Sustainability reporting (including Integrated Reporting)
Company boards, executives, and management are investing more and more time and resources on issues of sustainability - such as carbon (greenhouse gas emissions), energy efficient technology, water use, cleantech, and biodiversity, to name just a few. An important part of the global push towards sustainability practices involves a need to account for, and report on, sustainability. On this page, we maintain a history of recent developments in sustainability reporting requirements and practices. Organisations and resources IIRC GRI UNEP FI Deloitte resources   Developments February 2012 January 2012 December 2011 November 2011 October 2011 September 2011 August 2011 July 2011 June 2011 May 2011 April 2011 March 2011 February 2011 January 2011 December 2010 November 2010 September 2010 August 2010 July 2010 March 2010 February 2010 December 2009 August 2009 August 2006 February 2006 May 2005 January 2005
Organisations and resources
International Integrated Reporting Council (IIRC) The International Integrated Reporting Council (IIRC) (previously the International Integrated Reporting Committee) was formed in August 2010 and aims to create a globally accepted framework for accounting for sustainability, bringing together financial, environmental, social and governance information in an "integrated" format. The IIRC brings together a cross section of representatives from corporate, investment, accounting, securities, regulatory, academic and standard-setting sectors as well as civil society. It comprises a Steering Committee, a Working Group and a three taskforces (dealing with content development, engagement and communications, and governance). The IIRC is chaired by Professor Mervyn King, Chairman, King Committee on Corporate Governance and Former Chairman, Global Reporting Initiative. Membership includes Hans Hoogervorst (IASB Chairman), Leslie Seidman (FASB Chairperson), Maria Helena Santana, (Chairperson, IOSCO Executive Committee), Göran Tidström (IFAC President), Jim Quigley (former global Chief Executive Officer of Deloitte), and many others. Paul Druckman is Chief Executive Officer. In November 2011, the IIRC announced a number of changes to its organisational structure. Under the new arrangements, an initial transitional phase until the end of 2013 will see the IIRC supported by a strengthened secretariat operating through a not-for-profit company established for the purpose under the same name. The company's board will comprise Mervyn King as Chairman, Leslie Ferrar (Treasurer, Household of the Prince of Wales and the Duchess of Cornwall) and Christy Wood (Chairman of the Board of Governors, International Corporate Governance Network) as Deputy Chairs, together with Ian Ball (Chief Executive, International Federation of Accountants), Ernst Ligteringen (Chief Executive, Global Reporting Initiative), Jessica Fries (Director, The Prince's Accounting for Sustainability Project) and the IIRC's Chief Executive, Paul Druckman. A Governance Committee will also be established, with responsibilities relating to audit, nominations and executive remuneration for the company. The IIRC's stated objective is to develop an internationally accepted Integrated Reporting Framework by 2014. The IIRC released a Discussion Paper on integrated reporting on 12 September 2011 and is currently undertaking a Pilot Programme with a number of companies globally. The IIRC website can be accessed at www.theiirc.org. Global Reporting Initiative (GRI) The Global Reporting Initiative (GRI) is a network-based organisation that developed a widely used sustainability reporting framework. The GRI's Reporting Framework, together with the accompanying Sustainability Reporting Guidelines, provide guidance on how organisations can disclose their sustainability performance. The guidelines are currently in their third generation ("G3.1"), with work commenced on the fourth generation guidelines ("G4"). GRI was founded in the US in 1997 by CERES and the United Nations Environment Program (UNEP) and was originally based in Boston, Massachusetts. In 2002, GRI moved its central office to Amsterdam, where the Secretariat is currently located. GRI also has regional 'Focal Points' in Australia, Brazil, China, India and the USA. The GRI website can be accessed at www.globalreporting.org. United Nations Environment Programme Finance Initiative (UNEP FI) The United Nations Environment Programme Finance Initiative (UNEP FI) is a global partnership between the United Nations Environment Programme (UNEP) and the financial sector. Over 190 institutions, including banks, insurers and fund managers, work with UNEP to understand the impacts of environmental and social considerations on financial performance. Through its Climate Change Working Group (CCWG), UNEP FI identifies the roles of the finance sector in addressing climate change, and advances the integration of climate change factors - both risks and opportunities - into financial decision-making. This is done through a work programme encompassing research, training, events and regional activities. The UNEP FI website can be accessed at www.unepfi.org. Deloitte sustainability and climate change resources Deloitte maintains a global website dealing with sustainability and climate change resources, including specific resources on sustainability reporting, assurance and compliance. Industry perspectives and member firm resources are also available. Click for Deloitte global sustainability and climate change resources.
