Cory SearcyAssistant Professor, Ryerson UniversityAssociate, IISD

Laurence RocaMASc. Candidate, Ryerson

University

Background

Corporate SD Indicators in Canada

Study Overview

Results

Summary

How are corporate

sustainability indicators used

in practice?

Many corporations have made commitments to apply the principles of sustainable development to their operations The hardest part about SD is actually applying it in practice

One of the keys to understanding corporate SD is performance measurement Fundamental to this task is the creation of SD indicators

Sustainable Development Indicators Signs, symptoms, trends, or warnings that identify relationships

based on defined parameters Show the presence, absence, or threats to SD Roles: measure progress, communicate, educate, understand

interdependencies, and inform decisions

Numerous Canadian corporations have included SD indicators in their publicly available SD reports A review of the GRI website and CorporateRegister.com

showed that 95 Canadian corporations published a SD report or equivalent in 2008

Many of these reports included an indicator “scorecard” near the beginning of the report

A content analysis of the 2008 Canadian reports highlighted: A total of 227 indicators were reported (157 were used

once, 35 were used twice, 13 were used three times) The most reported indicators were:

Total employees 30 GHG emissions 14

Fundings, donations, sponsorship and community investments

25 Lost time injury frequency 11

All injury frequency 20 Total production 11

The purpose of this study was to explore the use of SD indicators in corporate strategic management. Focus was particularly devoted to three areas: Board-level decision-making Corporate strategic management Supply chain management

The study consisted of three key phases: A survey of relevant literature A content analysis of 17 corporate SD reports Interviews with 15 Canadian experts

The literature review focused on both peer-reviewed publications and internet reports published since 1987

Key areas of focus in Board-Level Decision-Making: SD indicators, corporate governance, and performance measurement

Key areas of focus in Corporate Strategic Management: Corporate SD (and related) indicators, sector-specific SD indicators,

Balanced Scorecard, composite indices, and integration

Key areas of focus in Supply Chain Management (SCM): SD indicators, green procurement, ethical sourcing, life cycle

assessment, and sustainable SCM

There is relatively little literature that specifically focuses on the use of SD indicators in the three areas of interest.

There is relatively little literature that specifically focuses on the use of SD indicators in the three areas of interest.

The review focused on the Canadian companies listed on the Dow Jones Sustainability Index (North America) 19 of the 118 companies listed were Canadian

Industries represented in the sample: Financials: 8 companies Oil and Gas: 5 companies Telecommunications: 2 companies Basic Materials, Industrials, Utilities, and Technology: 1

company each

All but two of the companies provided a SD (or related) report on their website The most recent SD report was reviewed

The review in this area focused on four key questions:1. Chairperson of the Board Statement: Did the report contain a

formal, signed statement from the Chairperson of the Board of Directors?

2. Governance Structure: Did the report provide a description of the role of the Board in the governance of the corporation or reference to such a description available on the corporate website?

3. Board Committees: Did the report identify specific Board Committees responsible for environmental and social issues?

4. Use of Sustainable Development Indicators: Did the report specifically describe how indicators are used at the Board level?

Chairperson of the Board Statement: Only one report contained a formal statement from the Board

chair Two other reports contained a brief message or quote from the

Board

Governance Structure: All but one report contained details on the governance structure

Board Committees: 59% of the reports contained some detail on how SD issues were

addressed at the Board committee level Several corporations created a distinct committee to address SD

(or related) issues, while others incorporated SD in existing committees

Use of SD Indicators: None of the reports specifically described how indicators were

used, but there were limited examples on how SD information was shared with the Board

The review in this area focused on five key questions:1. Top Management Statement: Did the report contain a formal,

signed statement from the Chief Executive Officer (or equivalent)?

2. Measurements of Sustainable Development Performance: Did the report contain sustainable development indicators? Were economic, environmental, and social issues addressed by the indicators?

3. Clear Targets: Did the report contain explicit targets for the SD indicators that were highlighted in tables or figures?

4. Forms of Measurement: Did the report contain any reference to (1) the Global Reporting Initiative, (2) the Global Compact, (3) the Balanced Scorecard, and/or (4) composite measures?

5. Use of Sustainable Development Indicators: Did the report specifically describe how sustainable development indicators are used in corporate strategic management?

Top Management Statement: All of the reports contained a statement from top management

Measurement of SD Performance: All of the reports contained some measures relevant to SD

performance Most reports addressed all three pillars of SD, but the number

and types of measures varied widely

Clear Targets: Many of the reports acknowledged the importance of targets in

the text 35% of the reports clearly reported on progress towards

targets for clearly identified performance indicators

Forms of Measurement: 82% of corporations reported on at least some of the GRI

indicators 29% reported a commitment to the Global Compact 18% referenced the Balanced Scorecard 35% reported on some form of aggregated measure, though

in no cases was a comprehensive composite indicator reported on

Use of SD Indicators: Limited details on the use of indicators were provided in 4

reports There were also numerous statements focused on integrating

SD considerations into the decision-making process

The review in this area focused on three key questions:1. Supply Chain Management Strategy: Did the report

contain a description of, or reference to, the corporation’s supply chain management strategy?

