RAAS Consulting Ltd

The Business Climate

Extracts from the unpublished manuscript: The Business Climate, a book that explores CSR / Sustainability from a business perspective. The objective is to demonstrate the importance of CSR / Sustainability to business, and to provide practical guidance on how to implement CSR / Sustainability in the business.

These pages are extracts only, and do not represent complete chapters, but some specific sections or areas of commentary.

Extract from the Introduction:

1 Purpose of this document

The purpose of this document is to provide a broad background on the issues around sustainability and corporate social responsibility, and to provide businesses with guidance on why and how to implement an effective CSR/Sustainability reporting environment and process. Over the past few years, climate change and sustainability have skyrocketed in importance globally, becoming issues perceived as impacting all of humanity.

At one end of the spectrum, doomsayers predict that the world is coming to an end, and that while there is nothing we can do about it, we should all radically change our lifestyles to reduce the coming cataclysm.

Pundits at the opposite end of the spectrum agree that the climate is changing, but that the change is completely normal and part of the planetary climate cycle. They view human influence on that change as minimal.

What both extremes have in common is an agreement that climate change is real, and that human civilization ― and business ― must begin to accept this change. Both extremes also agree that companies need to change their behavior. The doomsayers say that behavior change is imperative in order to save the planet; the other camp says companies can become more effective and efficient businesses by applying sustainability principles.

This document does not set out to take a position on which set of views may or may not be correct. The consensus in the scientific community is that climate change is happening, and that human activity is contributing to that change, and that human activity will continue to contribute to that change. The consensus is also that human activity can influence the rate of change (by speeding it up or by slowing down the eventual total level of change).

What this document does set out to accomplish is to explore the landscape of how business can respond and what expectations of the regulatory changes will be imposed on business. We believe there is little doubt that there will be significant regulatory change. Rather than viewed as an undesirable recourse, businesses will discover significant opportunities to apply the lessons of sustainability to become more effective and efficient businesses, while at the same time being able to reduce their greenhouse gas emissions. The perhaps unexpected outcome will be that businesses will find it possible to be both profitable and responsible.

2 Structure and Chapter Summary

This document is structured in three main sections sections:  1) A review of the current situation, covering the existing and potential CSR/Sustainability landscape; 2) A consideration of the roles of the various stakeholders (from a business perspective) in the CSR/sustainability discussion; and 3) A description of additional information to assist businesses as they look toward implementation of their CSR/Sustainability programmes..

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Overview of Topics of This document.

Section 1: Background

1. Introduction

Outlines the case, the document and the key messages. Central to the document is the message that CSR/sustainability reporting today is largely a marketing exercise, but that changes are coming that will move CSR/sustainability reporting into the mainstream of corporate external reporting.

2. It Is Coming, Get Ready

Gives a general overview of CSR and sustainability, examines the drivers for such reporting and makes some predictions about the coming requirements to provide such reporting.

3. The Politics of Climate Change

Canvases the range of drivers and different views on the subject of climate change and corporate responsiblity more generally.

4. The Technological Response to Climate Change

Much as been said and written and postulated about the role of technology in responding to and potentially solving or forestalling climate change issues. The range of technologies that are coming or that are being discussed are reviewed at a high level.

5. Sustainability Reporting Options

Companies have a wide range of CSR/sustainability reporting options, and an understanding of the options is important to help companies reach decisions on the reporting standards they may wish to adopt.

Section 2: Key Stakeholders and Their Roles

6. The Role of Government

Two major aspects of the role of government are considering: the role of the regulator (primarily the financial and business reporting regulators such as the SEC) and the role of economic incentives in the climate change and sustainability debate.

7. The Role of Business

This chapter looks specifically at why companies choose to embark on CSR/sustainability programs and considers the key players within and outside the company that should be included in such a program.

8. The Role of the Assurance Provider

Assuming that the future primary audiences for CSR/sustainability reporting will be regulators and investors, the information provided to these audiences, through a single report, will evolve rapidly over the coming few years. That evolution in reporting will result in greater needs for assurance over the content of the reports. This chapter explores current assurance options and expectations for how assurance will be provided.

