The new GRI chief talks to Ethical Corporation’s editor Terry Slavin about how to make sustainability reporting more relevant for investors and CEOs
When Tim Mohin, the new head of the Global Reporting Initiative, spoke at Ethical Corporation’s sustainability reporting summit last year, he opened with a reference to his fellow panellists: Richard Howitt, CEO of the International Integrated Reporting Council and CDP’s Paul Simpson. “Great to be up here with my arch enemies,” he joked.
Although Mohin quickly added that he thought the perception of competition between standards is “overblown”, there is little doubt that the reporting landscape is increasingly crowded, with a veritable alphabet soup of different standards: along with GRI, IIRC, and CDP, there is California-based SASB (Sustainability Accounting Standards Board) and newest on the block, the TCFD (Task Force on Climate-Related Financial Disclosure), which applies to financial, rather than sustainability reporting.
There is more a perception that reporting is complicated than there is reality'
Mohin pointed out that Amsterdam-based GRI, which turned 20 last year, is far and away the market leader: a new report from KPMG had found 75% of the world’s largest 250 companies (and 63% of a sampling of large and mid-cap firms) use GRI for non-financial reporting. “If you want to do sustainability reporting, you use GRI. For carbon disclosure you use CDP; If you want to do integrated reporting, you use IIRC,” he said. “There’s more perception of complication than there is reality.”
It is a perception that is widely shared, though. In an interview after the session, Mohin said that before he joined GRI last January, after working 22 years in corporate social responsibility (CSR), mainly in the electronics industry, he had thought: “Why can’t these people [reporting standards] just get along. There are big issues at stake.
Reporting should be focused on the SDGs, says Tim Mohin (Credit: Riccardo Mayer/Shutterstock)
One of his priorities is to harmonise GRI’s standards with those of its six-year-old competitor, SASB, which has developed provisional sustainability accounting standards for 79 industries, and is looking to codify them this year.
He points out that SASB’s approach is in many ways complementary, focused on what materially affects companies, while GRI’s standards are focused on how companies have an impact on the world. But there is overlap, where the two standards ask the same questions in slightly different ways, which Mohin describes as a “barrier of entry” for companies. He is seeking funding to “do the hard work of bringing these two standards together”.
While Mohin wants to see more sustainability reporting, he thinks the glossy CSR report is past its sell-by date. “Transparency works: when you measure something you manage it. But it’s not enough,” he said. “We [in CSR] have created something akin to the military industrial complex, where companies produce these beautiful 100 plus-page reports full of glossy photos and marketing materials, but outside the company they have little impact,” largely ignored by the mainstream investment community. Can you take this information and look into the future and see what is happening next is his litmus test.
Investors who care about ESG issues tend to be more stable. That makes them valuable for investor relations departments
This problem has become more acute with the growth of programmatic trade. Mohin learned this during his last job, as senior director for corporate responsibility at Texas-based Advanced Micro Devices (AMD), when he went on investor road shows. “We were a very cheap stock and people moved in and out in micro-seconds,” Mohin said. Investors who care about environmental social and governance issues, on the other hand, “tend to be more stable, more buy and hold”. That makes them valuable for investor relations departments, he says, “But most companies haven’t discovered that.”
Not only are CSR reports ignored by mainstream investors; they can also have little impact on C-suites. “There is a big gap in most companies – not all – between current [CSR] practices and impacting [corporate] governance structures so they see this information and they act on it,” Mohin says.
To overcome this, CSR reporting should follow what Mohin calls the four Cs: be concise, current, consistent and comparable. He adds to this list an F, for forecast. “Can you take this information and look into the future and see what is happening next” is his litmus test.
Perhaps surprisingly, CSR reporting is growing fastest in Asia, where GRI has seen a doubling of reporting companies in the past five years. This is because exchanges such as Hong Kong, Singapore, Kuala Lumpur and Jakarta are adding environmental, social and governance (ESG) disclosure requirements for listed companies, Mohin says. And it means that companies in Asia have an opportunity to leapfrog the western habit of weighty annual CSR reports in favour of something more relevant to decision-makers.
What shape that reporting should take is an area where GRI is on less assured footing. With the vast reams of data companies now generate, there is already a crowded market of services helping companies input, sort, and analyse data.
