this week, as well as next, includes so many events of such variety that it stands in a class by itself.

For those who are not familiar with the work of CERES, I should back up. The coalition was founded in 1989 by Joan Bavaria, the visionary president of Trillium Asset Management, a social investment firm based in Boston. Joan’s idea was that if large institutional investors — investment firms, religious endowments, pension funds, and others — could build an alliance with major international groups, their combined expertise, interests, and clout could be used to move companies toward greater environmental responsibility. Joan drew together an impressive alliance of organizations, including the Natural Resources Defense Council, Friends of the Earth, the National Wildlife Federation, the New York City Comptroller’s Office, the World Wildlife Fund, the Interfaith Center on Corporate Responsibility, the AFL-CIO, and many others.

A key component was the creation of a set of principles to encourage companies to change the manner in which they view their environmental impacts. The original board of CERES, which included Earth Day Network Chair Denis Hayes, crafted a set of affirmative statements of corporate responsibility known first as the Valdez Principles (after the Exxon disaster, which happened while CERES was being formed) and then later the CERES Principles. The text of the principles — and a great deal of other information about CERES, past, present, and future — is available on our website.

What distinguished CERES from the other codes of conduct that were starting to pop up was a commitment to accountability. Corporations were expected not just to sign the principles but to act on them, and to report on their results annually. Surveying the world today, when environmental reporting is standard practice for the leading companies of the world, backed up by an impressive array of books, articles, organizations, and award ceremonies, it is hard to remember what a radical idea this was 12 years ago. When CERES first proposed the notion in 1989, it was embraced by a small number of visionary companies and rejected by almost everyone else.

Since then the ranks of those who are concerned about the link between business and the environment has grown enormously. Organizations have popped up around the world to contribute to the debate. Driven by the concerns of citizens about the rapid pace of ecological degradation and climate change, by actions of the governments and the United Nations, by activist organizations and investors, and by business associations, the relationship between environment and business has shifted from the periphery to the center of what it means to operate in our global economy. Some major companies — such as Sunoco, General Motors, Bank of America, ITT, Ford, and others — have endorsed the CERES Principles. CERES has gradually evolved from a controversial experiment into a recognized leader in stakeholder dialogue and standardized reporting. The coalition has developed into a national and international network in which the concerns of the environmental and activist shareholder community can be communicated effectively to the senior management of big companies.

The change has been exciting for everyone, though, like all change, it has brought new challenges. With the growth of the Internet, the power of activist organizations has risen dramatically. The idea that companies should release information not just about their environmental performance but also their understanding of and contributions to sustainability has taken hold in many parts of the world. Ironically, the very popularity of this idea created a danger for its realization, as differing ideas about disclosure developed rapidly and independently in different parts of the world. The centrifugal force of these competing efforts created a headache for everyone. Companies found it difficult to respond to the new queries of investors and activists; investors and activists doubted the value and credibility of the information they were receiving from companies. At the same time the enormous power of the Internet and the relentless progression of globalization continued to reinforce the need for the information.

In 1997, in an effort to address this problem, CERES launched an experiment. Though the title of the project — the Global Reporting Initiative (GRI) — was bold, the early idea was modest. Some of the large international companies that had endorsed the CERES Principles had been asking whether the CERES report form could gradually evolve into a more globally applicable form. The members of the CERES coalition generally supported the idea. The first few meetings, in late 1997, brought together key American partners, such as the Investor Responsibility Research Center and the Council on Economic Priorities, to discuss ways in which to harmonize our respective approaches to the release of environmental information. Soon it became clear that a diverse and influential group of Canadian and European organizations also wanted to participate. Within the span of a few months we joined forces with the United Nations Environment Programme (UNEP), which had been providing leadership and publishing benchmark studies of reporting.

Over the next two years, the GRI expanded at an explosive rate, thanks to the intensity of interest and the amazing rate of learning and communication made possible by the Internet. Hundreds of organizations sent representatives to meetings and offered comment on the web. In March 1999, the GRI released an “exposure draft” of sustainability reporting guidelines for companies which had already moved past the confines of environmental reporting and started to lay out the contours of the social and economic dimensions of sustainability. In just 15 months, the GRI network was able to gather comment on the “beta version” in meetings around the world, develop a process of revision, and release a new set of guidelines in June of 2000.

