Master´s Thesis

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Applying sustainability reporting:

an exploratory case study at

Author: R. Rispens

Address: Gorechtkade 47-A, 9713 BE Groningen Student number: 1008110

Phone: +31624219819

E-mail: RenzeRispens@outlook.com

Rijksuniversiteit Groningen / University of Groningen Faculty of Economics and Business

Master in Science Business Administration

Specialization Organizational & Management Control Supervisor: Drs. D.J.J. Heslinga

Koopman Logistics Group B.V. Supervisors: G.F. Hes

D.M. Smid

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Preface

Dear readers,

The report you are reading is the completion of my study Master in Science Business Administration - specialization Organizational & Management Control. Although, I officially started this study in 2011, in the previous century my expectations (and of many others) about studying and graduating in Economics were obviously, to put it mildly, otherwise. However, looking ahead on the road, instead of in the mirror, I am glad to finish the main reason why I came to Groningen.

The subject of the thesis is about the process of applying sustainability reporting at Koopman Logistics Group (KLG), established in Noordhorn, the Netherlands. Due to contacts of Drs. Heslinga it appeared possible to complete the study as an exploratory case study at KLG. Therefore, and for the very useful comments and support during the process of writing this thesis, I would like to thank Drs. Heslinga.

Further I would like to thank Mr. Hes and Mr. Smid for their time and effort to discuss relevant aspects of this study in relationship to the activities of KLG. Also thanks for the available resources and the ad hoc initiatives and invitations.

To my family and friends, and especially to my parents, I am grateful for all their support in all the ways.

Yours sincerely,

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1. Introduction

In the last decades organizations have become more aware of their responsibilities towards the environment and their stakeholders. Organizations undertake measures to reduce the negative consequences of their activities on the environment and to stakeholders, in order to achieve a more sustainable organization. Sroufe and Sarkis (2007) state that most organizations have some version of an environmental management system in place, ranging from informal policies and practices till formalized third party audit certified systems. These certifications are commonly published by the organization and the systems are an integral part of the strategic direction. The undertaken measures and the effects organizations have on the environment and towards their stakeholders are increasingly reported beside financial information. The reporting of non-financial information is considered to be a relevant addition regarding the accountability of organizations. The reporting of non-financial information is currently to a large extent voluntary, but rising in use and in general seen as an important manner to inform stakeholders. According to Webb et al. (2012) the sustainability movement is market-driven and sustainability reporting is a rapidly growing business trend applied in large multinational corporations and a growing number of small and medium size enterprises (SME). So the importance of sustainability reporting can be explained due to market-driven influences and as a requirement from stakeholders to be informed about the organizations sustainability performance.

At organizations the knowledge about financial reporting is centred around a limited number of employees, due to the specific knowledge necessary to succeed in drafting a good financial report. So therefore it is comprehensible that for reporting on sustainability, organizations experience the process of providing correct information to their stakeholders as difficult. Reasons therefore can be found in the different interests of stakeholders and the relative new concept of reporting on sustainability. Also the principles of social and ethical accounting, auditing and reporting are in general relative new for organizations and also in strong development.

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Statement of the problem

Organizations provide increasingly information to stakeholders, because of different requirements. While in the past the provision of financial information to shareholders and government institutions was most in common, in the present organizations have to disclose more information about environmental and social issues. Particularly other stakeholders, such as customers and employees, become more involved in the provision of information. For organizations the frequency of providing information to all these stakeholders can probably be more structured and realized in an effective manner, so that repeating of information could be reduced to a minimum. Therefore the problem statement can be described as: “Providing information to stakeholders can be nowadays so fragmented that there might be a more effective and structured manner to inform stakeholders”.

Purpose

The goal of this study is to discover how organizations can apply sustainability reporting effectively, to succeed in informing stakeholders about the sustainability performance of the organization.

Significance of the study

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Research questions

The research question for this study will be:

How can sustainability reporting be applied effectively?

This key research question will be rewritten into the following sub-questions to be able to answer the key question in a coherent and related way.

Sub-questions:

1. What are the current insights with respect to sustainability reporting? 2. Why should organizations report on sustainability?

3. How can a sustainability report be realized?

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2. Background

2.1 Introduction to the context

KLG is one of the larger transport and logistics companies in the Netherlands. The management of KLG has the vision to be a leading transport and logistics company and that the organization is supposed to be known for the quality that is delivered.

KLG is established as a one-man company back in 1930 and is nowadays one of the larger transport and logistics companies in the Netherlands, with nearly 800 employees and 480 trucks transporting finished vehicles and general cargo throughout Northwest Europe on a daily basis. In addition KLG offers also related services to the automotive industry and has two warehouses (www.Koopman.nl). In appendix A an organization chart of KLG is outlined. KLG operates in highly competitive markets where innovation, cost control and delivering quality are critical success factors to remain attractive for existing and new customers. Currently KLG operates only in business to business markets, where mainly the customers consist of original equipment manufacturers, importers and exporters, traders and lease and rental companies.

The management of KLG has the vision to be a leading transport and logistics company and that the organization is supposed to be known for the quality that is delivered. KLG is certified in accordance with ISO 9001:2008 and ISO 14001:2004.

After conversations with the management of KLG, they proposed to research the possibilities of applying the GRI framework for sustainability reporting at KLG. Research questions related to sustainability reporting at KLG are:

 to what extent sustainability reporting will create added value for the organization;  which reporting framework best suits at KLG;

 which application aspects for the organization are relevant;

 how an effective process of applying sustainability reporting could be achieved.

