Sustainability reporting for ports

Sustainability reporting for ports Exploratory research on boundaries, stakeholders and benchmarking Magali Geerts (Magali.Geerts@vub.ac.be) Prof. dr. Michaël Dooms (michael.dooms@vub.ac.be) March 2015

Introduction (1) Several ports already publish a sustainability report or have it integrated in their annual report. Reporting about relevant corporate environmental and social responsibility issues forms an essential basis for the license to operate for a port, the basis for development and operations of ports. BUT What should be the reporting boundaries for a sustainability report on the port level? Port Authority activities Port and industry area activities Supply chain High influence Medium influence Limited influence Limited impact Reasonable impact High impact Source: Adapted from the annual report 2015 of Port of Rotterdam

Introduction (2) Other issues: Stakeholder inclusion: In the process of Sustainability Reporting On a permanent basis Benchmarking

Introduction (2) Academic / scientific background: Stakeholder theory angle Institutional theory angle Port collaboration angle Port governance angle

Methodology Selection of 10 leading Sustainability Reports (or likewise); Explorative, qualitative exercise; In-depth reading of boundaries and performance indicators, construction of a table using the Rotterdam approach ; Selection of a limited set of performance indicators* / areas ( traditionally most used) in 4 perspectives (Economic/Environment/Social/Governance) Emergence of tendencies / conflicts / food for thought * We focused exclusively of the reporting of quantitative indicators

Antwerp Rotterdam Bremen Hamburg Gothenburg Valencia Porto Nave (BR) Transnet (SA) Vancouver (CAN) Los Angeles (US) The list of 10

Stakeholders and boundaries (1) How far do Port Authorities go in their analysis about stakeholders? Do they report about boundaries? Port of Antwerp Port of Rotterdam Port of Bremen Port of Göthenburg Port of Valencia Chapter on stakeholder relations : Different stakeholder groups identification / Key concerns of the stakeholders / Form of dialogue / Actions taken by the port List of stakeholders that were involved in the development of the sustainability report + opinion of the stakeholders regarding the previous sustainability report Reference to the scope of the annual report Geographic/activity approach to boundaries: Port Authority and Industry cluster Chapter on experience/perception of the port by the public, also special indicator Chapter on stakeholder relations : Different stakeholder groups identification/ Key concerns of the stakeholders / Form of dialogue / Actions taken by the port Reputational research through public opinions Stakeholder satisfaction index (unique exercise in 2012) Permanent Community liaison committees and complaint management Reference to the scope of the annual report Chapter on stakeholder relations : Different stakeholder groups identification / Key concerns of the stakeholders / Form of dialogue Chapter on significant sustainability aspects and report boundaries : 16 sustainability aspects are determined and boundaries of influence along the logistics chain are defined for future purposes. Reference to boundaries as a footnote for the current KPI s Indicator on impacts of operations on local communities Chapter on sustainable relations : Different stakeholder groups identification / Form of dialogue / Expectations of the stakeholders / Actions taken by the port Stakeholders expectations about the port integrated into the sustainability report Satisfaction indicators based on some stakeholders groups: employee and customer Reference to boundaries as a footnote in the KPI chapter List of stakeholders are identified, but limited information about the concrete concerns and actions taken to indulge them. Reference to boundaries is integrated in the titles of the indicators. Description of the port authority s policy in terms of its relations with its social environment.

