As “green” efforts enter the mainstream, businesses worldwide are under increased scrutiny to become more socially responsible, as well as environmentally conscious, while meeting investor expectations for financial performance. Getting there means managing the “triple bottom line”1 of your business
Also known as “sustainability,” the triple bottom line describes a company's environmental, social and governance (ESG) management approach. The idea is to balance the needs of people, the planet and the company's profits to create long–term shareholder value. Because of the depth of data, systems infrastructure and enterprise–wide visibility required to create a triple bottom line, the CIO is perfectly situated as the sustainability champion.
In ever increasing numbers, corporations, government agencies, universities and even cities are compelled to develop and report on key performance indicators around sustainability. The pressure to report on sustainability comes from all sides: the financial community, customers, employees and government regulators.
While sustainability reporting is currently voluntary, many believe mandatory disclosure is inevitable2 Already, thousands of corporations around the world engage in sustainability reporting. Ernst & Young research shows that more than two–thirds of the Fortune Global 500 publish some form of sustainability or corporate social responsibility (CSR) report.3
In addition to the external pressures to institute a sustainability reporting program, there are also significant benefits to creating better internal processes and controls to gather and analyze ESG data.
According to Ernst & Young, these include better measurement of the organization's triple–pronged bottom line, greater stakeholder trust, improved risk management and increased operational efficiency.
Sustainability reporting programs are influenced by the Global Reporting Initiative (GRI) and the integrated report.
Global Reporting Initiative (GRI)
The GRI is a main point of reference for corporate sustainability reporting. This voluntary, non–proprietary initiative has developed content and quality principles, standard disclosures and a set of 79 reporting parameters to guide organizations in developing programs to measure corporate performance on sustainability. The GRI's guidelines are grouped into the three commonly accepted categories that define sustainability: economic, environmental, and social (including labor practices, human rights, impacts on society, and product responsibility).
In addition to fast becoming a commonly used framework for sustainability programs the GRI has caused a multiplicative effect, since major companies adopting GRI reporting often ask suppliers to report on similar indicators.
Fig 2:GRI Performance Indicators.
The “Integrated” Report
Another factor is the mounting pressure on organizations to report on data showing their environmental, economic and social impacts, their progress toward these goals and areas in which they still have work to do. According to Dr. Robert Eccles, professor of management practice at Harvard Business School and co–author of One Report: Integrated Reporting for a Sustainable Strategy, this type of reporting is increasingly expected to be integrated in one single “integrated” report that combines financial and non–financial performance information.
These integrated reports – which may supersede annual reports that include just financial data – are not static documents but instead leverage Web 2.0 technologies to provide stakeholders with analytic tools, more detailed information and an opportunity to engage with the company.
The Role of the CIO in Enabling Sustainability
CIOs are uniquely positioned to drive corporate sustainability initiatives and could even function as sustainability champion in companies without a chief sustainability officer. For one thing, IT already owns a healthy piece of responsibility for the company's environmental impact – and many CIOs have already steadily worked to successfully reduce IT's carbon footprint. IT also has a cross–functional view of the organization and understands how to optimize business processes and lead organizational change management necessary for launching a sustainability program.
Most importantly, since the effort requires a significant amount of information gathering, IT is perfectly positioned to support the business in choosing the foundation and tools for sustainability reporting and tracking.
Sustainability programs require new frameworks, strategies, technology foundations and reporting and tracking tools, in which IT must be integrally involved in selecting. IT has a vital role in supporting organizational efforts to gather information about sustainability from internal and external sources, create collaborative capabilities, set targets and track progress against these goals.
IT's role in a corporate sustainability program falls into two categories of activity: Plan the platform and tools for the initiative and analyze and improve the company's sustainability performance.
- Category 1: Develop the integrated technology foundation that collects, analyzes and reports on core sustainability information for GRI reporting.
IT can lead the effort to identify a subset of GRI indicators the company is going to track. In some cases data exist, and it's a matter of pulling it together in a reporting format. But other data may not exist, such as the case of occupational/health and safety data or carbon reporting.
Because sustainability reporting is not a one–time event but at least an annual endeavor, applications need to be developed that automate data collection and capture of these indicators. Captured data need to be rolled up into a centralized platform, and analysis and reporting tools need to be disseminated for key stakeholders to set targets, track efforts and report. Real–time monitoring, reporting and analysis will require sophisticated sensing and database technologies.4
- Category 2: Analyze and improve the company's sustainability performance.
IT can also play a lead role in improving corporate sustainability performance to ensure the long–term economic success of the enterprise. The commitment to doing this should start at the highest level of the organization, with sustainability becoming integrated into the corporate strategy, which is supported by the overall IT strategy.
Fig 3:Sustainability Reporting Systems Architecture.
In the end, sustainability represents a significant opportunity for the CIO. Particularly in organizations where a program has yet to begin, CIOs should consider taking this role until the company has sustainability embedded in all of its core business processes and no longer needs to be flagged as a separate initiative. Corporations can play a leading role in creating a more sustainable society, and CIOs have it in their power to ensure they can do so.
Read the full white paper, Beyond Green: The Triple Play of Sustainability (PDF) or learn more about how CIOs can become Chief Sustainability Officers for their organizations.
1 Wikipedia definition, “triple bottom line,” http://en.wikipedia.org/wiki/Triple_bottom_line
2Steve Lydenberg, Jean Rogers and David Wood, “From Transparency to Performance,” The Hauser Center for Non-Profit Organizations at Harvard University, May 2010.http://hausercenter.org/iri/wp-content/uploads/2010/05/IRI_Transparency-to-Performance.pdf
3 “Seven Questions CEOs and Boards Should Ask About 'Triple Bottom Line' Reporting,” Ernst & Young, 2010.
4 “A Workshop on Integrated Reporting: Frameworks and Action Plan,” Harvard Business School, October 2010.