Despite the enormous amount of work that went into them, the June guidelines still represent early thinking — a version 1.0 that itself needs to be considered, discussed, and revised. The challenge now is to design a process through which this will be done that draws in more voices and more participants than we have had in the past. Because the GRI emerged initially in the developed world, there is a special challenge to reach out to new participants — representatives of both business and nongovernmental organizations (NGOs) — from emerging economies (hence the trip to India and other meetings like it that are planned for the future).

Equally important is the task of building a permanent, balanced, multi-stakeholder institution that can s
erve as the steward of the guidelines in the future. Though CERES was the original convener, and though I still serve as the chair of the GRI steering committee, CERES has made clear from the beginning that our intention is to spin the GRI off into an independent organization by the end of 2001. In some sense we are building on successful models pioneered by organizations such as the Financial Accounting Standards Board in the U.S. and the International Accounting Standards Committee. But the GRI is also a strange new hybrid whose governance structure must allow for the balanced participation of many groups who are not naturally inclined to understand each other.

This brings me back to the meetings in Europe and the reason I am sitting on an airplane. Tomorrow I will be serving as the cohost (along with UNEP and the European Environment Agency) of a meeting of key European representatives from business, NGOs, accounting societies, the European Commission, the United Nations, and other critical parties to discuss the future institutionalization of the GRI. There will undoubtedly be many points of view, and part of my responsibility will be to help foster consensus. This is a special challenge since many European organizations believe that they have made much more far-reaching commitments to sustainability than their counterparts in the United States and they understandably have questions about an effort that seems to have started in the United States. At the same time, GRI is already well rooted in Europe and the logic in favor of continued cooperation is strong. How strong, we will see.

Wednesday, 20 Sep 2000

PARIS, France

The meetings in Paris have been going surprisingly well, though yesterday’s gathering, which focused on the future of the Global Reporting Initiative, was hindered somewhat by the participants’ widely divergent levels of familiarity of the project. Some people wanted a basic briefing on the idea of reporting and the rationale behind the GRI, while others wanted to pursue discussion of what the GRI should be doing and how it should be structured in the future.

Finding the right balance between retracing old arguments for the benefit of new participants and moving forward is part of the challenge of trying to expand the circle of parties involved in the GRI. In some ways human beings are like animals — when they encounter something new, they circle around it, sniffing and poking until they are satisfied that it is safe. Even though we were all sitting around in business attire, looking out of the window at the Eiffel Tower, the behavior was fundamentally the same.

In other words, skepticism is inevitable at the beginning. I have learned, fortunately, that with a little patience most of the questions can be answered and most people gradually accept the fundamental logic of what we have been doing. In time some people move beyond acceptance to real enthusiasm — they see the possibilities for social and systemic change that are embodied in the idea of reporting on environmental and social performance and they decide to commit themselves to supporting the overall vision. When that happens, all kinds of magic are possible.

One of the reasons organizations like CERES and the GRI encounter skepticism is that they are really very new models for how human beings can interact. CERES’s success has come from the tremendous learning that takes place when people step outside their conventional circles and move into conversation with people whose premises and language are quite different. We all gravitate in our interactions toward people who are like us. Business people go to conferences with other business people; investors talk to investors; environmentalists congregate with environmentalists. As each group gathers, they tend to confirm each other’s assumptions and biases. Environmentalists and business managers have found it easy to point the finger and murmur “if only this other group would change, everything would be all right.” But when people are actually drawn together into conversation, across boundaries, such behavior becomes much more difficult. People become aware of complexity; they learn how change can really take place; they sometimes find new and unexpected areas of agreement.

In the case of the Global Reporting Initiative, part of the challenge for people is that the world itself is changing and, in doing so, calling forth new human institutions. Looking at the rapid pace of globalization, I think we are in a watershed historical period in which institutions are fundamentally remaking themselves. Being in Paris reminds me that for much of its history Europe was governed by two competing forces, arrayed essentially in a matrix. Princes and kings exercised secular control, while bishops and popes had spiritual authority — over the same people and places. It took a long time for nations to emerge, for national leaders to consolidate control over the regional dukes and princes and to cut off the power of Rome.

In the 21st century a new matrix is emerging. On the one hand we still have systems of accountability based on place — local, regional, national, and international forms of government. On the other, we now have huge transnational institutions and organizations whose members transcend the boundaries of geography. The most powerful form is that of the corporation, although other organizations — civil society organizations, churches, humanitarian groups — have found new ways to connect and to coordinate internationally. The place-based systems of accountability are struggling to discover ways to control corporate behavior even as corporations are figuring out ways to expand their freedom across many countries. In some sense the whole debate about trade liberalization is about whether governments can guide the behavior of companies to support human and environmental goals.

