Transcript Valerie Chort

Why Sustainability Reporting
Matters
Valerie Chort
Partner
Sustainability & Climate Change
CSIN 2nd National Conference - Accountability Through
Measurement
March 2, 2010
Drivers of change
Drivers of change
Politicians &
regulators
Customers
Investors &
creditors
Rating
agencies
Employees
Communities
NGOs,
SIGs, etc.
Opportunities and threats
Business operations
Changing laws and regulations
Impact on competitiveness
Strategy, risk management
and governance
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Conference
Ogilvy Renault
– April 16, 2009
Deloitte
CR&S Presentation – August
25, 2009
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Disclosure demands are increasing
• Carbon Disclosure Project : Climate Change Disclosure
– Annual survey request on behalf of 475 international institutional
investors with $55 trillion in assets under management
– Sent out to more than 3,700 companies worldwide
• Indices focused on environmental, social and economic performance
– DJSI (Dow Jones Sustainability Index) (World)
– FTSE4Good (World)
– Jantzi Social Index (Canada)
– Domini Social Equity
– Ethibel Sustainability Index
• Principles for Responsible Investment (PRI)
– 75% of asset owners that are signatories to PRI disclose how Corporate
Responsibility (CR) issues are integrated into their investment
practices (2009).
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Disclosure demands are increasing (cont’d)
• 380 shareholder proposals in North America in 2009, half were related
to sustainability and governance topics
Source: Shareholder proposals were found in a database compiled by Interfaith
Center for Corporate Responsibility. http://www.iccr.org/ethvest.php
Source: Ethical Funds Sustainable Investing Program 2008 Annual Report
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OSC & SEC clarify disclosure expectations
• OSC and SEC are clarifying expectations related to climate change
disclosure
– Dec. 2009, OSC issued Notice 51-717 Corporate Governance and
Environmental Disclosure which communicates their plans to enhance
compliance by reporting issuers with corporate governance and
environmental disclosure requirements.
– OSC will conduct a compliance review of corporate governance
disclosure filed by issuers in spring 2010 and will develop guidance for
issuers on compliance with existing environmental disclosure
requirements, as set out in National Instrument 51-102 Continuous
Disclosure Obligations.
– The OSC intends to publish guidance by December 2010 to give
reporting issuers sufficient time to consider it when preparing their 2010
annual continuous disclosure documents.
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SEC interpretive release on climate change disclosure
• Addresses four topics related to climate change matters that registrants
should consider when assessing what information to provide in their
filings under existing SEC disclosure requirements.
1. Impact of existing and potential litigation or regulation.
• specific risks as a result of climate-change legislation or regulation
• “reasonably likely to be enacted” and “reasonably likely to have a material effect”
• positive as well as negative consequences
2. Effect of international accords and treaties related to climate
change, specifically those associated with governing greenhouse gas
emissions.
3. Actual and potential indirect consequences of climate-changerelated regulations or business trends (e.g., reduced demand for
ghg producing products, higher demand for products with lower
emissions than competitor products).
4. Actual / potential impacts of the physical effects of climate change.
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Quality Reporting
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Sustainability Strategy Framework
Environmental Footprint
Employment Practices
Product Stewardship
• Energy sources
• Recruiting and attracting talent
• Energy efficiency
• Training programs and career
development
• Disposal of products at end-of-life, takeback programs (e.g., smart phones, other
electronic equipment)
• Green buildings (retail and corporate)
• Greenhouse gas management
• Waste management and recycling
• Water consumption
• Hazardous / toxic materials
• Green IT
• Fleet management
• Biodiversity
Governance and Reporting
• Diversity
• Employee wellness / absenteeism
• Occupational health and safety
• Compliance / ethics and transparency
• Stakeholder engagement
• Privacy and data collection
• Management systems to track key
environmental and social performance
indicators
• Environmental and social reporting and
communications
• Third-party verification
• Recycled materials content (metal,
plastics, etc)
• Workplace design / virtual
• Responsible materials usage (e.g.,
elimination of PVC, BFRs)
• Employee travel & commute
• Environmental design
Impact on Communities
Enlightened
organization
• Board /management oversight
• CR&S policies / accountability
• Coltan policy
• Brand / reputation management
• Strategic philanthropy (e.g., priorities,
programs, causes)
• Employee volunteerism and giving
Customer Partnerships
• Marketing and promotion of sustainable
products / practices
• Customer information / awareness on
products and their impacts
• Contribution to business customers’
environmental policies and sustainability
objectives
• Dealer relations
• Strategic alliances
• Community health and education
Sustainable / Ethical Sourcing
• Ethical sourcing: supplier code of conduct
(e.g., human rights, anti-child labor and
fair workforce practices)
• Environmentally-friendly purchasing
policies
• Supplier management: environment,
health and safety performance, evaluation
and compliance audit programs
• Supplier diversity programs
Source: Deloitte Analysis
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What makes a quality report?
