Transcript Document

Research Report Launch Event
Afternoon Results Session
King III & GRI+14: 2013 Review of Sustainability
Reporting in South Africa
5th Annual Review of Sustainability Reporting Among ALL
JSE-Listed Companies & ‘Known GRI Reporters’
Research Results Presentation
25 July 2013
Sandton Convention Centre
Order of Events
13h00 – 13h05 Welcoming Remarks
Lauren Stirling, IRAS
13h05 – 13h30 Observations & Insights from the Design Team
Glenn O’Hearne, Studio 5
13h30 – 14h00 Expectations from the Pension Fund Sector
Adrian Bertrand, GEPF
14h00 – 14h30 Sustainability Data Transparency Index Awards
Michael H Rea, IRAS
14h30 – 14h45 COMFORT BREAK
14h45 – 15h15 International Reporting
Alan Knight, TaylorKnight
15h15 – 17h00 Our Research Results
Michael H Rea, IRAS
King III & GRI+14: Results Session
Welcoming Remarks
Lauren Stirling, IRAS
King III & GRI+14: Results Session
Observations & Insights
Glenn O’Hearne, Studio 5
King III & GRI+14: Results Session
Pension Fund Expectations
Adrian Bertrand, GEPF
King III & GRI+14: Results Session
Sustainability Data
Transparency Index (SDTI)
Awards
Michael H Rea, IRAS
SDTI Awards
The Sustainability Data Transparency Index – SDTI – is
based on:
• Whether or not we could find public disclosures of
quantitative data for 56 ‘reasonable’ selected sustainability
indicators, as per the following breakdown:
12
9
9
10
11
5
Labour
Economic
CSI/SED
Environmental
Health & Safety
Governance
• Scoring is based on the following scale:
‘OK’
‘NI’
2
1
‘NC’
0
A ‘reasonable’ response was found
‘Needs Improvement’, either in terms of the
quality of data, or in terms of how easy it was
to find it
‘Not Covered’, either no response is available,
or we simply couldn’t find it
SDTI Awards
“Yes! We know what ‘Materiality’ means!”
• Despite what many companies complained about, we are
not morons, and we did not assume that it would be fair to
compare a bank – or a retailer – to a mining company.
• We did…however…disagree within anyone who thought
companies shouldn’t provide quantitative data (i.e., actual
‘numbers’) in their public disclosures.
• While the primary ranking – Appendix II – does not
differentiate based on industry/sector, our review of every
single indicator does offer sector-specific break-downs.
• Thus, our 1st Annual SDTI Awards are offered to those
companies leading within their sector, with a minimum SDTI
Score of 50.0%.
NB: 6 sectors did not have award winners due to the top
score being below 50.0%.
And the winners are…
SDTI Awards
King III & GRI+14: Results Session
International Reporting Trends
Alan Knight, TaylorKnight
Our Research Results
Michael H Rea, IRAS
The Table of Contents
1. About the Author
2. Acknowledgements
3. Our Reporting Theme
4. Research Scope, Objectives and Approach
5. Sustainability Reporting in SA: Our Research Findings
6. Reporting Assistance Chapter 1: Labour
7. Reporting Assistance Chapter 2: Economic
8. Reporting Assistance Chapter 3: CSI/SED Spend
9. Reporting Assistance Chapter 4: Environmental
10. Reporting Assistance Chapter 5: Health & Safety
11. Reporting Assistance Chapter 6: Governance
12. Independent Third Party Assurance
13. GEPF Discussion Piece
14. Update on the JSE SRI Index
15. Our Personal Favourites
16. 10 Tips to Effective Integrated Sustainability Reporting
17. Appendices
18. Moving Forward
About the Author – IFC
If you don’t know who I am, here are the bits you need to know:
1. I’m somewhat of a haemorrhoid in the sustainability
reporting space, particularly for
•
consultants who don’t lead by example and/or at least
try to practice what they preach
•
practitioners who don’t do their homework, and yet
purport to be able to tell people what they ought to do
•
the “Big 4 Accounting Firms” and/or their friends in
thought leadership positions who won’t engage with
those too small/poor to buy in to discussions (i.e., the
GRI and IIRC)
2. An assurance provider – first and foremost – and a promoter
of effective sustainability reporting & assurance
3. Someone with 14 years’ experience in the space, and who
believes in the principle of ‘to whom much is given, much is
expected’…and thus believe I owe it to you to share my
experience through this annual research project
Acknowledgements – p.01
This research project would not be possible, if not for the support
of the following people/organisations:
• The IRAS team, including our research interns
• Studio 5, including their incredibly talented and committed
design team, who worked until 03h30 both Monday and
Tuesday night!
