What is sustainability reporting? 1 Origins of Sustainability Reporting 2 Origins…. 1989 1977 Valdez principles established by Sullivan principles created to apply coalition of environmental NGOs economic pressure on South Africa. and investors. Launched as “Global Sullivan Principles” in 1999 to cover social justice and human rights Valdez principles become CERES principles after the founding coalition (Coalition for Environmentally Responsible Economies) 1976 OECD issues Guidelines for 1997 Multinational Enterprises. 5th edition Ceres establishes GRI published in March 2011 as independent entity in 1997 with support of UNEP FI and World Bank Group 3 GRI in relation to other standards National, sector and issue focused guidelines 4 Global sustainability reporting trends • 48% of S&P 500 companies now publish reports (Greenbiz, 2012 State of Green Business report) • More than 5,500 such reports are published worldwide. (According to CorporateRegister.com) • As of 2010, 1866 from 60 countries use the GRI framework to publish reports (29% increase in reporters from developing countries compared with 2009) 5 Reporting trends in emerging markets CHINA – 2006 regulations for state-owned enterprises and 2008 stock exchange requirements = 703 reports in 2011. SOUTH AFRICA – Over 450 JSE listed companies must produce integrated reports (F+ESG) INDIA – 2011 requirement that top 100 companies must publish Business Responsibility Reports. BRAZIL –2012 BM&FBOVESPA stock exchange recommends sustainability reporting Why report? • Stakeholder relationships (license to operate) • Risk reduction (reputational and operational) • Investor relationships • Identification of new markets and business opportunities • Future resilience • Employee morale • Improved strategy and management systems 7 ACCOUNTABILITY VULNERABILITY & DEPENDENCY OPPORTUNITY 8 The CFO’s role is on the rise Growing awareness of scarcity of business resources CFOs interested in potential cost savings Rankings and ratings matter to company executives Six growing trends in corporate sustainability, Ernst&Young, March 2012 9 Sustainability Reporting Guidelines RG Overview of Sustainability Reporting Orientation to the GRI Reporting The Purpose of a Sustainability Report Framework Sustainability reporting is the practice of measuring, All GRI Reporting Framework documents are developed disclosing, and being accountable to internal and using a process that seeks consensus through dialogue external stakeholders for organizational performance between stakeholders from business, the investor towards the goal of sustainable development. community, labor, civil society, accounting, academia, ‘Sustainability reporting’ is a broad term considered and others. All Reporting Framework documents are synonymous with others used to describe reporting on subject to testing and continuous improvement. economic, environmental, and social impacts (e.g., triple bottom line, corporate responsibility reporting, etc.). The GRI Reporting Framework is intended to serve as a generally accepted framework for reporting on A sustainability report should provide a balanced an organization’s economic, environmental, and social and reasonable representation of the sustainability performance. It is designed for use by organizations of performance of a reporting organization – including any size, sector, or location. It takes into account the both positive and negative contributions. practical considerations faced by a diverse range of organizations – from small enterprises to those with Sustainability reports based on the GRI Reporting extensive and geographically dispersed operations. Framework disclose outcomes and results that occurred The GRI Reporting Framework contains general and within the reporting period in the context of the sector-speci#c content that has been agreed by a wide organization’s commitments, strategy, and management range of stakeholders around the world to be generally approach. Reports can be used for the following applicable for reporting an organization’s sustainability purposes, among others: performance. t Benchmarking and assessing sustainability The Sustainability Reporting Guidelines (the performance with respect to laws, norms, codes, Guidelines) consist of Principles for de#ning report performance standards, and voluntary initiatives; content and ensuring the quality of reported information. It also includes Standard Disclosures made t Demonstrating how the organization in!uences up of Performance Indicators and other disclosure and is in!uenced by expectations about items, as well as guidance on speci#c technical topics in sustainable development;G3 Reporting and Framework reporting. The GRI Framework (G3.1) t Comparing performance within an organization and