One way to do so is for governments to negotiate trade agreements, but the protests against the World Trade Organization’s work and role suggests that many groups in civil society do not trust governments to represent these interests adequately. Another way is for stakeholders — consumers, investors, communities, trade unions — to ask companies to make direct commitments to environmental and social standards of performance. We also need clear information. It is not enough, in the modern world, to know the greenhouse gas emissions of a country such as Denmark; we also need to know the greenhouse gas emissions of General Motors.

That’s where the GRI comes in. By creating a structure through which outsiders can learn directly about a company’s commitments and performance, the GRI holds the promise of creating a system of scrutiny and accountability very different from that of governments. To be truly effective, the systems must complement each other, with governments backing up the responsibilities of organizations and vice versa. This is, in fact, what happens in the financial world. People often forget that our mighty financial markets — and all the complex rules and understandings that underlie them — were not brought down from Mount Sinai by Moses. They evolved through the specific decisions of particular human beings over time. And now, as we move into the 21st century, we are seeing the same thing happen again, but in the new world of sustainability.

At least that’s what we hope.

Thursday, 21 Sep 2000

EN ROUTE FROM PARIS TO LONDON

The day began with yet another meeting at the U.N. Environment Programme. In this case it was the annual presentation that the UNEP Paris office makes to a large collection of industry association executives. It was at this same meeting three years ago that we first forged the partnership that led to the Global Reporting Initiative and it is amazing to look back and see how far we have come.

This is the third time I have attended this event, and the first two
taught me a good deal about how industry associations work. Though the people are often pleasant and intelligent, they are structurally hindered by the design of their own organizations from thinking creatively about the future. Industry associations are, for the most part, defensive structures, designed to protect their members from change. Industry association executives must constantly take into account how all of their members will react, including the slowest, most recalcitrant performers. So when a new idea emerges — a new technology, a new law, a new development in international trade — industry associations are often the first and the loudest to say that it will be bad for their members.

That being said, industry associations are also important mechanisms through which information can be distributed, which is why UNEP is so careful to brief them on what is happening and why the association executives come. There are a few international business associations — Business for Social Responsibility, the Prince of Wales Business Council, and the World Business Council for Sustainable Development — that have taken a more proactive and positive role. And when I look back over the last three years, I have seen a significant shift in the tone of the meetings. Three years ago, when I raised the question of building consensus on reporting, the response at the Paris meeting ranged from curious to hostile. Last year when I made a presentation on the GRI, the comments signaled a kind of grudging resignation. “How soon do you think this will be mandatory?” was the first question I received. This year almost all the speakers have referred to the GRI in a tone that implies this is a positive and permanent part of the world scene. Some people are even excited about it and came up to me and to others with offers of help. I think that people’s concern about issues like climate change has also risen; it is almost impossible for anyone to say, as they more or less did three years ago, that this was the figment of some hysterical environmentalist’s imagination.

I am writing this segment of the diary in the late afternoon on the train from Paris to London. The impeccable farming country of northern France is racing past my window, leading me to ponder, once again, the idiocy of America’s abandonment of railroads. In a few minutes we will dart through the Chunnel and appear in England. This is only the second time that I have been through the Chunnel, and it still amazes me that one can take a train under the expanse of water that separated England and the continent for so many centuries.

(We have just popped into the dark of the tunnel.)

It also amazes me that I can use this six-pound piece of plastic to communicate with and to gather information about almost anyone. Indeed, this morning I spent a few minutes on the Internet collecting articles by and about Sir Geoffrey Chandler, the head of the business unit of Amnesty International in the UK with whom I am having dinner tonight. I have never met him before, but I’ve heard that he has a strong interest in human rights reporting by companies. I found one article by him that suggests there is important convergence in our views.

“The market only works effectively on what is measured,” he wrote. “Since at present this is only money, the market is essentially short term in its impact. If we had comparable standards for the measurement of the quality and development of the human resource, something of far more importance to the long-term success of the company, if we had measurement of the environmental and social impact, the market would operate on a different time-scale.”

This is another example of how the same idea is popping up everywhere at once. The real challenge is to figure out how all the people who are saying it can work together to make it a reality.