global reporting initiative indicator selection decisions

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Global Reporting Initiative Indicator Selection Decisions: A Case Study

by

Kobboon ChotruangprasertAccounting Department

Schulich School of BusinessYork UniversityToronto, Ontario

Canada M3J 1P3

Phone: 416-730-2100 ext. 77910Fax: 416-736-5687

e-mail: [email protected]


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ABSTRACT

Due to the voluntary nature of the Global Reporting Initiative (GRI) Guidelines, GRI adopterdoes not have to report every GRI indicator. This raises the question whether a company thatclaims to adopt GRI tends to report only the GRI indicators that would portray it in a good light.This paper attempts to shed light into this question. Specifically, this paper investigates how acompany decides which social and environmental indicators to report, why those indicators are

chosen and whether and how GRI adoption affects indicator selection decisions. Sustainabilityreporting by Company A1, a Canadian mining company, is used as a case study for this paper.Research methods include interviewing Company As employees who are involved in preparingGRI reports and reviewing both internal and external documents. Economic theory, institutionaltheory, and integrative social contracts theory are used as my analytical lenses. I argue thatCompany As sustainability reporting appears to be driven most heavily by the factors associatedwith economic theory. Even though the number of indicators reported by Company A increasesafter GRI adoption, the amount of details appears to be insufficient in some cases. This makes itdifficult or impossible for stakeholders to find specific information that they need from thecompanys GRI report, especially the information at the mine site level. In addition, reporting inaccordance with GRI does not appear to help improve information accuracy.

Key words: non-financial reporting, Global Reporting Initiative, sustainability, mining

1The companys name has been changed to protect its anonymity.


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INTRODUCTION

Mining companies have been increasingly facing expectations from stakeholders to be

transparent on its social and environmental impact. On a number of occasions, stakeholders have

requested that mining companies adopted the GRI Guidelines. In a series of four national

roundtables organized by the Canadian government during 2006, a group of stakeholders

including representatives from mining companies, NGOs, academia and aboriginals2advised the

Canadian government to endorse the adoption of the GRI Guidelines among the Canadian

mining companies. Additionally, in July 2009, the Social Investment Forum (SIF) called on the

Securities and Exchange Commission (SEC) to help strengthen financial markets and foster

sustainable business practices by requiring publicly traded companies, including Canadian

mining companies that have their stocks listed in the American stock exchange, to adhere to the

highest reporting level of the current version of the Global Reporting Initiative (GRI)

2From http://www.pdac.ca/pdac/advocacy/csr/roundtables-background.pdf, accessed on April 7 th, 2010.


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guidelines3. The highest reporting level for G3, which is the current version of the GRI

Guidelines, requires companies to report all core G3 and Sector Supplement indicators4.

Yet, there is a variation in GRI adoption and GRI indicators reported by Canadian mining

companies. Only a small number of Canadian mining companies are reporting using the GRI

Guidelines despite an existence of the GRI Mining and Metals Sector Supplement. In addition, a

number of companies that are using the GRI Guidelines are not reporting all core GRI indicators.

Consequently, there appears to be a gap between the current non-financial reporting (NFR)

practice of some Canadian mining companies and stakeholder expectations.

The gap between a companys NFR practice and stakeholder expectations has not been

addressed adequately in the literature. In particular, we currently do not have an adequate

understanding about companies indicator selection decisions and the mechanisms that

stakeholder expectations are taken into account in such decisions. This work-in-progress paper

aims to address these literature gaps. Specifically, this paper asks how a company decides which

social and environmental indicators to report, why those indicators are chosen and whether and

how GRI adoption affects indicator selection decisions.

I begin by providing a background of GRI and the Mining and Metals Sector Supplement

and reviewing existing literature about GRI. Next, I discuss the three theoretical lenses used in

this paper, including economic theory, institutional theory, and integrative social contracts theory

(ISCT). Then, I explain the method and data used in this study and discuss findings, beforeending the paper with conclusion.

3From http://www.socialinvest.org/documents/ESG_Letter_to_SEC.pdf, page 6, accessed on April 5th, 2010.4Information about GRI application level can be accessed athttp://www.globalreporting.org/NR/rdonlyres/FB8CB16A-789B-454A-BA52-993C9B755704/0/ApplicationLevels.pdf, accessed on May 16 th, 2011.


