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Materiality of Projects in Non-financial Reporting

Are Projects Material to Non-Financial Reporting?

The Rise of Sustainability (Non-Financial) Reporting

I am often asked what I do for a living.  When I explain that I work in sustainability I usually get an “oh, ok.” followed by a “what does that mean?”  Therein lies the challenge.  Sustainability is a broad topic.  For us at GPM, we address global environmental, economic, and social challenges by advancing sustainable project practices on a global scale.  It is through our advocacy that organizations can improve their triple bottom line.  One of the keys to this is transparency which means sustainability reporting.

According to KPMG research, almost 400 regulations, guidelines, codes-of-conduct, frameworks and other reporting instruments – both mandatory and voluntary – across 64 countries were identified in 2016. The previous research in 2013 identified 180 instruments across 44 countries.

Wim Bartels, KPMG’s Global Head of Sustainability Reporting & Assurance and a lead author of the report said:  “The underlying trend is clearly up over the last 3 years. The average number of reporting instruments per country we studied has shot up by about 50 percent since 2013.” (src)

The challenge in sustainability reporting is what to include and what not to include.  This is known as “materiality”. To be more precise, materiality is a measure of the estimated effect that the presence or absence of an item of information may have on the accuracy or validity of a statement. Materiality is judged in terms of its inherent nature, impact (influence) value, use value, and the circumstances (context) in which it occurs. (src)

One of the key benefits that organizations realize by leveraging GPM training through our Partners and adopting our P5 Standard (which is free) is that by doing so, they can include projects in their sustainability reports.

Are Projects Material to Sustainability Reporting? YES!

The global reporting initiative, the gold standard for sustainability reporting which has over 10,000 organizations supplying over 40,000 reports in their publicly searchable database, lists product responsibility with the graphic shown below.

The chart lists 4 economic, 12 environmental, and 30 social aspects by which product sustainability reporting should be based on.

Context is everything.

The majority of organizations report on their products from a supply chain perspective using the above elements to measure against.  The problem with this approach is that products do not appear from thin air.  Projects bring them to life.

Looking at the graphic below, a sneak-peek at our 2018 PRiSM model, it illustrates that in a product cradle to cradle lifecycle the development of the product (see the blue boxes at the bottom) accounts for a tremendous amount of effort and that effort has impacts. It is the impacts that should be included in the sustainability report.

 

If organizations do not factor in the social, environmental and economic impacts that the project aspect of their products that they are reporting on, then their report is only telling a portion of the story.  Products do magically make it from idea to supply chain.  Products are the result of projects and the work should be material to reporting.

Still not convinced?

My first-grade son attends Village Oaks Elementary in Novi, Michigan.  He brought home an activity that he did in school last week that blew me away.  He was asked to list the consequences of changing land. (His handwriting is actually better than mine… #sad)

 

In building houses he listed a positive consequence as people have a place to live and a negative consequence is it takes away homes for animals.  When I asked him what he meant, he told me that cutting down trees to build the houses will impact forest animals and insects who depend on them for housing.

If our children are being taught to consider the importance of the impact of change while corporations do not feel that impacts from change are material to reporting, there is a clear disconnect that needs to be addressed.


Our P5 Standard can help you do this.  Download it today!

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Dr. Joel Carboni

Dr. Joel Carboni has over 20 years in project, program and portfolio management having led initiatives in Aerospace, Finance, Government, and Technology. He has a Ph.D. in Sustainable Development and Environment, is a Certified Senior Project Manager (IPMA Level B®) and Certified Green Project Manager (GPM®). He is the founder and president of GPM Global, the International Institute for Peace and Sustainable Development, and the current President of the International Project Management Association USA (IPMA-USA) He is a medal of honor recipient from Universidad Autonoma Lisboa, AI Media's Leading Advisor Award 2017 the 2015 World CSR Congress Leadership Award, 2014 HRD Leadership & Training Award and 2013 IPMA Achievement Award He has lectured on or taught sustainable project management in 37 countries around the world

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