• Law Print, not least of which Dave White, who managed to
print 200 copies of the report in ONE DAY!
• Mark Becking – SD Toolkit – for making the SDTI Toolkit
(www.sdtiglobal.com) possible
• Adrian Bertrand & John Oliphant of the Government
Employees Pension Fund
• Corli le Roux and Makhiba Mollo of the JSE
• Linda de Beer, Independent Director, Wits Lecturer and King
Committee Member
• The Other Sustainability Reporting Practitioners who help pay
for the research through the placement of ads in the report
Our Reporting Theme – pp.02 – 04
It’s all about three things:
1. Context
2. Comparability
3. Materiality
Could you live on a per person income of R150/month?
While we enjoy the benefits of jobs and city life – be it Joburg,
Pretoria, Durban or Cape Town – there are millions of people
existing in our periphery who do not have access to even a
fraction of what we enjoy!
We must understand that abject poverty, limited opportunity, and
economic subjugation – as well as a raft of environmental
degradation issues – is an important part of the context in which
we operate our businesses in South Africa.
We must understand that ‘whole ‘ and/or ‘raw’ data – such as a
total volume of water consumed – is useless unless we compare
that data – in a meaningful way – to our peers.
We must accept that materiality may be just as ‘defined for us’ as
it is something we define for ourselves.
Scope, Objectives & Approach – pp.05-08
Moving away from measuring the GRI tick-boxing skills of
reporters, and towards a much more value-adding analysis of
data trends…mostly because nobody listened when said,
Our GRI Compliance Score is a complete red herring!
We reviewed the GRI compliance scores – for the LAST TIME – for
all of the GRI-based reports we could find in SA, measuring each
report against all 127 of the GRI’s G3 indicators.
We identified 56 ‘reasonable’ sustainability data indicators via a
process of engagement with reporters and practitioners in SA.
We reviewed the annual/integrated annual reports – including
stand-alone sustainability reports, where provided – for ALL of
the JSE-listed companies, ultimately settling on a population
sample of 331 reporting entities (including the ‘known’ nonlisted GRI-based reporting entities).
We scored each reporting entity against all 56 data points – on a
2 for reasonable, 1 for partial and 0 for no response scale – and
created a Sustainability Data Transparency Index (SDTI) Score.
Scope, Objectives & Approach – pp. 05-08
We sent our results to ALL companies and asked them to check
our homework, leading to no fewer than 60 discussions.
We calculated 39 ratios – or data estimations such as ‘calculated
person hours worked’ – in order to identify significant trends
and/or anomalies.
Due to the overwhelming abundance of available data, we
transferred the more than 12 500 discrete data points – from a
total of 31 445 possible data points – into SDTI Toolkit, an online
database , and have created a ‘Pay to Play’ service for companies
wishing to use our data for their own research and/or reporting
purposes.
We wrote what we hope will be useful ‘Reporting Handbook’,
ultimately leading to 168 pages of opinions, recommendations
and guidance…based on what is arguably THE most robust
reporting and assurance experience statements in SA.
We have created an online database of GRI-based reports – and
assurance statements – which is made available to anyone
looking for these resources (available on www.iras.co.za).
Our Research Findings – pp. 09 – 26
134 GRI-based reports were identified, up from 130 last year
31 companies declaring an Application Level got it wrong,
including 8 that were assured: 2 NC(A+), 3 NC(B+) and 3 NC(C+)
A total of 57 reports were assured, of which 33 were assured by
one or more of the “Big 4”, while IRAS continues to be the
“leading assurance provider” (by number of engagements)
NB: Quality of assurance was a stumbling block for IRAS this
past year, requiring a re-think of our ‘quantity goals’.
22 reports were assured using AA1000AS (up from 16 last year)
The average GRI Compliance Score for assured reports was 71.8%
(71.9% last year)…while the average for non-assured reports
was 53.0% (51.1% last year).
