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September 22, 2004
EHS Auditors Slow to Take Up GRI
by Graham Sinclair
Part two of this two-part article addresses changes Environmental, Health & Safety auditors are
making in response to the Global Reporting Initiative.
SocialFunds.com --
Environmental, Health & Safety (EHS) auditors are experiencing increasing workloads,
responsibility, and accountability due to changes mandated by Sarbanes-Oxley, as described in part one of this
two-part article. Part two focuses on EHS auditors' responses to the Global Reporting Initiative
(GRI) and other voluntary guidelines
and standards for sustainability reporting, which are adding more demands to EHS auditors'
already-full plates.
 This distinction between mandatory and
elective changes may help explain EHS professionals' cool reception for GRI at the annual Auditing Roundtable conference held
earlier this month in Philadelphia. Their reluctance to embrace GRI may also be structural,
reflecting their sensitivity to the Chinese walls necessarily erected to maintain auditing
integrity.
"The GRI reporting and verification function and the EHS auditing function
are intentionally maintained separate in many organizations," said Barbara Jo Ruble, the
newly-elected president of the Auditing Roundtable.
EHS delegates at the conference
expressed the opinion that reporting without GRI may be due to the fact that not all parts of the
firm are up to compiling the content for the GRI framework. David Chatfield, CEO of his self-named
EHS consulting firm, believes that the slow development of inter-departmental communication has led
to slow adoption of the GRI framework by the broader auditing community.
"For the first
time, audit personnel are having externally focused business units like investor relations or PR
ask how the EHS team would like to present knowledge to external clients," Mr. Chatfield said.
"Few firms have the leadership at senior level to integrate the information across the business
into a corporate-wide sustainability initiative framework like the GRI."
Ron Lund,
long-time Auditing Roundtable contributor and former corporate audit officer at Dow Chemical
(ticker: DOW),
explains the reticence to adopt GRI as a market phenomenon, out of the hands of the EHS
professional.
"No US company wants to be first, and none wants to be last," said Mr.
Lund. "They want to be in the 'happy follower' category."
"True, integrated reporting is
still years away," said Bryan Jacob, responsible for environmental assurance at Coca-Cola (KO). “However, this
doesn’t imply reporting will--or won’t--involve GRI”. Coca-Cola has endorsesd the Coalition for
Environmentally Responsible Economies (CERES)
principles for its company-owned US operations, but the GRI framework is not adopted in Coca-Cola’s
environmental disclosures.
SRI analysts and researchers, who are generally enthusiastic
about GRI, also acknowledge its challenges.
"The GRI is great--we support it," said Frank
Dixon, managing director of the research firm Innovest Strategic Value Advisors. "But I am not sure that
it will ever become ubiquitous amongst US firms without some level of compulsion."
"Currently, leading firms are using the GRI," Mr. Dixon added. "But my perception is that
firms with doubts will be held back by their legal counsel," not wanting to put information into
the public domain.
Social investors are clamoring for an end to reams of unaligned data,
something the GRI helps by aligning information in ways that can add value to investor decisions.
Currently, analysts may be led to feel like they are conducting oranges versus apples comparisons
due to uneven data availability, presentation and verification.
“An information gap
persists between what analysts are getting, and what they need to make [an] assessment,” said Geoff
Lane of the consulting firm PriceWaterhouseCoopers (PwC) in the UK.
"If 80 percent of the information
that socially responsible analysts want can be gathered through some sort of common means, that's
great," said Don Reed of the Australian sustainability consultancy Ecos Corporation. "[But] investors do not lead the
creation of value; they follow it."
"Right now, with so many different questionnaires
asking slightly different questions, there is starting to be pushback on it," Mr. Reed added.
There is also push in the other direction, as some in the corporate community recognize the
value created by sustainability reporting via GRI and other voluntary protocols.
PPL (PPL), which uses
CERES guidelines because their environmental metrics are more industry-specific than GRI's, has
hired Innovest to conduct surveys of its "eco-efficiency" for the last five years. This move has
given the firm's EHS personnel a more sophisticated view of the needs of external research
analysts, according to PPL Environmental Manager Robert Barkanic, and has also given Innovest a
better understanding of PPL's approach to sustainability.
"As a result PPL’s ranking [in
Innovest eco-efficiency ratings] has improved," said Mr. Barkanic.
The shift toward
greater transparency by stakeholders including the investment community may help overcome the
barriers to the adoption of voluntarily sustainability reporting mechanisms such as GRI.
In 2002, the SRI mutual fund company Calvert Group filed a shareowner resolution at TriQuint
Semiconductor (TQNT), which had no policy,
management system, certification, or voluntary initiatives concerning EHS available to shareowners.
The resolution garnered 31 percent support from voting shareowners, prompting the company to unveil
a new section on its website
devoted to EHS issues in December 2003.
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SRI World Group, Inc. All Rights Reserved.
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