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OVERVIEW OF THE GLOBAL REPORTING INITIATIVE

The rapid growth of non-financial reporting (NFR) has led to an enormous volume of

inconsistent and unverified information. A number of stakeholder groups have been active in

trying to correct this problem. Many initiatives emerged, such as the chemical industrys

Responsible Care guidelines (a set of voluntary guidelines issued by the European Chemical

Industry Council for its members) and Public Environmental Reporting Initiative (PERI)

guidelines by CERES.

Although there are quite a large number of initiatives relating to NFR, the Global

Reporting Initiative (GRI) appears to be the most dominant disclosure standard at present

(Ballou, Heitger, Landes, & Adams, 2006). Convened by the Coalition for Environmentally

Responsible Economies (CERES) in partnership with the United Nations Environment Program

(UNEP), GRI was established in 1997 to assist reporting organizations and their stakeholders to

better describe and articulate the overall contributions of the reporting organization towards

sustainable development (Marshall & Brown, 2003). In 2002, the GRI became a permanent

institution with a Board of Directors and headquarters in Amsterdam, the Netherlands. The GRI

is an official collaborating centre of UNEP, which encourages companies to use the GRI

guidelines in their communications on progress under the UN Global Compact

5

. GRI has threeadvantages over other reporting initiatives. First, the steering committee of GRI composes all

major stakeholders, including business, environmental, accounting, and United Nation interests.

5From UNEP website: http://www.uneptie.org/Outreach/reporting/gri_background.htm, accessed on 22 September2006.


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Second, GRI tries to go beyond the traditional environmental and health and safety concerns. It

incorporates economic, social, and environmental aspects of sustainability. Finally, GRI

emphasizes the concept of standardization (White, 1999).

The mission of the GRI is to develop and disseminate globally applicable guidelines for

NFR to allow for a comparison of economic, environmental, and social performance of

corporations regardless of size, sector, or location. The vision is to raise the level of rigor,

credibility, comparability, and verifiability of NFR to that of financial reporting6. To this end,

GRI issued its first set of Sustainability Reporting Guidelines as an Exposure Draft in 1999.

After a period of testing and public comment, the June 2000 Sustainability Reporting Guidelineswere released. The 2000 guidelines were followed by the 2002 Sustainability Reporting

Guidelines. On October 5th, 2006, GRI issued the third version of its guideline, called G3. An

update to the G3, called the G3.1 Guidelines, was launched on 23 March 2011. It includes

expanded guidance for reporting on Human Rights, Local Community Impacts, and Gender. 7

The GRI guidelines consist of overall guidelines and Sector Supplements for a number of

industries, such as mining and metals, financial services, and telecommunications. A Sector

Supplement is designed to help companies address issues specific to a particular industry in a

common fashion, producing more relevant, meaningful, and comparable reports. Sector

Supplements complement the main GRI guidelines. The GRI asks companies operating in the

industry in which Sector Supplements are available to use Sector Supplements in addition to, not

in place of, the main GRI guidelines.

6 From GRI website: http://www.globalreporting.org/AboutGRI, accessed on 13 January 2008.7From GRI website: http://www.globalreporting.org/ReportingFramework/G31Guidelines/, accessed on 16 May2011.


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The GRI released the pilot version of the Mining and Metals Sector Supplement

(hereafter referred to as the Mining Supplement or the Supplement) in February 2005. The

Mining Supplement was developed through GRIs multi-stakeholder process in partnership with

the International Council for Mining and Metals (ICMM). The GRI released the final version of

the Supplement in March 2010.

The review of the literature that is related to GRI is provided in the following section.

LITERATURE REVIEW

Although the GRI is starting to attract the attention of researchers, extant literature

remains limited. Example of studies related to GRI include those that provide opinions of the

GRI both as an institution and as guidelines from the authors and other experts points of view

(Hartman & Painter-Morland, 2007; Klein et al., 2005; Levy, Brown, & de Jong, 2010; Vogel,

2005) and those that investigate the relationship between GRI reporting and financial

performance (Greeves & Ladipo, 2004; Samy, Odemilin, & Bampton, 2010; Schadewitz &

Niskala, 2010).

