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November/December 2009 - By Andrew Singer

General Electric Strives For Greater Frankness In Its Citizenship Reports

Corporate citizenship reports make easy targets. Critics routinely dismiss them as little more than public relations fluff. Others attack their statistical claims. Where’s the validation? Has an accounting firm certified the accuracy of the numbers?

General Electric Company (GE) has heard all those criticisms, and it has worked assiduously over the past decade to make its own citizenship report—now in its fifth edition—a serious working document.

To this end, the current report—2008 Citizenship Report: Resetting Responsibilities—published in July 2009, and covering fiscal 2008, offers broader and deeper data, much of it now posted online. It was also vetted by an outside panel of ‘sustainability’ experts.

Ombuds office data

A discussion of GE’s ombuds office provides an example of the sort of detail now offered in such reports. Not only does it report on the number and nature of the 1,672 ‘concerns’ that arrived in the office in fiscal 2008, but it also details the 420 disciplinary actions taken in response to those reports. There were 131 “employee separations” (i.e., firings), for example.

bob_corcoran-GE03As for the validation question, GE has not gone quite so far as to hire a big four accounting firm to sign off on its report. That would be expensive—even for a huge concern like GE. But the company convened for the third year a “stakeholder advisory panel” to vet the report before publication. (More on this shortly.)

The company’s efforts haven’t been for naught, apparently. In April 2009, GE received the top sustainability reporting award at the 2009 Ceres Conference in San Francisco. Ceres, a non-profit group that promotes environmentally responsible economics, commended the company for providing “a complete picture of how the company’s sustainability priorities are aligned with the company’s strategic business priorities.” According to Ceres, “The [citizenship] report also presents these priorities in the context of emerging global challenges including climate change and energy, globalization, human rights, water scarcity, and the subprime mortgage crisis.” 

‘We rewrote everything’

In a recent interview, Bob Corcoran, GE’s vice president of corporate citizenship, was asked about the stakeholder panel, which draws on sustainability experts from around the globe. “It’s been very effective for us,” he said of the process.

Current members include Nick Robins, head of the HSBC Climate Change Centre for Excellence; Rachel Kyte, director of IFC Environmental and Social Development Department; Isabel Hilton, CEO of China Dialogue; Salil Triphani, director of Institute for Human Rights and Business; and Valdemar de Oliveira Neto, regional representative for Brazil at Avina.

“Last year they challenged us on how we wrote it,” recounts Corcoran “You’re being too gentle—not direct enough.”

“You’re absolutely right,” answered Corcoran. “We rewrote everything. It delayed publication for a month.”

This year, heeding the panel’s suggestions, GE focused on a more thematic approach in writing the document. Everything to do with climate change, say, would be presented in one section of the document. In earlier versions, employee actions’ with regard to climate change might be found in one area; suppliers’ contributions might be in another section, and so on. “It was too difficult to connect,” comments Corcoran.

The Stakeholder Advisory Panel convened this year at 30 Rockefeller Center (‘30 Rock’) in New York City on April 9 for a full-day meeting. Before the meeting, however, panelists had received a clean draft of the citizenship report. They had dinner as a group—and without GE staff—the evening before the meeting. They presented their findings the next day: ‘Not enough on this, or you wasted space here, or this is what’s missing….’

Hosted by Corcoran, the meeting was facilitated by AccountAbility. The discussion also included participation by GE functional leaders in the EHS (Environment, Health & Safety) and labor relations areas.

At the end of the day, the panel caucused. They returned and went down their list of concerns. Corcoran and company representatives responded item by item: “Good point. Good point. We’ll change this,” or “We can’t do this,” or “we can’t do it here but we will change it in the next report.”
Corcoran was asked about the genesis of the outside expert panel. He noted that earlier citizenship reports were criticized by some NGOs (non-governmental organizations), and others, because they lacked external validation. If one were to hire an outside accounting firm like Price Waterhouse to validate the report, however, the cost would be high—perhaps $1 million-$2 million for a company in a single industry—considerably more for a company like GE that has 300,000 employees and operates in multiple industries.
This wouldn’t be a prudent use of shareholder’s funds, in Corcoran’s view. So GE organized a stakeholder panel to provide objective, external input—a validation of sorts. It used its internal audit staff to vet the report’s statistics.

‘More relevant’

Have corporate sustainability reports in general evolved in recent years? “The biggest change is that they are more real, more relevant, and more honest,” says Corcoran. Many of the early reports were full of “fluff”; they almost seemed like tools for campus recruiting, i.e., documents to convince job candidates that they would be joining a really swell organization. Some early reports were only four or six pages—“too short and too soft,” recalls Corcoran.

This is GE’s fifth citizenship report, and it runs 48 pages. The three previous reports were considerably longer—extending 100, 110 and 140 pages, respectively. Forty-eight pages seems “more to the good side of right,” says Corcoran, who notes that their actual target this year was 40 pages. They came in a bit over. But the brevity is “about right.”

(They’ve had no complaints about the length in the current report—either from their employees or NGOs.)

