Tracking Global Governance
Is the System Working?
This chapter examines global governance, the united Nations (uN) system and efforts within this governance system to develop processes of reporting with sustainability indicators that are globally applicable. in addition, it will be considered whether a global accounting of corporate triple bottom line (TBL) issues is feasible or desirable. Does it make sense to add it all up at the global level?
The development of environmental performance indicators at the global, regional, national, community and company levels has developed significantly over the past ten years. There is, however, less harmonization and agreement on common frameworks and indicators for sustainable development issues (economic, environmental and social). This chapter will outline the global governance system on environmental issues, as well as some initiatives that are being undertaken at different levels to develop a common framework for sustainability indicators.
The collection of data for the purpose of compiling a global assessment of the state of our planet and the well-being of its inhabitants takes place in a top-down and bottom-up manner. in its grandest scale, the top-down collection takes the form of global observing systems – for example, by satellite. At the micro-level scale, the bottom-up collection can take the form of small area estimations (for example, based on household unit interviews) and surveys of, or reports by, local authorities and individual companies. Between these macro-and micro-level methods of data collection, the processing and presentation of indicators of sustainability can take various forms, ranging from spatial (geographical information system or GIS) databases and indicator maps to state of the environment socio-economic reports and composite indices.
The Global Reporting initiative (GRi) encourages sustainability reporting by organizations of all types, not only companies. Take, for example, environmental reporting by governments. These can take the form of state of the (national) environment reports and reporting on the environmental impact of the operations of government as an organization. While sustainability reporting at higher levels of aggregation becomes more complicated, state of the environment reports are being prepared today globally, regionally, nationally and locally. This process is being assisted by the Cookbook for State of the EnvironmentReporting developed by the United Nations Environment Programme (UNEP)/Global Resource Information Database (GRID)– Arendal, helping newcomers to make use of the improved cost-efficiency of reporting that internet publishing brings. The Cities Environment Reports on the Internet programme (CEROI) has engaged over 20 pilot cities in an effort to compile and share information along a common framework (see UNEP and GRID–Arendal, 2000).
State of the environment reports inevitably raise the question of impact resulting from public authority operations. Nothing prevents the local authority from reporting on its own operations. Examining environmental reporting by the governments of 12 Organisation for Economic Co-operation and Development (OECD) countries, Cash et al (2001) highlighted that most do not address the environmental impact of their operations, even though the size and scope of government activity – such as procurement and energy use – has wide-ranging environmental effects.
Environmental and sustainability reporting by large companies has increased steadily over recent years (see SustainAbility and UNEP, 2002a). A recent KPMG survey (see KPMG, 2002) of almost 2000 companies, including the top 250 companies of the Global Fortune 500 (GFT250) and the top 100 companies in 19 countries, showed that, in 2002, 45 per cent of the GFT250 and 28 per cent of the top 100 companies produced environmental, social or sustainability reports in addition to their annual financial reports. This compares to 35 per cent and 24 per cent respectively in 1999.
Each actor, whether public authority or civil society organization, plays a role in the broader context of global governance. Considering whether it makes sense to add it up at the global level requires a brief introduction to global governance.
We do not have a world government. We have global governance, a core part of which is the UN. We also have a world of some 200 sovereign states that find themselves in the company of, among others, some powerful organizations, including multinational enterprises. To start with, what is ‘global governance’?
A pioneer in introducing the term global governance was James Rosenau (see Rosenau and Czempiel, 1992; Rosenau, 1990; Hewson and Sinclair, 1999), who noted a shift in the location of authority and both integration and fragmentation running parallel in the process of globalization. The notion of ‘governance’ signalled something looser than ‘government’. it focused on global organization, implying ‘organization’ as verb rather than noun. Governance in this context also applied to public governance and the role of non-governmental stakeholders in the process. The post-Cold War world of the 1990s was full of expectation of global civil society becoming a source of revitalization for global organizations, the UN and its agencies included (see CGG, 1995).
As institutionalization in global governance becomes wider in scope, it becomes looser in structure. From the micro to the macro, this can be presented in the following order: national state < international organization (for example, the European Union) < international regime < international convention < international system. All of these represent multilevel governance of the 'multilevel international society’ that Miall (1994, p6) spoke of when he described the international institutions, states and sub-national organizations that play important roles in 'managing cross-national transactions’.
