About 2/3 of the world’s exploration and mining companies are headquartered/listed in Canada. And increasingly, extractive companies (particularly those with some appetite for political risk) are searching and developing new resources in developing countries and frontier regions.

Over the past few years, the CSR discussions amongst Canadian (= mostly international) extractive sector and its stakeholders has moved forward. This includes shared expectations on key issues emerging from consultations held in 2006 (better known at the National Roundtables in Canada) which were memorialized in the attached consensus Advisory Group Report – March 2007 (PDF, 2.3 MB). The Canadian Government responded in March 2009 with the publication of a new CSR strategy ‘Building the Canadian Advantage: a CSR Strategy for Canadian International Extractive Sector’ (DFAIT_CSR-March2009, PDF, 483 KB). In this strategy, the Canadian Government announced that it will promote widely-recognized international CSR performance guidelines, including the Global Reporting Initiative (GRI) for CSR reporting. It seems that some Canadian junior and mid-tier mining companies decided to kick start the process in a pro-active manner: they started reporting.

NovaGold produced its first sustainability report earlier this year. NovaGold s a pre-production mining company with interests in two of the world’s largest gold and copper-gold projects, a substantially constructed gold mine and other exploration-stage properties (Donlin Creek, Southwest Alaska; Galore Creek,  Northwest British Columbia;  Ambler , Northern Alaska; and Rock Creek, Northwest Alaska).  

Similarly, Osisko, which is also a pre-production mining company, published its 2009 sustainability report in line with the GRI reporting framework.  Osisko is currently building the Canadian Malartic gold mine in the Abitibi mining district. (Note: Osisko had already published its first, forward looking sustainability report for 2008 in 2009.)

Several weeks ago, Agnico-Eagle Mines Limited also made good on its promise to publish its first CSR report. AEM is a Canadian-based, mid-tier gold producer with mines in Canada, Finland and Mexico (LaRonde, Goldex, Lapa, Meadowbona all in Canada, Kittila Finalnd, Pinos Altos, Mexico).  This report – well – reports against the Mining Association of Canada’s  Towards Sustainabile Mining and the GRI reporting framework/indicators.

Red Back Mining, an emerging mid-tier, gold producer listed in Canada, published its inaugural 2009 sustainability report recently. Red Back’s mining operations are located in Ghana (Chirano) and Mauritania (Tasiast).  [Disclosure: I assisted with the production of this sustainability report.]

Also in 2010, Lundin Mining Corporation, a mid-tier, base metals mining company produced its first sustainability report in line with the GRI framework. Previously, Lundin Mining had already published a couple of annual CSR reports. Lundin Mining’s operations are located in Portugal, Sweden, Spain and Ireland. In addition, Lundin Mining holds a development project pipeline and an equity stake in Tenke Fungurume copper/cobalt project in the Democratic Republic of Congo. [Disclosure: I assisted also with the production of this sustainability report.]

Considering that we are still in the early part of the sustainability reporting season, all signs are that Octopus Paul may well be right – again! We should expect a new cohort of Canadian mining companies producing their first sustainability reports.

Do you think this will shift some of the inevitable comments on how first-timers should further improve their reporting practices to – instead – encourage those who remain ’free riders’ by not reporting to get on with it? Also, have you come across other new CSR and sustainability reporting efforts in the extractive sector? Kindly send us a link to these new reports.  

Mehrdad Nazari, Senior CSR, GRI & ESIA Advisor, PRIZMA (Blog: www.prizmablog.com, Web: www.prizmasolutions.com)

In a previous blog entry entitled “New GRI Mining & Metals Supplement – No Help for Application Level Determination,” I noted that I had been corrected by GRI staff that Performance Indicators from Sector Supplements should NOT be counted when determining GRI Application Levels. However, I learned today that this is no longer the case.

For the sustainability reporting nerds amongst you, GRI’s FAQ section on Application Level declaration is useful reference. The NEW RULE detailed in Question 20 of the same FAQ highlights that, for GRI Application Level C, three out of the minimum ten Performance Indicators required can now be selected from the final version of the GRI Sector Supplements. Similarly, up to six Performance Indicators contained in finalized Sector Supplements can now be counted towards the minimum of 20 Indicators required for GRI B-level reporting. (NB: GRI has released Sector Supplements for Electric Utilities, Financial Services, Food Processing, Mining & Metals and NGO.)

Will this new rule change the rampant Application Level declaration avoidance practiced by reporters in countries like China, Japan, South Africa and the US (see also my recent blog entry)? More generally, do you feel that availability of Sector Supplements will help attract new reporters or perhaps unintentionally scare them off because of a perceived increase of complexity?