History of developments
February 2012
Sustainability and integrated reporting update Following is a summary of recent developments in sustainability reporting, integrated reporting and related topics: Australian GRI Conference on Sustainability and Integrated Reporting. The Global Reporting Initiative (GRI), with the support of the Australian government, is holding its inaugural regional Conference in Melbourne, Australia on 26-28 March 2012. The outcomes of this conference are designed to help inform GRI’s thinking on integrated reporting and the next generation of its Sustainability Reporting Guidelines ("G4"). More information is available at www.australiangriconference.org New sustainability reporting requirements in Brazil and India. ​The São Paulo stock exchange and the Securities and Exchange Board of India (SEBI) have recently introduced new sustainability reporting requirements. More information is available in this article from the GRI (link to GRI website) Impact of sustainability issues on capital investment decisions. CPA Australia has published a report outlining preliminary findings on current practices around the integration of sustainability issues in investment decisions. The report is available on the CPA Australia website (PDF 1488k) Carbon reporting survey. The Climate Disclosure Standards Board (CDSB) is undertaking a survey on the disclosure of climate change related-information under the increasing number of mandatory and voluntary reporting frameworks. The survey can be accessed through the CDSB website Reporting guidance for event organisers. GRI has published an 'Event Organizers Sector Supplement' (EOSS) to its sustainability reporting guidelines. More information is available in this article from the GRI (link to GRI website).   PAIB report considers growing investor demand for non-financial information The Professional Accountants in Business Committee (PAIB) of the International Federation of Accountants (IFAC) has released a report considering trends in investor demand for, and use of, environmental, social, and governance (ESG) information. The report notes that ESG information is increasingly used by investors to understand an organisation's key ESG factors and how they impact overall performance over a longer time horizon. The reporting includes an appendix which outlines the core sector-neutral ESG metrics demanded by investors and reconciles them to the Global Reporting Initiative (GRI) guidelines - these include such items as greenhouse gas emissions, water and energy use, workplace health and safety and board effectiveness. The report also recommends how professional accountants can better support their organisations in responding to investory demands for ESG information, and ultimately improve the management and reporting of ESG performance. The recommendations include: Professional accountants should work with their organisations to implement a structured and systematic approach to engaging investors to determine their ESG information needs ESG factors and performance information should be incorporated into governance and accountability arrangements to improve information and disclosure quality Financial and non-financial performance and outcomes should be linked to improve understanding of sustainable value creation Investor needs should be met by material, timely, consistent, and comparable information Data that may be dispersed in different parts of the organisation or its supply chain should be brought together to support internal and external decision making. Click for access to the report (link to IFAC website).
January 2012
New board level guide to sustainability Deloitte's Global Center for Corporate Governance has released The Sustainable Board, a white paper providing a board-level overview of sustainability and its impact on organisations. According to the paper, sustainability is increasingly becoming a top-of-mind issue for boards that are seeking to enhance performance and reputation, mitigate risks, and foster innovation and growth. The paper is presented as a series of topics, with examples of questions that boards may wish to ask themselves and management in order to further their understanding. There are specific sections dealing with the measurement of sustainability information, and sustainability transparency and disclosure. The questions in the paper in relation to disclosure are reproduced below: Questions for directors to ask What are the organization's policies regarding setting goals and measuring performance in economic, environmental and social areas (i.e. internal reporting) and disclosing those activities to investors and other stakeholders (i.e. external reporting)? Does management voluntarily disclosure sustainability and social responsibility related strategies, performance and risks beyond the general requirements set forth by regulators (e.g. Management's Discussion & Analysis guidance)? Is the board required to review and approve all sustainability disclosures before they are released? What information, if any, does management provide on sustainability issues to regulators, customers, suppliers, non-governmental organizations or other stakeholders? Does the organization disclose the metrics used to measure performance towards achieving its sustainability objectives? Is there a third party verification process for sustainability reports? How does the board satisfy itself regarding the accuracy of the sustainability information that is publicly disclosed? The paper notes the following in its conclusions: Demand for reporting and disclosure of sustainability performance continues to increase – both as a response to regulation, and stakeholder and investor pressure, but also from internal management looking for better ways to manage risk and measure and improve performance. Click for The Sustainable Board (PDF 407k).
December 2011
Deloitte 2011 Corporate Responsibility Report Deloitte has published its 2011 Corporate Responsibility Report, reflecting Deloitte's wider outlook on corporate responsibility, and acknowledging that Deloitte's most significant impacts on society result from the work that member firms do for their clients. The Deloitte 2011 Corporate Responsibility Report has been checked by the Global Reporting Initiative (GRI) as Application Level B, and also serves as Deloitte's Communication on Progress to the United Nations Global Compact for 2010-2011. Click to download the report (PDF 3227k). More information about the report is available on our deloitte.com website. Deloitte IFRS podcast on integrated reporting A new Deloitte podcast is available. Nick Main, Deloitte Global Leader, Sustainability & Climate Change Services and Robert Bruce discuss the concept of 'integrated reporting' and the International Integrated Reporting Council's (IIRC) Discussion Paper Towards Integrated Reporting – Communicating Value in the 21st Century. Nick discusses the key changes proposed and provide insights into what integrated reporting is all about. The podcast is available for download here (18:30 mins 8 mb) or via iTunes; it is one of a series that will be posted to IAS Plus. All podcasts of the series are available here.
