Featuring
Cornelius Graubner
Verisk Maplecroft
Companies face increasing scrutiny over their social and environmental performance, but managing the impacts of their activities requires access to better data than business professionals currently have. Innovation in aerial image and sensor technology is now allowing for the collection of accurate high-frequency environmental impact data at scale. The rapid rise of mobile phones around the world is opening the space for innovative approaches to do the same for the more complex challenge of measuring the social impacts of corporate operations.
The Rise of Corporate Social Reporting
In the last 10 years, the concepts of social entrepreneurship and sustainable investing have gone from peripheral phenomena to the mainstream. In the United States, one out of every six dollars under professional management—a total of $6.57 trillion—is invested in some form of sustainable investment. Globally, the sustainable investment market has grown by 61 percent between 2012 and 2014, outpacing the growth of traditional professionally managed assets. Today, global sustainable investment assets account for a total of $21.4 trillion—more than twice the size of the GDP of China. One of the driving forces behind these trends is profit: sustainable investments pay off. Research finds that companies that integrate social and environmental issues into their business models outperform their counterparts both in terms of stock market and accounting performance.
Business leaders see they have a new role beyond generating profit. A 2013 study from the UN and Accenture found that 84 percent of CEOs believe business—not governments or supranational organizations—should "lead efforts to define and deliver new goals on global priority issues" like sustainable development. This is a sharp departure from traditional notions of looking at social and environmental impacts merely from a perspective of compliance or marketing.
However, progress is slow, not only regarding complex global challenges like poverty, inequality, and climate change, but also on issues that are under direct control of companies. So far, the so-called "sustainable" businesses have failed at fulfilling the promise of a more socially and environmentally "healthy" corporate world. Many extractive companies, for instance, are slow to implement changes required by U.S. regulation on conflict minerals. Despite clear language of the 2010 Dodd-Frank Act on conflict minerals provision and existing OECD recommendations on due diligence for responsible supply chains, almost 80 percent of companies fail to comply with minimum provisions of the U.S. conflict minerals law. In the meantime, the extraction of several minerals used in the production of mobile phones, laptops, and cars continues to finance violence and human rights abuses in the Great Lakes region and other conflict zones in Africa.
The question now is: How we can bridge the disconnect between the growing interest of business and finance in the sustainability agenda and more decisive action towards better social and environmental outcomes?
Sustainability by Declaration
To answer this question it is worth looking at what defines a business as sustainable. Today, there are more than 100 organizations that provide sustainability ratings and set standards, yet a generally accepted methodology is lacking, and the sustainability data market remains fragmented.
In addition, sustainability data that feeds into the ratings and standards is almost always self-reported by companies, and not usually externally audited. In the United States, the Sustainability Accounting Standards Board (SASB) recommends that companies disclose the sustainability information in the Management Discussion and Analysis (MD&A) section of their annual reports. However, the MD&A does not require external auditing, and according to the Global Reporting Initiative (GRI), only 16 percent of U.S. companies that published a sustainability report based on GRI guidelines included some level of external assurance.
In other words, sustainable companies become sustainable by declaration, and what is written in a company's sustainability report does not always reflect its true impact on communities or ecosystems on the ground. Managing sustainability impacts requires access to better data than business professionals currently have, but how can we improve the quality and reliability of sustainability reporting systems?
Human Sensors: Crowdsourcing Data with Mobile Technology
The collection of social impact data from people and communities continues to be a tedious, expensive, and lengthy process. It involves large call center budgets, door-to-door surveys, focus group discussions, and other approaches where data is sourced only from a small number of people at a time.
The Internet has fundamentally changed how people communicate, and the explosion of electronic communication allows companies to obtain perception data at scale in a cost-efficient manner. At its core, the innovation in mining digital data is to make the data collection affordable by reversing the burden of the collection process: instead of being queried one at a time through phone calls or direct conversations, insights are crowd-sourced in bulk from conversations that are already happening online by email or on networks like Twitter, Facebook, Sina Weibo, or VKontake, or by email, and are analyzed for content by advanced algorithms.
