It is a pleasure to be here in the foothills of some of the oldest mountains on earth. This is a perfect location to talk about sustainability. The peaks massing behind us tell their story. 480 million years ago these marine sedimentary rocks were deformed in a powerful collision of tectonic plates that folded their shape and pushed up new mountains with volcanic rocks and slivers of ancient ocean floor. The Appalachian range was birthed with the supercontinent Pangaea. Because North America and Africa were connected, the Appalachians formed part of the same mountain chain as the Atlas mountains in Morocco. This range, known as the Central Pangean Mountains, extended into present-day Scotland. Our forefathers who settled these lush valleys and the great Cherokee Nation before them span only a blink of the geologic time counted here.
At the end of my remarks I will come back to the mountains. For now they are the perfect backdrop. See them as you listen.
Back to sustainability. You’ve certainly noticed that sustainability reporting is in vogue. It has captured the momentum created by the fascination with transparency. Transparency is a word in transition. It formerly was used primarily as an adjective – transparent - meaning “see through” or “clear”. Then, in recent years we all encountered “transparencies” – a new noun referring to the acetate sheets used to present words and images with overhead projectors. In business today transparent is the new accurate. It’s the norm for external reporting. Let’s look first at the expectation that is fulfilled by transparent communications.
Accurate is no longer good enough. Business reporting is expected to help the reader understand the source of data, the process of manufacture and the relationship among different product pieces. Accurate was for “what”. Transparent is for “how” and sometimes even for “why?” Accurate was “the truth”. Transparent is”the whole truth”. We are still striving for “nothing but the truth” in sustainability reporting.
We have had a significant expansion of corporate accountability. In the name of transparency we adopted the “triple bottom line” approach to reporting environmental management and corporate social responsibility along with our financial statements. There were lots of presentations. They showed a three legged stool or large triangle with dollar signs, people and a little green leaf at the angles. The units of measurement were profit, compliance and charity.
While innovative and useful in reporting accomplishments that are not apparent on financial statements, the triple bottom line could not answer all of the “how” questions posed to corporations by an inquiring public.
The tight triangle gave way.
The first bottom line has always been financial performance. With the call for greater transparency, audited financial statements were no longer enough. In the 21st century, we are expected to link our financial success to overall economic development. This change reflects the growing public sentiment against mere production and consumption and in favor of performance, efficiency and sustainability.
Developments along the second bottom line have always been particularly interesting to me with my background as a regulator. Regulatory compliance measured results at the end of the process. It was reflective of 1980’s thinking. “Beyond compliance” was 90’s thinking. In this century, all of that has morphed into ecological integrity so that pollution is designed out of manufacturing instead of having to be treated out of process waste. Life-cycle impacts, energy efficiency and mass balance reporting have replaced the compliance audit.
In the third new bottom line corporate philanthropy is no longer enough and has yielded to measurable “social progress.” This change reflects the emerging consensus that poverty poses a great threat to world stability and, also, an opportunity for companies to meet the needs of consumers at what is called the “bottom of the pyramid”. It reflects a bias for results over intent.
At the same time that expectations for transparency have escalated, the definition of “public” has changed, and now reaches well beyond our borders. Economic, technological and electronic information lift the notion of global community from a theoretical concept to a daily encounter. The global conversation gives rise to ever new corporate performance measures that continue the move from profit, compliance and charity, through transparency, and towards the more complicated and not yet well-defined concept of “sustainability.” The basic concept is clear: it is not sufficient to do well in isolation from others. The cumulative and whole-life impacts of corporate actions must add up to a sustainable path to the future. In this conversation, global sustainability requires that all the world’s resources be brought to bear on a better life for all the world’s people. Success in the global market cannot be achieved without achieving a flood-tide capable of lifting all ships.
