Transcript AS THE PENDULUM SWINGS

AS THE PENDULUM SWINGS
Returning to a more
asset-based approach to
sustainability reporting
Kurt Ramin
June 25, 2009
TRUEVUE
19th International XBRL Conference - Paris, France
Copyright © 2009 TrueVue All Rights Reserved
TrueVue Team
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Kurt Ramin – IASCF and IUCN
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John O’Connor – IMF and World Bank
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Sustainability Indicators
Erik Thomsen – DSS Lab
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XBRL & IFRS Reporting Standards
World Bank Information systems
Gary Gannon – UNGCCP
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XBRL Consortium, UBmatrix co-founder
Summary
TrueVue’s focus
 Role of XBRL for sustainability
reporting
 Conceptual challenges
 Technical challenges
 The road ahead
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TrueVue Focus
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We help forward-looking government
bodies and corporations
To identify critical assets/flows
 To integrate CSR/sustainability reporting
with management information systems
 To develop integrated socio-economicenvironmental management information
systems
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XBRL and Sustainability
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Sustainability reporting and XBRL need
one another
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No going back on electronic
dissemination
Information services for sustainability
are relatively under mobilized
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Significant business opportunity
Conceptual challenges:
Metrics
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Most approaches to sustainability
metrics fall into 2 traps
(1) as with standard accounting – relying
too heavily on flows
 (2) Focus on physical quantities that can’t
be compared with other business
indicators (need pricing)
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The Benefits of Sustainability*
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Report based on several studies
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Interviews of 135 executives (CSR professionals, human resources, environment, strategy finance and
investor relations) in 20 companies in 11 industries
Survey of 238 CEOs and investment professionals (McKinsey)
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Survey of 127 CSR professionals and socially responsible institutional investors (Boston College
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Addresses issue of terminology regarding CSR/Sustainability and settles on ESG as
preferred term
“ESG programs can create significant quantifiable financial value.”
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Maintain a good corporate reputation and/or brand equity (77%)
Attract, motivate and retain talented employees (55%)
Meeting society’s expectations for good corporate behavior (35%)
Improve operational efficient and/or decrease costs (34%)
Strengthen competitive position (33%)
Open new growth opportunities (23%)
Improve risk management (23%)
Greater benefits in the long-term than the short term
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Measuring value of ESG activities is a major challenge but can be done
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Very few companies effectively communicate this value to investors, many of whom have
a short-term orientation
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“If very few companies quantify fully the financial value of their ESG activities, even fewer
effectively communicate that value to the market.”
*”How Virtue Creates Value for Business and Society” McKinsey/Boston College
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Conceptual challenges:
Early Research
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Work that began 20 yrs ago with one
of our partners at the World Bank
John took an asset-based approach to
sustainability
 Approach now ratified by the UN
statistical commission
 Will eventually be adopted by all countries
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Conceptual challenges:
Wealth Accounting
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Focus: long term financial profitability
Wealth accounting works as well for
corporations as government bodies
 Uncovers hidden financial assets and
liabilities
 Environmental/social quantities need to
be combined with prices to create
financial values
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Conceptual challenges
Assets and Flows
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Starting with key assets and assetimpacting flows puts a relevancy filter
over GRI-style indicators
This “balance sheet” approach works well
for private companies and governments
 Provides a more useful basis for
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 Benchmarking
 Planning
 capital
budgeting
 investment decisions
Technical Challenges
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Significant information system
challenges
Interpreting text, spreadsheets, images
 Dealing with uncertainty
 Dealing with local variability
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The Roadmap to One Report:
Integrating Financial and Nonfinancial Reporting
From Data Chaos to Information for Decision-Making
Leverage the Internet
•XBRL
•Web 2.0
•Multimedia
Engage in a
Dialogue with
Stakeholders
Use a process of
Integrated design
•Annual report
•Identify usage
patterns
•Environmental
•Social
•Establish criteria for
validation
•KPIs
One
Report
•Use social media
Novo Nordisk
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Health care, pharmaceuticals, biotech
22,000 employees
HQ in Denmark
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Revenues are over 2% of Danish GDP
Exports almost 5% of DK
Super sector leader in “Great places to work”
Quoted on pan European DJSI
SR integrated at all levels of the company including
its annual report
Novo Nordisk
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“ Our formal commitment to sustainable
development has been built into the
corporate governance structure,
management tools and individual
performance assessments”
Novo Nordisk
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“
Our formal commitment to sustainable development has
been built into the corporate governance structure,
management tools and individual performance assessments”
“Pro-actively preparing for a carbonconstrained future is a matter of costeffective environmental management and
risk mitigation”
Novo Nordisk
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“ Our formal commitment to sustainable development has been built into the corporate
governance structure, management tools and individual performance assessments”
“Pro-actively preparing for a carbon-constrained future is a matter of cost-effective
environmental management and risk mitigation”
Following strong operational, financial and nonfinancial performance, we saw an appreciation of
Novo Nordisk share price”
2006 Annual Report
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Tagging of Financial Data (Objects)
valued at Location and Time
RFID -
NFC - Oyster
Radio
Frequency
Communication
Identification
Near Field
<CurrentAssets>5329000000</CurrentAssets>
<CurrentAssets contextRef="End_2004"
unitRef="EUR">
</CurrentAssets>
Time
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532900000
Value Files
0
Unit
“Einstein’s Formula" of
Financial Reporting
OBJECTS
@ Location
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X
VALUE
@ Time
Modular Format (period = time and location)
operating, financial, other (objects x value)
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Sort objects
definition):
(entry/exit
People
 Fixed Assets
 Products
 Financial
 Communication
-Intangibles
(time sensitive)
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Statement of Financial
Position
Cash Flows
Recognized Income and
Expense for Period
Statement of Changes in
Equity (including to
owners
Add Related
Disclosure: (People, Fixed
Assets, Product, Financial,
Communication
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Parallel (dual) Reporting
FV, historical and Mirror
accounting, renders the
current/non-current and one
equity model outdated
Sustainability Accounting and Reporting
Historical
cost
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Fair value
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Cash flow
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People (and
Entities)
Tangible assets
Communication
(Intangible Assets
and Liabilities)
Financial Assets
and Liabilities
Products
Disclosure
Disclosure
Disclosure
Disclosure
Disclosure
21
SUSTAINABILITY
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The Road Ahead
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XBRL incorporates emerging asset-based
indicator frameworks
New generation of information systems
makes it possible to manage the irregularity
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Merging socio-environmental with traditional
management information systems
Creating a global sustainability-oriented
information network
Wealth management becomes the
framework at a macro and micro level
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Total wealth is maximized for all
Contact Information
Kurt Ramin
[email protected]
+971 050 153 9785
TRUEVUE
www.truevuesolutions.com