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2.2 Literature review

The practise of sustainability reporting has been evolved in the mid-1990s as a method for business organizations to manage and balance their productive efforts with those of the environment and their surrounding communities (Christofi et al., 2012). This suggests that there were already underlying concepts developed. Wilson (2003) states that the practise of sustainability reporting is a result of the evolving concept of corporate sustainability, which consist of another four concepts, namely sustainable development, corporate social responsibility, stakeholder theory and corporate accountability theory.

Sustainable development was first described in the book Our Common Future published in 1987 by the World Commission on Environment Development, as the development that meets the needs of the present without compromising the ability of future generations to meet their own needs. The WCED (1987) concludes that sustainable development in essence is a process of change in which the exploitation of resources, the direction of investments, the orientation of technological development and institutional change are all in harmony and enhance both current and future potential to meet human needs and aspirations. Therefore Wilson (2003) quotes it a broad, dialectical concept that balances the need for economic growth with environmental protection and social equity. It is quoted dialectic, because it defies a concise analytical definition, although one can often point to examples that illustrate its principles. So it can be more named a philosophic concept, without questioning the historical relevance for creating awareness for sustainability.

Corporate social responsibility is also a broad, dialectical concept that in general terms deals with the role of business in society (Wilson, 2003). It is an evolving concept concerning ethics (or moral philosophy) in business and to which extent business has responsibility to society. As one probably can imagine the history of ethics in business has evolved during centuries, but the concept of corporate social responsibility was only first defined by Bowen (1953) as the obligation of businessmen to pursue those policies, to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society.

Probably due to the broad, dialectical concepts the above concepts are to some extent interchangeable or overlapping with each other. For example Christofi et al. (2012) use the term corporate sustainability development.

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Garvare and Johansson (2010) distinguish stakeholder in primary and secondary stakeholders as a more pragmatic approach, where primary stakeholder should be used to describe actors that have direct control of essential means of support required by the organization. The term secondary stakeholder is used in their study to describe actors that do not directly provide any essential means of support for the organization, but still have enough influence to merit being considered more than just interested parties. The main difference in both definitions is the aspect that in the definition of Garvare and Johansson (2010) organizations recognize actors who have significant influence on the organization and who do not. Stakeholders can also be distinguished in internal stakeholders and external stakeholders and Freeman (1984) states that in most common cases the internal stakeholders must be seen as the conduit through which managers can reach other external stakeholders.

The basic premise of stakeholder theory is that the stronger organizational relationships are with other external parties, the easier it will be to meet the corporate business objectives and develop a competitive advantage (Wilson, 2003). Russo and Perrini (2010) describe, from a practitioner perspective, that stakeholder theory taught good managerial and instrumental practices to firms. Freeman (1984) suggests that the stakeholder concept can be used to enrich the understanding of the process from strategic planning to strategic management and to what extent internal and external changes in the business environment can be in control.

Stakeholder theory can therefore more be seen as a strategic management concept, whereas sustainable development and corporate social responsibility are more a philosophical concept (Wilson, 2003). So the stakeholder theory subscribes from a strategic perspective the idea of the management to deal with the interests of stakeholders.

However, stakeholder theory describes not why organizations should report to stakeholders. Therefore the concept of corporate accountability gives insights in the legal or ethical responsibility of organizations by explaining, justifying or reporting of the actions for which an organization is held responsible (Wilson, 2003). So where on the one hand an organization has responsibility to stakeholders, on the other hand this responsibility should be reported to stakeholders according to the concept of corporate accountability. The concept of corporate accountability therefore gives ethical reasons why organizations should report on their economic, environmental and social performance.

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However, accounting and reporting on environmental, social and economic aspects is an approach on three different areas, which are mainly not identical in calculation to each other. Tulberg (2012) states this is implying that there is less compatibility between the three categories than within each category. He argues that a fourth dimension, progress, should be included in the triple bottom line approach, to cause some quality improvement in the reporting practises. Currently there is the view that more information is considered better than less information. To this the organizational progress of the environmental, social and economic performance should be measured and reported in a more consistent periodic manner. This is also to response on criticism about the concept of triple bottom line.

Norman and MacDonald (2004) states namely that the concept of triple bottom line may in fact provide a smokescreen behind which firms can avoid truly effective social and environmental reporting and performance and argue that many claims on the concept of the triple bottom line approach are actual very tepid. Their main criticism lies in the idea of the aggregation claim of the triple bottom line approach. This claim indicates that by aggregating data there could be calculated a net profit/loss for the social and environmental aspects in accordance with the calculation of an economic net profit/loss for organizations. To their opinion only for the economic aspects a calculation is relevant and organizations should only report on social and environmental indicators provided by reporting standard. Pava (2007) notices in relation to Norman and MacDonald (2004) that one of the major limitations of the business ethics movement, to date, has been the inability to measure and track social and environmental performance in a meaningful, consistent, and comparable way. But blaming the advocates of triple bottom line reporting for this failure is to blame the only group that has noticed this problem and is trying to remedy it.

Another criticism expressed by Peattie and Crane (2005) is about the use of the words “sustainability” or “sustainable development” by organizations for marketing purposes only. They notice that the use of these words can be misleading in the sense of promoting something as sustainable, which actually is not sustainable. O'Dwyer and Owen (2005) are even more convinced about the misleading use of the terms “sustainability reporting” and in some cases “sustainability performance”. They state that claims on sustainability in corporate practise are not possible, because the total effect on the environmental and social resources cannot be calculated. To their opinion this is due to the fact that sustainability reports are organization centric while sustainability requires a collective and cumulative assessment of economic activity relative to resources base. However, as they notice, there are no other terms in general used in science for the concept and practise of sustainability reporting and as the concept of sustainability reporting is still strong in development this discussion will probably remain a tension field.

