Example 5: Waste as a Material Issue
Source: Nissan Report.
2. The report includes description of waste management practices on how the company addresses waste issues. For example, waste management sites, the choice of waste management, i.e. landfilling or incineration. 62% of companies have disclosed information with regards to their waste management practices, the number still seems to be relatively low as arguably all companies should address waste issues. It may be noted that some sectors (Food, Apparel) more than others (Energy) report on waste.
Example 6: Waste Management
Source: Ford Report.
3. Describes how waste reduction contributes to cost reduction - few companies realize the grand opportunity that lies in efficient waste management. Depending on the sector, recycling or other forms of waste elimination may lead to substantial cost reduction. A potential explanation of this phenomenon is that companies are either unaware of the benefits of waste reduction or do not wish to disclose such information as 'cost savings' due to competitiveness with peers. 'The economic benefit of transitioning to this new business model is estimated to be worth "more than one trillion dollars in material savings" (Circular Economy Report, 2013). Only 8 companies (16%) from the sample mention how waste reduction has contributed to cost savings. Most companies are from the Apparel sector, a few from Auto and Food and none from Energy and IT sectors.
Example 7: Waste Reduction as Cost Savings
Source: General Motors report.
Example 8: Waste Reduction as Cost Savings
Source: GAP
4. Total volume of waste over years - many companies from the sample still fail to include such information. In addition, only a few companies present the related data in a comprehensive way clearly distinguishing the different types of waste for a number of consecutive years. The distinction should be made between the different methods of disposal, i.e. incineration, composting, reuse, recycling or other. 68% of companies have disclosed such information.
Example 9: Waste Figures
Source: Nike Report.
5. Reuse-Recycle-Recover is mentioned - implementing such practices is beneficial to the company's balance sheet resulting in lower costs for materials, processing and disposal as the materials are reused. Most waste minimization strategies emphasize prioritizing options for reuse, recycle and then recover. Particularly outstanding in this field are companies from the Apparel and the Auto sectors with all reports mentioning the reuse-recycle-recover management practices they have implemented in their operations. It should also be noted that this sub-criterion is the companies scored best at with 84% of companies reporting on the issue. All companies from the Auto, Food and Energy sectors mention this sub-criterion. Companies may not report well on their overall waste management but mention the reuse-recycle-recover approach that they have applied to products and not processes.
6. Hazardous waste mentioned separately - even though the EN 23 indicator specifically mentions hazardous waste separately from non-hazardous, many companies do not disclose such information. Hazardous waste should be defined by the national definition at the point of generation (GRI.4 Guidelines). Non-hazardous waste here implies all forms of solid waste, excluding wastewater. 64% from the sample have reported on the issue. All companies from the Energy sector report their non-hazardous waste.
Example 10: Treatment of Hazardous Waste
Source: BT Report.
7. Energy recovery from waste management - do reporters disclose information about how much energy was generated from the chosen waste disposal method? Often, if the reporter has established well-defined ways of measuring waste through reliable data collection processes and mentions that waste was disposed through incinerators, inclusion of data on energy generated from this activity is more probable. Most incinerators have some form of environmental controls and some type of energy recovery system. Only 24% from the sample have provided information on how much energy was recovered from waste disposal/management. Food sector is the top performer, which can be explained by the biofuels that can be produced from food waste. Surprisingly, not a single company from the Auto sector reports on this.
8. How waste management is addressed internally within the company - the sub-criterion focuses on the internal management within the company and whether employees are aware of the waste management policies. Do internal stakeholders receive training on waste management? Overall, 56% of the companies report on this sub-criterion, i.e. use employee engagement as a tool to deliver on a company's waste reduction targets.
9. Report mentions the circular economy concept - do the reports disclose information on how the company is part of the circular economy? Only 2 companies from the sample (i.e. Nike and BT) mention the concept. Lack of such information demonstrates that companies are not aware of the concept and its potential benefits.
Example 11: Circular Economy
Source: BT
10. Life cycle analysis is considered - as described earlier LCA is an integral part of good waste management. Not only does this factor imply the company's consideration of its supply chain (hence impact beyond direct operations) but it is also the first step to becoming part of the circular economy. Once the different stages of the product's lifecycle are identified, the efficient ways of performance at each step of the circular way of managing the entire value chain can then be established. 62% of companies describe the life cycle analysis. Auto sector is the top performer.