But obtaining data on the effects of corporate activity from online sources alone is insufficient and systematically excludes poor and marginalized populations around the globe. Only 37.9 percent of the global population uses the internet at least once a year. More than 60 percent of the world's people are still offline, and the growth rate of internet adoption is slowing down. For the time being, connectivity remains concentrated in high-income countries, and in urban areas of developing economies for members of the middle and upper class. This is important not only because inequality exacerbates key socio-economic problems—for example, the global poor are more affected by climate change than the global rich—but also because key supply chains for industries like garment or consumer electronics originate in developing economies.
The ubiquity of mobile phones offers a compelling opportunity to collect better data from more people. The Population covered by 2G mobile-cellular network has reached 96.8 percent of the global population, and even in rural areas of developing countries, the majority of households have at least one mobile phone.
Several studies and pilot projects have shown that mobile technology can reliably address problems of scalability and data integrity. For example, researchers at the World Bank and the Center for Global Development showed that mobile surveys not only manage to include "invisible" populations—like the poor or women—in frontier economies like Afghanistan, Ethiopia, Mozambique, and Zimbabwe, but that they are also extremely cheap to implement. Another study with 6,000 participants in India found that utilizing mobile tech in reaching out to communities generates more accurate data. In this case, mobile surveys generated nine times more responses on sensitive questions than face-to-face conversations or call center surveys did.
Case Study: Ulula's Work in Mining
The work of our social impact data startup—Ulula—offers a glimpse of what is possible today in the mobile data and engagement space. We work with global industries like oil, gas, mining, textiles, or agribusiness, and with finance and insurance providers to help create shared value between our clients and communities that are impacted by their operations. Our work in mining illustrates how mobile technology can be used to mainstream sustainability performance into extractive operations to benefit both mining companies and communities that live around mining sites.
By its very definition, mining is a place-based business—companies cannot move assets around and thus rely on good relations with communities to keep operational risks low. In mining, the social license to operate—"the level of acceptance or approval by local communities and stakeholders of mining companies and their operations"—has for years been one of the top five business risks, keeping managers up at night. Fifty percent of all projects report schedule delays and 75 percent of these delays are related to social and environmental issues. A week of disruption in an average industrial-size mine costs $20 million, and the monetary impact of risk events related to social and environmental disruptions has substantially increased over the last 10 years.
One of the countries where these dynamics play out is Peru. Here, the last decade has seen a surge in mining activities that was followed by a steady and significant rise in social conflicts related to mining. Between 2008 and 2012, the Fraser Institute recorded a 300 percent rise in social conflict. Data from Peru's Defensoria del Pueblo, the country's ombudsman institution, confirms this trend. These conflicts hurt communities, companies, and the government. The question is how to improve community engagement to achieve a sustainable reduction of local conflict levels by increasing transparency and information flow between stakeholders.
Ulula recently partnered with one of the major mining operators in the highlands of Peru. We are using a mobile-based grievance mechanism to enable community members and mining companies to easily and directly exchange information regarding disputes, claims, or other concerns and information through simple mobile phones. The automated system collects, anonymizes, and organizes community messages, and allows mining staff to directly respond to community members on their issues of concern, manage grievances, and analyze data or information.
For example, if a farmer finds that his well has been polluted by leaked mining tailings he can report this anonymously by sending a free SMS to the platform. The report will be automatically classified as an environmental-related grievance, and registered as such into the system. Through the dashboard, company staff can then follow up to manage the grievance directly, and track the "status" of the grievance until the case is closed. The farmer, in the meantime, receives regular automatic updates on the status of his complaint, and once the case is closed receives a message asking how satisfied he is with the company's response. This closes the feedback loop and allows mining staff to assess how effective their response to the grievance was.
In addition, we run automated pulse surveys—frequent quick-fire polls in which we ask two or three questions at a time—to generate additional data on how the mine's operations and community engagement procedures are perceived by villagers who have not reported any issues through the grievance mechanisms. The combination of various tools produces decision-useful intelligence based on data, which has been sourced directly where it matters: at the community level.
Conclusion
Measuring the social and environmental impact of corporate operations is key, not only for people and the planet, but also for profits. The last few years have seen the mainstreaming of the sustainability agenda into business discourse. The integration of innovative sensor technology has led to impressive improvements in the way environmental outcomes are measured by companies, and similar innovation is needed for measuring the social impact of business operations. Utilizing the ubiquity of mobile phones around the globe to crowd-source data collection opens up the possibility of finally getting the sustainability revolution underway.