The Deloitte Sustainability Reporting Scorecard
SUSTAINABILITY REPORT
I. Communicate Effectively
II. Identify Relevance
Report
Provider
III. Demonstrate Commitment
and Management Quality
IV. Address the Sustainable
Development Agenda
Report
User
V. Quantify Performance
VI. Achieve Credibility
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The Basis for a good Sustainability report
• As key element or CR reporting, we focus on consistency, or “red thread”
between the different layers of the report, so that – in the end – targets and
indicators are relevant, value-adding and reflect the corporate context.
Targets and
indicators
Sustainable
value creation
Targets and
indicators
Sustainable
Value creation
Management commitment
and strategies
Stakeholders and
relevant issues
Corporate Context
Report with ”Red Thread” –
consistency between it’s layers
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Corporate Context
Report with no ”Red Thread” – targets and
indicators may be extensive, but do not reflect
the layers below
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Building a Leading Report
The Deloitte Sustainability Reporting Scorecard
Focuses on quality rather that quantity, and provides guidance on the process of reporting to
make sure that the report is able to communicate effectively. Categories include:
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Reporting Trends
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Leading practices
• Reports cross-referenced with XBRL (eXtensible Business Reporting
Language)
• Materiality Matrix: Stakeholder concern vs. Impact to business
• CR governance diagrams
• GRI reference tables with indicator information
• Stakeholder review of report
• Context-based reporting
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Context-based sustainability reporting
An emerging advanced school of corporate sustainability management that
measures, manages and reports sustainability performance relative to actual
social, economic and environmental conditions in the world.
Stakeholder
Demands
• Organizations, like Loblaw, are now assessing suppliers relative to sustainability
standards of performance (context), not just top-line data or trends
• Provides organizations with the appropriate information necessary to understand
their environmental and social risks based on stakeholder norms and expectations
Risk Mitigation
• Reveals social, economic and environmental blind spots for management
• Helps avoid claims of green-washing and opacity in reporting
• Provides a competitive advantage relative to organizations whose reporting doesn’t
include context
Standards
Branding
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• The Global Reporting Initiative (GRI) requires context in sustainability reports
• Strengthens stakeholder perceptions of organization’s sustainability performance
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Example: context-based sustainability reporting –
water use
Performance Reporting
With Context Missing
Level of Water Use
Performance Reporting
With Context Included
Level of Water Supply
– Context, in the case of water, consists of available renewable supplies, mainly from
precipitation.
– Declining use ̶ or even increasing efficiency ̶ does not necessarily translate into
sustainable performance; background conditions (i.e., supplies) must be considered as
well.
– In this example, performance was unsustainable in all three years, despite year-over-year
decline in use.
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Best practices from
the 2009 CICA
Corporate Reporting
Awards
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Observed weaknesses
• Poor integration with corporate agenda
• Omission of material issues raised elsewhere
• Failure to address sector-specific issues
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What works: Attention to the clarity of communication
• Clearly communicates information – Reader-friendly
• Logical flow
• Simple tools
– Table of contents
– Visual elements: tables, graphs,
diagrams
– Glossary
• Contextualized information
– Historical
– Sector benchmarking
– Indicators per business operations
• Best practice: GRI summary table
• Potash, TransAlta, BMO, Talisman,
Suncor, Catalyst
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What works: Scope and integrity of data clearly defined
• Boundaries: Reader needs to know what is covered
• Best Practices: Discussion of scope of report
– Operations
– Sustainability elements (environmental, H&S, social, etc.)
– Regions covered
– Period under review
– Quantities subject to external party verification
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Expanding scope over time
Materiality
Areas under control
Areas influenced
Bombardier, TransAlta, Catalyst, TELUS
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Example: Organizational snapshot
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What works: Transparent and balanced disclosure
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Contextualized information
Industry benchmarking
Explanations for achievements and shortfalls
Acknowledgement and discussion of challenges
Tracking progress against previously-defined goals
Establishing specific targets for upcoming year
• Nexen, Suncor, Potash, TELUS
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What works: Formal external review process
• Enhances credibility
• Provides unbiased feedback on quality of disclosure
• Helps to identify gaps in reporting
• Drives data integrity
• Best practice: Publication of unaltered stakeholder feedback
• 3rd Party Assurance: Suncor, Nexen, Talisman, Telus, Barrick
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What works: Effective web-based disclosure
• Migration from printed material to web-based reports
• Thoughtful information architecture
• Accessible Sustainability information
– Minimal mouse clicks
– Hyper-linking
– Tailored to stakeholder
• Multiple reporting formats
– PDF
– HTML
• Bombardier, TELUS, Catalyst, Potash, Suncor
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Closing thoughts
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Remember...sustainability performance is broader than
reporting
Sustainability performance requires careful planning and execution. Every step of
the journey is critical to success, from early stages of sustainability strategy
development to building trust and receiving recognition for sustainability reporting.
