Transcript Defining Sustainability

Sustainability Reporting and
Corporate Social Responsibility
Presented to Northwest Food Processors
Sustainability Summit
April 18, 2012
Laurie Tish, Partner, Moss Adams
Michelle Gall, Senior Manager, Moss Adams
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Sustainability Reporting
“Sustainability isn’t just a social issue—it’s very much a
business imperative as well. On a national and global level, it
will have a significant effect on our economy. It’s just a question
of how and when.
At Moss Adams, this discussion is taking center stage as we seek
to understand and prepare for the impact sustainability
reporting will have on our clients and their industries.”
- Rick Anderson, Chairman and CEO, Moss Adams LLP
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Defining Sustainability
The United Nations defines sustainability as “meeting the
needs of the present without compromising the ability of
future generations to meet their own needs.”
The Center for Sustainable Enterprise at the University of
North Carolina’s Kenan-Flagler Business defines it as “a way
of doing business that creates profit while avoiding harm
to people and the planet.”
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Sustainability and Business
• Underlying theory is that there is a link between
improvements in corporate social/sustainability
performance, the well-being of the communities
they are located in, and long term profitability
• Europe is ahead of the US in compiling such data
and reports
– Data indicates that over 80% of European
companies publish some form of CSR report
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Corporate Social Responsibility
(CSR) Reporting
• Creation of reports that provide a picture of
overall performance across the ‘triple bottom line’
– Economic
– Environmental
– Social performance
• Reporting financial and non-financial information
to key stakeholders
– Increases accountability
– Measures how well the company is living up to its
values
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Sustainability and Business
Five main reasons to conduct business in a
sustainable manner:
1. Supplier networks demand it – “greening of the
supply chain”
2. Government contracts necessitate it
3. Customers require it
4. Potential employees insist on it
5. Public policy encourages it – laws are starting to
require it
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California Transparency in
Supply Chains Act
• Law passed in 2010
– Applies to all retailers and manufacturers doing
business in California with total gross revenues in
excess of $100 million
– Must formally publish their policies and safeguards to
prevent the use of slave labor and human trafficking in
their product supply chains
– Estimate is that over 3,200 companies, many domiciled
outside the state, will be required to report
– In effect as of January 1, 2012
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Standards and Criteria
There is no globally accepted framework for
sustainability.
Current frameworks and standards in use:
• The Global Reporting Initiative (GRI)
- International Integrated Reporting Committee (IIRC)
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Country specific standards (Australia, Japan, Netherlands, UK)
Global Impact Investment Rating System (GIIRS)
US Generally Accepted Auditing Standards (GAAS)
International Auditing and Assurance Standards Board
Internal Company Criteria
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Standards and Criteria
• GRI External Assurance
– Activities designed to result in published conclusions on the
quality of the report and the information contained within it
• Including consideration of underlying processes for preparing the
information
– Key qualities include:
• Conducted by group/individual external to the organization
– Competent in subject matter and assurance practices
– Independent
• Implemented in a manner that is systematic, documented, and
evidenced-based
• Application of GRI Sustainability Reporting Framework (G3)
• Results in an opinion or set of conclusions
– Does not require independent audit or verification of
data, subject matter or the underlying systems
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Standards and Criteria
• US GAAS
– Promulgated by the American Institute of CPA’s
• Assurance
• Agreed Upon Procedures
– Results in an opinion
• IAASB
– Promulgated by IFAC
• Facilitates convergence of US and international standards for
audit and accounting
– No guidance yet for Corporate Social/Sustainability
Responsibility reporting
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Standards and Criteria
• Company Criteria
– Explanation of perspective, context, vision
– Identification of key performance indicators
• Measurable
• Clearly understood
– If subject matter relates to a highly technical area, thirdparty specialists can be utilized and then relied upon by
verifier
– Should be supported by a well-documented structure of
internal controls
– Timeliness of reporting is important
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CSR Verification
Who performs the review or verification of data?