GRI literature that helps to highlight the importance of understanding how companies

make GRI indicator selection decisions includes those studies that use the GRI Guidelines as ascoring template to evaluate the extent to which companies sustainability reports meet the GRI

requirements (Guenther, Hoppe, & Poser, 2006; Morhardt, Baird, & Freeman, 2002; Samy et al.,

2010; Skouloudis, Evangelinos, & Kourmousis, 2009). The findings in these studies revealed


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major gaps between the GRI requirements and companies reporting practices. Specifically, the

authors of all these studies find that reporting practices of the companies under their studies are

well below the standards reflected in the GRI Guidelines. Guenther et al (2006)s study is most

relevant to my study, as it is related to the mining industry. Guenther et al (2006) focus on

reporting of the 35 GRI G2 environmental indicators by the companies in the mining and oil and

gas industries. They find that companies appear to pick and choose GRI indicators to report

rather than reporting all indicators. For instance, total water use, non-compliance and direct

energy use are completely reported by the 29 mining companies in their sample, but other

indirect energy use and impact of transportation are not reported by any of those companies.Other indicators are reported by only some companies in the sample (Guenther et al., 2006).

Similarly, Jenkins and Yakovleva (2006) note that there is considerable variation in the maturity

of reporting content and styles (page 271) of mining companies despite a clear trend toward

GRI adoption among the biggest mining companies worldwide (Jenkins & Yakovleva, 2006).

The implication from these studies is that even though companies report that they adopted the

GRI Guidelines, it does not mean that they report all GRI indicators. Therefore, my study uses

Company A as a case study in trying to understand how GRI indicators selection decisions are

made.

While a few studies investigate motivating factors for GRI adoption (Dilling, 2010;

Hedberg & Malmborg, 2003), only one study (Prado-Lorenzo, Rodrguez-Domnguez, Gallego-

lvarez, & Garca-Snchez, 2009) focuses on factors motivating companies to report a number

of GRI indicators rather than GRI adoption as a whole. This study focuses on motivating factors

of firms disclosing GRI indicators related to greenhouse gas emissions and global warming.

Their sample includes 101 Fortune 500 companies in the USA (the only country in the study that


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did not ratify the Kyoto protocol), Australia, Canada and the European Union in "Aerospace and

Defence; Airlines; Chemicals; Energy; Forest and Paper Products; Industrial and Farm

Equipment; Metals; Mining, Crude-Oil Production; Motor Vehicles and Parts; Petroleum

Refining and Utilities" industries (Prado-Lorenzo et al., 2009) (page 1141). The GRI G3

indicators included in this study are EN16, EN17, EN18, EN19, and EN20. The authors find that

while EN16 (total direct and indirect greenhouse gas emissions by weight) and EN18 (initiatives

to reduce greenhouse gas emissions and reductions achieved) are reported by over 90% of the

companies in their sample, EN19 (emissions of ozone-depleting substances by weight) is

reported by less than 40% of the companies. The authors find that larger companies andcompanies from the countries that have ratified the Kyoto Protocol are more likely to disclose

these five GRI indicators. However, the question remains exactly how and why most companies

decide to report EN16 and EN18 but not EN19. I intend to shed light on this question by

studying how a Canadian mining company decides which GRI indicators to report.

Another relevant literature is the 2008 study by Clarkson et al that attempts to determine

whether the companies that report GRI indicators more extensively are also those with better

CSR performance. Clarkson et al (2008)s study finds a positive association between the level of

disclosure of GRI environmental indicators and environmental performance. In other words,

companies that have superior environmental performances are found to disclose higher level of

GRI environmental indicators. According to the authors, their results are consistent with

explanations by economic-based voluntary disclosure theory. This is because according to the

authors description of economic-based voluntary disclosure theory, superior environmental

performers would benefit from disclosing more as a means to convey their superiority, while

inferior environmental performers are more likely to remain silent with the hope that the market


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would regard them as average performers. Meanwhile, the authors note that socio-political

theories such as legitimacy theory also appear to be useful in explaining GRI reporting. This is

because the companies with relatively poor environmental performance tend to disclose soft

claims about their environmental commitment that are not readily verifiable (Clarkson, Li,

Richardson, & Vasvari, 2008). The conclusion from their study supports the use of multiple

theories in this paper.