Our Research Findings – pp. 09 – 26
Our Research Findings – pp. 09 – 26
Our Research Findings – pp. 09 – 26
Our Research Findings – pp. 09 – 26
The Top 20 GRI reporters – as per GRI Compliance Score – are as
follows (see p.18)
Our Research Findings – pp. 09 – 26
Only within some sectors is there a strong positive correlation
between GRI uptake and SDTI effectiveness (see p.21).
Our Research Findings – pp. 09 – 26
Only within some sectors is there a strong positive correlation
between GRI uptake and SDTI effectiveness (see p.23).
Our Research Findings – pp. 09 – 26
In terms of SDTI scores, anything above 40% is deemed “GOOD”,
while anything above 50% is deemed “EXCELLENT!”
The average SDTI Score was 33.52% (median = 31.36%).
The average SDTI Score for assured reports was 52.6% (29.3% for
non-assured reports).
Lowest score for an assured report was 28.8%...for the Auditor
General of South Africa’s report.
The highest score for a non-assured report was 63.6%...for
Massmart (ranked 13th overall).
Our Research Findings – pp. 09 – 26
45 of 57 assurance engagements included assurance over specific
data points.
61 companies don’t disclose their number of employees.
22 companies don’t provide employee compensation data!
251 companies provide enough data to calculate a Ratio of
Executive Compensation Relative to Employee Compensation, or
an Income Disparity Ratio.
AVI had the highest Income Disparity at 158.1:1
Trencor had the lowest Income Disparity at 2.3:1
The Average Income Disparity for all 331 companies was 30.8:1
Only 114 companies provide union membership stats.
Training Spend per Employee could only be calculated for 87
companies.
Our Research Findings – pp. 09 – 26
Our Research Findings – pp. 09 – 26
Only 57 companies provide HDSA Procurement data
Only 68 companies provide R&D Spend data
Only 148 companies provide CSI/SED Spend data
Only 76 companies provide data for Total Direct Energy
Consumption
Despite the collective awareness of pressures on electricity
supply – and Eskom’s 49M campaign – only 98 companies
provide data for Total Electricity Consumption
Only 112 companies provide data for CO2 Emissions
Only 102 companies provide data for Total Water Consumption
Only 106 companies provide data for Number of Fatalities
Only 56 companies provide data for Number of Lost Time Injuries
Our Research Findings – pp. 09 – 26
In terms of SDTI scores, anything above 40% is deemed “GOOD”,
while anything above 50% is deemed “EXCELLENT!”
The average SDTI Score was 33.52% (median = 31.36%).
The average SDTI Score for assured reports was 52.6% (29.3% for
non-assured reports).
Lowest score for an assured report was 28.8%...for the Auditor
General of South Africa’s report.
The highest score for a non-assured report was 63.6%...for
Massmart (ranked 13th overall).
Reporting Assistance: pp. 27 – 84
Case Study: Corrected Income Disparity Ratios at Anglo Gold
Ashanti and Gold Fields
Initial Income Disparity Ratios – as per our analysis, and post the
feedback process – for Anglo Gold Ashanti (AGA) and Gold Fields
(GF) were as follows:
AGA 203.9 to 1 suggesting that the Average Executive
Director (ED) earned 203.9 times what the
Average Worker earned
GF
175.8 to 1 suggesting that the Average ED earned 175.8
times what the Average Worker earned
Following extremely useful meetings, these were corrected to
148.2:1 for AGA and 128.1:1 for GF.
The problem had NOTHING to do with data reported for ED pay,
but rather that not all employee compensation was reported.
Reporting Assistance: pp. 27 – 84
Case Study: Corrected Income Disparity Ratios at Anglo Gold
Ashanti and Gold Fields
Reporting Assistance: pp. 27 – 84
The Metals & Mining sector reports the most CSI/SED Spend…by
far (roughly R3 billion more than Banking & Financial Services)!
Reporting Assistance: pp. 27 – 84
Enterprise Development appears to be the #1 CSI/SED investment
area, but this is most likely due to inconsistencies in the way in
which ED Spend is reported.
