24 posts categorized "Fronesys"

28 June 2013

Fronesys apprentice hired by think tank

Apprenticeships are all the rage in policy circles, but do they work in a start-up company like Fronesys? Jyoti Banerjee reflects on the first apprenticeship at Fronesys.

As a company doing work in the areas of youth unemployment and digital skills, we are conscious that so many young people with great potential are currently missing out on jobs. So when we had the chance to recruit our very own apprentice, we were keen to find out if real-world experience in an advisory service like ours would make a difference in the search for jobs.

We are pleased to report that Dan Johnson, our first apprentice at Fronesys, has just been signed up by the Institute of Business Ethics, an organisation focusing on corporate behaviour. Dan came to us with a business degree and a Master's Degree in Sustainability from Nottingham University. He had also won an award from the Institute of Chartered Accountants in Scotland (ICAS) for the best student essay on integrated reporting, a subject close to our hearts.

So we figured he knew a thing or two.

But nobody would give Dan a job. His work experience in a local church and in a ski resort had been richly rewarding but had not given him any relevant job experience when it came to the kind of work he was seeking.

As a start-up ourselves, we knew that Dan would get exposed at a deep level on our projects. In his first two months, Dan worked on a digital skills project for a major telco, the economic case for a proposed Smart Cities implementation, and did research into corporate behaviour. Something must have clicked at his next job interview because he came back with a job offer.

Dan, we are sorry to see you go, but pleased that you have the opportunity to get an excellent job. We like to think that your time with Fronesys helped make the difference.

Need to start thinking about a new apprentice...

03 June 2013

Fronesys in winning consortium for WRAP framework contract

Fronesys is pleased to announce that our consortium (Fronesys and its partners Advancing Sustainability, as consortium leader, and Sustain) has won a WRAP Framework Contract (FRA052 Resource Efficiency in Products) through which we can provide a tailored support package advising on a range of issues from accessing finance to marketing and business strategy. WRAP logo

WRAP (Waste & Resources Action Programme) is a not-for-profit private company backed by funding from the Department for Environmental Food and Rural Affairs, the Scottish Government, the Welsh Assembly Government, the Northern Ireland Executive and others.

In this area, Fronesys focuses its work on:

  • reducing waste
  • driving greater resource productivity
  • positioning UK businesses to better address emerging resource security/scarcity issues in the future
  • helping reduce the environmental impacts of our production and consumption in both the UK and abroad
  • 19 September 2012

    ITU launches sustainability toolkit ... with some help from Fronesys

    This week the International Telecommunications Union, the UN body tasked with setting standards in the technology sector, is launching an environmental toolkit aimed at helping ICT companies manage their sustainability performance. Fronesys was glad to help ITU get the toolkit together.

    Over fifty tech companies from around the world contributed to this toolkit. We made a significant contribution of our own: we wrote two of the seven documents in the toolkit, and edited the whole effort.

    There is no shortage of standards, guidelines and tools targeting the sustainability performance of the technology sector. Why do we need another one? The problem with existing material is that none of it is comprehensive in coverage of all the major activities of an ICT organisation. And most are not practical in allowing the integration of regulatory compliance, good practice and business performance. This toolkit aims at just such a balancing act.

    The Smart 2020 report found that the full life cycle carbon footprint of the ICT industry represents around 2% of worldwide emissions, and is projected to grow at a 6% annual compound growth rate. Although the sector’s emissions are rising, its largest influence is expected to be through enabling increased energy efficiencies and improved environmental performance in other sectors.

    A significant challenge for ICT companies is that in enabling better environmental performance elsewhere, the ICT sector is itself taking on significant burdens, at a time when there is greater scrutiny applied to environmental performance, and, often, at much greater cost. As a result, it is important for ICT organizations to use sustainability actions to drive their own business performance, while being more responsible corporate citizens.

    Toolkit content

    The Toolkit on Environmental Sustainability for the ICT sector is an ITU-T initiative which provides plenty of detailed support on how ICT companies can build sustainability into the operations and management of their organizations, through the practical application of international standards and guidelines.