November 2011
IIRC restructures The International Integrated Reporting Committee (IIRC) has announced a number of changes to its organisational structure: The IIRC will now be known as the International Intergrated Reporting Council, rather than the International Integrated Reporting Committee The IIRC will be supported by a strengthened secretariat operating through a not-for-profit company established for the purpose under the same name. The company's board will comprise Mervyn King as Chairman, Leslie Ferrar (Treasurer, Household of the Prince of Wales and the Duchess of Cornwall) and Christy Wood (Chairman of the Board of Governors, International Corporate Governance Network) as Deputy Chairs, together with Ian Ball (Chief Executive, International Federation of Accountants), Ernst Ligteringen (Chief Executive, Global Reporting Initiative), Jessica Fries (Director, The Prince's Accounting for Sustainability Project) and the IIRC's Chief Executive, Paul Druckman An IIRC Governance Committee will also be established, with responsibilities relating to audit, nominations and executive remuneration for the company. Click for press release (link to IIRC website).   IIRC to hold webcast on integrated reporting The International Integrated Reporting Committee (IIRC) is holding a webcast on integrated reporting on 15 November 2011 at 08:00am GMT. The webcast will last for one hour and will include topics such as an overview of the rationale behind the move towards integrated reporting, initial proposals for the development of an International Integrated Reporting Framework, and the next steps towards its creation and adoption. Click for More information and registration (link to webcast registration).
October 2011
Sustainable development platform established in Singapore The World Business Council for Sustainable Development (WBCSD) and Singapore Business Federation (SBF) have jointly established a CEO-led 'Sustainable Development Platform' in Singapore. The WBCSD and SBF signed a Letter of Intent at the recent Asia Pacific Sustainability Leadership Forum to jointly create the independent organisation, which would consist of a group of local Singapore companies and foreign subsidiaries. The objective of the organisation is to provide businesses in Singapore with access to international best practices and collaboration opportunities on sustainability issues. Click for press release (link to WBCSD website).   Initial organisations participating in integrated reporting pilot announced The International Integrated Reporting Committee (IIRC) has announced that over 40 companies from around the world have been chosen as the initial participants in the IIRC Pilot Programme Programme, with further participants expected. The IIRC states that the pilot programme aims to: Encourage organisations to innovate in their reporting practices Inform the future evolution of reporting and investor practices Drive convergence in international reporting guidance. The Pilot Programme is designed to run over a two year period and will involve a group of organisations who will work as a peer group network, exchanging knowledge and sharing experiences and participating in the development of the International Integrated Reporting Framework envisaged in the IIRC's Discussion Paper Towards Integrated Reporting – Communicating Value in the 21st Century (see our earlier story). The initial participants in the programme include a variety of organisations from many geographical regions (including Deloitte): Pilot company Country Sector AB Volvo – Volvo Group Sweden Automobiles Association of Chartered Certified Accountants United Kingdom Accounting Aegon Group The Netherlands Financial Services Akzo Nobel N.V. The Netherlands Chemicals ARM Holdings plc United Kingdom Technology Hardware & Equipment Atlantia S.p.A. Italy Industrial Goods & Services BBVA Spain Banks BWise b.v. The Netherlands Industrial Goods & Services Chartered Institute of Building, The United Kingdom Professional Organization Cliffs Natural Resources United States of America Basic Resources CLP Holdings Limited China Utilities CNDCEC Italy Accounting DANONE France Food & Beverage Deloitte LLP United Kingdom Accounting Deloitte Netherlands The Netherlands Accounting Diesel & Motor Engineering PLC Sri Lanka Industrial Goods & Services Edelman United States of America Media EnBW Energie Baden-Württemberg AG Germany Utilities Enel Italy Electricity eni S.p.A. Italy Oil & Gas Eskom Holdings SOC Limited South Africa Utilities Flughafen München GmbH Germany Industrial Goods & Services Gold Fields South Africa Basic Resources HSBC Holdings plc United Kingdom Banks KPMG International Switzerland Accounting LeasePlan Corporation N.V. The Netherlands Financial Services Marks and Spencer Group plc United Kingdom Retail mecu Limited Australia Banks Microsoft Corporation United States of America Technology N.V. Luchthaven Schiphol The Netherlands Industrial Goods & Services National Australia Bank Limited Australia Banks Natura Cosméticos Brazil Personal & Household Goods Novo Nordisk Denmark Health care PriceWaterhouseCoopers N.V. The Netherlands Accounting Prudential Financial, Inc. United States of America Financial Services Randstad Holding N.V. The Netherlands Industrial Goods & Services State Nuclear Energy Corporation ROSATOM Russian Federation Utilities Stockland Australia Real Estate Takeda Pharmaceutical Company Limited Japan Health care The Coca-Cola Company United States of America Food & Beverage Vancity Canada Banks Vestas Wind Systems Denmark Oil & Gas Via Gutenberg Consultoria  em Entretenimento e Cultura Ltda Brazil Industrial Goods & Services Click for IIRC press release (link to IIRC website).   Deloitte podcast on sustainability A new global Deloitte podcast explores sustainability reporting issues, building on the themes discussed in the recently issued publication Sustainability 2011 — A difficult coming of age (PDF 376k). In the podcast, Nick Main (Deloitte Global Leader for Sustainability & Climate Change Services) and Valerie Chort (National Leader of Corporate Responsibility and Sustainability, Deloitte & Touche LLP), offer their perspectives on the report, including such topics as some of the primary drivers of business engagement in the sustainability agenda, the progression of standards development in sustainability over the next 5-10 years, and the most significant downsides to not addressing the sustainability challenges, both for governments and for companies. Click for access to the recorded podcast (link to deloitte.com website).   