Similar to these different levels of public governance, the private governance of multinational companies reflects equally complex structures and possible focal points for the collection and management of knowledge. How do these processes of public and private governance intersect? How can the collection and management of data, information and knowledge between these governance systems be linked (see Table 5.1)? Ditz and Ranganathan (1997, p6) argued that it would be useful to combine indicators, generated at the facility level or community level, into information that is meaningful at larger scales.
|Public policy||Corporate management|
|Local community municipality||Facility/site|
|National authority Business||unit/company|
|Global/international organization/regime||Corporate group|
|Regional/international organization/regime||Sector association|
The boundary question: boundaries determined by economic activity, law or nature?
So, how does your company report feed into this global governance system and affect the global assessment and decision-making on the sustainable development agenda? The complexity of the matter can be best explained by making an analogy with that difficult question of completeness that you have to deal with when embarking on the compilation of your corporate environmental or sustainability report. Under the principle of completeness, the GRI guidelines (GRI, 2002) advise the user to address 'the boundary question’ in terms of the operational boundary dimension, scope dimension and temporal dimension.2 Based on this and considering different types of integration, one can expand these into four dimensions:
1Company operational boundaries: these are the entities covered in the report – for example, the company group and/or subsidiaries, divisions and business units that may be based in different countries (internal vertical integration).
2Value chain boundaries: this reflects the use of a life-cycle approach and involves questions that are organizational (are external partners, such as suppliers and waste treatment contractors, included?), questions concerning issues covered, and questions of relations with customers/consumers (life-cycle integration).
3Issue scope: this comprises the inclusiveness of the report in terms of the range of issues that it addresses under the economic, environmental and social pillars of the triple bottom line (horizontal integration across issue areas).
4Temporal dimension: the time period of the reported information needs to be made clear, helping to determine progress over time and to assess both short-term and long-term impacts (chrono-economics – that is, accounting that is not static; Dahl, 1995).
It is part of their mandate and in the public interest for public authorities to assess the state of the environment and development in their areas of jurisdiction. This implies that, in terms of the value chain, scope of issues and time frame involved, they need to be inclusive. Article 5.9 of the Aarhus Convention requires public authorities to establish pollution inventories or registers through standardized reporting. it is argued that the mere publication of quantities of pollutants released into the environment begins to involve the public in the related decision-making and that by reducing releases, the regulator and company can publicly demonstrate their commitment (Stec and Casey-Lefkowitz, 2000, p82).3
The key question from a global governance perspective is that related to operational or organizational boundaries.At what level does it make most sense to collect certain types of data; what level of aggregation is appropriate; and, accordingly, what is the appropriate level for analysis and policy action? The principle of subsidiarity would require that the collection of information, its analysis and policy action are required at the above-state level only in those instances where issues have transnational effects, and where action at the international or global level produces clear benefits by reason of scale or effects compared with action at the national or sub-national level.
For international action in support of the public good, traditional international law requires us to use the sovereign state as a main organizing unit. Keynesian macro-economics also left us with a tradition of using the national state as organizing principle (Milward, 1992, pp42–43). The national state is assumed to be the correct object and unit of measurement, as is reflected in the calculation of gross domestic product (GDp). National statistical services also use national GDP as their overall objective. Accordingly, ‘adding it up’ implies going from the level of company to national economy, to regional organization, to global institution. But is it that simple? Are we working with the same sustainability framework and similar indicators?
When deciding on what the ‘key performance indicators' are for your company to report against, the main considerations are:
- relevance to you as the reporter;
- what is of interest to your stakeholders; and
- the sustainability context.
The latter consideration is the point of departure for a UN agency such as UNEP. This is where the micro level of organizational performance is linked with the macro level of global concerns. The GRi guidelines remind us that many aspects of 'sustainability reporting draw significant meaning from the larger context of how performance at the organizational level affects economic, environmental and social capital formation and depletion at a local, regional or global level’ (GRI, 2002, p27).
If we then apply 'the boundary question’ to consideration of the macro-level sustainability context and the appropriate level at which to collect, assess, interpret and act, we need to look at 'the boundaries of nature’ and effects or impacts that go across 'the boundaries of the national state’. The transportation systems that dissipate unwanted materials, disperse them and spread locally acquired pollution transnationally are human trade, the food chain, air movements and water cycles (Rhode, 1992, pp208–213).
