Examining the World’s Business Environment with Global Reporting Initiative’s Allen White

September 16, 2013

JOHN SHEGERIAN: Welcome to another edition of Green is Good. We’re so excited to have with us today Allen White. He’s the co-founder of The Global Reporting Initiative and The Global Initiative for Sustainability Ratings. Welcome to Green is Good, Allen White ALLEN WHITE: Thank you, John. My pleasure to be here. JOHN SHEGERIAN: Hey, before you started this great work that you’re working on and that we’re going to talk about today, talk a little bit about your journey. How did you even get to where you are today, Allen? ALLEN WHITE: Well, it began after college when I spent three years abroad in the Peace Corps in Central America and Nicaragua. It was a conscious and reasoning experience. I saw another side of the world. I saw that a lot of people were living in fairly desperate and destitution conditions and I thought for the rest of my life, I want to contribute to positive change worldwide and that evolved into some graduate studies in economics and geography and later, I was an academic for a number of years and got a little tired of grading papers and a little excited about moving into something where I could be more hands-on, more activist, and so I joined Tellus Institute in the early ’90s and it’s been a journey of great satisfaction, gratification since then the Director of all programs at Tellus Institute that relate to business, business responsibility, business sustainability. JOHN SHEGERIAN: Got it, and I’m on your website right now so for our listeners out there that want to follow along on Allen’s great website, they can go to www.ratesustainability.org. Talk a little bit about your thoughts and what you’ve learned along the way with regards to business’ role in sustainability and sustainability development. ALLEN WHITE: My general view of that, John, is that business comprises millions of terrific people. Companies comprise terrific talent, innovation, ingenuity. What is often the case these days is that those great individuals are captive to conditions that don’t allow them to fully realize their own dreams as company people so I think part of that problem itself is related to a couple of issues. One is tremendous short-term employment in companies delivering that model that results in quarterly results, financial results, and sustainability by definition is a long-term proposition. You simply can’t operate a company on a quarterly basis or even a yearly basis and call yourself a sustainability leader and people in business feel that pressure all the time, particularly publicly traded. Also, business is typically or historically viewed in an atomistic way. In other words, it’s a company and it operates by itself in some fashion apart from society. Well, that is not reality. That’s not nature. That’s not the world. That’s not the planet so the notion that companies are part of a broader system, ecosystem, social system, economic system, and a little circle within the economic system is the corporation so that mindset of systems thinking and systems action is critical and unfortunately, in short supply these days. JOHN SHEGERIAN: Allen, how come sometimes great companies that have wonderful, as you point out, people leading them such as — I’m just going to give an example and I’m a huge fan of theirs; Walmart — How come they’re constantly facing the media throwing rocks through the windows in terms of human rights, environment, labor practices, and other issues when they’re truly doing so much great work with regards to sustainability? Why is there that paradox and that constant tension? ALLEN WHITE: I think the answer lies in probably the nature of the media and finally the preparation of the company or lack therefore. When I say the media, it’s bad stories always trump good stories. Good stories from good companies are an everyday experience. Bad times, whether it’s a storm in the Gulf or Walmart dispute in California, whatever it is around the world, those tend to be more in the news and it’s not going to change. It’s definitely not going to change. The public does, in fact, eat that stuff up and companies, small, medium, and larger companies are going to have bad times. To run a business these days, you are going to face bad times. There’s going to be missteps. There’s going to be problems that you didn’t expect around the corner and certainly, they’re on your steps confronting you and your staff and you’re on the front page but what you can do is prepare for these inevitable bad times by having systems and a management referral system in place so you are ready and the data shows that companies with strong sustainability agendas, they still have problems inevitably but they’re better equipped to manage the repercussions of those problems, creating a so-called sustainability cushion. JOHN SHEGERIAN: Allen, obviously you’ve seen a lot of things in your journey and in your practice. Why did you get involved with the GRI, The Global Reporting Initiative? ALLEN WHITE: Well, the GRI dates back to the late ’90s when my colleague and myself saw a need and an opportunity. I had been involved with Ceres for years and Sergio was really the pioneer and he was conceptualizing the idea of environmental reporting for companies. That goes way back to about 1989, 1990, but it was a slow journey in The States to get many companies on board. There were a few dozen, maybe 25, 30, a tiny number, and by the late ’90s, Bob and I and the partnership said, “Well, we simply have to take a big step forward here. Number one, let’s go global. Number two, let’s move from purely environmental reporting to sustainability reporting and number three, let’s do it through the process where everyone has a voice,” so we took our chances. It was a big aspiration, a big dream. We didn’t know where it would go. A lot of big dreams fall in your face because the timing’s not right. The leadership’s not right and it was generally a risky situation but this happened to be the right idea at the right time and so we launched it formally in 2002 at the United Nations after a few years of design and startup and the rest is history. It’s been a terrific ride and my successes there, I was the CEO for a number of years. My success in Amsterdam, they’re doing a great job and never perfect, always a work in progress, but making a big difference. JOHN SHEGERIAN: So, talk a little bit about this then. In sustainability reporting and pushing forward the whole movement, the business practices and sustainability, the sustainability revolution, talk a little bit about the importance of this sustainability reporting and why this was important and continues to be a driving force? ALLEN WHITE: Well, reporting is important for both internal