• Certified Public Accountants
– Usually structured as an attest engagement
– Review report for Greenhouse Gas Emissions
• Industrial Compliance firms
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Checklist format
Pass/fail report
‘Client’ is often not the auditee
• ‘Expert’ Panels
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This is not an attest engagement or any form of verification
Assessment of content only
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External Review Committee
Report
• Committee members are usually selected by the Company
and/or have close ties to the Company’s Board or
management
• Report contains the following:
– Identification of task or focus of group
– Description of process
– Disclaimer that any data was verified or audited
– Observations and comments regarding report content
• See Shell report for example
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A good reason to have an
audit…..
“The accuracy of environmental and social data
may be lower than that of data obtained
through our financial systems”
-- Shell Oil 2010 Sustainability Report
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Audit Report Content
• Addressed to stakeholders
• Identification of data or activities that is the
subject matter of the report
• Identification of the criteria used to evaluate the
data/subject matter
• Explain which standards were used in connection
with the audit/verification
• Identification of procedures performed (optional)
• Opinion
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Greenhouse Gas (GHG)
Emissions
• Scope of emissions
– Scope 1 Direct
– Scope 2 Indirect
– Scope 3 Other Indirect
• Measurement and verification of GHG emissions present
unique challenges
– GHG quantification is subject to inherent uncertainty
• Emission factors are used in mathematical models to calculate
emissions
• The models, due to scientific knowledge and other uncertainties, may be
unable to precisely characterize the relationships between the various
inputs and the resultant emissions (lots of moving pieces!)
• The selection of different but acceptable measurement techniques can
result in materially different measures
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Greenhouse Gas (GHG)
Emissions
• Criteria is comprised of an “exhaustive list of standards”
• Even if criteria is defined, data is measurable and generally
acceptable, the ability to compile and quantify company
data may be difficult due to:
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Machine and equipment specifications
Location of plants/stores in developing countries
Cost vs. benefit
Internal control structure and systems are not robust and
may not be reliable
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Embracing Sustainability
Walmart
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New auditing system to increase supply chain transparency
Ethical sourcing - Assist suppliers in sustainability efforts
Direct-import supplier requirements
Worldwide sustainable product index
Zero Waste initiative
Energy efficient stores
Alternative trucking fuels
Elimination of greenhouse gas emissions
www.walmartstores.com/sustainability
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Embracing Sustainability
Shell Oil
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Global Warming Potential
Energy Efficiency
Total Spills
Fatal Accident Rate
Injury Frequency
Carbon Dioxide Release
Methane Release
Regulatory, Health, Safety Fines
www.sustainabilityreport.shell.com/2010
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Embracing Sustainability
Starbucks
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Coffee Purchases
Cocoa Purchases
Reusable Mug Usage
Recycling in Stores
Electricity and Gas Usage
Greenhouse Gas Emissions (scope 1 and scope 2)
Investment in Farmers (loans)
www.starbucks.com/sharedplanet
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Benefits of CSR
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Transparency and accountability
Implication of high quality management
Stronger relationship with vendors
Higher retention of employees
Engagement and relationship with stakeholders
Branding
Higher levels of trust
Scrutiny of operational data at same level as financial data
Can be a good management tool
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Challenges to CSR
• Scope is controlled by company/client as there are
no set consistent CSR standards
– Indicators used can be arbitrary or modified to fit
certain situations
– Stakeholders do not typically have formal input
• CSR reports vary widely in content and
methodologies
– Criteria for data and conclusions may not be clear
• Audit report may not clearly identify the criteria
used
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Sustain Your Interest
International Corporate Sustainability Reporting
www.enviroreporting.com
An international resource library dedicated to Corporate Sustainability
Reporting and environmental reporting.
International Integrated Reporting Committee
www.integratedreporting.org
The IIRC was created to respond to the need for an integrated
sustainability reporting framework.
Accounting for Sustainability www.accountingforsustainability.org
A4S is bringing organizations together to develop practical tools to enable
environmental and social performance to be better connected with
strategy and financial performance.
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Sustain Your Interest
Global Reporting Initiative www.globalreporting.org
GRI is a network-based organization that pioneered the development of
the world’s most widely used sustainability reporting framework and is
committed to its continuous improvement and application worldwide.
Carbon Disclosure Project www.cdproject.net
Pertaining to Greenhouse Gas Emissions
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Questions?
Laurie Tish
206. 302-6466
[email protected]
Michelle Gall
541.225-6021
[email protected]
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