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2.3 Guidelines and standards

For the practise of sustainability reporting many guidelines are worldwide available. Some guidelines are country specific, where others focus only on labour or environmental aspects of organizations activities. Also a distinction can be made between mandatory guidelines, which are frequently captured in legislation and regulation and therefore country specific, and in voluntary guidelines. A specific voluntary guideline regarding environmental aspects has been published by the European Union in 1995 as the first Eco-Management and Audit Scheme (EMAS). EMAS is developed as a management tool for organizations to evaluate, improve and report on their environmental performance (ec.europa.eu). However, in corporate practise the standard ISO 14001 is more common in use than the EMAS tool, although both are voluntary in use (Neugebauer, 2012). The relevance of the ISO standard 14001 will be explained in paragraph 2.3.5. In general the most influential guidelines and standards on sustainability in corporate practise are described below. The standards and guidelines are all developed by a multi-stakeholder approach.

2.3.1 SA8000

The organization Social Accountability International established the social standard SA8000:2008 for decent work as a tool for implementing international labour standards. The SA8000 standard is based on conventions of the International Labour Organization and the United Nations and organizations can be certified in accordance with the standard by a third party verification. The standard SA8000 is specific for decent workplaces conditions across all industrial sectors worldwide and defines minimum requirements that organizations should met in adopted policies and procedures that protect the basic human rights of workers. These requirements consist of the following elements:

 child labour;

 forced and compulsory labour;  health and safety;

 freedom of association and right to collective bargaining;  discrimination;

 disciplinary practices;  working hours;  remuneration.

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2.3.2 AA1000

The AccountAbility Series of Standards (AA1000 standards) are principle based standards for organizations to achieve social and ethical accounting, auditing and reporting. The AA1000 standards affect issues of governance, business models and organizational strategy, as well as providing operational guidance on sustainability assurance and stakeholder engagement.

The AA1000 standards consist of the following quality principles and process standards:  Principles standard;

 Assurance standard;

 Stakeholder engagement standard.

The principles standard provides a framework for organizations to identify, prioritize and respond to its sustainability challenges. The assurance standard provides a methodology to evaluate organizations adheres to the principles standard. The stakeholder engagement standard provides a framework for organizations to ensure the processes are purpose driven and deliver results (www.accountability.org). For the understanding and application of the AA1000 standards the AccountAbility organization publishes guidance for assurance providers, reporting organizations and stakeholders. According to Adams (2004) the strength of the AA1000 standards lies in the focus on the quality of the processes by which organizations should report on their social and ethical impacts, rather than to identify issues that should be addressed. This focus on the processes of social and ethical accounting, auditing and reporting is based on the conviction that only when these processes are in control, reporting can be relevant to stakeholders. The principle of inclusivity is according to Adams (2004) a key addition referring to the reflection of the aspirations and needs of all stakeholder groups at all stages of the accounting, auditing and reporting process. From the principle of inclusivity, AccountAbility recommends for a whole stakeholder engagement that stakeholders of an organization identify other stakeholders of the organization.

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2.3.3 DSJI

According to Christofi et al. (2012) the two most widely used frameworks with indicators on how to report on sustainability are the GRI reporting guidelines and the disclosure indicators of the Dow Jones Sustainability World Index (DJSI). The DJSI main focus is to track the financial performance of the leading sustainability driven companies from an investable/traded concept. However, the DJSI membership is only eligible for companies who are on the top 10 per cent per sector of the 2,500 companies of the DJ Global Index membership (Christofi et al., 2012). Because for SME the disclosure indicators of the DJSI are not relevant in the sense of organization size, the disclosure indicators are here not further described. The GRI Sustainability Reporting Guidelines are however not limited to the size or background of an organization and are voluntary applicable.

2.3.4 GRI

GRI develops the Sustainability Reporting Framework (GRI framework) in collaboration with experts in its network. The GRI organization arose in 2001 from the CERES organization as an independent institution. GRI´s mission is to make sustainability reporting standard practice by providing guidance and support to organizations (www.globalreporting.org). The first version of the GRI guidelines (G1) were published in 2000 and two years later followed up by the G2 guidelines. Also in 2002 GRI became a collaborating organization of the United Nations Environment Programme. In 2006 the third generation guidelines (G3) were published, which were updated and completed in 2011 by G3.1.

The GRI framework consists of reporting guidelines, boundary and technical protocols, and sector supplements to serve as a framework for reporting on economic, environmental, and social performance. Figure 1 gives an overview of the third generation reporting framework.

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14 The reporting guidelines consist of the parts:

 Principles for defining report content and ensuring the quality of reported information;  Standard disclosures (performance indicators and disclosure items);

 Guidance on specific technical topics in reporting.

The reporting principles consist of materiality, stakeholder inclusiveness, sustainability context and completeness of the report content. Ensuring the quality of reported information should be accomplished by the principles of balance, comparability, accuracy, timeliness, clarity and reliability. The standard disclosures are divided into strategy and profile, management approach and performance indicators. The performance indicators are organized into the categories economic, environmental and social performance. This is the practical application of the triple bottom line approach. In appendix B an overview of the latest GRI G3.1 Standard Disclosures is outlined.

In addition to the standard disclosures the sector supplements are designed to complement the guidelines in different sectors and include sector-specific performance indicators. For the logistics and transportation sector GRI developed in 2006 a first pilot version as “GRI Logistics and Transportation Sector Supplement” in accordance with the G2 guidelines. This sector supplement is still relevant and can be used in addition to the G3.1 guidelines. GRI is currently developing the G4 guidelines and expects that these will be published in May 2013.

The protocols consist of indicator protocols and technical protocols. The indicator protocols describe the performance indicators in the guidelines (definition, compilation guidance) to ensure consistency in the interpretation by users. The technical protocols provide process guidance on defining the report content and boundary (scope of the report, range of topics covered).