New research report highlights CFO involvement in sustainability A new report from Deloitte provides a unique view into how CFOs think about the challenges and opportunities associated with sustainability, based on an independent global survey of 208 CFOs undertaken by Verdantix on behalf of Deloitte. Among the key findings in the report are: Many CFOs are engaged with sustainability issues as they relates to core finance activities like financial auditing and reporting, compliance, and risk management Only one-third of CFOs describe themselves as fully involved in sustainability strategy and governance; one-fifth plan to get more involved in the next two years Nearly half of the CFOs surveyed are planning capital investments that will support the implementation of sustainability initiatives. The report also provides insights about how CFOs are responding to sustainability issues now and for ideas about how CFOs can orient themselves toward both the tactical and strategic dimensions of sustainability. Click for Sustainable finance — The risks and opportunities (some) CFOs are overlooking (PDF 768k).   Deloitte quarterly report on trends in integrated reporting in South Africa Deloitte South Africa has revealed the findings of the first Deloitte quarterly report on trends in integrated reporting in South Africa, analysing trends and areas of excellence in integrated reporting among South Africa's listed companies. Deloitte has undertaken substantial research into the quality and extent of integrated reports produced during the transition from the traditional annual financial report, supported by a sustainability report, to the inclusive integrated report as recommended by the Johannesburg Stock Exchange (JSE). Click for access to a Deloitte (South Africa) blog (link to external website) discussing the findings.   AccountAbility names members of its Advisory Council AccountAbility, the international corporate responsibility organisation, has announced members of its newly formed Advisory Council. This council will "provide strategic guidance and facilitate AccountAbility's mission of advancing corporate responsibility and sustainability by increasing the impact of its standards, shaping a leading research agenda, and delivering transformative service solutions". Members include CEOs, policymakers and thought leaders, including the former US FASB chairman Robert Herz. Click for AccountAbility announcement (link to AccountAbility website) to see a full list of council members.   IFAC recommendations for G20 includes support for integrated reporting The International Federation of Accountants (IFAC) has provided a series of recommendations for consideration by the G20 at its meeting on 3-4 November 2011 in Cannes, France. The IFAC submission follows previous submissions by IFAC to the G20 in 2009 and 2010 and encourages the G20 to continue its essential work on addressing important issues arising from the global financial crisis and to meet the commitments made in its communiqués of 2008–2010 and in the reports of its working groups. In IFAC's view, to achieve these aims the G20 must strive for reporting of high-quality, internationally consistent, relevant, and reliable financial and non-financial information by all sectors. IFAC recommends that the G20 consider three objectives, including the development of integrated reporting, where IFAC encourages the G20 to support the development and use of integrated reporting, and in particular, the work of the International Integrated Reporting Committee (IIRC) in creating a globally accepted integrated reporting framework. Click for IFAC announcement (link to IFAC website).   New research paper on reporting the impacts and reliance on 'ecosystem services' The Global Reporting Initiative (GRI) has released a research report entitled Approach for reporting on ecosystem services — Incorporating ecosystem services into an organization's performance disclosure. 'Ecosystem services' (ES) is a term used to capture the benefits derived from ecosystems, such as food, pharmaceutical products, timber, soil fertility, pollination, and freshwater. In cooperation with the United Nations Environment Programme World Conservation Monitoring Centre (UNEP-WCMC) and consultancy CREM, GRI proposes a new approach for developing sustainability reporting indicators to help companies report their impacts and reliance on ecosystem services. The research publication elaborates on what ecosystem services are, and in which ways organisations interact with them and how to factor ecosystem services into their long term strategy and operations. The publication suggests indicators that organisations could use to assess and report their impacts on ecosystem services, discussing both narrative reporting and performance reporting. Some examples of reporting indicators on ecosystem services include: Nature and amount of natural resources harvested, produced, traded and/or consumed (e.g. crops, fish, timber, fibre) by the organisation in relation to safe ecological limits Volume of water consumed by the organisation by source related to total water availability in areas of operation, including identification of water sources significantly affected by withdrawal of water Economic cost to the organisation due to climate related disasters (e.g. flooding, crop failure) Volume of inputs from sources complying with internationally recognised responsible production standards. The publication builds on related initiatives around 'natural capital' such as The Economics of Ecosystems and Biodiversity study (TEEB), the World Business Council for Sustainable Development (WBCSD) Corporate Ecosystem Valuation (CEV) Guide and The University of Cambridge Natural Capital Leaders Platform report (issued in June 2011). The GRI publication represents a move towards incorporating ecosystem services information into sustainability reporting and ultimately integrated reporting. Click for GRI press release (link to GRI website).   