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With its latest sustainability report, Maersk takes a big step in the direction of integrated reporting
The 2012 sustainability report from Maersk – the company’s full name is AP Moller-Maersk –reads, in several places, like a business case presentation for integrating environmental, social and governance (ESG) factors into business strategy and operations. At nearly every turn, it ties performance on its material issues – safety, corruption, oil spills, arctic operations, energy use, and CO2 emissions – to its ability to reduce risk and costs and grow its business. What’s more, the report’s remarkably frank discussions of sticky issues such as fatalities and corruption are a breath of fresh air in a reporting landscape littered with murkiness and cliché.
While many companies claim, with little evidence, that sustainability is integrated into their operations, Maersk backs up its claims with detailed descriptions of how that is the case, and how it isn’t. Maersk has created a new enterprise risk management framework that integrates sustainability; top management are held accountable for progress on sustainability metrics; and more than 1,000 leaders completed sustainability training last year. It has developed a “sustainability dashboard” that requires business units to assess operations on a variety of criteria, including goals and targets, resource allocation, stakeholder engagement, and measuring accountability for sustainability metrics.
As important, however, is the company’s transparency regarding gaps, namely in using “sustainability as an opportunity-creating driver of innovation and business development” and in integrating it into employee key performance indicators. The report states that Maersk will review the gaps in 2013. The way in which the report discusses all of this creates a clear impression: this is important to the business.
The company details its process for determining material issues and states that it will lead to the development of a new sustainability strategy in 2013. Disappointing, however, is that Maersk does not go so far as to explain how the materiality analysis informs the overall corporate strategy. That would be a marker of a truly integrated approach.
Safety is a material issue, and Maersk discusses it at length, both in the overall report and in almost all of its brief business-unit reports within it. The discussions show neither squeamishness nor opacity – “the incident severity ranges from minor injuries resulting in a few sick days to permanent disability eg lost limbs” – and do not shy away from linking safety directly to productivity. The cases it cites reveal missteps and messiness – “workers were confused, truck drivers were losing their way in between stacks, cranes, stations, etc” – but also lessons learned on the way to stronger performance. In all, it’s a frank appraisal and a microcosm of the bigger journey that is managing for sustainability.
Maersk’s cold-eyed way of viewing material issues as business issues is a further indicator of an integrative mindset. In discussing its efforts to fight corruption, the company notes that in many parts of the world “facilitation payments” are a “reality in global business today”. Maersk requires employees to, in this order, refuse to pay, request a receipt, ask to speak to a superior, or, failing those, keep a record of any payments made. Maersk calls for concerted action to fight corruption, having founded an organisation, the Maritime Anti-Corruption Network, which has overseen a project to identify and map ports where demand for facilitation payments is high.
Maersk notes that energy use and CO2 production are “critical material issues” and devotes a fair amount of space to discussion of these environmental impacts as well as its efforts to reduce them. In plain language, Maersk describes how its different business units use context-based metrics to measure carbon emissions such as CO2 per container, CO2 per cargo unit x nautical mile, and CO2 per lifted container. Its efforts to achieve reductions in these metrics are centred on efficiency.
The company not only talks but also quantifies the business case for efficiency. For instance, by reducing ships’ speeds, called “slow steaming”, Maersk reduces CO2 emissions and fuel consumption and saves $7bn a year in the process.
Maersk is less forceful, however, in addressing climate impacts of its oil business. It largely sidesteps a discussion of fossil fuels’ contribution to climate change, focusing instead on efficiency and safe production.
The company is currently evaluating the possibility of drilling in the Arctic regions and states that Arctic operation is a material issue. This is the only section of the report that seems to have been reworked by the legal and public affairs departments. The statements are carefully wrought: “Our position is clear: if we cannot find a way to ensure that we can handle daily operations in a safe way as well as upholding a satisfactory level of disaster response, we will not proceed.” Satisfactory to whom?
Given that the company published its first sustainability report as recently as 2010, Maersk’s path toward integrated reporting has been remarkably short. And while it’s not quite there yet, it’s impressively close. Expectations are high for the years to come.
Follows GRI? Yes, at the C+ Application Level.
Assurance? Yes, full report according to AA1000 standard, and GRI application level.
Materiality analysis? Yes, for company as a whole and for each business unit; describes process and relevance to business.
Goals? Yes, for company as a whole and for business units.
Targets? Yes, company-wide and for business units.
Stakeholder input? Yes, but limited to investor input.
Seeks feedback? Yes, provides names and email addresses of editors to receive comments.
Key strength: Makes the business case for performance on each of its material issues as well as other ESG issues such as employee engagement, diversity and safety.
Chief weakness: Hides interesting quantitative metrics within narrative.
Pleasant surprise: A mini report for each of its business units, complete with business-unit-specific material issues, goals and performance metrics.
Level of integration: 3.5 (on a scale of 1 to 5)communications CR Reporting Kathee Rebernak Maersk sustainability report