Shorter and smarter
Addressing the need for shorter, more relevant reports, the G4 Guidelines put materiality at the heart of disclosure. The G4 requires a robust materiality process to identify the Aspects (new GRI speak for ‘issues’) material to the company and its stakeholders. Those that are most material must be reported on. But crucially and radically, those Aspects deemed less material do not require disclosure under G4.

Be honest: how did you do it?
The quid pro quo for waving goodbye to huge reports is that all companies must be much more transparent about their materiality decision making process. In a major change since G3, any organisation wishing to report ‘in accordance’ with G4 must disclose the way they identify, validate and prioritise their material Aspects.

What are Aspects?
GRI provides a list of Aspects (issues) in established categories (Economic, Environmental and so on). There are 47 Aspects in total and many are familiar, but some, for instance those to do with suppliers, now pop up under several categories.

Core v Comprehensive
Having identified their material Aspects, organisations can be ‘in accordance’ with G4 by choosing either Core or Comprehensive reporting. Core reporting is a great entry point for SMEs, allowing them to report on only one indicator per material Aspect identified, whereas Comprehensive reporters must disclose information relevant to all the indicators relating to each of their material Aspects. Thankfully, the old A-C system that encouraged organisations to report rafts of superfluous data has gone.

Boundaries and the value chain
Recognising that an organisation’s biggest impacts are often in the value chain, they are required to identify where impacts occur for each material Aspect by describing whether their significance is internal to the organisational boundary or external (eg suppliers or other stakeholders), or both.

Where’s the hitch?
Clearly the quality of the report hinges on the robustness of the materiality process, and since this is primitive in many organisations, major questions remain about whether reports will really represent the organisation’s impacts and its sustainability context. It will be up to the organisations themselves, assurance providers and other stakeholders to scrutinise, critique and improve the materiality process. Fertile territory for rating agencies perhaps?

Few would debate the fact that the Internet promotes freedom, openness and economic and social development, and that’s good for everyone: individuals, business, governments, and civil society. But the positive benefits must be weighed against the potential abuse of these ICT-enabled freedoms—by repressive governments and overzealous law enforcement, for instance—which can pose serious risks to human rights, especially in countries where those protections are lacking.

The Stockholm Internet Forum debated these questions this week, bringing together policymakers, civil society representatives, activists, business representatives and technical community representatives. This year, they zeroed in on Internet freedom as it relates to security and development. Ericsson’s Vice President for Sustainability and CR, Elaine Weidman-Grunewald, in a panel discussion on reconciling freedom and security in cyberspace, pointed out that with the three parallel forces of mobile communications, broadband and the cloud, technology is evolving at a far more rapid pace than we’ve ever experienced, “and it is exceeding the pace of policy. We need to find a way to govern what we call freedom of the Internet,” Weidman-Grunewald said. These and other issues are explored by Ericsson in their discussion paper published this week, “ICT and Human Rights: An ecosystem approach” urging “the cooperation of a wide range of stakeholders, all players within the ecosystem, as well as local and national governments, international bodies, business partners, human rights2NGOs and other representatives of civil society.”In One Stone’s research and consultancy work on corporate responsibility within human rights, for the ICT and other industries, a message we push consistently is the need for transparency and multi-stakeholder dialogue particularly for an issue as serious, sensitive, and complex as the interface of communications technology and human rights. From this perspective, Ericsson’s invitation for discussion, along with the work of GeSI’s human rights working group , is to be commended, as is Facebook’s recent announcement that they are joining the Global Network Initiative. They’ve hopped on rather belatedly—Microsoft, Yahoo and Google, founders of  GNI, have been on board since 2008. But it is clearly important to have Facebook at the table if the industry commitment is to have its full impact. AsGNI executive director Susan Morgan said , “this puts GNI in an even better place to press governments to fulfill their obligations to protect rights online.”