New standards for reporting greenhouse gas emissions The Greenhouse Gas Protocol (GHG Protocol), a partnership between the World Resources Institute and the World Business Council for Sustainable Development (WBCSD), has released two new standards which aim to allow businesses to better measure, manage, and report their greenhouse gas emissions: The Corporate Value Chain Standard seeks to identify opportunities for companies to make more sustainable decisions about their activities and the products they produce, buy and sell The Product Life Cycle Standard provides a tool to assist companies to measure the greenhouse gas emissions of an individual product, covering materials, manufacturing, use and disposal. The measurement of greenhouse gas emissions is of importance in both sustainability and integrated reporting, and indirectly in accounting for any recognised liabilities under emissions trading and similar schemes. Click for press release (link to WBCSD website).   Minutes from the third meeting of the Experts Group on Non-Financial disclosure by Companies The European Commission's Expert Group on disclosure of non-financial information by EU companies held its third meeting on 30 September 2011. Minutes from that meeting are now available on the EC's website (PDF 33k). The discussions of the expert group focused on the nature, content and scope of potential legislation. They were based on a non-paper circulated to the members of the expert group ahead of the meeting and included as Annex 2 to the minutes. No next meeting is scheduled for the time being, but the Commission may call for another meeting in the future depending on the developments this initiative may make. A legislative proposal on the disclosure of non-financial information by companies is planned for the first half of 2012.
September 2011
GRI issues construction and real estate guidance, supports call for integrated sustainability reporting The Global Reporting Initiative (GRI) has issued a final Supplement, providing guidance on how to apply GRI's Reporting Framework and Guidelines in the construction and real estate sectors. The GRI's Framework and Guidelines set out the principles and indicators organisations can use to report their economic, environmental, and social performance. The Construction and Real Estate Sector Supplement provides guidance for those who invests in, develop, construct, or manage buildings on the principles and indicators to follow to report business strategy and performance. Specific issues covered in the new Supplement include building and materials certification, CO2 emissions, management and remediation of contaminated land and labor health and safety issues. The GRI has also lent its support to the 'Corporate Sustainability Reporting Coalition', an investor-led group which is calling on United Nations member states to commit to develop, a global policy framework that requires listed and large private companies to integrate sustainability information into annual reports and financial statements, or explain why if they do not do so. Click for: GRI press release on new Supplement (link to GRI website) GRI announcement on sustainability reporting coalition (link to GRI website). Minutes from the second meeting of the Experts Group on Non-Financial disclosure by Companies The European Commission's Expert Group on disclosure of non-financial information by EU companies held its second meeting on 12 September 2011. Minutes from that meeting are now available on the EC's website (PDF 57k). The discussions of the expert group focused on whether a principles-based approach, rather than a detailed, rules-based one should be chosen; whether existing international frameworks are possible references for principles-based legislation, including the UN Global Compact, the OECD Guidelines for Multinational Companies, the UN "Protect, Respect and Remedy" Framework for Business and Human Rights, as well as the ISO 26000 and the IASB Management Commentary; whether legislation should mandate a set of specific topics to be covered by non-financial reports; whether a disclosure requirement should take the form of a general reporting obligation; and whether an obligation to disclose non-financial information will have positive effects on business accountability, company performance and capital markets in general. The discussions were based on two non-papers circulated to the members of the expert group ahead of the meeting and included as Annex 2 to the minutes. The experts are now invited to submit written comments on the issues discussed. The next meeting is expected to take place on 30 September 2011. A legislative proposal on the disclosure of non-financial information by companies is planned for the first half of 2012.   Robert Bruce analyses integrated reporting The first discussion paper outlining the proposed system of integrated reporting to bring all aspects of reporting together has been published by the International Integrated Reporting Committee (IIRC). Our resident regular columnist, Robert Bruce, assesses the paper and its future development. Click for The Bruce Column — Going for Long-Term Value.   Perspectives and practical recommendations on integrated reporting Deloitte's Global Sustainability and Climate Change Services Group has issued Integrated Reporting — A better view? (PDF 1,213k). The publication provides a brief history of reporting trends, a discussion of common challenges, and some practical recommendations for the adoption of integrated reporting. The publication makes the following observations: Just as the world has inexorably moved toward the adoption of International Financial Reporting Standards (IFRS), the progression toward a single, global, common framework for integrated reporting seems inevitable. Less clear, however, is the timing of adoption, which may be affected by a variety of economic, political, social, and other factors. Regardless of how the timing plays out, forward-thinking companies are putting integrated reporting on their agendas now, as the benefits of being ahead of the curve may be significant. See also our IFRS in Focus Newsletter (PDF 74k) and our our earlier story on the International Integrated Reporting Committee (IIRC) discussion paper on integrated reporting.   