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15 Table 1: Application level criteria (www.gobalreporting.org)

The plus (+) at an application level can be added if the sustainability report is externally assured by a third party audit to confirm that the reporting organizations has published a sustainability report in accordance with the GRI guidelines. External assurance is recommended by GRI, but is however still voluntarily.

2.3.5 ISO

The International Organization for Standardization (ISO) develops and publishes voluntary international standards in a broad range for products, services, the environment and business. Organizations can be certified in compliance with some ISO standards, although this is due to the voluntary of the standards not required. The standard ISO 9001includes the requirements for a quality management system in an organization and the standard ISO 14001 specifies the requirements of an environmental management system. Both standards should be used as an internal audit tool for the organization to verify to which extent the organization meets the specified criteria. The certification process by a third party audit is still voluntary, but ISO states that a certification may:

 be a contractual or regulatory requirement;  be necessary to meet customer preferences;

 fall within the context of a risk management programme;

 help motivate staff by setting a clear goal for the development of its management system (www.iso.org).

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Figure 2: Model of a process-based quality Figure 3: Environmental management

management system (ISO 9001) system model (ISO 14001)

ISO published in 2010 the standard ISO 26000, which consist of guidance for organizations on social responsibility based on the principles:

 concepts, terms and definitions related to social responsibility;  the background, trends and characteristics of social responsibility;  principles and practices relating to social responsibility;

 the core subjects and issues of social responsibility;

 integrating, implementing and promoting socially responsible behaviour throughout the organization and, through its policies and practices, within its sphere of influence;

 identifying and engaging with stakeholders;

 communicating commitments, performance and other information related to social responsibility (www.iso.org).

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2.3.6 IIRC

The International Integrated Reporting Council (IIRC) mission is to create an International Integrated Reporting framework that provides material information from organizations about their strategy, governance, performance and prospects in a clear, concise and comparable format. The framework aims to include financial, governance, management commentary and sustainability information in corporate reporting. The IIRC hopes to encourage more corporate report preparers to use integrated reporting and thereby gain more recognition from both standard-setters and investors (www.theiirc.org). Currently the IIRC framework is in a development stage for version 1.0, which is expected to be released in December 2013.

The International Federation of Accountants (IFAC) and the IIRC have signed a memorandum of understanding to promote cooperation, coordination and alignment in developing an international framework for integrated reporting of sustainable business practices. Through signing the new agreement, IFAC and the IIRC also aim to enhance their respective missions and strategic goals. Another interesting aspect is the fact that the IIRC has been co-founded by GRI. GRI states that the future of corporate reporting is the integration of financial and sustainability strategy and results. An integrated report should be the result of such an integrated reporting process.

2.3.7 FSR PL

As cited before, there are many initiatives for reporting on sustainability worldwide. Specific in the Netherlands the Foundation Sustained Responsibility (FSR) has developed the Corporate Social Responsibility Performance Ladder framework (CSR PL framework; in Dutch: “MVO Prestatieladder”). The framework is a management system certification standard for the Corporate Social Responsibility (CSR) practise in organizations. The framework is based on the existence of a CSR Management System where stakeholder requirements and stakeholder expectations are managed on result and consists of three main elements:

 CSR management system requirements;  Stakeholder management;

 CSR indicators.

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2.4 Role of control

GRI states that sustainability reports based on their framework can be used for the purposes of:  Benchmarking and assessing sustainability performance with respect to laws, norms, codes,

performance standards, and voluntary initiatives;

 Demonstrating how the organization influences and is influenced by expectations about sustainable development;

 Comparing performance within an organization and between different organizations over time (www.globalreporting.org).

So the aspect of controlling on sustainability practise seems to be even import, because what is not in control cannot be reported (and benchmarked) in a reliable manner. The question rises what the role of controlling is in the development of the corporate sustainability practise.

According to Jalink (2008) control helps organizations in the realization of corporate social responsibility by structuring the data collection process. The control framework is therefore relevant as infrastructure for measurability of sustainability actions and also the implementing actions in the control cycles. The role of the controller is thereby changing from typical quantitative data to more qualitative data collecting. Lamfers and Van der Hoeven (2011) conclude that the project approach on sustainability reporting should be changed to a more organizational process approach lead by management incentive. They also conclude that synergy can be realized by using actual data collection methods of the controller.

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2.5 Research framework

For answering the research question “How can sustainability reporting be applied effectively?” it seems that the objectives of sustainability on the environmental, social and economic performance in an organization should be corresponding with the content of a sustainability report.

Based on the findings in the sections of the literature review, the guidelines and standards; and the role of control, a process approach on organization sustainability reporting can be recommended over a project approach. Therefore the aspects of sustainability should be included in the organization processes. It seems that for realizing the objective of sustainability in organizations the quality of processes is a critical factor. Adams (2004) for instance already mentioned that the strength of the AA1000 standard lies in the focus on the quality of the reporting processes. Another critical factor is the role of control in the reporting process. Therefore the focus on the quality of the processes should be seen in a broader perspective as a control topic. The idea behind this is that during reporting cycles the quality of processes is in control.

Relevant hereby is to research the relationships between the objectives of sustainability in organizations and the realization of a sustainability report and what thereby the influences are of the processes and disclosures.

Therefore the research framework in figure 4 has been developed to clarify the relations between the organization objectives of sustainability and reporting about sustainability.

The model can be read top-down and starts with an analysis to which extent on the one hand legislation and regulation and on the other hand organization policy do affect the organization sustainability objectives. Although one main sustainability objective may exist in organizations, in the research framework the objectives will be related to the underlying aspects of the triple bottom line approach. This is because in general the environmental, social and economic performance in an organization can be analyzed as concrete as possible and the findings in the previous sections support such an approach.