In conclusion, while there is a recent increase in the interest in GRI-related research, GRI

literature is still very limited. Review of GRI literature reveals some important literature gaps.

Theoretical explanation for GRI adoption appears to be unclear and incoherent. Furthermore,while existing literature shows that companies that adopt the GRI Guidelines choose to report

only some GRI indicators, it is unclear from the literature how the companies decide which GRI

indicators to report. I intend to address these literature gaps using three theoretical lenses, as

illustrated in the next section.

THREE THEORETICAL ACCOUNTS

My analysis is performed through the lenses of economic theory, institutional theory, and

integrative social contracts theory (ISCT). Using three theories together by combining them

allows me to develop a balanced framework for understanding, explaining, and evaluating GRI

indicator selection decisions.

i) Economic Theory


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Economic theory in this paper refers to a particular viewpoint that the responsibility of a

corporation is, and should be, profit maximization within the framework of the law and local

customs. Milton Friedman supported this viewpoint that the social responsibility of a for-profit

corporation should be to use its resources and engage in activities designed to increase its

profits so long as it stays within the rules of the game, which is to say, engages in open and free

competition without deception or fraud (Friedman, 1970). Economic theory takes the position

that a firm should make every decision in a way that will maximize its profits. In other words,

maximization of profits (revenues minus costs) should be the backbone of all corporate

decisions. Profit maximization is reinforced in microeconomic principles (Baye, 2006; Pindyck& Rubinfeld, 2009). In application to the concept of corporate social responsibility (CSR),

economic theory takes the position that a firm should be socially and environmentally

responsible only if being socially and environmentally responsible is the most effective or cost

efficient way to maximize profits. Likewise, in application to GRI indicator selection, economic

theory takes the position that a firm should report those indicators in a way that is the most

effective or cost efficient way to maximize profits. This paper aims to study whether in fact a

Canadian mining company is motivated by reasons associated with economic theory in selecting

GRI indicators.

ii) Institutional Theory

The most fundamental concept of institutional theory is that organizations are affected by

forces that exist in the organizations institutional environment (Selznick, 1949). Thus, in order

to understand organizations, one needs to understand their social context, which is constructed as

social reality through interactions (Berger & Luckmann, 1967; 1966).


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Institutional theory takes a position that the fundamental goal for an organization is long-

term survival (DiMaggio & Powell, 1983; Meyer & Rowan, 1977). It posits that organizations

form and expand by incorporating institutional rules, or myths, or institutional logic, which is

defined as the belief systems and associated practices that predominate in an organizational

field (page 170) (Scott, 2000). Institutional behavior is shaped by three types of rules

regulative, normative, and cultural-cognitive. According to institutional theory, these rules

guide, support, and constrain social and corporate behavior. The regulative rule includes not

only the legal means of rule-setting, but also political monitoring, economic sanctioning, and

informal means of public shaming. The normative rule includes values and norms. The cultural-cognitive rule includes common beliefs and social construction of reality. According to

institutional theory, incorporating these rules allows organizations to achieve legitimacy.

Suchman (1995) defines legitimacy as a generalized perception or assumption that the actions

of an entity are desirable, proper, or appropriate within some socially constructed system of

norms, values, beliefs, and definitions (Suchman, 1995) (p. 574). Organizations achieve

regulative legitimacy by operating within the legal envelop. Organizations achieve normative

legitimacy by operating within a specified moral framework. Organizations achieve cultural-

cognitive legitimacy by respecting relevant cultural values. Altogether, legitimacy achieved by

conforming to the three rules of the institutional environment increases the organizations

resources and survival capabilities (DiMaggio & Powell, 1983; Meyer & Rowan, 1977).

Where GRI indicator selection is concerned, institutional theory suggests that a mining

companys GRI indicator selection decision will be affected by the forces within the mining

industry and that the decision can be properly explained by examining the social and cultural

contexts within the mining industry. An example of factors within the regulative rule of


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institutional environment that may affect a Canadian mining companys GRI indicator selection

decision includes Canadian governments social and environmental information requirements

that a mining company has to report. Examples of factors within the normative rule of

institutional environment that may affect a Canadian mining companys GRI indicator selection

decision include social norms and values, and mining industry associations emphasis on certain

indicators. An example of factors within the cultural-cognitive rule of institutional environment

that may affect a Canadian mining companys GRI indicator selection decision includes peer

companies reporting.