IFRS in Focus newsletter describes the recent IIRC discussion paper on integrated reporting Deloitte's Global Office has issued IFRS in Focus — International Integrated Reporting Committee issues Discussion Paper on Integrated Reporting (PDF 74k). The IFRS in Focus newsletter provides an overview of the IIRC's Discussion Paper Towards Integrated Reporting — Communicating Value in the 21st Century, which introduces proposals for the future development of corporate reporting and argues that a change is necessary, as there have been major changes in the way business is conducted and how businesses create value. See also our earlier story on the discussion paper.   GRI and ISO co-operate on sustainability The Global Reporting Initiative (GRI) and the International Organization for Standardization (ISO) have signed a Memorandum of Understanding (MoU) to increase their co-operation on sustainability matters. GRI has developed a widely used sustainability reporting framework ("G3.1", with work commenced on the fourth generation guidelines, "G4"). GRI also participated in the development of ISO 26000 Social Responsibility, published by the ISO in November 2010. The MoU is intended to leverage the activities of the two organisations related to reporting and benchmarking by business and on sustainable development by sharing information on ISO standards and GRI programs, teaming up with other partners, participating in the development of new or revised documents, joint promotion and communication. Click for GRI press release (link to GRI website).   IIRC issues Discussion Paper on Integrated Reporting, proposes a new approach to corporate reporting On 12 September 2011, the International Integrated Reporting Committee (IIRC) released a Discussion Paper Towards Integrated Reporting – Communicating Value in the 21st Century. The IIRC seeks to bring together world leaders from the corporate, investment, accounting, securities, regulatory, academic, civil society and standard-setting sectors to develop a new approach to reporting. The Discussion Paper is the first step in the development of an 'International Integrated Reporting Framework', with an exposure draft expected to be published in 2012. It seeks to build on existing developments in reporting such as the international convergence of accounting standards, sustainability guidance published by organisations such as the Global Reporting Inititative (GRI), and the IASB's IFRS Practice Statement Management Commentary. Integrated reporting aims to combine the different strands of reporting (financial, management commentary, governance and remuneration, and sustainability reporting) into a coherent whole that explains an organisation's ability to create and sustain value. The focus of an Integrated Report would be a broader explanation of performance than traditional reporting, by describing and measuring where practicable, the material components of value creation and, more importantly, demonstrating the links between an organisation's financial performance and the social, environmental and economic context in which it operates. The IIRC believes an Integrated Report should be an organisation's primary reporting vehicle, replacing rather than adding to existing requirements. Under the IIRC's vision, much information currently produced (including detailed financial reporting information, operational data and sustainability information) would move to an online environment enabled by technology, reducing clutter in the primary report so that report can focus only on the matters the organisation considers most material to long-term success. The table below provides an overview of the proposed Framework: The IIRC's Proposed International Integrated Reporting Framework GUIDING PRINCIPLES The following guiding principles would underpin the preparation of an Integrated Report: Strategic focus – providing insight into the organisations' strategic objectives, and how those objectives relate to its ability to create and sustain value over time and the resources and relationships on which the organisation depends Connectivity of information – shows the connections between the different components of the organisation's business model, external factors that affect the organisation and its performance depend Future orientation – management's expectations about the future, as well as other information to help report users understand and assess the organisation prospects and the uncertainties it faces Responsiveness and stakeholder inclusiveness – insight into the organisation's relationships with its key stakeholders and how and to what extent the organisation understands, takes into account and responds to their needs Conciseness, reliability and materiality – providing concise, reliable information that is material to assessing the organisation's ability to create and sustain value in the short, medium and long term. CONTENT ELEMENTS The guiding principles should be applied in determining the content of an Integrated Report, based on the following key elements: Organisational overview and business model – the organisation's mission, principal activities, markets, products and services, it's business model, value drivers and critical stakeholder dependencies, and its attitude to risk Operating context, including risks and opportunities – a more in-depth description of material issues, the process for determining which issues it considers material, and how the material issues affect the organisation's ability to create and sustain value over time Strategic objectives and strategies to achieve those objectives – risk management arrangements related to key resources and relationships, linkages and what makes the organisation unique and able to realise value in the future, such as the extent to which sustainability considerations have been embedded into its strategy and give it a competitive advantage Governance and remuneration – the organisation's governance structure, how it supports the strategic objectives of the organisation and relates to the organisation's approach to remuneration Performance – a concise and connected assessment of how the organisation has performed against its strategic objectives and related strategies, including KPIs, organisational impacts (both positive and negative) on resources and relationships, and significant external factors impacting performance Future outlook – opportunities, challenges and uncertainties the organisation is likely to encounter in achieving its strategic objectives and the resultant implications for its strategies and future