Stakeholders and boundaries (2) Port Metro Vancouver Port of Hamburg Port of Portonave Transnet South Africa Port of Los Angeles Boundaries clearly reported report using a broader port-wide boundary and aligned over performance indicators within the topics Extensive list of material topics and link to stakeholders Consultation of stakeholders through a recently completed strategy exercise Permanent Community liaison committees and complaint management Geographic/activity approach to boundaries: The area in which the HPA exerts influence on, rents and manages properties and land, and is responsible for roads, waterways, rails and sites See themselves as an urban infrastructure company (p.12) Stakeholder survey with >100 stakeholders participating (structured description of issues), TIDE project survey >800 (local community), + CRI index of Bertelsmann Institute Private integrated port/terminal operator: boundary discussion limited (subsidiaries) Lots of attention to stakeholder identification and description, extensive list of topics and stakeholders interests Creation of an Ombudsman position both for internal and external stakeholders Extensive social programs Extensive discussion on stakeholders and links to strategic objectives and risk (but no link to indicators), for each stakeholder (presented as a boundaries discussion => stakeholders as boundaries) State-Owned integrated company for port management and operation as well as rail transport (and boundaries as such implicitly described) Stakeholder consultation limited to ex-ante consultation for projects Boundaries: combination of the POLA Harbor Department and the activities of the tenants Stakeholder description provided, identification of a dominant core: tenants, regulators, local communities Description of multi-channels of stakeholder inclusion Large attention to both core and non-core business CSR related investments

Boundaries analysis (cont.) What was our approach for the boundaries analysis? ~ Rotterdam approach Boundaries based on type of activitities: Boundary 1 = Infrastructure management activities under the responsibility of the Port Authority Boundary 2 = Port related activities linked to cargo handling and other industry located in the port area Boundary 3 = Port related activities linked to the total supply chain or indicators linked to the region

Boundaries analysis What are the boundaries for the most common performance indicators? Port Authority activities Port and industry area Supply chain TOTAL ECONOMIC: ENVIRONMENTAL: SOCIAL: GOVERNANCE: TOTAL Direct economic value Traffic volumes Investments made R&D expenses Modal split Operational performance Energy consumption CO2 emissions Other port activity related emissions Direct/Indirect employment Safety / Accident rate Training Is there a formal measurement/mechanism in place to examine the perceptions of local communities? (1) Surveys on perception / Complaints line / Ombudsperson (2) Consultation for projects, strategy, reporting

Boundaries analysis What are the boundaries for the most common performance indicators? Port Authority activities Port and industry area Logistics chain TOTAL ECONOMIC: Direct economic value 6 4 4 14/30 Traffic volumes 1 9 0 10/10 Investments made 6 2 0 8/30 R&D expenses 3 1 0 4/20 Modal split 1 4 0 5/10 Operational performance 1 3 1 5/30 ENVIRONMENTAL: Energy consumption 6 2 0 8/20 CO2 emissions 8 5 4 17/30 Other port activity related emissions 3 4 3 10/20 SOCIAL: Direct/Indirect employment 9 5 3 17/30 Safety / Accident rate 7 2 0 9/20 Training 6 1 1 8/30 GOVERNANCE: Is there a formal (1) Surveys on perception / Complaints line / 7/10 ports measurement/mechanism in place to Ombudsperson (3/5 ports) examine the perceptions of local (2) Consultation for projects, strategy, reporting (5/5 10/10 ports communities? ports) TOTAL 57 39 16

Boundaries analysis (cont.) What about benchmarking? Are there ports that already do this? And which indicators then? Direct economic value: Port of Antwerp Traffic volumes: Port of Antwerp / Port of Rotterdam / Port of Bremen / Portonave Other port activity related emissions: Port of Antwerp Direct/indirect employment: Port of Antwerp CR reputation: Port of Hamburg Internal benchmarking: Transnet

Boundaries analysis (cont.) SOME REMARKS: What lessons can be learned? Many ways to develop boundaries: o Geographical o Organizational / Legal (scope of activities as determined by law) o Stakeholders as boundaries o Business ecosystem approach o Supply chain approach Multiple boundaries per indicator, potentially leading to certain confusion o E.g. economic impacts All sustainability reports that are based on the GRI principles, are obliged to report about the boundaries of the report. Yet, this seems not a guarantee to fully understand the boundaries of the different indicators.

