Transcript Slide 1

Integrated Sustainability
Reporting and Assurance
CIS Conference – Corporate Governance
September 2009
Overview
… see the wood for the trees
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Sustainability reporting and
assurance – ‘The trees’: some
highlights & lowlights
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Integrated sustainability reporting
and assurance: ‘The wood’
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Key challenges
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Innovative ideas
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Where to from here?
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Integrated Sustainability Reporting and Assurance
Current Sustainability Reporting
- highlights
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Excellence in Sustainability Reporting
(2008)
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47% ranked as excellent or good
16% marked as perfunctory (2007: 25%)
Best reports compete well globally
Increased commitment to sustainability
Increased effectiveness of communication
Increased quality of reporting
Increased levels of trust and reliability
Integrated Sustainability Reporting and Assurance
(1)
Current Sustainability Reporting
- highlights
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Corporate Register Reporting State of Play
(2008)
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Reporting across all sizes of company has grown
“No slowdown” in 2008: just over 500 first time
reports
Tracked and registered 3100 reports
Just over 1000 produced a ‘GRI report’
Trend towards combining non-financial
information with annual financial reporting
“The best are integrating them fully”
Integrated Sustainability Reporting and Assurance
(2)
Current Sustainability Reporting
- lowlights
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(1)
Excellence in Sustainability Reporting
(2008)
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Poor link between sustainability and business
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Reduction of volume/length of reports is a result
of omission rather than materiality principle or
stakeholder focus
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Difficult to gain understanding of full impact,
performance against benchmarks or
management of indirect (value chain) impacts
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Lack of transparency on processes to ensure
completeness, validity and accuracy of
information
Integrated Sustainability Reporting and Assurance
Current Sustainability Reporting
- lowlights
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GRI (G3) & JSE reporting criteria are critical, but
issues must be still become part of organisations’
DNA
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Majority of reports do not deal with the issues
identified by stakeholders, and do not contain
information on processes to determine materiality
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Study of 30 large global companies in 3 industries,
shows much of the information is:
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(2)
not material
not assured
not comparable
providing favourable, rather than balanced reporting.
Integrated Sustainability Reporting and Assurance
Current Sustainability Reporting
- assurance (international)
(1)
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Around 30% (900 reports) included an assurance statement in 2008
(CR Reporting Awards)
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Three major provider types – Accountants “Big 4” (40%), Certification
Bodies (25%) and Specialist Consultancies (24%)
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Quality of the assurance statements based on key elements:
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Reference to standardised approaches and levels of assurance
Specific declarations (e.g. stated audience)
Methodology
Provider recommendations and opinions
Assurance conclusion
The choice of assurance provider affects which key elements are
included in resulting assurance statements
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Integrated Sustainability Reporting and Assurance
Current Sustainability Reporting
- assurance (international)
(2)
(CR Reporting Awards ’08 p31)
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Integrated Sustainability Reporting and Assurance
Current Sustainability Reporting
- assurance (local)
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82 of the 399 South African reports involved used GRI
(G3) (SustainabilityServices.com, 2009)
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Of these, 29 (35%) companies sought external assurance,
& 21 (72%) of these reports assured by the “Big 4”
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14 (48%) are from the Mining & Minerals sector, while 3
(10%) are from the Banking & Finance Services
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Majority sought ‘Type 2’ assurance
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Assurance used to increase the level of credibility over the
report, and is valued for the internal benefit of testing the
accuracy & reliability of systems & processes in place
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Integrated Sustainability Reporting and Assurance
“A key challenge for leadership is to make
sustainability issues mainstream: the leadership
must integrate strategy, sustainability and
control (integrated governance), and establish
the values and ethics that underpin
sustainable practices.
Governance, strategy and sustainability have
become inseparable”
KING III (2009:13)
‘Integrated sustainability reporting and
assurance’?
(1)
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King III Chapter 6
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Principle 6.1 … ‘effective communication with stakeholders’
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Principle 6.2 … ‘focussed on substance over form’
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Principle 6.3 … ‘formalised as part of the company’s
reporting process’
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Principle 6.4 … ‘take place at least once a year’
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Principle 6.5 … ‘should have independent assurance’
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Integrated Sustainability Reporting and Assurance
‘Integrated sustainability reporting and
assurance”?
(2)
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More about the management than the reporting
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of business strategy/systems w.r.t. sustainability issues
of company values and culture
of information
of gaps and shortcomings in performance
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Requires long-term processes of monitoring (data collection, analysis)
and stakeholder engagement (internal, external)
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Does not mean “combined” to financial information in annual report –
the report is one outcome of the longer-term process
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Targets need to be set for all aspects, and trade-offs between aspects
should be considered
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Integrated Sustainability Reporting and Assurance
‘Integrated sustainability reporting and
assurance”?