    The basic components of the toolkit are a number of individual documents, each covering a separate area, as follows:

    • Introduction to the toolkit
    • Sustainable ICT in corporate organizations, focusing on the main sustainability issues that companies face in using ICT products and services in their own organisations across four main ICT areas: data centers, desktop infrastructure, broadcasting services and telecommunications networks.
    • Sustainable products, where the aim is to build sustainable products through the use of environmentally-conscious design principles and practices, covering development and manufacture, through to end-of-life treatment.
    • Sustainable buildings, which focuses on the application of sustainability management to
      buildings through the stages of construction, lifetime use and de-commissioning, as ICT companies build and operate facilities that can demand large amounts of energy and material use in all phases of the life cycle.
    • End-of-life management, covering the various end-of-life (EOL) stages, and their
      accompanying legislation, and provides support in creating a framework for
      environmentally-sound management of EOL ICT equipment.
    • General specifications and key performance indicators, with a focus on the matching environmental KPIs to an organization’s specific business strategy targets, and the construction of standardized processes to make sure the KPI data is as useful as possible to management.
    • Assessment framework for environmental impacts, explores how the various standards and guidelines can be mapped so that an organization can create a sustainability
      framework that is relevant to their own business objectives and desired sustainability performance.

    Each document features a discussion of the topic, including standards, guidelines and methodologies that are available, and a check list that assists the sustainability practitioner make sure they are not missing out anything important.

    Although the toolkit is wide-ranging and designed to help improve business and sustainability performance, some companies may decide that they cannot afford to use such tools, particularly in the light of a negative business outlook. This document explores why companies cannot ignore their sustainability performance if they seek superior financial performance.

    Finally, the document covers how the toolkit may mature and develop in future, through extending its scope, deepening its metrics, lowering the questionnaire burden on ICT companies, and through the provision of an implementation program to enable national regulators, policy-makers and individual ICT organizations to use the toolkit to achieve their own objectives.


    Most obviously, this toolkit is aimed at the leaders and managers of technology companies. It gives them a single framework covering all their major environmental impacts so that they can deliver their business objectives while meeting best practice guidelines and complying with standards and regulations.

    However, the scope should also be interesting to policy-makers who want to consider the breadth and scope of regulations they wish to put in place with respect to the ICT companies operating in their jurisdiction. And it is potentially interesting to researchers as a basis for carrying out sectoral, national and international studies on the environmental impacts of the technology industry.

    Wondering how to take advantage of the toolkit in your own organisation? Fronesys can help. After all, we are quite expert with this toolkit! We can offer you a targeted assessment assessing how you manage your environmental impacts, and how the toolkit can help improve your performance. Get in touch.

    05 September 2012

    Circular economy: will the tech industry ever learn?

    In the face of planet-wide resource depletion and huge volatility in raw material pricing, it is time for the circular economy. The tech industry is well-placed to make this move. But will it? Fronesys in in discussion on the issue with the International Business Leaders Forum (IBLF).  

    At a time when the arrival of a new phone from Apple promises to create an intense cycle of device replacement among millions of consumers across the world, it is worth asking whether such a cycle of economic activity - make, sell, use, throw away - really makes sense. Does it deliver value to the tech industry making products that are intensive in their raw material usage but short-lived? Does it make sense to the consumer who often throws away a perfectly usable product in search of product nirvana as espoused in global media advertising?

    Business-as-usual (BAU) growth of ICT hardware and services is being driven by a combination of:

    • technological momentum, including ever increasing demand for communication bandwidth, access to sophisticated data sets, storage and computing power
    • the growth of the middle class in emerging economies.

    Such ubiquitous connectivity brings with it many benefits, but also a number of dis-benefits. Market forces will naturally drive many of the benefits (social, economic and environmental), but the ICT industry can do much to address additional benefits that will not arise as a matter of business as usual, as well as responding to the negative sustainability impacts that result, directly and indirectly, from their operations and value chains.

    Circular thinking

    As the Ellen MacArthur Foundation laid out in its recent report, Towards the Circular Economy, "The call for a new economic model is getting louder. In the quest for a substantial improvement in resource performance across the economy, businesses have started to explore ways to reuse products or their components and restore more of their precious material, energy and labour inputs. The time is right, many argue, to take this concept of a ‘circular economy’ one step further, to analyse its promise for businesses and economies, and to prepare the ground for its adoption."