Next is to determine if the processes exist to achieve the sustainability objectives and to what extent these processes are in control. If the processes do not support the sustainability objectives of the organization, than first these processes should be designed and implemented in order to be able to report on sustainability. If the processes do partly support the sustainability objectives of the organization, than an analysis should be made to what extent the organization can report on sustainability. Critical in determining the required processes is the quality control of these processes. Thereafter is to determine on which sustainability disclosures the organization is able to report. At this point a decision should be made, which reporting guidelines are most in line with the organization view on sustainability reporting.

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Legislation and regulation Organization policy

Control

Guidelines

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3. Methodology

In this chapter the design of the research will be set out. Thereby it is relevant that the approach of the research is consistent with the purpose of the research, which is defined as:

“The goal of this study is to discover how organizations can apply sustainability reporting in an effective manner to succeed in stakeholder’s requirements.”

To realize the goal of this study, the research framework presented in section 2.5 will serve as guidance for the research to apply sustainability reporting effectively at KLG. There are several considerations relevant in the implementation of this research, which will here be clarified. Blumberg et al. (2005) notice that a number of different design approaches exist, but unfortunately no simple classification system defines all the variations that must be considered.

The first main distinction in the research approach in order to answer the research question can be made between an exploratory study and a descriptive study. Blumberg et al. (2005) state that the essential distinction between these two options of studies are the degree of structure and the immediate objective of the study. Exploratory studies are especially used in developing hypothesis or research questions, whereas descriptive studies are more used in testing the developed hypothesis or research questions. The research design of descriptive studies is more specified in procedures and data sources. The research approach of this study can therefore described as an exploratory study, where the research framework will be applied at KLG to test if the concept of the research framework is appropriate in practise. Due to limited time and resources available, the research will consist of a single case study. The research approach consist of an analysis of the elements of the research framework and to which extent KLG is able to apply sustainability reporting effectively. Also insights and recommendations for further research can thereby be achieved.

According to Blumberg et al. (2005) a widely used distinction for research techniques exist, namely qualitative techniques (words, sentence and narratives) and quantitative techniques (numbers and figures). For the research especially qualitative techniques will be used to analyse documents and guidelines and to interview management of KLG. The analysis of documents and guidelines should make clear to what extent the elements of the research framework are applicable at KLG. The in-depth interviews with the management of KLG are probably less structured and more based on conversations in order to gain clarity on issues where documents are insufficient or to provide additional information. The data analysis can be qualified as secondary data analysis regarding documents and guidelines and as primary data analysis regarding the interviews. Expected is that the secondary data analysis will dominate.

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Another advantage of the exploratory case study approach with respect to other research methods is the more emphasis on the full analysis of the research framework and the interrelations between the defined elements. The analysis will be more detailed and therefore can provide valuable insights for problem solving, evaluation and strategy (Blumberg et al., 2005). Because multiple sources of information are used, evidence can be verified to ensure the validity of information and missing data can presumably be avoided.

There are however also disadvantages to this exploratory case study approach. The reliance on qualitative research techniques in combination with a case study approach make it hard to test the results and to generalize the findings to other organizations, because of specific characters of organizations. Also comparison to other research is limited, because of the unique research approach and the developed research framework. Also the risk exists of not finding material data, despite all efforts in the research approach.

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4. Results case study KLG

In this chapter the collected data from documents, guidelines and interviews will be presented. The presented research framework in section 2.5 serves thereby as guidance for the research of how sustainability reporting can be applied effectively at KLG. The first section starts with additional background information about KLG to place the analysis into context. The analysis is in accordance with the research framework and begins with an overview of which legislation and regulation affects the objectives of sustainability at KLG. In addition an analysis is made of the organization policy regarding the sustainability objectives. Thereafter an analysis follows to what extent the processes exist to support the objectives of sustainability at KLG. Besides the analysis focuses on the quality aspects of these processes and to what extent these processes are in control. The next analysis consists of which reporting disclosures at KLG could be achieved and which reporting guidelines are most in line with KLG objectives and processes. Finally an overview of the reporting process is given.

4.1 Background KLG

As is described in chapter one, management at KLG has the opinion that sustainability reporting will be a valuable addition to inform stakeholders. The opinion of management should be in line with the vision and objective of KLG. The vision of KLG, about important developments in the sector transport and logistics, is the ongoing process of globalisation and division of labour in Europe. Thereby the transportation streams are still growing and specific solutions are increasingly requested. Besides global suppliers of transport and logistics services, there is sufficient space for organizations as KLG to be distinctive based on a customer oriented quality approach. With a distinctive approach in the service level, expansion of activities may be possible and therefore autonomous growth should be above the sector average growth level.

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4.2 Sustainability objectives

4.2.1 Legislation and regulation

As in other organizations, KLG has to comply to several legislation and regulation in order to operate. In this paragraph the purpose is to identify, which legislation and regulation can have a material impact on the sustainability objectives of KLG. The identified legislation and regulation are divided conform the aspects of the tripe bottom line approach. Although several legislation and regulation are applicable to KLG, not all legislation and regulation do have a material relation with sustainability. For example one could argue that taxes on fuels can have a positive relation with sustainability, but in general the primary goal of taxes is probably more public revenue driven.

Economic

In the analysis it is assumed that given the social development regarding sustainability, most legislation and regulation applicable on KLG is primarily economic related. However, further on in this paragraph, it becomes clear that relevant existing legislation and regulation already consist of a trade-off between economic, environmental and social aspects. Therefore legislation and regulation which might material influence the sustainability objectives of KLG, is allocated to the environmental or social aspect.

Legislation and regulation concerning economic issues at KLG consist of:  Legislation on the Dutch Civil Code Title 9 of Book 2;

 Guidelines for Annual Reporting (Dutch Accounting Standards).