between di"erent organizations over time. • Principles, process and performance H ow • Different levels of reporting to R (A,B,C, +) es and Gu e ipl id p nc an o ri c r P e t • Multi-stakeholder consensus S t a Reporting n S e d c a Framework s t r l o d o • Sector supplements t r c r D S to o i u s o p p c r e p lo P R s le u o m re t s • National guidelines (Brazil t e a n h ts pilot) W Figure 1: The GRI Reporting Framework 10 Version 3.1 3 IFC Performance Standards Objectives and GRI Objectives Requirements IFC IFC GRI GRI Reporting principles Content • Materiality • Stakeholder inclusiveness • Sustainability Context • Completeness Quality • Balance • Comparability • Accuracy • Timeliness • Reliability • Clarity 12 Stakeholders Materiality “The information in a report should cover topics and Indicators that: reflect the organization’s significant economic, environmental, and social impacts would substantively influence the assessments and decisions of stakeholders.” 14 A Paradigm shift Holistic Environmental, social, representation economic and of value governance performance creation in corporate annual report Sustainability Integrated reporting reporting 15 Managing different forms of capital “The process of integrated reporting … challenges organizations to demonstrate their stewardship of multiple forms of capital— financial, manufactured, human, intellectual, natural, and social—and encourages collaboration and communication within the company.” Hanks, J. and Gardiner, L. (2012) Integrated Reporting – Lessons from the South African Experience, Private Sector Opinion 25, Global Corporate Governance Forum 16 Group discussion What is “good” sustainability reporting? (Discuss in groups for 10 mins and report back) 17 DESIGNING THE PROCESS 18 What IFC has learned • Build a cross-cutting team • Identify stakeholders • Determine goals of reporting • Identify material issues to report on • Build an appropriate reporting system (consider scale and scope) • Link reporting to an integrated corporate strategy 19 Challenge/ opportunity Response Outcome Manila Privatization of major water • IFC staff and company worked Significant reputation supplier. Member of largest together to undertake extensive benefits and numerous Water family-led group in the stakeholder engagement, establish business awards contributed (Philippines) Philippines (Ayala Group) with an environmental and social to very successful IPO, strong social commitment. management system with KPIs, subsequent annual Needed to reach out to and then publish first sustainability reports and a underserved communities. sustainability report. coordinated sustainability effort at Group level. Petrotesting Diverse community and • IFC provided support to CSR First report published shortly environmental initiatives which team to develop first before the company was sold (Colombia) demonstrated commitment to sustainability report, building to new owners. New best practice. But lack of their capacity and helping to management view CSR efforts focused strategy at corporate promote awareness at corporate as adding value and are level and ad hoc public level. exploring options to move reporting. forward with a more focused sustainability strategy. GDIH The company sought IFC’s • IFC global and local IS/AS team First report published in May assistance to publish a best worked with company to select 2010, and second in 2011. (China) practice sustainability report in local trainer and consulting firm Each time company has been response to guidelines/ to assist in mapping IFC/GRI/SSE ranked top in the energy requirements issued by the requirements and designing best sector in China for its SR Shanghai Stock Exchange. IFC practice report report. Reports ties and client saw opportunity to sustainability to core business leverage the ESMS approach strategy and discusses under PSs. stakeholder views. 20 4 Common pitfalls • Outsourcing: Selecting the right local consultant to provide coaching and support throughout the process • Leadership: Effectively introducing senior staff to the concept of reporting and getting their buy-in • Organizational ownership: Identifying a cross-departmental task force within the company to be responsible for the reporting process, thereby bringing different perspectives, speeding up data collection, and ensuring internal learning • Internal capacity: Proper training of the task force and operational staff at the outset on GRI reporting by certified trainers 21 Reporting as part of the strategy cycle Reporting Strategy Monitoring & Planning Engagement Implementation 22 The following diagram shows an example of reporting responsibilities inside a company: Board of directors, Chairman and CEO Senior Executive responsible for Sustainability Reporting