    The current economy is essentially linear: remove materials from the planet, make a product, use it, throw it away. While some recycling does take place, for many materials, including some very scarce ones, it remains the exception rather than the norm. Driving efficiencies into the linear economy (for example, lower cost manufacturing) has actually made it increasingly difficult to repair and reuse products.

    The Ellen MacArthur Foundation report concluded that adopting a more circular economy approach, whilst being disruptive to many existing business models, actually offers a significant business opportunity. In Europe the report found even partial adoption of circular economy principles could provide a net material cost saving opportunity of up to USD 630 billion per annum. In China, concerns surrounding resource scarcity led to the adoption of a Circular Economy law in 2009.

    "Instead of the goal of maximum linear growth in GDP," said Ian Cheshire, CEO of Kingfisher / B&Q, "we should be thinking of maximum wellbeing for minimal planetary input. That starts to challenge business to go beyond efficiency gains, useful though they are, and really redesign their business models. The wellbeing challenge also forces us to think about our total impact as a business rather than the narrow shareholder value lens, since businesses that do not create broader social value will again not survive the longer term."


    The technology industry could be (or arguably should be) at the vanguard of the circular economy for a number of reasons:

    1. It is dependent on a number of scarce materials and is exposed to availability constraints and price volatility.

    2. ICT equipment often becomes obsolete long before it fails – in fact the industry has often been accused of built-in obsolescence.

    3. The ‘cloud’ is already offering ‘infrastructure as a service’ (IaaS) – typical of the new business model thinking surrounding the circular economy.

    4. ICT applications will underpin information systems for reverse logistics, remanufacturing and material recovery - all critical to the circular economy transition.

    As Gavin Pattersion, chief executive of BT Retail pointed out, "Digital technology will play a crucial role in providing the information needed to create iterative logistics and restorative systems". In agreement with this view was Chris Dedicoat, president, EMEA, Cisco: "The Circular Economy is a blueprint for a new sustainable economy, one that has innovation and efficiency at its heart and addresses the business challenges presented by continued economic unpredictability, exponential population growth and our escalating demand for the world’s natural resources."

    So what sort of impacts should we see if the Circular Economy were to work in practice?

    • New business models
    • Using the circular economy model as a tool to drive improvement and innovation
    • Application of ICT as an enabler of the circular economy
    • Increasing levels of reuse and remanufacture
    • Addressing obsolescence
    • Collaboration across the industry to drive action
    • Minimising risk exposure to critical environmental factors such as resource scarcity

    Such thinking may not help Apple's new iPhone 5, but surely we must put the mechanisms in place so that the iPhone 6 and its peers from across the industry offer a new social contract between the tech industry and the consumer.

    Want to chat further? Get in touch with Fronesys and the IBLF.

    20 August 2012

    What happens to the lost generation?

    Fifteen million people between the ages of fifteen and twenty four are out of work in North America and Europe at the moment. Italy and France have 25% youth unemployment while, in Spain, 45% of the young people are jobless. At these levels, there is grave potential for structural unemployment, giving rise to fears for a “lost generation.” Fronesys has been discussing these issues with the International Business Leaders Forum (IBLF).

    This note explores the challenge of structural unemployment among youth, and asks if the opportunities afforded by technology, such as social, mobile, cloud and big data, may provide an avenue by which these young people may find viable economic and social engagement.


    Youth unemployment is currently very high, but another key problem is that young people are likely to be the last to find employment after the recession. Research indicates that prolonged periods of unemployment can have lasting effects on career prospects, as skills and education quickly become dated.

    While technology has created many new types of jobs, some jobs will never return. Secretaries, file clerks, book-keepers, telephone operators and bank tellers – scores of such white-collar jobs have been rendered nearly extinct by the introduction of intelligent technology. Many companies produce as much as before, or more, with fewer people, thanks to a focus on efficiency, which often replaces expensive, less reliable humans with cheap, consistent machines.