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Environment

Legislation concerning environmental issues at KLG consists of:  Environmental Law;

 Labour Condition Law.

Especially the Labour Condition Law (in Dutch: “Arbo-wet”) contains also articles concerning social aspects of labour conditions. From these laws have arisen regulations and permits and thereby relevant for KLG are:

 Activities Decree;

 Decree Risks Major Accidents;  Environmental permits;  Usage permits.

The Activities Decree (“Activiteitenbesluit”) contains conditions for organizations regarding, which permits are necessary to operate and distinguishes organizations in type A, B, or C. Because of the storage of hazardous substances at Koopman Warehousing, this subsidiary of KLG is classified as a type C business. Koopman Warehousing has also to comply with the Decree Risks Major Accidents (“Besluit Risico’s Zware Ongevallen; BRZO ´99”), which sets requirements on the most risky organizations in the Netherlands. One main requirement is the existence of a safety management system, including prevention policy concerning major accidents.

Also the Guidelines Hazardous Substances (“Publicatiereeks Gevaarlijke Stoffen; PGS 15”) applies to the subsidiaries of KLG if they storage ore use hazardous substances for their activities.

Social

Legislation concerning social issues at KLG consists of:  Labour Condition Law;

 Labour Time Law

 Collective Agreement Law.

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The above legislation and regulation represents the legal framework, where from own sustainability policy could be formulated.

4.2.2 Internal policy

At KLG general policy regarding sustainability is integral recorded in the organization handbook and the staff regulations. Specific policy concerning the subsidiaries is integral recorded in the operational handbooks and the work instructions. Based on the vision and mission, KLG has defined the following objectives, which interface with sustainability:

 Monitoring and reduction of CO2 and NOx emissions;  Optimizing of life cycle of facilities and equipment;  Complying to permits;

 Preventing of accidents and incidents;

 Optimizing of wellbeing and health of employees.

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4.3 Quality of the processes

This section begins with an overview of the management system of KLG as background information and how the integration of the principles of the standards ISO 9001 and ISO 14001 is accomplished at KLG. Thereafter will be analyzed the existence of the integration, quality and in control of the defined objectives of paragraph 4.2.2.

4.3.1 Management system at KLG

Normally the management system includes the overall system of an organization. Hoyle (2009) describes a management system as the set of interacting processes by which an organization defines and achieves its goals. A qualifying prefix would describe a management system that achieves the organization´s goals relative to this qualifying prefix. So a quality management system achieves the organization´s quality goals, whereas an environmental management system achieves the organization´s environmental goals.

At KLG the main process system consist of the Transport Management System (TMS) and the daily operational activities of the main subsidiaries Koopman Autotransport (KAT) and Koopman Cargo (KCG) are entirely integrated in the TMS. For measuring the financial performance of these subsidiaries the Financial Information System (FIS) has been developed. According to the management, the TMS and FIS produce appropriate management information every four week period.

Due to the expansion of activities in recent years and also due to the merger of operational activities, not all processes of the other subsidiaries are currently entirely integrated in the TMS and FIS. This depends on the operational activities of the subsidiary. The operational activities of the Koopman Car Terminal are partly integrated in the TMS, whereas Koopman Warehousing (KWH) and Koopman Automotive Solutions (KAS) have their own process system. However, it is expected that in the near future significant synergy benefits can be accomplished by integrating more operational activities between the subsidiaries. To the opinion of the management, the operating systems of KWH and KAS should be improved, to produce in a more structured mode the required management information. The process systems in use are supported by an organization handbook and policy documents (such as policy plans, employee regulations and environmental registries) to create the set of interacting processes to achieve KLG’s defined goals. The realization of an effective quality management system and environmental management system is based on the principles of the standards ISO 9001 and ISO 14001 as shown in figures 2 and 3. Before 2011 the standard ISO 9001 was here leading with respect to the standard ISO 14001and the director of KLG decided to what extent the subsidiaries managed the environmental principles according to the standard ISO 14001. In 2011 it was decided that KLG as group should be in compliance with the principles of the standards ISO 9001 and ISO 14001. This was decided due to organizational changes, which have been made to integrate specific activities of the subsidiaries. Also relevant hereby was the decision to become more proactive involved in setting the organizational framework and objectives for the subsidiaries.

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The quality aspects concerning the standard ISO 9001 consist at KLG on customer focus and process continuation. For the quality aspects concerning the customers, KLG in general uses more informal methods, such as customer consultations rather than customer satisfaction surveys. To the opinion of the management of KLG is the informal analysis more effective due to the differences in customer requirements.

The main focus areas with regard to quality are:  management of customer relationship;  improvement of complaints analysis;  diversification of portfolio activities;

 improvement of warehouse management system.

The main focus areas with regard to the environmental and social aspects consist at KLG of the defined objectives of paragraph 4.2.2. In the following paragraph the processes to realize these objectives will be analyzed.

4.3.2 Integration of the objectives

This paragraph refers to the integration of the defined objectives in the operating processes and what actions are undertaken to ensure the quality and control of the processes. Of each objective the main relevant actions are described and specific actions can influence several objectives.

Monitoring and reduction of CO2 and NOx emissions

According to the management reduction of emissions can best be realized by raising awareness in the organization of the environmental effects of the activities. Because the activities are constantly a consideration between economic performance and environmental effects, management focus more on policy rather than norms. That is also the main reason why an overall calculation of CO2 and NOx emissions is not applied at KLG. Also not all the stakeholders of KLG are convinced of the utility of CO2 and NOx calculations. There are however ongoing projects at KLG, which could optimize the trade-off between economic performance and environmental effects, namely:

 adding of LPG in addition to diesel;

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Although, adding of LPG in addition to diesel might reduce CO2 and NOx emissions, it is still not clear what longer term the effects are on the engine management. The project with the use of long heavy vehicles is still continuing, but reduction of emissions seems realistic due to the combination of biogas and the higher load factor. At KCG CO2 emission is monitored since 2011 by the stimulation program “Lean and Green”. The purpose is thereby is to reduce CO2 reduction by twenty percentage in five years.