There is a solid business case for demonstrating sustainability. Start with your company vision. I looked at a few of yours on-line. Paraphrasing a bit, here are two: “... be the BEST furniture company…” “Enrich the lives of the people we touch … with exceptional value”. These are great statements. But what exactly do you mean by “best”? By what criteria will you make the proof? How about “enriching others’ lives”? Does that mean making them comfortable in their home, or confident that you are not using wood harvested by illegal logging? Do your employees understand what you are striving for and what specific actions will achieve “best company” or “enriched lives”? Have you articulated a cohesive business philosophy and plan of action for measuring your success beyond your financial bottom line?
My guess is sometimes yes and sometimes no – you probably haven’t been consistent nor brought together all of the good work you already do under the banner of sustainability. On your web sites I read about long and proud histories, safe working practices, earth-friendly product materials, support for community welfare. But not on the same page, and not as part of your commitment to maintain a sustainable relationship with the earth’s resources.
Therefore, I don’t believe that you are getting all the credit that you could, nor are you organizing your external reports in a way that they can be compared to emerging best practices in sustainability.
So, what is the business case for a sustainability report? As “transparent” was the new accurate, sustainable is the new viable. In the view of those seeking evidence of viability, sustainability related risks and opportunities are just as relevant as financial metrics. If your mission is to be the BEST, then you need to demonstrate how you will measure that, and why you are not sacrificing the future for short term gain. If your mission is to enrich lives you need to show that your actions on behalf of some have not been at the expense of others. If you buy materials or use services in developing countries, this could be a challenge for you to prove. Your goal is to show that your total global relationship is based on principles and practices that are resource-efficient, and do not compromise welfare or bet on unrealistic future developments.
It is not enough to simply say we are sustainable, we must be able to prove it with responsible governance, reliable systems and demonstrated progress toward tangible goals.
In other words, to make sustainability meaningful for your company and others you will need to define it specifically for yourself and report your progress.
Here’s the way we do that at Weyerhaeuser. Sustainability for us means mobilizing our talented people to convert the potential of our vast renewable resource, our trees, and to deliver innovative products to society in the most efficient way. And to achieve this, we have identified three areas:
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Meet investor expectations
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Contribute to a higher quality of life with our products, and
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Protect life-sustaining ecosystems
These focus areas align with the three pillars of performance that have come down through transparency to sustainability - profit, people & the planet. We have goals for each and report our progress.
We believe that success in these focus areas will be rewarded with:
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Satisfied investors
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Loyal customers
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Engaged, motivated employees
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Thriving communities, and
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External recognition and respect
All of our stakeholders expect us to achieve short-term results without compromising long-term prosperity.
For example, our customers expect that we operate on a sustainable basis, and frequently seek proof in the form of detailed questionnaires about our sustainability policies and performance. With one of our customers we provide the world with absorbent disposable diapers. This customer has a goal of $50 billion in cumulative sustainable product sales between the years of 2007 and 2012. Our customers in wood products expect that our wood is sourced responsibly from certified sustainably managed forests, and home buyers increasingly want energy efficient homes.
In addition, our institutional investors as well as third party evaluators and indexes rate us regarding our sustainability performance. In fact, some large international investment firms have indicated that they own Weyerhaeuser shares because of our sustainability reputation. We have been selected for inclusion in the Dow Jones Sustainability North American index for the past 5 years.
We intend to prove our sustainability through responsible governance, reliable systems and demonstrated progress towards tangible goals.
The proof and demonstration are particularly challenging in a single report because key audiences and stakeholders have different information needs. Investors and third party evaluators want detailed data that they can analyze. Employees want to feel good about where they work. Customers can be sophisticated and have very detailed questions or just want a high level overview. Consumers want reassurance about the source and method of manufacture and communities want to know what is behind the company’s fence. Some companies offer stakeholder perspectives within their reports or offer a way for stakeholders to comment publicly on their sustainability performance. Many stakeholders want independent verification of the company’s claims.
These stakeholder expectations continue to increase, and it has become clear that some common reporting principles are important. For example, if reporting is not consistent, readers cannot compare companies against each other, or against generalized measures of success.
As accounting practices have been standardized over many years into Generally Accepted Accounting Principles, so it is happening with sustainability measurements and reporting. The leading reporting standard is sponsored by an independent non-profit organization called the Global Reporting Initiative. While it is widely used, their framework can lead to an encyclopaedic approach that will not work well for every company. But a quick study of their guidelines can help you map your own course.