    There are a number of reasons why we might be interested in youth unemployment, and ask if there are drivers for change.

    Thanks to the Internet, which provides a global medium for collaboration, and an unprecedented level of social connectivity, businesses, governments and society-at-large have powerful new tools for reinventing institutions around a new set of organising principles for the 21st century. These tools are built around the confluence of the tech mega trends: mobile, social, cloud and big data.

    The nature of business and work itself is changing. The key differentiator between old and new business models is networked collaboration, a profoundly new approach in orchestrating capability to innovate, create goods and services, and solve problems.  Social networking could morph into social production, where self-organising groups of peers can design and make products and services, and tackle major societal problems.

    Across the Middle East, the so-called Arab Spring is an example of networked collaboration across millions of young Arabs which led to the toppling of decades-old dictatorships. We have only begun to tap into the potential of networked collaboration. Technology can enable engagement at all levels, from improving local public services, to online peer education, to internationally-coordinated action on climate change. Technology has the potential to transcend geographical, social and cultural boundaries to bring new opportunities for young people to engage in business and society.

    Further, the “lost generation” is composed of digital natives with skills that could be helpful to regions where the digital economy is only just beginning to take root, such as Africa.

    How should the ICT industry respond?

    • Can the power of networked collaboration enable more people from more regions of the world to connect, collaborate and compete on a global stage?
    • Can young digital natives build these opportunities if they are not actually in employment at the time?
    • Could the power of networked collaboration offer them the means to engage meaningfully economically today, while driving the entire global economy towards more distributed forms of business?
    • Does entrepreneurship create a different dynamic from employment? Will this generation of digital natives want to be entrepreneurs instead of employees?

    Industry Leadership

    The ICT industry provides the technological basis for networked collaboration, so it has a unique opportunity to take the initiative in enabling this “lost generation” to engage; this may even be a growth opportunity waiting to be exploited.

     What would a responsible, proactive framework look like in this context? We suggest it will include:

    • Understanding the way in which lateral business ventures, covering social commons and marketplace, compete with the traditional business model
    • Understanding, and engaging with, stakeholder expectations, including those from government, NGOs and business leaders
    • Exploring ways in which “lost generation” output could be used to further the introduction of the digital economy into places where it is currently nascent, such as Africa.
    Want to talk further? Get in touch.

    20 June 2012

    Rio+20: Action, please, on sustainability reporting

    Bloomberg reports that 75% of over 20,000 companies worldwide do not report their sustainability impacts. As a result, such impacts have minimal effects on the practice of incorporating sustainability data into company valuations. Rio20

    The Rio+20 meeting is already at the receiving end of dampened expectations about what global heads of state will actually commit to doing. They can make a start by commiting to a UN agreement on sustainability reporting. Aviva Investors has pulled together a group of 70 organisations to support a statement on this. Fronesys is pleased to add its support to the group which also includes UNPRI, GRI, ACCA, Ceres, WWF-UK and UNCTAD.

    The letter says this:

    As heads of state gather for the Rio+20 meeting it is important to focus on practical and meaningful action that will benefit us all.

    Investors have a vital role to play in ensuring a sustainable future for our world.  But how can we make informed investment choices if basic information on sustainability is lacking?

    That’s why Aviva formed a group to call for a significant change in corporate reporting. The group believes that the changes we’re calling for will have a positive impact on the sustainability of the planet and ensure the quality of life for our children and future generations.

    At the moment 75 per cent of companies* do not report on sustainability issues, limiting the ability of markets to integrate sustainability into company valuation.

    We are asking participants at Rio+20 to commit to developing a UN agreement on sustainability reporting so that we, as investors, can help guide the world towards a sustainable future.

    This UN agreement would be a commitment by member states to develop regulations, codes or listing rules to encourage [require] the integration of sustainability issues within the annual reports of all listed and large private companies.

    Corporate sustainability disclosure would be on a “report or explain” basis.  We recognise the need for flexibility so an opt-out for companies that choose not to prepare a sustainability report could exist.  However, these companies would be required to explain their reasons to their stakeholders.