performance. RESOURCES AND RELATIONSHIPS – THE "CAPITALS" In order to assist in understanding the concepts underlying the Discussion Paper, it contains the following example resources and relationships that can be conceived as different forms of "capital": Financial capital – pool of funds available to produce goods and provide services, obtained through financing or generated through operations or investments Manufactured capital – manufactured physical objects, e.g. buildings, equipment and infrastructure Human capital – people's skills and experience and their motivations to innovate Intellectual capital - intangibles that provide competitive advantage including intellectual property, brand and reputation Natural capital – an organisation's activities may impact positively or negatively on natural capital such as water, land, minerals and forests, and biodiversity and eco-system health Social capital - institutions and relationships established within and between each community, group of stakeholders and other networks to enhance individual and collective well-being. The Discussion Paper notes the development of Integrated Reporting will require a change in established thinking about decision making and reporting, and identifies regulatory change as one of many challenges. The IIRC is conducting a two-year pilot programme, commencing in October 2011, to test and further develop the International Integrated Reporting Framework (see our earlier story). If, and until, Integrated Reporting is the primary report for all organisations, the report outlines a number of possible alternate pathways to integrated reporting, including combining the sustainability report with the management commentary or the full annual report, publishing a separate integrated report, modifying sustainability reports or adopting integrated reporting internally to underpin management information. The IIRC is calling for comments on the Discussion Paper to be submitted by 14 December 2011. Click for: Access to the Discussion Paper (link to IIRC website) IIRC press release (link to IIRC website).   New publications on sustainability The following new Deloitte sustainability publications are available: Sustainability 2011 — A difficult coming of age (PDF 376k) Sustainability disclosure 101 — Frequently asked questions about sustainability disclosure & reporting (link to Deloitte Canada website).   GRI calls for input into sustainability reporting guidelines and first country annex The Global Reporting Initiative (GRI) has called for comments on the proposed 'fourth generation' of its Sustainability Reporting Guidelines ("G4") and the first version of GRI's Guidelines tailored specifically for a country. The GRI's 'Sustainability Reporting Framework' includes Sustainability Reporting Guidelines, which are currently in their third version ("G3" and an updated "G3.1") and can be followed by entities in preparing sustainability reports. Annexes and supplements provide guidance in particular areas. The G4 guidelines are expected to address new requirements for sustainability data, and improve on the content in the current G3 and G3.1 guidelines with strengthened technical definitions and improved clarity (see our earlier story). The initial 'public comment period' on the G4 guidelines invites feedback, through an online survey, on the inclusion of proposed sustainability topics, and the potential shape of G4. The survey runs for 90 days and closes on 24 November 2011. GRI has also published a 'Brazilian National Annex' for public comment, the first version of GRI's Guidelines that is tailored specifically for a country. The deadline for submission of feedback on the National Annex is 25 October 2011. The GRI also supports the International Integrated Reporting Committee (IIRC) which is developing proposals for an integrated reporting framework. The IIRC is expected to publish a Discussion Paper in the near future. Click for: More information about the G4 survey (link to GRI website) More information about the Brazilian National Annex (link to GRI website).
August 2011
Upcoming Dbriefs webcast on sustainability Deloitte (United States) is hosting a Dbriefs webcast in early September on sustainability reporting With significant progress being made in global efforts to develop integrated sustainability reporting guidelines, this webcast will discuss: International Integrated Reporting Committee (IIRC) – a view of what constitutes integrated reporting, components of an integrated framework, and timeline Global Reporting Initiative (GRI) – the significant uptick in companies reporting under the GRI, establishment of a U.S. focal point for the GRI, G3.1 updates, and progress toward G4.0 Carbon Disclosure Project – adoption of a water reporting structure and other developments Sustainability's rate-the-rater initiative – what do ratings groups and rankings mean? Full details of the webcast are provided below: Topic: Sustainability Reporting Update: One Big Global Family? Date and time: Wednesday, 7 September 2011 at 2:00pm-3:00pm United States Eastern Daylight Time (GMT-05:00) Host: Eric Hespenheide, Partner – Deloitte & Touche LLP More information: Click Here Registration: Click Here   Financial reporting considerations of Australia's proposed carbon price Deloitte (Australia) has published Australia's carbon price — June 2011 financial reporting implications (PDF 1123k). An exposure draft of the Australian Federal Government's legislation to enact its proposed carbon pricing mechanism was released by the Australian Federal Treasurer on 28 July 2011. The exposure draft is open for comment until 22 August 2011 and is expected to be tabled in the Australian Parliament early in the Australian Spring. Given these developments, the publication sets out some of the considerations for entities potentially affected by the carbon pricing mechanism as they finalise their June 2011 financial reporting. Click for Australia's carbon price — June 2011 financial reporting implications (PDF 1123k).   