Studies of the vulnerability and assimilation capacity of natural environments and ecosystems in different regions help us to determine, for example, critical loads or levels that we should avoid bypassing. They help us to determine early warning signals. However, conducting these studies and strategic planning requires reporting of data on material inputs and outputs, emissions and determination of impacts. This is where the company sustainability report and national reporting by the public authority become crucial. Depending upon whether the approach in national legislation focuses upstream or downstream, the company and, ultimately, government as party to an international agreement need to meet and report on their performance against emission standards or quality standards.
Who is taking stock globally?
Global databases under the auspices of the UN on the global environment can be grouped under:
- global indexes;
- global observation systems; and
- omultilateral environmental agreements (MEAs).
Since the 1990s, UNEP has supported the effort to develop comparable global or meta-databases through its collaborative centres such as GRID–Arendal in Norway and the World Conservation Monitoring Centre (WCMC) in the UK, while coordinating with the UN Statistical Office (UNSTAT). Today the UN System-Wide Earthwatch System provides a collection of UN-related databases on the state of the world environment and development (see Box 5.1).
The observing systems assist key MEAs and their scientific advisory bodies in developing information systems with necessary indicators. This is of growing importance as we seek ways of improving the monitoring and enforcement of international agreements. in addition to the convention secretariats, other user groups include the private sector. Companies from sectors such as energy, tourism and financial services with a special interest in the forecast of weather and climate are showing a growing interest in investing in these observing systems in return for more accurate data that is of direct relevance to their daily operations (Bernal, 2002, p7). This confirms that environmental information has become more economically valuable (Denisov and Christoffersen, 2000, p25). In some instances, the private sector is also directly involved in global observation. The assistance of commercial ships on the high seas, for example, continues to be used in the effort to collect data on the state of the ocean.
UN-related databases include the Global Environment Outlook (GEO) data portal of UNEP; the UN statistical databases with, for example, the UN's Millennium country profiles; the Commission on Sustainable Development's (CSD's) work programme on indicators; the World Bank online databases, with the World Bank's world development indicators; FAOSTAT of the Food and Agriculture Organization (FAO); EarthTrends of the World Resources Institute (WRI); and the Human Development Index of the UN Development Programme (UNDP). Earthwatch also provides access to the UN Global Observing Systems - namely, the Global Climate Observing System (GCOS), the Global Ocean Observing System (GOOS) and the Global Terrestrial Observing System (GTOS). These three observing systems are led by the World Meteorological Organization (WMO), the UN Educational, Scientific and Cultural Organization's (UNESCO's) Inter-governmental Oceanographic Commission (IOC) and the FAO.
MEAs signify the existence of international environmental regimes in different issue areas. Of the over 500 international environmental agreements that exist today, the secretariats of most of the core global conventions and regional conventions of global significance are provided by six UN organizations, including UNEP.4 In terms of substance, the core MEAs can be divided into five clusters: the biodiversity-related conventions; atmosphere conventions; land conventions; chemicals and hazardous wastes conventions; and the regional seas conventions (see UNEP, 2001).
MEAs provide for annual or biannual reporting by national governments that are parties. The Basel Convention requires an annual report on the ‘amount of hazardous wastes and other wastes exported/imported, their category, characteristics, destination/origin, any transit country and disposal method(s)’ (Article 13). On the production, use and import/export of ozone-depleting substances, the Montreal Protocol requires the reporting of annual statistical data, ‘or the best possible estimates of such data where actual data are not available’ (Article 7). The UN Framework Convention on Climate Change (UNFCCC) requires parties to develop and report their national inventories of anthropogenic emissions by sources and removals by sinks of greenhouse gases (Articles 4 and 12). Parties are also required to support international initiatives that involve, for example, related data collection and systemic observation (Article 5).
The performance of states in fulfilling reporting requirements under MEAs has often been disappointing. Yet, the experience of the Montreal Protocol has shown how parties and convention secretariats can make strenuous efforts to overcome this deficiency when accurate reporting is essential to the functioning of the regime (Chayes and Chayes, 1993, p200). The same is to be expected with the Kyoto Protocol, where accurate reporting is essential for the market mechanism to operate. Convention secretariats have also improved in formulating requests for data that are demand driven, easing submission by designing standardized reporting forms and demonstrating that information will be compiled (for example, in periodic country reviews) rather than simply filed away (Peterson, 1998, p425).