    Without this agreement it could be years before sustainability reporting is common practice across global markets. An international convention would level the playing field and engage more companies on the path to business sustainability.

    The scale of support among investors for this idea is extraordinary. Managers representing US$2 trillion of people’s savings have come together to ask for this convention. They are backed by investor groups representing more than US$50 trillion of assets.

    We believe that disclosure is in all companies’ interests. Reporting is one of the most important catalysts for changes that contribute to the long-term health of a business. The world now needs to move from the pioneering approach of a minority of companies to a global benchmark of best practice for all companies.

    We call on governments internationally to support our proposals which, if adopted, could be one of the most significant and practical outcomes of the Rio+20 Summit.

    01 May 2012

    Welcome to Fronesys


    28 March 2012

    Common and not so common sustainability themes

    How can companies and stakeholders easily identify those sustainability issues that are hot and those that are not? Fronesys offers a materiality hit parade. Materiality Futures cog image

    The sustainability press today is filled with coverage of a wide range of non-economic issues and impacts that companies have to pay attention to.  But which of these issues do companies believe to be material to their performance, and which are not?   

    To answer this question, Fronesys analysed sustainability reports from 31 different companies, as published in Materiality Futures, our coverage of where the art and science of materiality reporting has got to.  In this report, authored by Chris Tuppen, we found that the 31 companies in our study referenced nearly 140 sustainability issues between them, covering economic, governance, environmental, social and global trends. 

    Before we examine the sustainability issues in question, we should lay out how we chose which companies to include in our analysis. Remember, the study was about materiality reporting, and so our goal was to identify all those companies that met the following criteria:

    • they published a materiality matrix of the sort laid out AccountAbility's Materiality Report, a methodology subsequently adopted as the basis of the related Global Reporting Initiative (GRI) technical protocol on report content.
    • their materiality matrix had at least three degrees of granularity per axis ( the way most companies present their materiality matrix, the vertical axis usually represents the stakeholder, and the horizontal axis the company)
    • individual issues are identified and positioned on the matrix

    As a result of sifting through sustainability reports via corporateregister.com, Framework:CR materiality analysis, and internet search engines, we found only 31 companies actually met our criteria. Although many companies respond to GRI indicator 3.5 and say they use a materiality determination process, relatively few disclose much detail on either the process or the determined level of materiality for individual sustainability issues. Note that this analysis covers sustainability reports published before August 1, 2011.  A full list of the 31 companies is available on the Fronesys website.

    Although we could simply list the 140 or so issues that crop up via the reports of these 31 companies, we can understand their significance better if we explore some metrics:

    • number of companies covering the issue
    • average, minimum and maximum scores on the company axis
    • average, minimum and maximum scores on the stakeholder axis

    To prevent the analysis from being clouded by issues that are important to just one or two companies, we did a further sift to exclude issues that were not featured by at least five different companies, and found that 50 issues met this additional filter. 

    Hit parade

    So which are the top sustainability issues? 

    Here's a table that lays out the top six sustainability issues, based on a sum of the average score from a company perspective and the average score from a stakeholder perspective:

    Top Sustainability Issues
    Source: Fronesys Materiality Futures report, 2011

    So if the top sustainability issues in company materiality reporting are sustainable products, carbon footprints, economic development / emerging markets, etc, etc, which are the ones that are bottom of the pile? Well, here's the bottom six, using exactly the same methodology as above:

    • Work/life balance
    • economic contributions, including tax
    • volunteering
    • freedom of association
    • biodiversity
    • senior executive remuneration

    It is not that these are unimportant issues. After all, biodiversity, for example, featured on the materiality matrix in 19 separate companies, the most commonly cited issue after climate change and diversity.  Yet it is not rated highly as a material issue, either by companies or stakeholders. It is almost like they don't know what to do with the issue - but that would be the topic of another blog altogether.

     Overall, it is very useful to get a view of what issues are actually making their mark on corporate managers - one has to assume that the more public the statements about materiality get, the more companies need to act (and be seen to be acting) to manage these impacts.

    Maintaining such a Top 50 list could be a useful service to the players in the market: companies can compare their own analyses with those of their peers, while stakeholders get a list of which issues are cooking and which need more attention. 