2. Supply Chain Management Performance Measurement: Did the report contain indicators on the corporation’s management of its supply chain?

3. Use of Sustainable Development Indicators: Did the report specifically describe how sustainable development indicators are used in supply chain management?

Supply Chain Management Strategy: 82% of reports provided some details The reports generally focused on the incorporation of SD

criteria into the supplier selection process, supplier compliance with corporate codes of conduct, and descriptions of corporate procurement policies

Supply Chain Management Performance Measurement: 88% had some form of measurement relevant to the supply

chain

Use of SD Indicators: Only one corporation provided explicit insight into how SD

indicators are used in its supply chain

The interviews focused on Canadian experts in corporate SD

15 experts were been consulted: 6 corporate experts (current or recently retired directors &

managers) 2 professors 2 auditors of corporate SD reports 5 other consultants

The interviews were conducted over the telephone, with calls ranging from 30 – 90 minutes To provide some structure, several standard questions were

developed

1. In your experience, what is the primary motivation for companies undertaking SD initiatives?

2. To what extent do you see PM and reporting as a key lever in both improving corporate performance and meeting societal outcomes?

3. In your experience, how are SD indicators being used in corporate strategic management?  Can you provide any examples?

4. In your experience, how are SD indicators being used in supply chain management?  Can you provide any examples?

5. Are you aware of any corporate Boards that use SD indicators to inform their decisions?  Can you provide examples?  

6. How could the use of indicators in Board-level decision-making, corporate strategic management, and SCM be improved?

7. What areas do you see for future work in SD measurement and assessment?  What key challenges do you anticipate in these areas?

A wide variety of motivations were cited by the experts

Some of the key motivations cited included: Corporate reputation Brand value Risk management Cost savings Recruitment and retention of employees Competitive pressures

Many experts noted the motivation can change over timeThe expert answers generally align with what has been

reported in the peer-reviewed literature

The expert answers generally align with what has been reported in the peer-reviewed literature

The majority of the experts consulted noted that performance measurement (PM) is a key lever in improving corporate performance and meeting societal outcomes PM is at the heart of getting corporations to change PM is a key to focusing the attention of senior management PM plays a key role in corporate accountability

Several experts cautioned that PM alone is not enough PM must be integrated into a broader information

management system that encompasses data management and reporting

There can be misplaced emphasis on PM

The views expressed by the experts were mixed Most felt that Boards do consider SD information, particularly

from a risk management perspective

There were different views on how the Board considers SD information Formation of Board committees Internal quarterly reporting processes Importance of indicators will vary by sector: e.g. GHG

emissions

Although the Board may have a great deal of interest in SD issues, this is not necessarily being captured by indicators There were few concrete examples on how Boards consider

SD indicators beyond Health and Safety indicators and GHG emissions

The experts felt that senior management in most large corporations have access to at least some SD indicators This is generally reflected in top management approval

of SD reports, integration of SD issues with the Balanced Scorecard, and other initiatives

There were few concrete examples on how SD indicators are used in practice In one corporation, the CFO received SD indicators (along

with more traditional financial indicators) on a regular basis

In another corporation, the indicators are regularly reviewed and discussed in directors meetings

In general, the experts expressed that there is less emphasis on quantitative performance measures in this area There are some exceptions, such as such as for safety

indicators when hiring contractors

The experts noted that SD issues are on the radar of SCM, but are not generally driven by indicators Typical areas of corporate focus include codes of

conduct, green procurement policies, or requiring suppliers to achieve recognized certification (such as ISO 14001)

Many suggestions for future work were provided by the participating experts

Some suggestions focused on SD indicators: Improve data management and control capabilities Study the processes and contexts in which decisions are made Focus on indicators that are useful in management decision-

making Focus on linking indicators to clear targets, including broader

public policy goals

Some suggestions focused on SD reports: Develop and apply standards for independent verification of

reports Renew study on what information and indicators should go in

reports Study how the information in reports is used in practice Enhance the GRI sector supplements Increase the visibility of SD info (e.g. carbon facts similar to

dietary facts)

Work on corporate SD indicators is abundant and growing rapidly

This ongoing pilot study focuses on the use of SD indicators in three key areas:1. Board-level decision-making2. Corporate strategic management3. Supply chain management

Despite many commendable efforts, work remains