August 18, 2008

Volume 86, Number 33

p. 52

Accounting for Sustainability

International Standards Help Companies Talk About Sustainability

Melody Voith

TWO YEARS AGO, Niomi Krzystowczyk received an intriguing assignment: define sustainability for Albemarle. Since she was part of the specialty chemical company's department of health, safety, and environment, the request was not completely out-of-the-blue, but the task left her casting about for guidance.

Kryzstowczyk recalls that she started researching what other companies were doing and stumbled on the Global Reporting Initiative (GRI), a voluntary set of guidelines for reporting on a company's financial, social, and environmental sustainability. "Sustainability can be somewhat overwhelming," she says, "but I looked at their reporting format and I thought, 'We can start here and figure out where we are today.' "

In the business world, financial reporting is a given, but the advent of sustainability reporting has sent many corporations into a flurry of introspection. For Albemarle, finding a recognized framework for measuring and communicating sustainability data and goals provided an organizing principle for its efforts.

With GRI guidelines in hand, Krzystowczyk returned to her chief executive officer, Mark C. Rohr, to say she was confident Albemarle could use company information to develop some measure of its sustainability and to communicate the information to internal stakeholders.

But she told Rohr, "if you are really serious, there are a couple things we need to do. First you need to give your vision to the company." In fact, the first segment of a GRI-based report must be a "statement from the most senior decisionmaker of the organization about the relevance of sustainability to the organization and its strategy."

In the spring of 2008, Albemarle published its first public sustainability report. In it, Rohr outlines his six guiding tenets: governance and integrity, corporate citizenship and community involvement, social and environmental responsibility, green innovation and design, financial performance, and employee safety and development.

The 10-page report, based on 2007 data, is a small subset of a 150-page document that the company uses internally to track and guide its sustainability efforts. The report has a strong theme of community involvement, Krzystowczyk says, because that value is important to Albemarle's employees.

Employees are only one of the important audiences for 3M, which has been publishing sustainability reports for seven years. Keith J. Miller, manager of environmental initiatives and sustainability, says the company started with stakeholder meetings and found that its report would have broad-based readership. "We know we have everyone from casual users of the information all the way to people who read metrics closely," including people who are involved in socially responsible investing, Miller says.

The stakeholder research helped Miller's team understand where the company should put its reporting efforts. "We started with the goal of answering 80% of the questions we heard," Miller says. Since then, 3M has shaped its report to follow the GRI framework.

In part on the basis of data in its sustainability report, 3M made the list of companies in the Calvert Social Index, a stock index managed by the Calvert Group. According to Calvert, a financial services firm, the index aims to serve as a benchmark for measuring the performance of large, U.S.-based companies that it deems to be socially responsible.

As a senior social research analyst for Calvert Funds, Jules Frieder helps choose which companies make the list. She says Calvert is always looking for companies that "capitalize on strategic opportunities in sustainability." A strong program of sustainability reporting is one way Calvert distinguishes those companies from the rest. Frieder's company is among a growing number of stock funds whose managers blend financial and social performance factors into their portfolio decisions.

"My industry relies on information—it's a market-based approach to change. We need to know about market risks and opportunities," Frieder says "Usually we don't see enough information that we need to see—reporting on violations, hazardous releases, communication to communities, and mechanisms to avoid harm." Real data is necessary, she says, because Calvert wants to gauge a company's progress over time.

The other important piece that Frieder looks for in sustainability reports is a system of product stewardship. "We like to see some level of precaution built into the process and reported on," she says.

Calvert's index doesn't include Albemarle, but it does list chemical companies such as Air Products & Chemicals, Lubrizol, and Sigma-Aldrich. "We've seen evidence that specialty chemical companies have really found some innovative opportunities, and their operations are able to keep pollution and waste more contained," Frieder says.

Chemical & Engineering News

ISSN 0009-2347

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