    Here's to more material number-crunching. 

    21 February 2012

    Knowledge is power: the case for a new reporting model

    Company reports often fail to take into account the key issues that are now crucial for future business success, write Cary Krosinsky & Jyoti Banerjee.  Cary book pic

    Today's corporate reporting model is no longer fit for purpose. It is dominated by a compliance mindset, with an inordinate focus on technical matters rather than the strategy of the business. 
    It is so separated from internal reporting that boards are unable to engage with it for their own work and the accompanying governance model is more about lists and tick-boxes, according to Paul Druckman, chief executive of the International Integrated Reporting Committee (IIRC), which is tasked with creating the integrated reporting framework. 

    At the same time, increasing numbers of investors are concerned about the risks to their portfolios from sustainability factors. These include environmental issues, starkly illustrated by the Gulf of Mexico oil leak’s impact on BP and the current woes of Tepco, operator of the earthquake and tsunami-hit Fukushima nuclear plant. Elsewhere, governance questions have had serious impacts on companies such as the now-defunct investment bank Bear Stearns and scandal-hit forestry group Sino Forest, while social risks have caused companies such as Apple to suddenly feel compelled to publish their complete lists of suppliers. 

    “Currently there is sole focus on the financial aspects of a business, both in reporting and in investment methods,” says the IIRC’s Druckman. “There is a lack of strategic focus in corporate reporting, even though boards and investors are strategic in their own thinking and activities – clearly, the current reporting model serves neither.”

    Investors plough on without information

    Yet despite being not fit for purpose, corporate reporting is not holding back investors. How could it when some 60 per cent of financial trades in the US are made by computers, according to Leon Kamhi, executive director of the fund manager Hermes. It seems unlikely that these trades are made with reference to what the annual reports of the companies involved are saying.  This prompts Ralf Frank, head of DVFA, the society of investment professionals in Germany, to ask "Who reads financial reports in this day of Bloomberg terminals?"

    Information is a key driver of change. Environmental realities are staring us in the face, social risks are increasing as inequity fuels global unrest and trust is emerging as a central issue to any investor.  Information providers such as Bloomberg, Reuters, Trucost and MSCI are providing more information on these environmental, social and governance (ESG) issues, and though gaps remain, availability of data is increasing.  Despite this, many investors, asset owners, as well as corporate leaders do not factor in climate change, peak oil, ocean acidification, human rights in the developing world, conflict minerals, or the growing human population to their strategic planning. 

    Or, at least, they didn’t do so until recently. We now see all large global public and private companies applying some focus in these areas, helped by the fact that fully 60 per cent of institutional investors in Europe look at sustainability factors within their decision making. Interest has historically been much lower in the US, but with serious resource constraints emerging, the interests of the mainstream and socially responsible investment communities are starting to blend.

    Socially responsible investing (SRI) is also on the rise, increasing demands for good data on these subjects.  As our new book Evolutions in Sustainable Investing points out in a chapter by Daniel C. Esty, and David Lubin, a Sustainability Imperative has emerged and companies have an opportunity to be winners or losers. We see three categories of opportunity and risk management that all companies should now be proactive on.

    Risk and opportunity

    The first area is resource efficiency. Many people see a world rapidly running out of key resources at a time when population trends are moving in the other direction. This inevitably creates a supply/demand equation that will put pressure on costs, and eventually much more. Companies have to understand material issues in their operations and supply chains in order to manage these impacts going forward. Those that fail to do this are being seen as laggards by stakeholders, internal and external, including investors who have already seen, for example, Coca-Cola take an $800m hit on commodity costs in 2011. 

    It’s a cliché to say it but innovation, our second opportunity category, is a key driver of business success, as seen by those aforementioned 2011 performance figures. We see the opportunity for large companies to scale up innovation, either by investing in start-ups via research and development as well as through acquisition strategies. The cases of getting this right have been clear. For example, Toyota managed to create an image of a sustainable product via the Prius, even if the company has a whole has a less efficient footprint than BMW or Ford.  