This paper examines whether and how each factor based on the three rules of institutionalenvironment affects the companys GRI indicator selection decision.

iii) Integrative Social Contracts Theory

Integrative Social Contracts Theory (ISCT) is a normative theory that aims to articulate a

framework designed to guide business decision making. The framework is based on the idea of

contract, which has been put forward by early philosophers such as Plato. According to ISCT,

social contracts entered by businesses do not only include formal agreements, but also take a

form of a handshake or informal agreements that bind companies to the society. These implicit

contracts are critical for understanding business ethics (Donaldson & Dunfee, 1999). (Page 1)

Answering ethical questions requires surfacing these implicit contracts (Donaldson & Dunfee,

1999) (page 3).

There is a place for both local and universal moral values under ISCT. ISCT takes the

position that a firm should make decisions in a way that will satisfy the contracts or the

implicit understandings of obligations that bind it into local communities, given that these


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contracts are consistent with hypernorms, i.e. universal moral principles. ISCT takes the

position that members of a local community generate ethical norms through micro-social

contracts. According to ISCT, micro-social contracts, also called authentic norms, represent

ethical obligations that morally bind a firm to society through the recognition of actual norms

created in real social and economic communities (Dunfee, 2006) (page 304). In other words,

ISCT takes the position that authentic norms are commonly shared values within a particular

community based upon community members attitudes and behaviors. In the context of this

paper, authentic norms for a Canadian mining company refer to not only commonly shared

values in Canada, but also commonly shared values in foreign communities where the companyoperates. This paper seeks to understand what managers perceive as their companys obligations

toward society, and how those perceptions affect the companys indicator selection decision.

DATA AND METHOD

The three theories above provide three sets of explanations for NFR that are not entirely

consistent, which emphasize the necessity of more fieldworks to allow a better understanding of

the NFR phenomenon. The need for a fieldwork study in this matter has been voiced in the

existing literature, for example, by Gray (2005): our simple theories are not yet able to tell us

when an organisation will (not) report, why it will (not) continue to report and why it does (not)

report certain information. The need for further fieldwork seems inescapable. (Gray, 2005)

(page 16) This paper presents a case study, where I conducted a fieldwork within Company A.


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Company A is a Canadian gold mining company with four regional business units in

Australia, Africa, North America and South America. Acquisitions of other mining companies

pushed Company A to its current position as the largest gold producer in the world.

Company A has often been accused of environmentally unsound practices including

alleged spills of cyanide, mercury and other heavy metals that have led to poisoning of human

populations and environmental damage. Company A recognized the existence of the negative

publicity around the company and has taken steps towards becoming more socially and

environmentally responsible. For example, a majority of Company As mines have been

certified under the International Cyanide Management Code.

In addition, Company A has engaged in non-financial reporting (NFR) in response to the

negative publicity. The company has tried to be increasingly proactive in publishing a number of

annual sustainability reports both at the organizational level and the site level. While Company

A had been reporting its social and environmental information in its annual report since the

1990s

, the company started issuing a standalone sustainability report in the year 2002. The

sustainability reports are meant to convey Company As environmental, health, safety and social

programs, practices and performance at its operations worldwide. Even while the company has

been issuing standalone sustainability report annually, it still devotes a separate section in its

annual report, where the company discloses a summary of social and environmental information.

Company A started reporting in accordance with the GRI Guidelines in its 2005 sustainability

report. In addition to reporting social and environmental information in sustainability reports,

site-level sustainability reports, and annual reports, Company A has also been publishing

8Company As 1998 annual report, the oldest annual report available from Company As website, contains socialand environmental information.


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quarterly report on responsible mining since December 2007. Company As sustainability

reports have been independently reviewed by an external auditing company since 2002.