Mehrdad Nazari is a Senior CSR, GRI & ESIA Advisor at PRIZMA

• 38 companies engaged in non‐financial reporting
• 55 non‐financial reports in any form have been published
• 47 UN Global Compact Communication on Progress have been published
• 7 GRI‐compliant reports have been published by five companies
• 3 reports have been verified by external auditors
• 10% of top 100 companies engage in non‐financial reporting

The list of Ukrainian companies with “GRI-compliant” reports include the following:

System Capital Management : Diversified holding with over 100 companies under its control (including intermediate ownership) and interests in mining, metallurgy, electric power generation and distribution, banking, telecommunications, media and real estate;

Nadra Bank: Banking

DTEK:  Coal mining, electric power generation and distribution (owned by SCM – see above)

Obolon:  Beer and beverages production

Metinvest:  Mining, metallurgy (majority owned by SCM – see above)

The study highlights that “the majority of companies that report on their non‐financial performance have the Ukrainian capital and work only on the Ukrainian market. No large multinational company has produced a GRI‐compliant report for their Ukrainian operations, though many have a large presence in the country with significant financial and non‐financial impact.”  [If memory from my days at the European Bank serves, at least Obolon and Nadra Bank have received funding from the EBRD. However, EBRD's involvement was probably not the main driver of sustainability reporting.]

Although most reports cover topics such as working conditions, environmental protection and philanthropy, these were some of the interesting topics which were often not covered in the non-financial reports:

• Fight against corruption – Corruption is a well‐recognized issue within Ukraine
• Poverty – Ukraine is one the poorest European countries
• Economic paternalism – Soviet traditions of providing social services provision remain deeply entrenched
• Product responsibility – Ukraine faces acute problem of waste collection and treatment

You can access the full report here. Are you working in or with companies in the Ukraine? What do you think were main barriers and drivers of non-financial reporting in the Ukraine?

Prompted by an on-line exchange about GRI Application Level statistics with Leeora Black, Managing Director, Australian Centre for Corporate Social Responsibility, I took a look at the study on the sustainability reporting practices of companies in the ASX 200 index, which is Standard & Poor’s ASX 200 Index of largest, listed companies in Australia. The study was published in July 2010 by the Australian Council of Superannuation Investors (ACSI).  ACSI assists its member superannuation funds to manage environmental, social and corporate governance (ESG) investment risk.

The annual study, now in its third year, measures progress of listed Australian companies with respect to sustainability reporting. And it provides some somber reading.  The 2010 report reveals a 5% decrease in overall reporting practices of the ASX 200, with 113 companies providing no reporting on sustainability, or only providing very limited information. Overall, the study noted that reporting practices of ASX 200 (ex ASX100) continue to be substantially lower than that of the ASX 100. In the 2010 study, there was a marked decrease in the number of ASX 200 (ex 100) companies reporting on sustainability, with 67% reporting on sustainability, down from 75% in the 2009 study.

The main conclusion ACSI draws from its research is that “the majority of ASX 200 companies are yet to provide sufficient reporting on their performance against sustainability risks, thus indicating that they do not fully appreciate the materiality of these factors.” 

While it is always tempting to point fingers at others and underline their ‘stupidity,’ I wonder if there is room for other conclusions:

First, does the limited number of sustainability reports (using GRI or other approaches) allow a real trend analysis?  

Second, does a declining trend (if that is the case) perhaps point to the failure of ACSI’s engagement strategy and – more broadly -the failure of the broader CSR/investment community (that includes me!) to make a more convincing case for and provide assistance with sustainability reporting?

GRI’s 2009 database shows only 72 sustainability reporting entries for Australia. Noting ACSI’s conclusions and limited number of reporters in Australia, I wonder how GRI is planning to achieve its two main propositions that:

(a) by 2015, all large and medium-size companies in OECD countries and large emerging economies should be required to report on their Environmental, Social and Governance (ESG) performance and, if they do not do so, to explain why; and

(b) that, by 2020, there should be a generally accepted and applied international standard which would effectively integrate financial and ESG reporting by all organizations.

Overall, I remain surprised that so many companies (listed or not) do not leverage their existing corporate ethics & values, policies, systems and performance data to also generate a simple sustainability report without major cost implications. (See also some of my previous blog entries: What are Cost Drivers of Sustainability Reporting for First Timers? and Has GRI Reached Glass Ceiling? and attached article Sustainability Reporting using GRI Lessons Learned Nov09).

Do you feel ACSI – and others – may need to change engagement and support strategies? Do you feel that GRI may be setting itself up for failure? And how can Australian companies (and others) be further encouraged and supported to explore sustainability reporting?

GRI recently announced that it is reorganizing to better pursue its two main objectives. First, that, by 2015, all large and medium-size companies in OECD countries and large emerging economies should be required to report on their Environmental, Social and Governance (ESG) performance and, if they do not do so, to explain why. And second, that by 2020, there should be a generally accepted and applied international standard which would effectively integrate financial and ESG reporting by all organizations.