From the TMS, management is able to use the following data, which probably have an effect on emissions:

 fuel efficiency per 100 km;  total driven kilometres;

 load factor (only at Koopman Autotransport);  loaded versus unloaded kilometres;

 scheduled versus actual kilometres driven;  driving speed per hour.

These data are periodically reported at KAT and KCG and are monitored to indicate the effects on the environment. In combination with data from the FIS, economic performance can be analyzed and feedback to the policy as a control function can thereby be realized.

Optimizing of life cycle of facilities and equipment

The optimization of the life cycle of driving equipment is related to technical and economic performance, which are monitored by such as fuel efficiency and maintenance cost. The policy thereby is to realize around ten years of operation or a total driven of around 1.2 million kilometres. At investment decisions an analysis of the expected cost and environmental effects is standard policy in accordance with expectations regarding legislation and regulation. The optimization of the life cycle of facilities is highly related with the process of compliance of permits.

Complying to permits

Although the facilities of KLG are various in operational function, in general investment decisions are a result based on costs, operational and permit requirements. Besides the activities at KWH, the other activities of KLG are covered by environmental and usage permits. At the terminals and truck and trailer service centres limited use of hazardous substances, such as oils, cooling liquids and coatings, are registered by material safety data sheets.

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As mentioned before the Decree Risks Major Accidents and Guidelines Hazardous Substances are at KWH significant of influence in the daily operations to prevent environmental incidents and accidents. The certification of the quality and environmental systems of KLG were reconfirmed for the standard ISO 9001 in 2011 and for the standards ISO14001 in 2012.

Preventing of accidents and incidents

The vision of management in the purpose to prevent accidents and incidents is prompted by the idea that accidents and incidents also have effects on society. To prevent accidents and incidents, policy consists of:

 additional employee education;  labour instructions;

 safety rules.

If nevertheless an accident or incident occurs, than depending on the circumstances procedures and measures exists, such as emergency plans, deployment of emergency response, liquid tight floors or sprinkler systems. These procedures and measures are periodically reviewed and are included in the ISO certification process. Besides accidents and incidents are registered also lost time incidents are monitored.

Optimizing of wellbeing and health of employees

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4.4 Reporting disclosures

As may be clear from the previous sections, at KLG policy concerning sustainability aspects is integrated in the daily operations and is a process of consideration between economic, environmental and social consequences. For a commercial organization the process in shaping own policy is of course limited to the degree of market opportunities and regulatory compliance. To communicate to the stakeholders how policy about these considerations is developed and how the relation with the economic, environmental and social performance is, a sustainability report can therefore be an added value.

As is described in the background chapter, several guidelines and standards related to aspects of sustainability are applicable at organizations. For specific instructions about the sustainability reporting process, the AA1000 Standards, the disclosure indicators of the DSJI and the GRI framework gives clear indications. Because KLG is not exchange listed and therefore measuring of financial performance in relation to sustainability has in fact no value for their stakeholders, the disclosure indicators of the DJSI are no further considered for KLG.

Since the research of Adams (2004) several updates of both the AA1000 Standards and the GRI framework have been published. In the latest updates are aspects as stakeholder inclusivity and materiality of issues as well in the AA1000 Standards as in the GRI framework incorporated. For actual instructions about the content of a sustainability report, the AA1000 Standards refers especially to the GRI guidelines. This can be explained by the fact that the AA1000 Standards more serve as guidance on the reporting process rather than as guidance on the reporting content.

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4.5 Overview reporting process

The process for realizing a sustainability report is represented in figure 5. The principles and guidance serve as a preparation for the disclosure of information as outlined in appendix B.

Figure 5: Overview of the GRI Guidelines (www.globalreporting.org)

From the conversations with the management of KLG it became clear that externally assurance by a third party audit is preferred and that the first sustainability report over 2012 should achieve an application level B+. As can be concluded from table 1 and appendix B, therefore KLG should report on all the criteria of the profile disclosures, regarding:

 Strategy and Analysis;  Organizational Profile;  Report Parameters;

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Also disclosure about the management approach should be included for all the indicator categories:  Economic;

 Environmental;

 Labor Practices and Decent Work;  Human Rights;

 Society;

 Product Responsibility.

Because the GRI Logistics and Transportation Sector Supplement (L&TSS) is still a pilot version, the L&TSS performance indicators can only be used as additional information to report on specific transport and logistics subjects. These additional performance indicators are related in appendix B to:

 EC1: Gross/net sales;

 EN3: Breakdown of energy use (road, office, warehouse);  EN28: Incidents and fines related to hazardous goods;  LA1: Separate figures on drivers;

 LA10: Number of hours of transport safety training.

In the L&TSS are specific performance indicators for the logistics and transport sector described and thereby relevant for KLG are:

 LT2: Break down of fleets composition;

 LT3: Policy and programs on environmental impact;

 LT4: Initiatives to realize renewable energy and energy efficiency;  LT5: Initiative to control urban air emissions;

 LT9: Policy to determine working and rest hours for drivers.

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5. Discussion and conclusion

In this chapter the research results are discussed and the research question will be answered. Beside are discussed some remarkable publications about the subject of sustainability reporting. Finally the conclusion and the limitations of the research are presented.