and external reasons. When companies report and they do it seriously and take it seriously, things happen. There are conversations that happen. There are indicators that are used internally to track progress. There’s an awareness that goes on with reporting that simply would not happen if we didn’t do systematic thinking about how we’re doing in human rights, how we’re doing in product stewardship, how we’re doing in accountable advertising, how are we doing in managing our externalities. It’s a form of discipline and it’s an instrument for consciousness awakening in companies. Externally, today’s world, this transparent world- Just pick up the paper today. It’s a transparency on steroids, you might say, so in many ways, sustainability reporting is part of this larger 21st century that affects business. You can’t run a business in today’s world and expect people to trust you. You need to demonstrate and be held accountable for what you’re doing and sustainability reporting is an instrument for doing that. JOHN SHEGERIAN: That’s so interesting, and for our listeners who just tuned in, we’ve got Allen White on. He is the co-founder of The Global Reporting Initiative and the Global Initiative for Sustainability Ratings and he has an amazing website. I’m on the website. This goes to everything he’s talking about here. It’s www.ratesustainability.org. Allen, you just recently created a new initiative, Global Initiative for Sustainability Ratings, so can you share a little bit about that with our listeners. How did that come about and why is that an evolution from your initial organization? ALLEN WHITE: Well, the GISR was conceived a couple of years ago. It was an idea that had been started a number of times over the years beginning in maybe 2007, 2008. Ratings was growing rapidly. That is sustainability ratings. They were becoming very prominent and very prolific around the world so companies by the thousands were being rated all the time. There were problems and remain problems of so many ratings, a lot of confusion in the marketplace, issues of rigor, issues of transparency, issues of impartiality, and so rating is intrinsically a good thing just like financial ratings. We need them. When they work right, they serve a tremendous public purpose. When they don’t work right, it can be very damaging, as it were in the financial crisis so sustainability ratings are an idea of who’s on this planet so on the agenda, we proposed a couple years ago to say we stepped in and said ratings, let’s bring them to a new generation. Let’s invite all raters into a process and all the parties, companies that are being rated, investors who use ratings, to take part in a process whereby ratings would rise to a new level, raise the bar, extend the market, and make ratings an everyday practice around the world, whether it’s an emerging economy, a developing economy, and move beyond simply disclosure. That’s the big key. Disclosure is essential. It’s precondition to being responsible and being accountable but disclosure alone does not get the public or get the investors the information they need in a way they can use it. A good rating will do that. JOHN SHEGERIAN: That’s so interesting, and for our listeners out there that want to become part of the solution and want to leverage your great work and your great services, how do they do that? I’m on your website. Talk a little bit about listeners out there that say this makes sense, I want to engage. They go to your website and they call your company or your firm? Is that how this works? ALLEN WHITE: There’s an information address there. They can write me directly, awhite@tellus.org, or there’s also a site or a work address on RateSustainability.org and we formally invite, cordially invite, companies to get involved and after all, those are the rated entities and they are the ones that pay the price or enjoy the benefits of strong ratings. We invited investors who use ratings to make the decisions and move capital in the market. We invited them to participate on various committees and also raters who we’re in touch with every day and those who we’re not in touch with, you need to raise your hand and let us hear from you. JOHN SHEGERIAN: We’re down to the last two-and-a-half minutes or so. Can you share with our listeners the two or three biggest challenges facing business in the future regarding public trust and confidence? Because you brought that up with regards to transparency and reporting and ratings. Can you tie that all together now and where you think we’re going? ALLEN WHITE: I think companies in the 21st century are on a new place and the old ways of doing business just aren’t going to make it so when you’re looking down the road and asking who are going to be the winners five years, ten years, and fifteen years out from now, who are going to be those companies that prosper, that are respected, and that are trusted, in short, I think they’re going to be companies that recognize that they live in a world that’s fast changing where responsibilities are up and down the supply chain, where they can’t expect protection and hide behind closed doors, even private companies, I might add, not just public companies, so they have to change their mindset and the mindset we suggest in our work and many others suggest in their work, like the International Integrated Recording Council, The Sustainability Accountability Standards Board, the Global Reporting Initiative, all these are rallying around a framework for companies to take seriously and that’s called the Framework of Multiple Capitals but today companies, if you ask them, ‘How do you measure your performance?’ they’ll so called earnings per share, meeting quarterly expectations, market capitalization, and so on and so forth. All good, all necessary, but a problem; They’re all financial. That’s the bottom line is financial performance. That does not suffice for today’s world. It’s simply not real and out of line and obsolete. One has to think about performance in terms of social capital, information, and protection and enrichment and natural capital, which means the environment, intellectual capital, and human capital. These other capitals must move forward into a position of parity, of equivalence with financial capital so that we have a holistic, comprehensive, integrative view of company performance, which would be a huge step forward and critical in today’s world. JOHN SHEGERIAN: Gotcha, and Allen, you’ve been fascinating. This is a new subject we’ve never covered here. For our listeners out there, get more engaged and go see Allen’s great work and you can hire his company and be part of the solution at www.ratesustainability.org. Allen White, you’re an inspiring sustainability leader and truly living proof that green is good.