Here is what you will find:
First, reporting principles and guidance. These govern your report content and address materiality, stakeholder inclusiveness, the context in which you define sustainability, and completeness. One of your principles should be a commitment to a third party audit.
Second, standard disclosures. Disclose honestly. A good sustainability report includes both hits and misses. These include your strategy, your management approach and the specific performance indicators relevant to your company’s impact on resources, people and the environment.
You can download the formal program from the Global Reporting Initiative. You will find it comprehensive, and as I said earlier, encyclopedic. We use it because we believe it is appropriate to our size and global customer base. As an alternative, you can begin right away following the same course as the Global Reporting Initiative, but in a manner tailored to your own needs.
You all have websites. You can put information on-line that includes your sustainability statement, how you are organized to manage and measure your performance, and your results. You already have much information of interest.
You probably measure employee safety. Safety is a key sustainability measure. You know the source of your raw materials and may have evidence of certification to a sustainable forestry standard. You can report on your waste reduction and recycling efforts. And remember that financial performance is a key component of sustainability. You don’t need to repeat your financial statements, but perhaps pull out a few highlights.
You know your own manufacturing process well and can summarize your use of electrical power, raw materials and potentially hazardous compounds such as solvents and glues. Once you have chosen a set of key performance indicators for your sustainability report, you can commit to report your progress over time, good or bad. A word of caution – avoid creating the impression that you are greenwashing. Don’t be fooled by attractive soundbites such as “save the planet, use less paper”. It is a popular green myth. But it is not true.” You need to link measurable items to the often lofty language. It’s OK to say “the best” as long as you can prove it.
Don’t feel that you have to have a perfect and complete report the first time, the reporting process is a journey and you can improve and adjust over time. You can offer an opportunity for comment and include a toll free number, and you have your first report ready to go. I’ll look forward to reading it.
I said I would come back to the mountains. They look so solid, so permanent. And yet we know they are in motion like the rest of the world. Planet earth is a dynamic place with tectonic plates colliding and enormous internal pressure released through earthquakes and volcanoes. Planet earth has a long history. Life has been sustained on planet earth over that history but individual life forms have come and gone. Life on earth remains an amazing and complex interaction of physical and chemical forces.
Our lives and behavior cannot freeze-frame the natural evolution which has occurred since the beginning of earth's time. For all life forms on earth except human, evolution is an involuntary action. A changing physical environment and competition for food drive adaptation in plants and animals. Darwin famously wrote that it is not the strongest of the species that survive, but those most able to adapt. Dramatic changes in climate and geography have resulted in winners and losers, and life on earth adjusted to the new conditions. Species adapt and survive, or don't and fail. Human beings, alone as a species, can seek to manage their own evolutionary journey. We are babes in the earth's history. We have just set out on our journey. We still have the features of our evolutionary success: our big brains and our opposable thumbs. In the sustainability dialogue we are looking for a deliberate path for that journey – one that incorporates efficiencies with natural resources, and effectiveness in both physical and social engineering.
We have much evidence of the capability of the human mind to overcome great obstacles. After all, again and again over the course of human history we have discovered, invented and adapted ways to be more efficient and effective with the world’s resources.
And so we should have every reason to be confident that we can think and subsequently act our way towards sustainable success for mankind. All we need to do is organize our intellectual resources in a way that maximizes our long-term survival. So – how will that happen? Government policy and rationing are proposed by some as the path to a sustainable relationship with the planet. I have a different view. Creativity fueled by ingenuity and imagination are my vote for the best method.
At Weyerhaeuser we welcome the growing interest in the contents of our sustainability report. Ours is on-line only. Its pages are among the most visited on our site. We know that we have a good story tell, and the report has allowed us to bring together many aspects of our operations under a common theme. We have been challenged by our own pledge to report against our goals even when our progress is not as good as we would like. We have been gratified by the external recognition we have received. We like the transparency. We like the reward.