Example 12: Life Cycle Assessment
Source: Volkswagen Report.
11. Targets on waste reduction - inclusion of targets on waste demonstrates the company's long-term commitment to waste reduction and management. "Targets are specific and measurable performance goals or management actions that a company aims to achieve over a given period" (WBCSD, 2013). Only 52% companies have included targets on waste, which underlines the short-term focus that can still be widely observed in business today. It is important for the company to develop appropriate KPIs for each of the material issues identified, in particular for waste reduction.
Example 13: Targets on Waste
Source: Nokia
12. Report describes how the company is choosing better, i.e. not to landfill - here the particular focus is on landfilling, which can be viewed as the most unsustainable way of managing waste. 44% of companies explicitly express their commitment to either completely extinguish waste sent to landfills or considerably reduce it.
13. Specific chapter on waste - including a designated chapter entirely dedicated to waste shows the company's high consideration of the issue. Only 30% from the sample have included a comprehensive chapter on waste where the related instances are described in detail.
14. EN23 in GRI4 or EN22 in GRI3 - total weight of waste by type and by disposal method - do companies mention the indicator. One of the criticisms of GRI Guidelines is what their use means in terms of reliability of information presented in the NFR. Often, a company mentions the use of a particular indicator but only partially reports on the matter. For example, the company includes EN 22 in the GRI Content Index (please refer to Annex) but in reality it only reports the total weight of waste generated and does not make the distinction between the different disposal methods. 72% have referenced the indicator - normally if the company has used the GRI Guidelines it would report on waste in terms of EN23.
15. Photographic evidence of waste management practices - similar to the sub-criterion described for the materiality criteria, photographic evidence of waste management activities improves the report's overall transparency and credibility of disclosed information.
Table 10: The overall results for Waste Analysis by Sector
Source: Extract from Analysis
Overall, it may be observed that the Energy sector performs poorly on this criteria - it may be argues that the sector does not generate large amounts of waste in terms of its operations hence the poor performance. However, as mentioned previously all companies gen
erate waste, which should be reported. Overall, the Food sector is the top performer on most of the sub-criteria.
Table 11: Top Performers on Waste from Sample
Source: Excel Analysis
Top performers are from the Apparel, Food, IT and Auto sectors. Despite the IT sector performing worst overall, 3 companies are top performers - those that do report do it exceptionally well.
Chart 3: Distribution of Scores on Waste for all Companies
Source: Excel Analysis
The distribution of scores presented in the Chart 3 reflects, as with materiality, the great variability that exists today. With a few top performers and poor performers, the majority of companies has either obtained a score of 4, or the better performers at 7/8/9.
Table 12: Best and Worst Company Performers
Table: Excel Analysis.
Chart 4: Distribution of Scores on Waste by Sector
Source: Excel Analysis.
Arguably, the risks and opportunities that relate to waste may be divided into two blocks of issues. Firstly, the risks in terms of diminished productivity and inefficient use of resources. Not only does inefficient production implies waste of resources in terms of workforce, monetary costs and a waste of time but also waste in terms of natural resources. Secondly, the risks in terms of type of waste may pose a significant problem to the company, i.e. hazardous or non-hazardous type of waste.
Implementing a good waste management system would aid the company in redefining its strategy, objectives and the overall business model by focusing on how to diminish waste and eliminate inefficiencies.
Chart 5: Distribution of scores on materiality and waste by sector.
Source: Excel Analysis
One conclusion can be drawn as a general conclusion is that the two criteria in review do not appear to be correlated. A sound materiality process does not necessarily entail good waste management process and vice versa. For example, the Apparel sector reports well on waste but performs poorly in terms of the materiality mechanism in place. On the other hand, the Auto sector performs well on materiality but does not perform as well in terms of waste.
Limitations of Present Work
Having a larger sample would improve the quality of findings and correlations. Other sectors could be considered covering a wider range of geographical locations; it could benefit to also look at state-owned and non-listed companies to see if these demonstrate superior reporting vis-?-vis publicly listed companies. I have used a random sample but choosing the companies with specific requirements (exact size, location, GRI application level or such) may improve the research.
There are various rating systems and analytical methodologies that could have been used. The chosen method allowed me to rate the companies with regards to certain criteria. If the company reported on a particular sub-criterion it was given a 1, in case of absence of related information it would attain a 0. The difficulty experienced with this approach lies in the subjectivity of the distinction between 0 and 1. For example, the company mentions life-cycle analysis but does not describe it.