(3)
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Best practice case study: Integration
Nova Nordisk A/S
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Discusses financial, social and
environmental performance
Contains consolidated financial and nonfinancial statements
Non-financial statements included:
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Overview
Indicators and targets
Accounting policies for non-financial data
Notes
Economic stakeholder model
Two assurance statements
Integrated Sustainability Reporting and Assurance
Challenges
Some key observations
(1)
ASSURANCE “credibility generating mechanism”
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Assurance method
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Separate assurance processes and statements for financial and
sustainability information vs.
Integrated, Multi-disciplinary audit team
Assurance model
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Expert panels and/or Expert commentary
Stakeholder panels
Internal Audit
External Audit (AA1000AS; ISAE 3000) – single or multiple
organisations
Integrated Sustainability Reporting and Assurance
Challenges
Some key observations
CONTENT “reporting on the thorny issues well”
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Ensuring a holistic picture (aggregation; growth vs.
longevity of the business)
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Ensuring materiality
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Achieving balanced reporting
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Allowing comparison within sectors / industries
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Taking responsibility for performance and
potential/actual impacts throughout the value chain
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Integrated Sustainability Reporting and Assurance
(2)
“The development of such future sustainability
reporting will be meaningful, credible, comparable
information about the key drivers of overall business
success, taking into account of external impacts of
the organisation.
Each company is on a journey, changing over
time… It’s time to properly address the real issues”
Hubbard (2009:17)
Innovation / Learning
- from financial reporting
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Integrated Sustainability Reporting and Assurance
Lessons from financial reporting
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Tone at the top
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Summarised, easily accessible results
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Letters from the CEO/Chairman
Accountability for performance
Focussed on key (material) indicators and information
Performance tables within the associated text sections
Standardised measures
Comprehensive assurance
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Ensures overall accuracy and reliability
Integrated Sustainability Reporting and Assurance
Innovation / Learning
- from public sector reporting
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Integrated Sustainability Reporting and Assurance
Lessons from public sector reporting
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Undertaken by government departments (e.g. Environmental
Affairs)
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Reporting frameworks
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Comprehensive structure/s for sustainability content
Allows for assessment of completeness
System-based report for decision makers
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aim to provide objective, comprehensive and science-based information
on conditions and trends considered important for decision-making
include issues relating to quality of human life and human-environment
relationships
recognise the environment as a system that interacts with economic,
policy and social systems
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Integrated Sustainability Reporting and Assurance
Innovation / Learning
- from ISO 26000
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Integrated Sustainability Reporting and Assurance
Lessons from ISO 26000
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Guidance on social responsibility
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Understanding of “community”
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Consensus on what social responsibility means
Highlights social responsibility issues that organisations need to
address
Translating principles into effective actions
Refining best practices that are evolving
Enhances a company’s tangible, long-term positive contribution
Publication in late 2010
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Integrated Sustainability Reporting and Assurance
Innovation / Learning
- from Sustainability Science
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Integrated Sustainability Reporting and Assurance
Lessons from Sustainability Science
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Complexity
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Multi-disciplinary teams
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Understanding a company in relation to the social-ecological system
it exists within
Understanding the trade-offs made between social, economic and
environmental material aspects of a company
(i.e. real statements regarding impact & outcomes of spending)
Guidance on assembling and functioning of such teams (e.g. for
integrated auditing)
Adaptive management
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Understanding how to use monitoring, reporting and stakeholder
engagement processes to facilitate social dialogue and mutual
learning
Integrated Sustainability Reporting and Assurance
Where to from here?
The way forward for sustainability reporting
and assurance
(1)
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Developing reports focused on specific needs and issues
in a particular context
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Developing reporting maturity (Hubbard, 2009)
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From – ‘What good we do for the community…’
To – ‘How we address our negative impacts on the community,
and involve the community directly in our processes…’
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Joint involvement of external and internal stakeholders
with specific dialogue, for mutual learning
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Aggregated reporting and standardised measures
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Integrated Sustainability Reporting and Assurance
The way forward for sustainability reporting
and assurance
(2)
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Using clear performance tables which include trend
information, within the body of the report
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Reporting actively used by the Board of Directors
(including independent directors)
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Clear linkages between performance (outcome) indicators
and impacts of business policies and activities/operations
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Use of appropriate frameworks that highlight what
information is ‘missing’ from reports
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Integrated Sustainability Reporting and Assurance
The way forward for sustainability reporting
and assurance
(3)
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In summary, we are aiming for…
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Use of sustainability reporting by
stakeholders for active decision making
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Integration of material sustainability
information and impacts into business
strategy, process and reporting
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Assurance on report content by
reputable, independent assurance
providers
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Integrated Sustainability Reporting and Assurance
Jayne Mammatt
[email protected]
+27 (0)11 772 3349