    The third category of risk and opportunity is communications. A 2011 Harvard study found that sustainability reporting is a good tool for building better and more effective channels of communication between the firm and its stakeholders. This is particularly important in investor relations, as companies that disclose more enjoy a competitive advantage in capital markets, though the communications benefits apply in labour and product markets as well.

    One important reason why this gap in communications continues is that sustainability reporting does not have wider currency among investors, as it can be difficult to discern which of the dozens of non-financial issues on which a company reports are actually material to performance. 
    A report from Fronesys, Materiality Futures, found that as of August 2011 less than 5 per cent of the 2,000 or so companies producing sustainability reports actually publish the process by which they decide which issues are most important to their business operations.  Even with these companies, there is a lack of transparency about how this “materiality determination” process works. This Fronesys report found that over 140 different sustainability issues are analysed across the 31 companies in the study. Of these, 50 issues figure prominently for a number of companies, including corporate governance, carbon, water use, human rights and privacy.  

    And so it is not surprising that it remains difficult for investors to know which sustainability issues could have an impact on the future value of their investments. Ultimately, these are all either practical risks that any investor should consider or they are unimportant, and working out which is which will be essential to being able to pick the winners and losers going forward.

    This materiality is the link between sustainability and business strategy, and it is where the Integrated Reporting initiative is concentrating its efforts. Integrated reporting is not about combined reporting, such as adding the text of CSR reports into the body of a mainstream financial report – rather it represents a move away from “stakeholder-driven reporting to the mainstreaming of what is strategic,” according to Paul Druckman.   

    Integrated reporting has the opportunity to bridge a number of disconnects that currently exist in corporate reporting, including: 

    • Integration - in many organisations, the people preparing the financial reports have no idea where the sustainability reporting teams are even located, let alone how they might integrate the two reports
    • Strategy - External reporting versus board strategy: if external reporting is not focused on what boards are focused on, then it is neither strategic nor material
    • External impacts -  Very few internal processes today, nor the accompanying business application software, track the external impacts of the company in a data-driven way (for example, within corporate supply chains) let alone report on them, even as these become increasingly material to bottom lines

    Increasingly, evidence shows that there is a growing correlation between stock price & attention to sustainability as a category of opportunity. A recent Harvard Business Review study showed that companies that act first to deal with ESG issues outperform in the long term. It seems inevitable that more investors will find an advantage in getting ahead of these curves compared with strategies that look only to the past, where resource shortages for example, were not a factor.

    Note that this report is an expanded version of an article that featured in The Times in January 2012

    Cary Krosinsky is senior vice president, North America, at Trucost, a Fronesys partner company. Jyoti Banerjee is a partner at Fronesys.

    24 January 2012

    Times article references Fronesys materiality report

    Raconteur Sustainable Investments coverIn today's Times supplement on Sustainable Investments, Cary Krosinsky and Jyoti Banerjee have analysed how company reports often fail to take into account the key issues that are now crucial for future business success. 

    Here's an excerpt from the article, which references the research work Fronesys has done on the materiality of sustainabilityissues in corporate reporting:

    One important reason why this gap in communications [between the firm and its stakeholders] continues is that sustainability reporting does not have wider currency among investors, as it can be difficult to discern which of the dozens of non-financial issues on which a company reports are actually material to performance.

    A report from Fronesys on Materiality Futures found that as of August 2011 less than 5 per cent of the 2,000 or so companies producing sustainability reports actually publish the process by which they decide which issues are most important to their business operations.  Even with these companies, there is a lack of transparency about how this “materiality determination” process works. This Fronesys report found that over 140 different sustainability issues are analysed across the 31 companies in the study. Of these, 50 issues figure prominently for a number of companies, including corporate governance, carbon, water use, human rights and privacy. 

    And so it is not surprising that it remains difficult for investors to know which sustainability issues could have an impact on the future value of their investments. Ultimately, these are all either practical risks that any investor should consider or they are unimportant, and working out which is which will be essential to being able to pick the winners and losers going forward.

    To read the article in its entirety, check out Page 12 on the Sustainable Investments supplement from Raconteur: http://np.netpublicator.com/netpublication/n39150548