My analysis is based on publicly available documents (such as Company As

sustainability reports and annual reports), an internal document (an excel file, which I would like

to call consolidated information template, with a complete list of corporate social

responsibility (CSR) indicators collected both at the corporate level and at the mine level), and

my interviews with three individuals at Company A Senior Director CSR, Manager External

Reporting, and Director of Communications9. These interviews were conducted using a written

guide that allowed me to ensure that all topics related to my research questions would be

covered. I prepared the interview guide based on a literature review and discussions with experts

in the areas of social and environmental reporting and the Canadian mining industry. Two

interviews were conducted by telephone in February 2008. An interview was conducted in a

face-to-face meeting in March 2008. All interviews were recorded with consent, transcribed and

analyzed thematically.

FINDINGS

While various factors appear to influence Company As indicator selection decisions,

economic rationale appears to be strongest. In other words, Company A appears to focus first

and foremost on the indicators that management believes would help the company maximize

9I am referring to them by their titles because two of the participants asked that their names not be revealed in mystudy.


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profits and stock prices. Company A chooses to report the indicators for profit maximizing

purposes both directly and indirectly. The indicators that directly help to maximize profits

include those that generate costs or revenues, and thus directly impact the companys bottom

lines. Examples of these indicators include materials used (EN1), recycled materials (EN2),

energy consumption (EN3), and water withdrawal (EN8). Therefore, Company A has been

tracking, managing, and reporting such indicators as sodium cyanide consumption, scrap metals

recycled, used oil recycled, batteries recycled, energy consumption and water consumption

consistently since it started issuing sustainability report in 2002. Management appears to believe

that as a public company, Company As highest priority is to maximize shareholders profits, asexplained in the interview quote below. At the same time, management also desires to

communicate that the company is satisfying its implicit social contracts, as can be seen from the

underlined portion of the quote, although maximizing profits appears to have higher priority.

"The focus of the company is to be energy efficient, and to reduce waste, and to

reduce and manage the water use... All the materials cost us a huge amount of

money. So theres a financial push to reduce the use of things And of course in the

health and safety area, its our goal to have no accidents and no incidences at all.

And in the social area, we want to be able to share the benefits of mining with the

community where we operate in a way that allows them to be independent and the

things that we help to put in place are sustainable after we leave.

So those are our

goals of our company. And if that means that we can reduce pollutant and reduce

water use or that kind of thing, thats great. But the goal, I think, as a publicly

traded, public company, has to be to reduce costs because a public companys first


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priorities are its shareholders. And we have to make sure that everything we do

benefits our shareholders." (Manager External Reporting)

Some indicators such as amount of land disturbed (MM110) and biodiversity (EN12) do

not have a direct or obvious link to the companys bottom line, but are reported by Company A

because management appears to believe that there are some indirect benefits that will ultimately

translate to higher profits and stock prices. Specifically, management appears to believe that

disclosing these indicators, including negative indicators such as spills (EN23) and non-

compliance with environmental laws (EN28) increases Company As credibility as a transparentcompany. Credibility, as stated in managements quote below, is believed to be important for

having social license to operate, which in turn affects share value.

That is a part of business argument if that if youre seen as a credible company,

your share increases in value. As a mining company, we sometimes have a lot of

oppositions into going into some areas and producing a mine. And if people

understand that we can, we will work on our issues and we will talk about them,

and we will make every effort to correct something that goes wrong, it means

theres less opposition and more positive experiences of trying to open a new

mine. (Manager External Reporting)

Before adopting the GRI Guidelines, Company A focuses on reporting the indicators that

it had already collected internally and the information asked by stakeholders. After Company A

10MM indicators are those from the Mining and Metals Sector Supplement.


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adopted the GRI Guidelines, GRI provides a new template for Company A to collect and report

information. As a result, the number of indicators reported by Company A increased

tremendously after GRI adoption. Only 17 GRI indicators11are reported in Company As first

sustainability report in 2002 (MM1, EC1, EN1, EN2, EN3, EN8, EN12, EN14, EN21, EN23,

EN28, LA1, LA7, LA8, HR5, HR6, and SO8), while 43 GRI indicators are reported in the 2005

report, the first year that Company A adopted GRI Guidelines.