In addition, the ultimate aspect that may undermine the quality of this assessment is the release date of the sustainability reports in review. The time lag in issuing reports has been identified as an issue in various studies (WBCSD, 2013; Eccles and Saltzman, 2011). It has also come to my knowledge that some of the companies included in the sample have published a report as I was doing this analysis. However, it was crucial to identify the cut-off date at 30th of April 2014 to avoid delay of research advanceme. Review of newly published reports may have changed my findings, in particular in the case of McDonald's (14) that obtained the lowest scores due to the lack any information on materiality and very limited material on the waste policy within the company.
The use of an elevated number of sub-criteria could have improved the comparisons on the two particular criteria in discussion.
Recommendations
The only thing worse than being blind is having sight but no vision
Helen Keller
General
The trend is to integrate sustainability thinking into the company's philosophy, which should be reflected in the company's sustainability report by linking non-financial topics and financial performance of the company. Identifying the key issues through consideration of current global and market trends would aid the company to prepare for future risks.
Ultimately producing an integrated report will address most of the discussed problems and complexities with traditional financial or annual reports. Namely, an integrated report is focused on the company's most material issues and covers only the essential. This makes the report concise and ideally of a reasonable length - in comparison to the infinitely long reports that exist today (from my sample, Ford - 506 pages, Nestl? - 306 pages). The information covered is not just of financial nature but environmental and social issues are considered just as highly. The report should aim to describe the company's long-term approach with the ultimate goal of continuous value creation.
At the time there is no general agreement upon what constitutes Corporate Social/Sustainable Responsibility and consequently no widely accepted way of measuring such activities in the corporate context (Aras and Crowther, 2009). Consistency and comparability would be improved if companies used the same guidelines and frameworks when preparing a sustainability/integrated report. Just as with financial statements, non-financial disclosure should also be "prepared and presented at least annually and directed toward the common information needs of a wide range of users" (IASB).
In addition, it is proposed to develop a standard that would define the physical appearance and the basic sustainability content that should be included in the report. Not as a competition to the existing frameworks, but combining the key content from them. However, the challenge is to develop guidelines and identify the appropriate indicators that will help companies to produce such reports.
Materiality
Core to the definition of materiality is the notion that corporate information is material if its omission or misstatement would influence decisions made by general users of the information (Zadek and Merme, 2003). Materiality analysis implies a long-term view, a wider view and a deeper view.
Table13: Materiality Process
Source: AccountAbility, 2013.
Figure 2: Materiality Framework
Source: AccountAbility, 2013
Materiality may no longer be defined purely in terms of financial indicators but should include a wide range of issues affecting the 'multiple capitals' (15) or in other words the 6 capitals defined by the IIRC (financial, manufactured, intellectual, human, social and relationship, and natural. The capitals refer to the stock and/or flow of financial, human, social, natural, built environment and intellectual assets - the model of capitals incorporates the 'intangible' assets drawing a more complete picture of overall 'value' of business enterprise (Murninghan and Grant, 2013).
Figure 3: Materiality Framework
Source: GRI.4 Implementation Manual
Top Leadership Commitment
A key challenge for leadership is to make sustainability mainstream in their organization by integrating strategy, sustainability and control, establish values and ethics that underpin sustainable practices - governance, strategy and sustainability are inseparable. (The King III Report, 2009) It is crucial for the company to have good Sustainability Governance in place, an overarching Committee that monitors and directs sustainability-related activities within the company. The Sustainability Committee should be headed by the CEO and include board members (top leadership).
Issues Identification
Identification of issues relevant to direct short-term and log-term performance should take place. Determine the key aspects and any other relevant topics, and their boundaries, based on the impacts related to all activities, products, services, and relationships, regardless of whether these impacts occur within or outside the organization. Identify the marke
t and global trends as well as regulations that affect your business and influence material issues.
Stakeholder inclusiveness
Internal - identify the key employees from each department to be involved in the assessment process. Hold regular meetings and discussions constantly reviewing the major risks and opportunities for the company. Using ISO 14000 and ISO 26000 Standards define the appropriate management mechanisms and their development to be integrated across the entire company. Communicate regularly to raise employee awareness and spread the sustainability philosophy across the entire organization.
Internal Stakeholders: the workforce of the company.
Exploring Current Trends in Corporate Sustainability Reporting Page 4