August 2008

Sustainability reporting – why bother?

Effectively managing risk and protecting reputations and brand value

By A. Gillam and D. Mountain

It is undeniable; our world is small and getting smaller. Globalization is bringing convergence in many industries, while simultaneously creating the need for greater stakeholder intimacy. Empowered stakeholders are demanding that businesses provide practical demonstrations of their commitment to the principles of sustainability. This is especially true for mining companies, which often operate at the interface of the developed and the developing worlds.

So, how can mining companies build a more cohesive image and protect their reputations and brand value? One essential element is through effective stakeholder engagement. By attracting and retaining a diverse group of stakeholders, global mining companies can forge strong relationships and build brand value.

How does sustainability reporting fit in? One part of the answer is effective stakeholder engagement — and sustainability reporting is a valuable tool for conveying information and inviting dialogue. Over the past decade, in particular, the growth of this practice has been accelerated by the dramatic increase in socially responsible investment (SRI) and the role of rating agencies such as the global Dow Jones Sustainability Index, FTSE 4Good in the UK and the Jantzi Index in Canada.

The Global Reporting Initiative (GRI) guidelines have emerged as a widely used platform to help organizations get the most out of their non-financial reporting efforts. The guidelines represent a multi-stakeholder perspective on what should be included in a corporate sustainability report. The guidelines, now in their third edition, are known as the G3 Guidelines. In addition to the guidance on management discussion and performance indicators — which can be used as a checklist when considering what to include in a report — the G3 Guidelines also articulate the underlying principles of transparency, materiality, accuracy, etc., which are critical to producing a report that meets stakeholder needs and is a truly useful communication tool.

The International Council on Mining and Metals (ICMM) has partnered with GRI to develop supplementary guidance for mining companies to use in addressing topics that are specific to this industry, similar to other sector-specific supplements for electric utilities, for example. ICMM member companies must commit to reporting in accordance with the GRI guidelines and the mining and metals sector supplement.

GRI recently commissioned a survey of individuals who read non-financial reports (Count Me In: The readers’ take on sustainability, KPMG and SustainAbility, 2008). With more than 1,800 responses from report readers, 90 per cent of them said their view of a reporting organization had been influenced by reading its sustainability report, with 85 per cent of those indicating a more positive perception.

Leading companies, such as BHP Billiton and Rio Tinto, use the process of developing a report as a tool for improving stakeholder engagement. One valuable process these companies employ is to reach out to stakeholders across all aspects of a company’s geographic and operational footprint and identify what issues stakeholders are raising that are important to them and have the biggest impact on the reporting company.

Even the most successful mining companies can benefit from keeping an eye on the broad social trends in their country or region, as well as the local issues that affect workers and fenceline communities. This doesn’t mean that a company has to constantly change to accommodate the latest management fad or PR fashion. Rather, leaders in the global mining industry can take advantage of feedback from a diverse set of stakeholders to more effectively manage risk and protect their hard-earned reputations.

Andrew Gillam is vice president, Strategic Advisory for Environmental Resources Management Ltd. (ERM), based in Vancouver, British Columbia, and Diane Mountain is a senior consultant with ERM’s Strategic Advisory practice, based in Washington, DC.

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