MEAs impose obligations on sovereign states and do not apply directly to companies. Their reporting requirements also tend to be very general. Still, an increasing number of MEAs identify specific substances that are controlled. These include the Montreal Protocol, UNFCCC, the Convention on the International Trade in Endangered Species (CITES), the Basel Convention, and the Persistent Organic Pollutants (POPs) Convention. There are a number of GRi environmental performance indicators that do relate directly to controlled substances and sites or areas listed under specific MEAs (some of which are now referred to in the 2002 GRI guidelines).
Mechanisms devised by the international community to institutionalize global responsibility in the environmental field can be categorized as liability or regulatory regimes (see Wapner, 1998, pp280–283). As international regulatory regimes display greater use of economic instruments (such as trade measures and emissions trading), the private sector is likely to show greater interest in helping to implement proactively. Once MEAs start listing specific substances and such listing forms the basis of an international market mechanism, transnational corporations pay special attention. This links with setting company targets and reporting against the related indicators.
The indicator question: a global effort to harmonize
Assessing progress toward sustainability and choosing relevant indicators is a challenging task for a number of reasons (see IISD and BFSD, 1999, p2):
- The concept of sustainability is one of both substance (expanded time horizon, broadened scale, more complex system) and process (enhanced transparency, collaborative, consensus seeking).
- The concept of sustainability is value based, with values that could vary between cultures and change over time.
- There are many different scales of analysis – from local to global – that are important, each of which should be used to inform the others.
- In tracking change we may be able to identify a trend, but we may not be able to identify if we are close to a critical breaking point.
A framework for organizing the selection and development of indicators and expressing the complexities and interrelationships encompassed by sustainable development (while it will always be imperfect) is essential and, ideally, should meet the needs and priorities of users. in a global effort, the UN CSD, with other UN agencies, and inter-governmental and non-governmental organizations, has developed a framework to guide the selection of sustainable development indicators at the national level. it proposes core indicators and methodology sheets for measuring and reporting on progress towards sustainable development.
What remains to be seen is whether this framework and indicators will be used by enough countries to become the de facto framework for assessing progress towards sustainability at the global level. in addition, most of the data collection will occur at a national level, and it is unclear how governments will encourage and use information generated through a bottom-up approach from business, local authorities and other stakeholders.
The initial framework proposed by the CSD was organized by the chapters of Agenda 21 under four dimensions of sustainable development: social, economic, environmental and institutions. Within these categories, the indicators were classified according to their 'driving force, state and response’ (DFSR) characteristics, adopting a conceptual approach widely used for environmental indicator development, notably by the oECD, and also similar to the International Organization for Standardization's ISO14031 environmental performance indicators model used by companies worldwide.
This DFSR framework led to the development of 134 sustainable development indicators, which were tested at the national level by 22 countries from all regions of the world. Many countries concluded that the DFSR framework, although suitable in an environmental context, was not as appropriate for the social, economic and institutional dimensions of sustainable development (see CSD, 2002, p20).
Subsequently, a theme framework was developed, reflecting the goals of sustainable development. These goals echo basic human needs related to food, water, shelter, security, health, education, and good governance for which the international community has established more specific benchmarks or targets. In 2001, the final framework of 15 themes and 38 sub-themes was produced to guide national indicator development beyond the year 2001. Fifty-eight core indicators are proposed, compared to 134 initially, and methodology sheets for the core set have been published.
This CSD framework represents a common tool to assist governments in meeting international requirements for reporting, including national reporting to the CSD. The wide adoption and use of the core set would help to improve information consistency at the international level. The CSD recommends that each country establish a national coordinating mechanism to facilitate networking among interested partners. it could help to address the missing links between voluntary corporate initiatives, such as reporting, and public policy frameworks. This gap has been highlighted by UNEP in its overview of 22 industry-sector reports prepared for the World Summit on Sustainable Development (UNEP, 2002).
So, what does it all add up to?
For sustainable development indicators to be really effective a common set must emerge that are universally adopted and understood by all. in addition, there are many collection points in the global governance system and different scales of analysis, from local to global, that are important. ideally, each should inform the others.
We have outlined an example of sustainable development indicators that have been developed at the global level under the auspices of the CSD for use by national government. National governments are advised to work with all stakeholders in their countries to gather data and test the indicators. This top-down approach has resulted in a concise set of meaningful indicators that are on the way to being understood and accepted worldwide, though it is too early to definitively judge their global relevance and ultimate effectiveness in measuring progress towards sustainable development.