Are we communicating
well?
Feedback
Strategy &
Execution
Are we doing the right
things?
The
Performance
Journey
Assurance
Are the things measured
right?
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Reporting
Are the right things
measured?
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Questions
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About Deloitte
• Deloitte’s Sustainability & Climate Change group provides a number of
different market offerings incorporating sustainability, corporate
responsibility, health and safety, climate change, and carbon
management.
• National practice covering all major markets
• Part of a global network of 300 professionals
Sustainability & Climate Change Services
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Sustainability Services
Climate Change Services
Sustainability Strategies and Implementation
Climate Change Strategies and Advisory
Corporate Responsibility Risk Management
Carbon Risk Management
Environment, Health and Safety Advisory
Carbon Governance
Non-financial Assurance and Reporting
Carbon Reporting
Financial Transaction and Advisory
Carbon Accounting
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Deloitte’s Sustainability & Climate Change services
Sustainability Services
Sustainability
Strategies and
Implementation
Corporate
Responsibility
Risk
Management
Assists organizations in evaluating and improving the effectiveness of corporate responsibility risk
management, control, and processes through:
• Identification of key compliance and regulatory risks and opportunities
• Systematic and disciplined risk and controls-based methodologies
• Support and integration into internal and external audit services
• Development of Board governance policies and services
Environment,
Health and
Safety Advisory
Provide end-to-end EH&S solutions including:
• Gap analysis and strategy development to develop appropriate objectives and priorities
• EHS risk profiling to limit exposure to identified risks
• EHS management and IT systems to manage EHS as an integrated, core business process
• EHS IT systems to establish and implement data capture, consolidation and reporting needs
• Change management and training to foster an EHS culture
Non-financial
Assurance and
Reporting
Assesses and values the environmental, health and safety components of firm assets and liabilities,
for example:
• Valuation of environmental assets and liabilities during mergers or acquisitions
• Evaluation of the performance of existing assets
• Contaminated land risk assessments
Financial
Transaction and
Advisory
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Works with senior executives to set direction and guidance for sustainability performance through :
• Global, industry and firm-specific trends and issue identification
• Peer and leading practice benchmarking and sustainability maturity assessments
• Sustainability visioning, goal-setting, and stakeholder engagement
• Business case planning and Initiative prioritization
• Action planning and implementation
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Levering our firm’s unique Audit Approach to provide tailored services to:
• Assess and conclude on appropriateness of environmental, health and safety liabilities in
collaboration with annual or quarterly financial audits
• Provide assurance on non-financial indicators:
o Corporate Responsibility Reports
o Greenhouse Gas emissions reporting
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Deloitte’s Sustainability & Climate Change services
Climate Change
Strategies and
Advisory
Strategic scenario analysis around evolving and changing regulations will drive long and short term
capital allocation decisions. Integrated carbon management strategy creates value by:
• Identifying new climate change related opportunities
• Developing and implementing a carbon management strategy that deals with a wide range of risks
• Supporting business growth through implementation of carbon management process and tools
Climate Change Services
Building out an optimized carbon portfolio that aligns with strategic goals, risk tolerance and meets
regulatory requirements will be key. Various risks and compliance options exist:
Carbon Risk
Management
Carbon
Governance
Carbon
Reporting
Carbon
Accounting
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•
•
•
•
•
Regulatory Risk
Compliance Risk
Price and Trading Risk
Operational Risk
Technological Risk
• Emissions reduction
• Purchased allowances
• Offset projects
The appropriate carbon organization structure, and related governance, policies and policies will
need to established. Carbon risk governance will entail:
• Defining roles and responsibilities
• Defining organizational policies and procedures to address carbon management decisions
• Designing appropriate internal controls
• Coordinating climate change risk management across various business units
Companies will need to develop custom reports and dashboards, and select and implement
systems which fulfill complex reporting requirements:
• External Regulatory Reporting
• Voluntary Reporting
• Management Reporting
• Financial Reporting
Financial statement implications and accounting treatment for carbon need to be considered.
Accounting considerations encompass three major areas:
• Carbon regulatory obligations
• Emissions rights and offsets
• Forward contracts to buy and sell credits
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Point of View Examples – Sustainability
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Point of View Examples – Climate Change and
Renewable Energy
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Point of View Examples – Green IT and Green Supply
Chain
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Contact information
Valérie Chort
Partner
Sustainability & Climate Change
Deloitte & Touche
Tel. : 416-601-6147
[email protected]
Johanne Gélinas
Partner
Sustainability & Climate Change
Deloitte & Touche
Tel. : 514-393-5408
[email protected]
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