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Beyond the Balance Sheet IFC Toolkit for Disclosure and Transparency Beyond the Balance Sheet IFC Toolkit for Disclosure and Transparency Beyond the Balance Sheet | IFC Toolkit for Disclosure and Transparency i © 2018 International Finance Corporation. All rights reserved. 2121 Pennsylvania Avenue, NW Washington, DC 20433 USA Internet: www.ifc.org The material in this work is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. IFC encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly, and when the reproduction is for educational and non-commercial purposes, without a fee, subject to such attributions and notices as we may reasonably require. IFC does not guarantee the accuracy, reliability, or completeness of the content included in this work, or for the con- clusions or judgments described herein, and accepts no responsibility or liability for any omissions or errors (including, without limitation, typographical errors and technical errors) in the content whatsoever or for reliance thereon. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of the World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The contents of this work are intended for general informational purposes only and are not intended to constitute legal, securities, or investment advice, an opinion regarding the appropriateness of any investment, or a solicitation of any type. IFC or its affiliates may have an investment in, provide other advice or services to, or otherwise have a financial interest in, certain of the companies and parties (including named herein). All other queries on rights and licenses, including subsidiary rights, should be addressed to IFC’s Corporate Relations Department, 2121 Pennsylvania Avenue, NW, Washington, DC 20433 USA. International Finance Corporation is an international organization established by Articles of Agreement among its member countries, and a member of the World Bank Group. All names, logos, and trademarks are the property of IFC, and you may not use any of such materials for any purpose without the express written consent of IFC. Additionally, “International Finance Corporation” and “IFC” are registered trademarks of IFC and are protected under international law. Disclaimers This Toolkit draws on international good practice, national regulations and codes, and the experience of various experts and practitioners on a deeply complex subject and is not intended to be comprehensive. Nor is it even a complete evaluation of the issues explored. This publication reviews a large number of annual reports from companies in developed and emerging markets. IFC makes no comment on the performance of those companies. The excerpts from the annual reports are used solely to illustrate different parts of reports covered in this publication, and IFC in no way guarantees the accuracy of the information or the present or future performance of the companies. Third-party content: IFC does not necessarily own each component of the content contained within the publication, in particular the examples from companies’ annual reports quoted. IFC therefore does not warrant that the use of any third-party-owned individual component or part contained in the publication will not infringe on the rights of those third parties. The risk of claims resulting from such infringement rests solely with you. If you wish to re-use a component of the publication, it is your responsibility to determine whether permission is needed for that re-use and to obtain permission. ii Beyond the Balance Sheet | IFC Toolkit for Disclosure and Transparency Contents Contents Foreword ........................................................................................................... ix Acknowledgments ..............................................................................................x Executive Summary ..................................................................................... xi 0. Introduction ................................................................................................. 1 0.1. Benefits of Disclosure and Transparency .........................................................1 0.2. Comprehensive and Integrated Approach to Corporate Reporting ...............4 Part I: Disclosure Framework ............................................................15 1. Strategy .......................................................................................................18 1.1. Business Model and Environment ................................................................. 18 1.2. Strategic Objectives .....................................................................................22 1.3. Risk Analysis and Response ..........................................................................24 1.4. Sustainability Opportunities and Risks ........................................................26 1.5. Introducing Key Performance Indicators ..................................................... 49 2. Corporate Governance ......................................................................... 55 2.1. Leadership and Culture: Commitment to ESG ..............................................55 2.2. Structure and Functioning of the Board of Directors .................................. 58 2.3. Control Environment .................................................................................. 68 2.4. Treatment of Minority Shareholders ............................................................ 81 2.5. Governance of Stakeholder Engagement .....................................................92 3. Financial Position and Performance ................................................97 3.1. Performance Report ..................................................................................... 97 3.2. Financial Statements ..................................................................................102 3.3. Sustainability Statements ......................................................................... 109 Part II: Reporting Guidance ............................................................. 123 Materiality .........................................................................................................123 Information Quality .......................................................................................... 124 Scope of Disclosure ........................................................................................... 124 Disclosure Requirements .................................................................................. 124 Who Should Be Involved in Preparing the Annual Report? ................................ 125 Reporting Formats ........................................................................................... 125 Technology and Reporting ................................................................................126 Disseminating the Annual Report ....................................................................126 ii Beyond the Balance Sheet | IFC Toolkit for Disclosure and Transparency Beyond the Balance Sheet | IFC Toolkit for Disclosure and Transparency iii Appendixes ................................................................................................ 129 Appendix A: Materiality Assessment for Sustainability Issues ......................... 129 Appendix B: Questions the Board Should Ask on ESG Management and Contents Disclosure ...................................................................................................... 132 Appendix C: Internal Planning for Annual Report Preparation ......................... 133 Appendix D: IFC Corporate Governance Progression Matrix for Listed Companies (Integrating Environmental, Social, and Corporate Governance Issues) ........................................................................................ 136 Appendix E: Major Frameworks for Sustainability Management and Disclosure ................................................................................................ 145 Appendix F: Annual and Sustainability Reports Used in the Toolkit ................. 148 Glossary ...................................................................................................... 150 References for Further Reading ................................................... 158 Boxes Box 0.1: Benefits of ESG Management ................................................................. 3 Box 0.2: Drivers of ESG Reporting ........................................................................ 4 Box 1.1: IIRC’s Value-Creation Process ................................................................. 20 Box 1.2: Definitions of Materiality ...................................................................... 30 Box 1.3: IFC Development Goals ......................................................................... 42 Box 2.1: National Ownership-Disclosure Requirements .................................... 84 Box A.1: The <IR> Framework Guiding Principles on Materiality ....................... 130 Box A.2: The SASB’s Five-Factor Materiality Test ...............................................

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