When developing such documents, companies often struggle to find the right tone. GE’s first report had a “lot of nice things,” including some hard data, but they recognized a need in future reports to be “more direct, more blunt.”

The company has also sought to find a proper balance between print and online reporting. Much supplemental data is now posted online, whereas narrative dominates in the print version.

 “We have a wealth of data online,” says Corcoran, which helps to satisfy the “data rats.”

When the company began the process early in the decade, baselining was difficult—that is, capturing data in fiscal 2001 (‘year one’) for things like greenhouse gas emissions or water usage. “This proved to be hard work,” says Corcoran. Water bills (an obvious way to measure corporate water usage, for instance) tend to be small, unlike energy bills, say, and there are no bills at all for greenhouse emissions . In ‘year two,’ “We often said, ‘Oops we missed this [the first year], we missed that.’”

Another tricky area from a measurement standpoint is diversity. GE is a global company, and it has learned that measuring diversity in the U.S. is different from measuring diversity in the European Union (EU), say. In the U.S., it’s all about race, ethnicity, and gender. This isn’t necessarily the case in the UK or Italy. In Italy, race doesn’t loom so large. It is a more homogenous society.

Therefore, GE reports two data sets vis-à-vis diversity: one for the U.S., another for outside the United States where the focus is primarily on gender.

Reporting ‘integrity concerns’

As noted, the current report presents good detail in the compliance and governance area, particularly with regard to the company’s ombuds office. GE has long had an extensive ombudsperson process “that serves as a mechanism for individuals to ask questions and report integrity concerns without fear of retaliation,” according to the company.

1,672 ‘concerns’ were reported to the ombuds office in 2008, up from 1,596 in 2007 (and 1,338 in 2004), of which 420 resulted in disciplinary actions (up from 343 in 2007 and 368 in 2004).

More than half (55%) of all investigations conducted in 2008 were in the U.S. and Canada, followed by Europe (17%), Asia (15%), and Latin America (13%).

The top five ombudsperson ‘concerns’ by type in 2008 (number of reports in parentheses) were:

    • Fair Employment Practices (345)
    • Conflicts of Interest (209) 
    • International Trade Controls (142)
    • Business Records (T&L, Time & Attend) (133)
    • Security & Crisis Management (114)

Seventeen areas are tracked overall, including theft, supplier relationships, working with governments, complying with competition laws, and ‘regulatory excellence.’ (Regarding this last, a footnote explains that “In response to today’s regulatory environment where GE is subject to a growing number of regulations and enforcement activities around the world, a new category of ‘Regulatory Excellence’ has been added to provide additional visibility into this critical area.)

Fair Employment Practices have always topped the list going back to 2001. Conflicts of Interest have consistently ranked second, although the number of ‘concerns’ have dropped since 2001. Elsewhere, ‘Working with Governments” was the third leading area of concern brought to the ombuds office in fiscal 2001 (91), but it had fallen to 14th place by 2008 (28).

Other areas that have increased substantially since 2001 are International Trade Controls (from 20 reports in 2001 to 142 in 2008), Business Records (from 65 reports in 2002 to 133 in 2008), Security and Crisis Management (from 18 in 2002 to 114), and Privacy (from 25 in 2001 to 69 in 2008).

As for publishing ombuds data, “people were very nervous about this” initially, says Corcoran. “There were some touchy things.” But now the company feels positive about it, he suggests.
More details about the ombuds process are presented online. There one finds not only the number of disciplinary actions take (420), as is in the hard-copy report, but also the types of action taken, such as “employee separation.” To wit:

“During 2008, 1,672 integrity concerns were reported through the ombudsperson process (37 percent anonymously) covering a variety of issues. The rising rate of reported concerns is an indicator of a healthy integrity and compliance culture—and a growing company. …

“The results of the 1,672 investigations in 2008 led directly to 420 disciplinary actions being taken, including 131 employee separations, 255 warnings, 13 job changes, and 21 financially impacted employees. Of the disciplinary actions, approximately 57 percent occurred outside the United States.

“Ombudspersons monitor investigations to ensure timely closure and prompt feedback to those who raise concerns. As of May 1, 2009, 98 percent of 2008 investigations are closed, averaging approximately 49 days to complete.”

Environment, Health and Safety

In Environment, Health & Safety (EHS), another key focus area, the company was able to reduce employee injuries by 12% in fiscal 2008 and “reduced air exceedances by 44% and spills by 20%,” according to the report.

Looking ahead to fiscal 2009, the company pledged in the report (among other things) to:

    • “Provide update on Hudson River dredging commenced in May 2009.” (More on this below.)
    • “Reduce employee injuries by 19%.
    • “Reduce wastewater exceedances and spills by 33%.

In the public policy area, GE had somewhat loftier goals. In 2009 it will “seek to promote the rule of law, particularly in the developing world where strong rule-of-law disciplines are critical to economic development.” It also pledged to “support comprehensive healthcare reform,” among other matters.
Other reports they admire?