Reporting Assistance: pp. 27 – 84
See p.64
Reporting Assistance: pp. 27 – 84
Both Exxaro and SA Corporate (Real Estate) report more
emissions per person hour worked than Eskom – which is highly
unlikely, as is Remgro’s being more than Sasol’s.
Reporting Assistance: pp. 27 – 84
Setting aside the NGO sector – Cotlands and Little Eden – the
highest levels of electricity and water consumption disclosure
are not where one might expect it: in the Metals & Mining
and/or Energy & Natural Resources sectors (see graphs on p.65).
Reporting Assistance: pp. 27 – 84
The 2nd most dangerous company – by number of LTIs – is
Standard Bank, between Lonmin (#1) and Sasol (#3).
Reporting Assistance: pp. 27 – 84
Eskom is THE most dangerous company, by number of fatalities,
with 25 fatal injuries, following by AngloGold Ashanti, Gold
Fields (consider income disparity in this context) and Harmony.
Reporting Assistance: pp. 27 – 84
When considering Fatal Injury Frequency Rate – which is FAR
more relevant that merely # of Fatalities – Mazor is THE most
dangerous company! Look at how far down Eskom and
AngloGold Ashanti (off the Top 10) are in this context.
Reporting Assistance: pp. 27 – 84
Merafe Resources (87.6%) is the only Metals & Mining company
within the Top 10 companies with the most HDSA Board
Members, with Grand Parade and Don Group both reporting
100% HDSA.
Reporting Assistance: pp. 27 – 84
Merafe Resources (43.8.6%) also shows up as the leading Metals
& Mining company in terms of Female Board Representation,
albeit no company reports more than 50%.
Independent Third Party Assurance: pp. 85 – 96
Tables Provided:
1. History of who has assured who in SA…for the past 5 years
(p.87)
2. Who assured what data points, as part of the 57 identified
assurance engagements (pp.89-90)
3. History of assurance uptake within the ‘Top 10 GRI Reporting
Countries’ (P.92)
Independent Third Party Assurance: pp. 85 – 96
Tables Provided – continued:
1. Assurance engagements per provider, by type of assurance
(p.93)
Update on the JSE SRI Index: pp. 99 – 104
The SRI Index is moving away from ‘private’ to ‘public’…which
means that companies will no longer be rated based on
information that is not publically disclosed – via annual reports
or websites (etc.) – but only on that which is available to ALL
stakeholders.
Possibly because of the fact that they used to be scored on what
could be provided ‘in secret’, 8 SRI Index companies scored quite
poorly our SDTI Index (assessed only on public disclosures):
Steinhoff
a “SRI Best Performer”, yet scored a 26.2% SDTI
and ranked 203rd overall
RMB
19.49% ranked 261st
Growthpoint
35.59% ranked 122nd
Tiger Brands
35.59% ranked 122nd
MMI
31.36% ranked 157th
Lewis Group
29.66% ranked 176th
ADvTECH
27.97% ranked 187th
Redefine
27.12% ranked 193rd
Our Personal Favourites: pp. 105 – 114
Lauren
Altron
African Rainbow Minerals
Jordan
Illovo Sugar
Anglo American Platinum
Hsien
Hulamin
Standard Bank
Thomas
Merafe Resources Royal Bafokeng Platinum
Bernardo
Naspers
Wilderness
10 Tips to Effective Reporting: pp. 115 – 126
1. Introduce yourself!
2. Define & Explain your ‘Materiality Process’!
3. ‘Integrate’ does not necessarily mean ‘combine’!
4. Let the data tell the story. Tell the story around the data!
5. Contextualise through comparability!
6. Ask and answer the ‘So What?’ question!
7. Tick the IIRC and GRI boxes later!
8. Neutrality works!
9. Print it…but if you link it, do it right!
10. Seek value-adding assurance!
Appendices: pp. 127 – 161
Appendix I:
Inventory of reports reviewed for SDTI
Appendix II:
Main SDTI Results Table (‘heat map’)
Appendix III:
Inventory of GRI-Based Reports
Appendix IV:
GRI Compliance Score Table (‘heat map’)
Appendix V:
GRI Uptake Table
Appendix VI:
Inventory of Sustainability Courses
Appendix VII:
Useful Contacts & Links
ANY MORE QUESTIONS?