Although perhaps desirable, I am not fully convinced about the feasibility of these goals. But that is beside the point…  I am concerned about existing structural challenges which may be contributing to the chasm between those who report and those who do not – or deviate from GRI’s reporting framework.

In my last week’s blog entry, I took A Look at GRI Application Level Declaration Statistics. The high percentage of undeclared reports intrigued me – so I dug a bit deeper. The largest ‘culprits’ – in terms of countries – comprise China (37 of 51 reports in GRI’s 2009 database or 73%), Japan (60/86 or 70%), France (15/25 or 60%), South Africa (18/45 or 40%) and the USA (47/132 or 36%). 

Looking just at the US contingent, I note that this includes long-term reporter, arguably many reporting leaders, such as Abbott, Alco, Cisco, Coca-Cola, Johnson & Johnson, Nike and Proctor & Gamble.

What drives these major brands to make the conscious decision to skip their GRI Application Level declaration? Are they worried about the Six Commandments mentioned in  Elaine Cohen’s blog post GRI Reporting Levels 101? Or are there other reasons – perhaps most persuasively offered by corporate counsel – which may be driving this process? I would welcome your insights and comments.

Mehrdad Nazari is a Senior CSR, GRI & ESIA Advisor (Blog: http://www.prizmablog.com, Web: www.prizmasolutions.com)

GRI requires that reporters following its G3 (Third Generation) sustainability reporting framework should declare a so called GRI Application Level. These are designated A, B or C with a “+” if part/all the report/data was also externally assured (the latter a hotly debated topic and not be be confused with GRI Check/Third Party Check – and not addressed in this blog entry).

The Application Levels reflect the degree of coverage of the GRI reporting framework, such as approach to management discussion and analysis, and number of Performance Indicators reported on. Passing the midyear mark for 2010 and expecting that most 2009 sustainability reports have been published by now, it may be a good time to review the approach taken by reporters to address the – at times - dreaded question of declaring a GRI Application Level. Querying GRI’s 2009 Report List (dated 30 June 2010), I produced the attached bar chart (2009 GRI Application Level Stats 4 July 2010), a summary of which is also provided below. 

From 1,379 reporters recorded by GRI by the end of June 2010, 29% are listed in the A/A+ Application Level category, followed by 25% in B/B+ Application Level, and 21% in the C/C+ Application Level. You may also be surprised to read that 25% are listed in the Undeclared category.

Are you surprised about these statistics? What do you think is driving the large undeclared segment which make up a full quarter of all reports? And what is your recommendation for an appropriate GRI Application Level for a first-time reporter?

Mehrdad Nazari, Senior CSR, GRI & ESIA Advisor, PRIZMA, http://www.prizmablog.com and www.prizmasolutions.com

The Equator Principles, is the leading voluntary standard for managing social and environmental risk in project financing. The Principles were launched in Washington D.C. in mid 2003 and were revised in 2006 to connect to the IFC Performance Standards.

Currently there are 67 adopters of the Equator Principles. They have committed not to provide project finance to customers who are unable to meet the social and environmental standards described in Equator Principles (largely based on the IFC Performance Standards). The Principles apply where the Equator Principles Financial Institutions provide project finance loans or project finance advisory services for projects having a total capital cost of US$10million or more.

New elements introduced in the Governance Rules (17 pages) include the introduction of an ‘Associate’ category. These will include financial institutions that do not undertake project finance but may be utilizing the Equator Principles as a source of good practice and knowledge for transaction types beyond project finance. The Governance Rules also highlight the need for its members to maintain client confidentiality; comply with applicable law on agreements, concerted practices or exchange of information which may restrict competition; and introduces the usual liability waivers.

Except for the new delisting clauses related to lack of public reporting by Equator Principles Financial Institutions or Associate, none of the elements of the Governance Rules suggest any major changes to the Equator Principles. This is much to the disappointment of advocacy NGOs like BankTrack. To access the original press release issued by the Equator Principles Association click here.

I previously blogged about the ongoing Review of 3 years of IFC Performance Standards and provided an update about IFC/MIGA’s CAO’s contributions to the review process.

According to a summary by the Bank Information Center (BIC), which seeks to influence the World Bank and other international financial institutions to promote social and economic justice and ecological sustainability, more than 50 representatives from civil society organizations (CSOs) and industry convened in mid June to contribute to the IFC Policy and Performance Standards Review process. CSOs suggested that communities should be involved in all project phases. They requested that IFC clients should document “broad community support” (BCS) for projects on an annual basis and requested disclosure of loans to financial intermediaries. CSOs also highlighted a need for IFC to apply stringent international standards on biodiversity offsets and focus on its Carbon Footprint. The inclusion of specific human rights language was also requested to help prevent workplace discrimination and/or coercion. BIC’s summry note about the consultation meeting at IFC can be accessed here.