5.1 Discussion

The purpose of the research was to discover how organizations can apply sustainability reporting effectively, to inform the stakeholders about the sustainability performance of the organization. Therefore the underlying concepts of sustainability in academics and business were analyzed and discussed in the background chapter. From the literature review it was found that the concept of sustainability reporting has evolved in the last two decades in academia and corporate practise. In literature the discussion about what sustainability really is and how it can be applied in corporate social responsibility is still going on, whereas in corporate practise the true meaning of sustainability seems to be subordinate to taking actions concerning corporate social responsibility.

However, as a management tool to communicate to stakeholders, the triple bottom line approach seems to be a positive contribution in the debate. Also the underlying aspects of the concept triple bottom line (economic, environment and social) are widely represented in the analyzed guidelines and standards. The standards especially refer to requirements of underlying management systems, whereas the guidelines are more focused on the elaboration of organizational policy and reporting principles.

The standards ISO 9001, ISO 14001 and ISO 26000 give as a management tool broad guideline measures to appropriately manage the organization on economic, environmental and social aspects. The GRI guidelines can thereby seen as a complement to the ISO standards as guidance for the reporting process to inform stakeholders about the organization sustainability performance. Also the strategic alliance between ISO and GRI and the involvement of GRI in the co-founding of the IIRC emphasize the social awareness of the importance of sustainability reporting.

As Adams (2004) noticed, the quality of the reporting processes and thereby the quality of the management system should be a critical factor to give attention to. Therefore the role of control in the operational systems has been analyzed to determine to what extent organizational policy corresponds with organizational performance on the aspects of sustainability. Especially the certifications of the quality and environmental management system should give a certain degree of assurance as a condition to disclose about the performance indicators. Also the external assurance of the sustainability report should be a reliable indicator of the presented content.

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1. The GRI Framework is widely, but not universally, employed as a sustainability reporting tool in the European electricity industry;

2. There are systematic, widespread and significant discrepancies between what companies claim they are reporting on within the GRI Framework and what they actually report on. These discrepancies diminish the accuracy and credibility of the system and its contribution to encouraging sustainable and responsible business conduct;

3. The system in place to verify the accuracy of GRI Application Levels is insufficient. A lack of will and ability to properly monitor and verify usage of the GRI Framework further diminishes the accuracy and credibility of the system and its contribution to encouraging sustainable and responsible business conduct;

4. The high frequency of discrepancies and inaccuracies in the GRI Framework reveal the fundamental shortcomings and inadequacy of (even well-intended) voluntary systems of reporting and disclosure.

As a reaction to these significant conclusions, the EPSU has indicated that the agreement on a common position in 2009, with the European electricity employers on CSR in the electricity sector to promote the voluntary approach and use of the GRI Guidelines, should be reviewed.

Also EPSU expects the European Commission and European Parliament to take the findings into account, when considering a proposal on disclosure of non-financial information by companies. Stricter rules and sanctions appear to be necessary (Steinweg and Wilde-Ramsing, 2012).

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The final question then arises, how this relates to the research question of this study:

How can sustainability reporting be applied effectively?

As a reaction to the findings of Steinweg and Wilde-Ramsing (2012) GRI states in their January 2013 Newsletter that they are not in a position to monitor or control the quality of reports based on the GRI guidelines. That is outside of the remits of what GRI does. In the end of the reporting process, it is still the reporting organization, which is responsible to choose the right report content and ensure the quality of their reports (www.globalreporting.org).

So, sustainability reporting can still be applied effectively in accordance with the GRI framework. Organizations should thereby report in accordance with the principles of materiality, stakeholder inclusiveness, sustainability context and completeness of the report content. As was discussed before, ensuring the quality of the reported information should be accomplished by the principles of balance, comparability, accuracy, timeliness, clarity and reliability. Overall, as the ambition of an organization is of real true meaning about sustainability performance, than ethical behaviour might be the only principle to prevent misleading publications.

5.2 Conclusion

The research results suggest that sustainability reporting can be applied effectively considering the quality of the operating systems and the manner how policy concerning sustainability aspects is incorporated in the organization.

Although in the last decade the development of standards and guidelines in relation to aspects of sustainability has expanded widely, the research results also suggest that the quality of sustainability reporting is still subjected to how organizations are dealing with the voluntarily use of these standards and guidelines. Mandatory reporting and third party auditing about sustainability issues will be probably an effective manner to increase the reliability of sustainability reporting.

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5.3 Recommendations to KLG

Management of KLG has noticed that in the future, when the concept of triple bottom line is more integrated in the organization, the ultimate objective is to integrate the financial reporting and sustainability reporting. Therefore the current developments about the IIRC framework might be interesting to follow in addition with the expected GRI G4 guidelines. Also the possible mandatory requirements from new legislation may influence the reporting requirements for KLG. Another relevant aspect in the current reporting practise of organizations is the calculations of CO2 and NOx emissions. As was described in the previous chapter, management at KLG and even not all the stakeholders of KLG are convinced of the relevance of these calculations. A clear explanation of such a view of the management and stakeholders will be an added value for the sustainability report.

5.4 Limitations

The results of the case study are limited to the extent of KLG where indicated and are not in advance applicable to other organizations. Also the presented results may not correspond as standard policy and operational activities applied at the transport and logistics sector or other sectors.

Also there may be other standards or guidelines, which can be relevant for KLG or other organizations, but due to the boundary of the research and available time, such standards or guidelines were not found or discussed.

Also the interpretation of the conversations and the available resources are limited by the capacities of the researcher and may lead to other results if the research would be repeated.

5.5 Recommendations for further research

Further research can be related to the incentives of organizations to report on sustainability and the reasons of the discussed reporting gap.

Also research about the current global application of the GRI guidelines might be relevant to research. For the different continents there may exist the need for specific guidance in relation to legislation or social backgrounds for non-global operating organization.

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