Let s vote on it?! Which is the most relevant criterion to define boundaries for a port sustainability report? o Geographical o Organizational / Legal o Stakeholders o Business ecosystem o Supply chain (value creating activities as boundaries)

Boundaries analysis (cont.) What lessons can be learned? The Rotterdam model can be adapted in the following way: (1) keeping 3 levels, but rather purely based on activities (review basis to determine the scope) Level 1: impact of port infrastructure management and development Level 2: impact of cargo handling, logistics services and industrial activities within the port area (including the hinterland interface) Level 3: impact of upstream and downstream supply chain activities taking place outside the port borders (2) adding a 4th level, but organizational and geographic boundaries are kept Level 1: Port authority organization Level 2: Port area/cluster (including industry/logistics), (including the hinterland interface) Level 3: Level 2 + local/regional community Level 4: impact of upstream and downstream supply chain activities taking place outside the port borders and local/regional community

Boundaries analysis (cont.) What lessons can be learned? Thoughts/concerns on (1): o Geographical / organization perspective less or not present any more o Integrated models (i.e. reporting consolidated on Level 1 + Level 2) like Porto Nave and Transnet might need to split certain reportings on indicators (Level 1 / Level 2) o Is however governance/management model proof (any governance model can fit) o More difficult to identify local community impacts (level 1, level 2 or level 3?) Thoughts/concerns on (2): o Mix and potential confusion between governance models remains, as a result difficult comparisons across ports Recommendation: at the beginning of each SR, clearly position the governance/management model of the port in question (landlord, tool, service) (Bremen, Valencia). o Is however largely consistent with the dominant model used nowadays

Conclusion General issues: Need to identify dominant or core set of stakeholders? (POLA, Transnet) Need to harmonize the boundaries problem? Is it really a problem? Can it be solved by being more transparent per indicator? Some underdeveloped indicator areas and a lot of variety regarding the dimension under which indicators belong: o Logistic Chain and Operational performance (Vancouver, Transnet, Rotterdam) o Investments (public + private): seldom consolidated numbers o Many approaches to economic value (incl. trade value, gross added value, taxes, ), especially outside the boundary of the organization Trade-off between qualitative and quantitative indicators/information

In Sum Organizational / legal boundaries provoke issues on the level of management model inclusivity (private vs public, landlord vs service) Geographical boundaries provoke issues on spatial contexts (urban vs coastal / nature areas; water areas) Stakeholder based boundaries provoke issues in terms of different salience/materiality of stakeholders and their issues Look for the elements with are the most generic to all ports, i.e. the activities carried out: Maritime & land logistics chains (sea => port => hinterland and vice versa) and associated activities Industry within the area Bremen approach comes close

Case Bremen

Conclusion (cont.) General issues: Benchmarking: o Only limited attention, mainly on traffic evolution and market shares in the range, country or broader region (competitive benchmarking) o Probably somewhat out of scope if the SR serves communication with primarily local stakeholders? o If developed, need to cope with potential bad news (i.e. not reaching the benchmark or underperforming against industry averages). o If developed, collaboration with global stakeholders might be needed (UNCTAD, etc). Existence of other sources on the port level (annual reports, other reports) and beyond

Question? Should port sustainability reports pay attention to benchmarking? A. Yes, as much as possible B. Yes, but only against general industry averages C. Yes, but only for certain aspects (e.g. Market Share), and with head-to-head comparison D. No, not at all

Limitations The Asian perspective of boundaries? More transparency on indicator calculations might shed new light on some conclusions on boundaries (i.e. sometimes our own judgment was needed) Cfr. need to be more transparent on definition and calculations cfr. GRI supplement airports More direct engagement with ports Hidden elements: some indicators, data or information might be existing, but not reported.

PPRN relevance & collaboration Expanding the data collection, overcoming language barriers through collaboration (joint DB?) Global survey on port sustainability reporting (?) Both academic and managerial relevance Academic: growing body of literature on sustainability reporting (how, why, motives, etc.) Managerial: concrete industry interest

Contact drs. Magali Geerts Research Associate Magali.Geerts@vub.ac.be +32 2 629 14 22 prof. dr. Michaël Dooms Project Director Michael.Dooms@vub.ac.be +32 2 629 21 30 +32 477 606 132 Skype michaeldooms