IFC will be conducting additional consultation meetings in Manila, Moscow, Brussels, São Paolo and close up the Phase II events in Washington DC. IFC expects to have the final version of its new policies in place by mid 2011. To learn more about and participate in IFC’s review, visit IFC’s dedicated webpage here.

Mehrdad Nazari (MBA, MSc, LEAD Fellow) is Senior ESIA, CSR & GRI Advisor at PRIZMA  

Those who have discovered the business case of sustainability reporting have probably realized that they are half way there before they even started. They see that, due to listing requirements, they have good governance and accountability structures already in place. They also have accounting and human resources departments, policies and practices in place – and already collect  a lot of useful data (and additional data could be collected with ease). ‘Tick off’ a bunch of GRI disclosure requirements and indicators. Many companies also have environmental, health & safety policies and management systems in place to enable regulatory compliance and support efforts aimed at continuous improvement. ‘Tick off’ a dozen or two additional GRI indicators. Add knowledge of industry-wide stakeholder engagement initiatives, and company/project specific stakeholder engagement/mapping (particulalry well developed in the extractive sector) and you have most – if not all – of the ingredients for a good GRI report in place. However, this information and related context and stories are perhaps confined within departmental silos and disbursed throughout the reporting organization. Pulling this data together is not a major problem.

Major costs associated with sustainability reporting – especially in the extractive/mining sector – is already ‘sunk cost.’ Most – if not all – the policies, activities, monitoring and stakeholder engagement which provide the platform for sustainability reporting are already in place. The reporting part is thus largely a marginal cost item.

Perhaps reporting could be compared to the top part of the floating ice berg: the visible part above the water line represents the smallest portion of the mass (in an ice berg it is about 1/8^th and for reporting, this would be a much smaller proportion). Sadly, most organizations have generated the mass of data and activities needed – now floating largely invisible below the water line  - but have failed to leverage that investment to also generate their first sustainability report.

So what drives the costs of inaugural sustainability reporting? Here I will briefly touch on capacity building, GRI Application Level, credibility and assurance , and desk-top publishing and disclosure.

Some investment in training and capacity building is often required for first time reporters. Options include attendance of “generic” GRI courses which were conceived for report coordinators. These courses do not cover GRI’s technical protocols or sector supplements in any great detail. This is one of the reasons first time reporters use experienced external consultants to coach them through their first report. Or they go through a couple of internal “mock reports” before finally getting up their courage to disclose their reports. The really worried types do both and – in the mining sector – still pray to Saint Barbara, the saint of miners, when disclosing their first report.

Another cost driver is the selection of the so called GRI Application Level. GRI requires that reporters should declare an Application Level (although some 25% of reporters in GRI’s 2009 database chose not to do so). These are designated A, B or C with a “+” if part/all the report/data was externally assured (a hotly debated topic which I will not address in this blog). The Application Levels reflect coverage of the GRI reporting framework, such as approach to management discussion and analysis, and number of Performance Indicators reported on.

The Application Level declaration appears to be creating psychological barriers to reporting. For many, the use of A, B and C conjures up images of school grades. Imagine the challenge of approaching your CEO and requesting resources to generate a sustainability report which targets ‘only’ a ‘C,’ an entry level advocated by GRI for first-time reporters (requiring only 10 indicators).

The approach to boost the credibility of the inaugural report can also become a cost driver. This is especially true if that that approach is – in my view – mistakenly equated to external assurance. External assurance, provided by the big four accounting firms and a few other niche providers, can become a major cost driver. First time reporters would be well advised to take a look at Tech, a mining and metals major, or other long-time reporters in their sector. Tech is an early adopter of GRI’s sustainability reporting framework and has produced annual sustainability report since 2001. However, Tech only used an “External Review” (a limited form of assurance) in 2007. There are many better – and typically more cost effective – ways to boost the credibility of inaugural reports. Acknowledging critical stakeholder voices and discussing challenges/failures in addition to including the obligatory picture of smiling school kids are amongts the most effective ones. And they are free of charge!

Other cost drivers include approach to report production, desk-top publishing and disclosure choices. Reporters will need to chose between “free” in-house drafting/editing and desk-publishing (and associated opportunity costs), and outsourcing. They will also need to consider if they want to invest in printing glossy reports or creating web-posted PDF report using recycled electrons.

Do these cost drivers resonate with you? Or have you come across more significant cost drivers for inaugural sustainability reporting which should be mentioned here?  Please share your comments and observations. For a related publication, please access also my publication Sustainability Reporting using GRI: Lessons Learned.

Mehrdad Nazari is a Senior CSR, GRI & ESIA Advisor at PRIZMA. He provides GRI-certified training courses and boot camps on sustainability reporting. He also assists junior and mid tier mining companies with their inaugural sustainability reportering effforts.