The GRI guidelines, developed through a multi-stakeholder, inclusive, bottom-up approach, is also rapidly developing and making positive steps to become the globally accepted framework for sustainability reporting at the organizational level, in particular corporate sustainability reporting. The question, then, is whether these initiatives for reporting at the level of organization, state, sector and thematic or issue area are moving down the same track. is there any possibility that we can ‘add it all up’?
Between the macro and micro levels of reporting and the collection of data and information, international agreements such as MEAs in specific issue areas are likely to play an increasingly important role. As indicated, those that, in particular, include economic instruments and list specific substances are the ones that strengthen the link between reporting by public and private organizations. Take the example of climate change. The UN CSD emissions of greenhouse gases indicator is based on the national reporting requirements outlined by the Climate Change Convention. At the corporate level, the World Business Council for Sustainable Development (WBCSD)/WRi Greenhouse Gas Protocol and indicators for corporate accounting and reporting standard and calculation tools are consistent with those proposed by the intergovernmental Panel on Climate Change for the compilation of inventories at the national level.
Table 5.2 allows for a comparison of selected indicators developed under the CSD and the GRI processes, with additional references to some MEAs in the environmental field. From this comparison, the following is evident:
- There is considerable similarity in the sustainable development themes addressed by the CSD and the categories examined in the GRi guidelines. The indicator detail varies, particularly in the economic and social issues, though this is to be expected given the different uses of the information being gathered and other key issues related to aggregation, weighting, units and scaling.
- CSD indicators on social issues, in particular, tend to focus on the empty part of the bottle, whereas company reporting tends to promote the full part of the bottle. Under, for example, poverty the CSD indicator refers to unemployment rate, while the company reports on number of jobs created.
- CSD indicators tend to focus on societal conditions (impacts), whereas company reporting tends to focus on management or technical processes. The one focuses on, for example, health, literacy rates and consumption patterns as matters of social concern, while the other highlights environment, health and safety (EHS), training and customers as management issues.
- The CSD framework uses different categories in some cases – for example, dealing with ‘energy use’ under economic indicators, while ‘energy use’ is categorized under environmental indicators in the GRi guidelines. While there is some consistency on the environment side, this is less apparent on the social and economic side.
Clearly, an important factor is how the reported information is used and to whom it will be communicated – whether you compile your report or database with the aim of the public good or with a profit motive. But these distinctions are becoming increasingly blurred as we integrate and realize the business case for sustainable development (see WBCSD, 2002). This is also reflected in the strategies we follow in global governance. in addition to the command-and-control approaches and economic-instruments approaches under regulatory regimes, a third possibility of growing significance is that of international voluntary initiatives.5 These can be dubbed ‘voluntary regimes’; some would say ‘private governance’. Sceptics criticize these initiatives as being about window dressing. Mindful of this, UNEP has argued that company involvement in voluntary initiatives should be accompanied by sustainability reporting and independent verification. Again, the efficiency of international institutions and initiatives can be strengthened by making the link with sustainability reporting.
The task of judging how we are progressing towards sustainable development will always be a formidable one. There will always be a degree of uncertainty and long debates over cause-and-effect relationships. in the midst of complexity, we will have to continue the international effort to refine and use integrated indicators that reflect both achievements in the form of leading practices, as well as integrated indicators that reflect unsustainable pressures that should be minimized in a precautionary approach to managing complex systems.
1The views expressed are those of the authors and not necessarily those of the Global Reporting Initiative (GRI) or the United Nations Environment Programme (UNEP).
3While some non-governmental organizations (NGos) have noted limited private-sector participation in the creation of the Aarhus Convention (Hemmati, 2002, p124), it includes a number of requirements of direct relevance to business and industry – for example, Article 5.6, which requires the public dissemination of privately held information when the activities of operators (read companies) have a 'significant impact’ on the environment.
4Of 41 core MEAs, UNEP provides the secretariats of 22, which include 12 of the 18 global MEAs and 10 of the 22 regional MEAs.
5voluntary initiatives are non-legislatively required commitments or obligations agreed to by one or more organizations, often by companies making commitments to improve their environmental performance beyond legal requirements (see OECD, 1999, and Utting, 2000, pp29–32).