Weve provided information in the beginning on what we collected data on and

then as we were asked questions on other areas we expanded what we asked our

sites to collect for data. In many cases we respond to public queries. And then

we decided to use GRI as our basis for what we would collect. (Manager

External Reporting)

The number of indicators reported by Company A continued to increase after GRI

adoption. For example, Company A reports all but 18 additional GRI indicators in its 2006

sustainability report, while only 3 additional GRI indicators are missing from the 2008

sustainability report. This suggests that Company A has made a conscious attempt to report all

indicators listed in the GRI Guidelines. Based on my interview with the Senior Director CSR,

the motivation for this seems to be to gain credibility amongst the stakeholders and in the mining

industry and gain recognition for having gone above and beyond the requirements of obtaining

the A rating of G3.

11GRI indicators in this study refer only to economic, environmental and social indicators that are requested byGRI. The indicators in the corporate profile and governance sections of the GRI Guidelines and the indicatorsreported by Company A that are not part of the GRI Guidelines, such as number of wildlife fatalities and number ofair emission points, are not included.


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There are some indicators in GRI that are marginally or perhaps not useful to us

If were close to the A rating of G3, which we are, we will perhaps make that extra

effort to get there by collecting some information not necessarily useful for

management purposes of the company, but well do it anyways because it does get

recognized We like to be able to say that we have an A rating, and it is verifiable

by the GRI. (Senior Director CSR)

My interviews suggest that Company A did not disclose the additional GRIindicators that are missing from Company As sustainability reports for two reasons. The

first reason is that the indicator is deemed not very useful or meaningful, thus the company

did not give the highest priority to reporting such data.

"The guideline GRI, they ask questions like, I think is one of the GRI requirements

how many meetings do you have, which is an indicator of nothing The implication

is that if you have stakeholder meetings, youre doing good. That is not the case. So,

you know, I tend to stay away from tracking the number of meetings we have

although I could be wrong, but I think its a requirement of GRI, and we actually

dont do it." (Senior Director CSR)

In fact, the number of stakeholder meetings indicator that the Senior Director CSR

mentioned is not one of the GRI indicators. Instead, this indicator is requested by the Dow Jones

Sustainability Index. Interestingly, even though the Senior Director CSR mentioned in the above


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quote that he perceived the number of stakeholder meetings indicator as not very meaningful,

Company A appears to be tracking this indicator in detail. The number of stakeholder meetings

is amongst the list of indicators collected by Company A, as can be observed from the

consolidated information template (Company As internal document). The consolidated

information template shows that Company A has separate indicators for number of scheduled

public meetings, number of meetings with elected officials, number of formal public advisory

group meetings, number of ad hoc meetings, number of other types of interactions (briefly

describe type), and total number of stakeholders in attendance at meetings in the year.

Therefore, I believe that even though an indicator is perceived as not very important, this reasonalone is not sufficient for Company A to refuse to collect and report the indicator.

The second reason is that the company currently does not have the data and is still trying

to collect the data in a way thats consistent across the whole company. For example, Company

A did not report "energy saved due to conservation and efficiency improvements" and also

"initiatives to reduce greenhouse gas emissions and reductions achieved" in its 2006

sustainability report because Company A did not have accurate data for these two indicators at

that time. These are 2 additional GRI indicators, among a few other additional GRI indicators

that Company A was not reporting at the time of my interview. I chose these 2 indicators

specifically because these two indicators ask the company to report positive information as

opposed to negative information such as the amount of fines and penalties that the company had

to pay. Since I believe that companies generally tend to report good news, I believe that it is

important to understand the reason Company A did not report these two indicators.


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"The only concern we have is can we get the information globally and accurately...

No one that I talked to in the corporate office or here is opposed to reporting We

just dont always have all the information in an accurate enough manner that we

can feel comfortable with those figures... We didnt collect a lot of data on our

waste product recycling and that kind of thing. So we were doing it. We werent

just collecting information on it... [We did not report energy saved due to

conservation and efficiency improvements and initiatives to reduce greenhouse gas

emissions and reductions achieved indicators] because were just collecting that

information. We now have an energy group in Toronto that is leading the energy

efficiency program across our sites. And this would be the first year that they will

be able to have some sort of figure that will show whether or not these energy

efficient programs are actually reducing our costs. Before that, we didnt have any

figures. People will just go in and say wow, you know, we should turn off our

lights every time we leave the room, and everyone would start doing it. But there

was no Nobody was keeping track of whether that reduced electricity cost, for

example What is preventing us from reporting even more things is that as a

company, we are not being consistent in some of that data collection. And we are

hoping to get more now. " (Manager External Reporting)

Company As GRI indicator selection decision appears to be driven not only by the GRI

Guidelines, but also by its institutional environment, such as peer companies sustainability

reports and industry conferences. In other words, even after the adoption of the GRI Guidelines,

Company A still observes the indicators that are reported by peer companies and that are


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considered important by the professional body and society. This explains the reason that the

company may report some indicators that are beyond GRIs requirements. One example is

Company As disclosure about mercury, which is not required by the GRI.

