Editor’s note: Dr. Mario Abela is director of standards at the Global Reporting Initiative (GRI), a nonprofit organization whose guidelines provide a widely accepted framework for companies to assess and report on their environmental, social, and economic impacts. Founded in 1997 by the United Nations Environment Programme (UNEP) and the Coalition for Environmentally Responsible Economies (CERES), GRI is now an independent body based in Amsterdam. Its sustainability standards have been adopted voluntarily by more than 14,000 companies and organizations, including 73% of the largest companies in the world. Barbara DeLollis, former BiGS head of communications, caught up with Abela to discuss the significance of the GRI standards and the path forward for holding corporations accountable. This interview has been edited for length, clarity, and style.
The GRI standards have their genesis in the notion that businesses must actively take steps to address the climate crisis. Why is that so important?
The climate crisis is an existential issue, a burning issue that business must respond to through every era, through every decade. And the reality is that we've blown our chances in terms of the planetary boundaries. So now we're in a gray zone where we don't know what will happen next because we've exceeded what the planet can cope with. If you want to stay in business, if you want to be a successful business, this is something you need to get your head around. Business models have no choice. They simply have to adapt.
Sustainability reporting is, for now, still mostly voluntary. Describe GRI’s role.
A lot of people seize on the difference between voluntary versus mandatory with sort of an undertone, implying that voluntary means that standards are not very good quality, and mandatory means that they are. That is just not the case. It’s important to pivot your thinking on this.
Anyone trying to understand the sustainability performance of an organization has struggled, because the information is in different places. The metrics are not standardized and so there's no consistent information and often no consistent trend line in the information. Today, in large part because of the standards that we were the first to create, there exists a well-regarded set of information on sustainability that investors and stakeholders have come to expect of companies. If we think sustainability reporting is important, then we need a common language to underpin that and we need a global system. Companies, regulators, and investors want consistency.
You have called out attempts by companies to market their products and methods as environmentally sustainable when they are not. Why is this ‘greenwashing’ so detrimental?
Simply put, greenwashing is fraud. It’s about making claims as a company that you cannot prove. And in the sustainability space, the fact is that the laws haven’t caught up to the claims that the marketing departments of these companies are making. But that is beginning to evolve.
In the airline industry, for example, there have been a number of cases where airlines have come out and said, ‘we're a sustainable airline’ or ‘we use sustainable fuel.’ And while there may be initiatives moving in that direction, the courts have basically said there's not enough evidence to show that this is actually the direction you're taking, because only a small percentage of your fuel is sustainable fuel.
So, what is your organization doing to combat greenwashing?
We are providing benchmarks, guidelines, data. As the standards around this sort of thing grow and this information is increasingly being audited and checked by third parties, we’re starting to see this shift at companies to acknowledge that these claims need to be data driven. The fundamental thing is to really make sure you pay a lot of attention to the data, data collection and data quality. If you don't have those fundamental systems in place, you're getting signals in the business that are inaccurate. And that means that you could be making the wrong decisions. It comes down to a fundamental question of governance and having good controls, good systems in place.
As risks and opportunities for insurers, companies, and investors evolve how do the GRI standards help stakeholders understand and prepare for these shifts?
The old way of doing business was really to externalize as many costs as you could. That's what people were taught in MBA programs. Profit maximization is the key. Pollute as much as you need to maximize your profits. But now this attitude is really starting to hit at our businesses in a really existential way.
It is really time for change now. There really isn't time to hang on with business as usual, hoping that things will somehow change, that somehow you won't need to transition. The costs of transitioning are just going to grow exponentially, and the more you delay this, the more value you destroy in the future. We've seen this time and time again, where companies focused too much on just maximizing short term profits and then come unstuck because these impacts convert to risks. And those often convert to serious litigation and serious damages against the company.
What role should academia play to address some of these problems of corporate sustainability?
It's important for academics to take sustainability seriously and not to treat it as a stand-alone issue. We need to understand more from an academic point of view what a business is doing. What challenges are they facing with this deluge of reporting and regulation? The law in many jurisdictions has taken this idea that, ‘we won't regulate, we’ll ask companies to disclose information.’ And by disclosing information, that will change behavior. Well, no surprise, that hasn't really worked. We need academics to be understanding and digging into the dynamics of what's happening in business, what's holding them back, and what they need to do to transition.