We have created something akin to the military industrial complex, where companies produce these beautiful 100 plus-page reports but outside the companies they have little impact
Although GRI created a Digital Reporting Alliance in May 2016 and named John Elkington, founder of Volans and the triple bottom line accounting, to head up the GRI Technology Consortium, former CEO Michael Meehan stepped down shortly afterwards, and the initiative was left to drift during Eric Hespenheide’s interim leadership.
Mohin admits that GRI has fallen behind in this area, and doesn’t quite know where the company should now play. He is in the early stages of reaching out to potential partners, including Elkington.
Yet he sees huge benefits from GRI getting involved in digital reporting. “We have this massive investment in ESG reporting, which is locked into these PDF reports … I don’t think anyone’s unlocked that trove of data to say ‘what does it really mean’. If we can analyse it in a way that creates not just data but decision-useful information [for investors and corporates], we could change the world. That’s what’s really exciting to me.”
If Mohin is slightly hazy on digitisation, he is crystal-clear what companies should be reporting: their contribution to the Sustainable Development Goals. “If we aren’t paying attention to the SDGs, we aren’t paying attention,” he says. “That is the one case where the 193 countries in the UN came together and agreed an agenda for 2030."
But with 17 goals and 169 individual targets the SDGs can be tricky for companies to navigate. GRI worked with the UN Global Compact and World Business Council for Sustainable Development to develop SDG Compass Guide, a guide in 13 languages to help companies understand and align their strategies with the SDGs. Later this year it will produce a more practical guide for companies to integrate the SDGs in their reporting.
Asked how he sees CSR playing out in the US, a year into Donald Trump’s administration, Mohin points out that he worked in the US Environmental Protection Agency in the aftermath of Ronald Reagan’s administration, helping to restore some of the provisions in the Clean Air Act that he had dismantled.
“I’ve seen this movie before,” he says. “Americans are for environmental protection. They didn’t vote for them to be dismantled [by voting for Trump]. There will be a backlash, and when it comes there will be rapid change,” Mohin predicts.
Most companies were blissfully unaware that modern slavery lay somewhere deep in their supply chains. It’s much more prevalent than anyone thought
He said that GRI and other civil society organisations are now “more important than ever” in the US, as seen by the growth of companies joining the We are Still In coalition and adopting science-based targets. “We are hearing more and more [from companies] that [say] even if regulations change, we won’t change our commitments.”
Asked who will be more important in holding companies to those commitments, ESG investors or civil society groups, Mohin is unequivocal: environmental activists, who have successfully shone a light on issues such as palm oil, ocean plastics, and human rights abuses.
Although many companies are trying to do the right thing in the background, he says, “Companies are busy. They have financial worries, product roadmap worries, investor worries. Until and unless one of these massive buckets of worries enter that mind space, it’s really hard to get any attention. And when an issue ends up on the front page of the New York Times, it gets attention.”
So what’s the biggest risk for companies? Modern slavery, Mohin replies without skipping a beat. Mohin spent a couple of years as supply chain responsibility manager at Apple, and says he saw the issues involved first hand. “Most companies were blissfully unaware these issues lay somewhere deep in their supply chains and are much more prevalent than anyone thought…. Tracking that back, finding out where it is, and taking action to eliminate the practice is number one.”He describes the UK’s Modern Slavery Act, asking companies to report on modern slavery in their supply chains, as a “beachhead” that will lead to change.
Change, however, is slow in coming. A report by the Business and Human Rights Resource Centre, published on the same day as the conference, showed that only a handful of FTSE 100 companies, such as Marks & Spencer, Sainsbury’s and Unilever, have taken “meaningful steps” to assess the risk of exploitation in their supply chains in the two years since the Modern Slavery Act was introduced.
Asked if GRI can help companies get to grips with the issue, Mohin says part of GRI’s strategic plan is to develop guidance for companies to report on human rights issues, which could eventually turn into standards.
This would be useful for companies that have to comply with US conflict minerals legislation, which Mohin does not believe Trump will succeed in dismantling, despite his threats. “The question that hasn’t been resolved is how companies report in a consistent way on the due diligence they’ve done in their supply chains to identify conflict minerals and eliminate the practice,” Mohin says. “That is where GRI can help.”
Tim Mohin will be speaking at Ethical Corporation's Responsible Business Summit New York, 26-27 March.