As Google CEO Eric Schmidt and co-author Jared Cohen noted in a recent interview about their new book, The New Digital Age: Reshaping the Future of People, Nations and Business,” In many countries, the Internet is the only way to get an alternative point of view in…the power of freedom, the power of ideas will spread, and it will change those societies in very dramatic ways.”

How governments, especially autocratic governments, react to the change that’s coming remains to be seen.But we hope that no matter how pressured the scenario, ICT companies uphold their commitment to respecting users’ basic human right of freedom of expression. This is not a standard one should have to sign; it’s an expectation.

For Executive Director Georg Kell, UNGC stated values of transparency, dialog and accountability apparently don’t apply to how the UNGC is governed.

In his annual letter to members from January, Kell announced a radical change in the organizations’ funding strategy–shifting its model from voluntary to mandatory membership fees. No dialogue was held with UNGC signatories prior to the decision—not even with its own Local Networks. There was no transparency on why the funding strategy was developed and how the money would be used. His letter was, however, accompanied by an invoice for up to USD 15,000 for signatories with a large turnover.

Photo by Hortulus at Flickr

Though most companies fully understand the need for the UNGC to adjust its income to an ever-expanding organization with an urgent agenda, signatories found reason to question the way the UNGC approached this issue. During a Local Network meeting in Geneva two weeks ago, Kell’s letter was the center of debate and meeting participants voiced the need for an inclusive approach when addressing the organization’s strategic issues.

The epilogue? Kell has since backed down and his proposal has been temporarily suspended. The UNGC is now committed to working with its Local Networks on developing a revised collaborative funding model that is to be presented to signatories in September.

One’s own advice is sometimes the hardest to take, Mr. Kell, but mistakes like these will take years from which to recover. The additional income will come in handy to fund all the stakeholder dialogue you’ll need to recapture the trust you’ve lost over the last couple of months.

An explicit new report published by the UK think tank Carbon Tracker and the London School of Economics describes the trillion dollar gamble that is currently being played out on the global financial markets.

According to the report, almost all investors and regulators seem to be ignoring the clear inconsistency between the accepted science of climate change and the behaviour of the top 200 global oil and gas and mining companies, on which the report focuses.

The report concludes that 60-80% of the coal, oil and gas reserves of these 200 publicly listed companies are ‘unburnable’ if the planet is to remain within the globally agreed ‘safe’ level of 450 ppm of CO2 in the atmosphere. In essence, these reserves are ‘stranded assets’ whose questionable value could have enormous implications for the robustness of pension funds and the wellbeing of the companies and people that invest in them. In fact, the Unburnable Carbon map illustrates why fossil fuels can be considered the new subprime.

Click to enlarge

In addition, these same 200 companies have invested up to $674bn in the last year in sourcing and developing more reserves and new forms of extraction. The analysis indicates that if this level of capital expenditure (CAPEX) continues at the same rate over the next decade this would result in over $6.74trillion in wasted capital developing reserves that are likely to be unburnable.

“Are there more fossil fuels listed on the world stock market than we can afford to burn?” asks James Leaton, director of Carbon Tracker, quoted in Greenbiz – “the answer is yes”.

The 2008 financial crisis revealed the short-termism endemic in financial markets – this existing investment perspective is very bad news for pension funds. The likely reduction in value of shares and investments in the stranded assets of coal, oil and gas industries has prompted Professor Lord Stern to raise the alarm for investors:

“[Smart investors] can see that investing in companies that rely solely or heavily on constantly replenishing reserves of fossil fuels is becoming a very risky decision.”
Professor Lord Stern in Carbon Tracker

To avoid the intensity of economic ruin caused by the rupture of the subprime bubble it would be prudent for all investments portfolios to be assessed for their carbon bubble ‘risk potential’ – redefining risk, dealing with uncertainty and strategising accordingly. This would allow businesses to make investment decisions based on the usable assets held by the fossil fuel industries, rather than the share prices on which these companies currently base their value.

Deflating this carbon bubble gradually through collaboration between investors, financial regulators, analysts and finance ministers could help avert the most devastating economic scenarios.