Are there other company citizenship reports that GE admires? Frank Mantero, GE’s Director of Corporate Citizenship Programs, speaks of the UK’s Vodafone’s Corporate Responsibility Report. (That company’s ninth such report covered the year ended March 31, 2009.) It is “concise” and its structure is “provocative”—e.g., “We said we’d do this, and this is what we’ve done….”

Mantero also likes the Ford’s annual Sustainability Report (Ford’s 10th annual report was published in June 2009), which offers a “nice snapshot of its entire value chain.” GE probably couldn’t do something similar, however, because it has operations in many different industries, with different supply chains, not a single industry like Ford.

Mantero also admires the “simplicity” of Coca-Cola’s report with its “singular focus on water.” Coca-Cola began corporation responsibility reporting in 2001. It released its 2007/2008 Sustainability Review in October 2008.

Has the job of corporate citizenship officer become more difficult because of the global financial crisis? “Not at all,” answers Corcoran. GE hasn’t lifted the foot off the gas pedal, he asserts, “which is what you’d expect from a 130-year-old company” that has been through recessions—and depressions.

“Yeah, the economy’s bad. But that’s just business,” is the attitude. The big issues aren’t going to go away in good times or bad.

Unfortunately, in the broader society the collective attention span is often short, Corcoran notes. “Climate change has suffered as a public priority,” he says. Two years ago the public was on the right track, in his view. Now climate change has fallen among public priorities. More Americans are more focused on their retirement income than they are on global warming these days.

The Hudson River cleanup

As mentioned earlier, GE will continue to monitor dredging of the Hudson River. For years the company was a target of environmentalists because of the polychlorinated biphenyls, or PCBs, that it had dumped into the Hudson River years ago—legally at that time. GE used PCBs at its plant sites in Fort Edward and Hudson Falls, N.Y. For decades GE fought calls from the EPA and environmentalists that it dredge the PCBs from the river, insisting that this would do more harm than good. (In high doses, PCBs have been shown to cause cancer in animals and are listed by federal agencies as a probable human carcinogen.) Finally GE capitulated to the clean-up, which the federal government estimated would cost $750 million. Other industry experts say it could cost much more:

In May 2009, “25 years after the federal government declared a long stretch of the Hudson River to be a contaminated Superfund site, the cleanup of its chief remaining source of pollution began,” reported the New York Times.  “Twelve dredges are to work round the clock, six days a week, into October, removing sediment laced with the chemicals known as PCBs. Mile-long freight trains running every several days will carry the dried mud to a hazardous-waste landfill in Texas.”

“We’re done fighting on the Hudson,” says Corcoran, who notes that as far back as 2002 GE chairman Jeffrey R. Immelt made a public pledge to cooperate and implement the dredging plan, drafted and approved by the EPA.

The company and the government continue to differ on the science, however. GE long argued that PCB levels were getting lower each year, and dredging would only agitate the sediment and make things worse. On the other hand, continual open conflict with the EPA and with New York State’s environmental agency wasn’t good either.

Asked if his job as corporate citizenship chief would be more problematic if GE were still fighting environmentalists on this issue, Corcoran acknowledges, “It would make it more difficult.”

GE has a website (www.hudsondredging.com) that follows the dredging operation including photos and the latest monitoring data. Still, as the Times article noted, “Even as it embarks on the cleanup, GE has a lawsuit challenging the constitutionality of the Superfund law working its way through federal court.”

Corcoran and Mantero were asked if there were any section of this year’s citizenship report in which they took particular satisfaction.

For Mantero, the 18 essays from ‘thought leaders’ that appear in the beginning of the document, something that has “not appeared anywhere else,” as far as he knows, is a point of pride. These were unedited, open-ended discussions by leaders in the sustainability movement, “not endorsements of the company’s policies.” One essay, “Reporting That Matters: Disclosing Meaningful Sustainability Data,” for instance, is by Ernst R. Ligteringen, chief executive of Global Reporting Initiative. Another essay is “Climate Change and Social Justice,” by Andrew Scott, director of Practical Action, a UK-based development charity.

Corcoran, for his part, was proud of the discussion about the “elephant in the room,” i.e., the current economic crisis. GE’s citizenship report can’t be assailed for being wishy-washy here. It notes, for instance, “The financial services industry is changed, and it will not be back as we know it—nor should it.” [Emphasis added.]

On page six of the report: “The global financial meltdown we have experienced doesn’t just represent the low point in the economic cycle; it represents a ‘reset.’”

On page nine: “Financial services will never return to its previous level as a proportion of the global economy —and never should. Financial markets remain crucial as the circulatory system for commerce, but they must be reset to enable long-term sustainable performance in the real economy. This means less leveraged finance, a fundamental re-pricing of risk, the ability to account for externalities like greenhouse gas emissions, and a realignment of executive responsibility and compensation with long-term performance.”

Corcoran realizes this “may not be a popular view” within the financial services industry in which GE remains a major player through its GE Capital division. Still, he says, the economic crisis has prompted “a huge economic reset for business,” and government must reassume financial oversight responsibility.

Andrew Singer is editor and publisher of ethikos.
Reprinted from the November/December 2009 issue of ethikos.
© 2009 Ethikos, Inc. All rights reserved.

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