9. The Role of the NGOs

Non-Governmental Organizations (NGOs) play an important role in the CSR/sustainability discussion as advocacy groups, standards setters and providers of services such as carbon offset programs.

10. The Role of the Analyst Community

Businesses need the analyst community to understand how effective CSR/sustainability programs help to drive long-term value creation. As such, the analyst community also needs to understand the importance of inclusion of CSR/sustainability metrics into their models and the importance of new reporting capabilities such as XBRL.

11. The Role of the Investor

Investors—owners of the business—second only to government, define the operating conditions and expectations on management. As such, the investor community needs to, and is becoming significantly more active in supporting and requiring the consideration of CSR/sustainability issues as core elements of the business.

Section 3: Additional Considerations

This section includes additional topics that logically did not fit the beginning sections of the paper, such as potential lessons for stakeholders, introducing a CSR/sustainability program, development of a CSR/sustainability policy, case studies illustrating CSR/sustainability reporting from a number of perspectives and other relevant material.  

12. Potential Lessons for Stakeholder Groups

Presents a number of recommendations for the various stakeholder groups and provides additional discussion of issues that were not otherwise considered.

13. Implementing a CSR/Sustainability Program

Provides a discussion of what a company might do to introduce a CSR/sustainability program into the corporate culture.

14. Developing Company Policy – an Overview

A CSR/sustainability policy provides an essential foundation to ensuring that the CSR/sustainbility message is communicated, understood and implemented throughout an organization. This chapterdiscusses the process of policy development and provides a draft CSR/sustainability policy.

15. Appendix

Includes a discussion of the CSR/ sustainability policy, sources, people, additional reading, as well as other information.

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3 A Word About Sources

This document intentionally includes sources from across a spectrum of views and positions. As this document is meant to assist businesses in preparing for the coming changes in reporting and regulation as a result of policy and business decisions relating to CSR and sustainability, it focuses on gathering information on the subject matter and contribution, not on the views, politics or prejudices of any author or perspective.

4 Disclaimer

The views expressed throughout are those of the author only, are the responsibility of the author. Any errors or opinions are the author’s. Every effort has been made to confirm sources and to provide attribution.

5 Core Messages

A few core messages are made throughout thispaper that pertain to the role of business, potential expectations  and impacts on business in the next few years, and recommendations for business in relation to CSR/sustainability reporting. These messages include:

1. Companies should already be producing CSR/sustainability reports. Standards exist with many companies already producing such reports. Reporting, however, has now evolved to a point where companies should be producing CSR/sustainability reports to ensure that they are clearly presenting their message, and to prepare for the time when they will be required to provide such reporting.

2. Listed companies (US) should be disclosing the potential impact of climate change on their business and their expected responses or planned responses to that impact. There seems to be general consensus that climate change is happening, thus achieving the standard of being a “known trend or uncertainty.” Companies filing with the SEC in the United States are required to discuss “known trends or uncertainties.” In 2006/2007, fewer than 400 companies, out of approximately 14,000 filers, discussed “climate change,” “global warming”, “carbon dioxide” or ”CO2” in their 10K or 20F filings. These low numbers seem to suggest companies don’t feel they need to disclose the potential impact of climate change. Either companies do not recognize an imperative to report, or are choosing not to report to avoid potential negative market reactions, or both.

3. Companies will be required to provide significant additional information in their reports. With governments around the world paying increasing attention to climate change issues,  businesses can expect increased reporting requirements.

4. A shrinking world from the perspective of digital communications, easy access to international travel and Internet reporting, are all working together to bring transparency to the entire supply chain. Companies that disregard the potential for their consumers to “see” their supply chains expose themselves to potential negative public relations events. Assertive corporate social responsibility programs and reporting will reduce risk and improve relationships with clients and consumers.

5. Assurance over CSR/sustainability reports will grow in importance, and robust standards will be important for gaining and retaining the confidence of the regulator and investor communities. Additionally, there is a likelihood that consumers of CSR/sustainability information will expect that assurance be provided as a normal part of the annual audit process.