"There is a little bit of discussions on our website related to mercury. That is

something we dont have to disclose. We dont have to talk about how we manage

mercury, but we choose to do that because that is an issue for instance that has come

up quite a bit in the States This is an issue that is key to our business, the way we

manage it is key, and its an issue we often do talk to the industry about it, the

industry association. We hear at conferences. We see at our own internal

management processes. Its not a single thing." (Senior Director CSR)

There appears to be a variation in the completeness of how Company A reports each

indicator. Not all indicators were reported exactly as requested by the GRI Guidelines.

Company A provides more information than requested by the GRI Guidelines for some

indicators. An example is G3s MM9 indicator, number and percentage of operations with

closure plans. For this indicator, Company A chose to not only report that all of its operations

have closure plans, but also separate closure plans into two aspects, including social and

environmental aspects, and describe each aspect in great details.

Meanwhile, Company A provided less information than required by the GRI Guidelines

for some other indicators. For example, G3s HR4 indicator is Total number of incidents of

discrimination and actions taken. While Company A declared that it reports the HR4 indicator,

its response for this indicator is simply that all incidents of discrimination reported to the


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company in 2008 were thoroughly investigated and resolved. While Company A suggested in

its 2008 report that all discrimination incidents were thoroughly investigated and resolved, the

company failed to disclose total number of incidents and describe actions taken to resolve them.

Therefore, it appears that while Company A reported that it discloses almost every GRI

indicator, disclosure of some indicators are incomplete.

Doubt has also been raised regarding the accuracy of the information reported. For

example, while Company A reports the GRI indicator EN22, total weight of waste by type and

disposal method, the information disclosed for this indicator is criticized as not truly accurate

and transparent. In the 2008 sustainability report, Company A reported the followinginformation about waste management at one of its mine:

At the (mines name), tailings management involves riverine tailings disposal

under water quality permit limits. Prior to disposal, the tailings undergo pre-

treatment. This disposal methodology was approved by the Papua New Guinea

regulatory authorities when (the name of the acquired company) established the

mine, and the monitoring results are sound. (Company A) has engaged a team of

experts to study and assess options to improve and reduce the discharge of

riverine tailings.(2008 sustainability report)

However, an investigation by Norwegian Pension Funds Council on Ethics found that

riverine disposal practice at this mine is in breach of international norms and poses the risk of

accumulation and build up of heavy metals, especially mercury, in the environment12. This

12From http://www.porgeraalliance.net, accessed on 16 May 2011.


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prompted Norwegian Pension Fund to divest from Company A, according to its press release in

January 200913.

CONCLUSION

This paper examines social and environmental indicator selection decisions through the

lenses of economic, institutional, and integrative social contracts theories by using Company A

as a case study. While GRI appears to be developed with the purpose of helping organizationscommunicate how they satisfy social contracts, the goal of transparently communicating the

companys ability to satisfy social contracts appears to have lower priority than profit

maximization goal in Company As decisions to disclose social and environmental information.

This paper shows that reporting on a particular GRI indicator does not necessarily mean that the

indicator is properly managed. Thus, there may be no universal answer to the question whether

the GRI Guidelines are a useful tool for a company to satisfy its social contracts, as it may

depend on how GRI is used by a particular company. My study aims to contribute to not only

discussions regarding voluntary GRI reporting, but also broader discussions such as those

regarding the need for corporate sustainability reporting regulations and the nature of third party

assurance audit assurance on sustainability reports.

13The press release can be accessed at http://www.regjeringen.no/en/dep/fin/press-center/Press-releases/2009/mining-company-excluded-from-the-governm.html?id=543107, accessed on 16 May 2011.


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