Minutes from the kick-off meeting of the Experts Group on Non-Financial disclosure by Companies The European Commisssion's Expert Group on disclosure of non-financial information by EU companies held its first meeting on 11 July 2011. Minutes from that meeting are now available on the EC's website (PDF 40k). In November 2010, the Services of the Internal Market and Services Directorate General of the European Commission started a public consultation in order to gather stakeholders' views on ways to improve the disclosure by enterprises of non-financial information (e.g. social and environmental). The discussions of the expert group focused on four topics: "Norms, Principles and Guidelines", "Costs-benefits for companies", "Business Accountability" and "The Capital Market". The Experts are now invited to submit written comments on the issues discussed. The next meetings are expected to take place on 12 September and on 30 September 2011.   Deloitte and Carbon Disclosure Project collaborate on water disclosure Deloitte Touche Tohmatsu Limited (DTTL) and Deloitte Consulting LLP in the United States (together, "Deloitte") in collaboration with Carbon Disclosure Project (CDP), an independent not-for-profit organisation, have announced an agreement to drive CDP Water Disclosure. The goal of CDP Water Disclosure, launched in November 2009, is to help investors, companies, governments, and other stakeholders in their decision making by making meaningful, systematic, and comparable reporting on water usage a standard corporate practice globally. CDP, through its Water Disclosure Report, provides critical data from the world's largest corporations to inform the global marketplace on water-related investment risks and commercial opportunities. Other organisations, such as the Global Reporting Initiative (GRI) also include disclosure of water aspects in their guidelines. Click for press release (link to Deloitte.com website). More information about the CDP Water Disclosure programme is available on the CDP website.
July 2011
Carbon Disclosure Project issues white paper on verification of climate data The Climate Disclosure Project (CDP) has released a white paper entitled Verification of climate data. The white paper discusses the importance of data verification, its benefits to companies, and what companies need to consider around verification. Click for access to the white paper (link to CDP website).   AOSSG calls for acceleration of IASB's efforts on standards for emissions trading and similar schemes The Asian-Oceanian Standard-Setters Group (AOSSG) has written to the IASB calling for more resources to be devoted to the IASB's Emissions Trading Scheme project. The letter outlines the AOSSG's views on how to proceed with the project, as follows: Given the need for an authoritative standard on emissions trading schemes, the IASB should allocate more resources on the project and accelerate the standard setting process The IASB should expand the scope of the project so as to address issues in broad areas, inter alia, Cap and Trading Schemes, Baseline and Credit Schemes, Clean Development Mechanism project activities, and Certification of Renewable Energy and so forth Taking into account the significant degree of variations in practice, more outreaching activities and field testings should be conducted world-wide including the Asia-Oceania region before standards are finalised. The letter also outlines the AOSSG's preliminary observations in response to the IASB's preliminary views made in the emissions trading project to date. Click for the AOSSG letter (link to AOSSG website).   Recommendations on Australian moves towards integrated and sustainability reporting CPA Australia, one of the professional accounting organisations in Australia, has released a report entitled The Social Responsibility of Corporations – Recent trends and future developments in the promotion of responsible business practices. The report contains a number of recommendations in response to The social responsibility of corporations report by the Corporations and Markets Advisory Committee (CAMAC, a body constituted under the Australian Securities and Investments Commission Act 2001). The CPA Australia report provides views in light of developments since the issue of the CAMAC report in December 2006, and suggests a number of actions that should be considered in the areas of disclosure and promotion of responsible business practices. Included in the recommendations are the following items related to integrated and sustainability reporting: The Australian Government, through Treasury, should actively pursue developments in integrated reporting, particular given the International Integrated Reporting Committee's (IIRC) intentions to develop criteria for regional coverage and to present a framework proposal to the G20 November meeting in 2011. Further, that appropriate funding be provided to the Australian Accounting Standards Board (AASB) to pursue this major development in the national interest The Department of Sustainability, Environment, Water Population and Communities be provided with short-term funding to investigate the suitability of the Economics of Ecosystems and Biodiversity (TEEB) as a component in the development of current and future cycles of state of the environment reporting, and as a basis for assisting related environmental policy development (see our story on recent TEEB developments) That government agencies be required to prepare sustainability reports (prepared in accordance with current guidelines) and incorporate such reports in their annual reports to the Parliament of Australia That the government provide financial support for specific projects that might arise from time-to-time under the umbrella of GRI Focal Point Australia (the Australian Government announced a contribution of $400,000 over two years in June 2011) A Global Reporting Initiative National Annex or similar developed, with government assistance, that would assist in mapping the existing array of corporate environmental, social and governance (ESG) disclosures as a basis for simpler and more efficient reporting The government fund the establishment of a Sustainability Commission to set sustainability targets for Australia and monitor performance against those targets, and draft a sustainability charter to shape behaviour on sustainability. The Australian Financial Reporting Council (FRC) has recently formed a taskforce on integrated reporting and the matter is also expected to be discussed at the July 2011 AASB meeting. Click for access to the CPA Australia report (link to CPA Australia website).
June 2011
Singapore Exchange releases sustainability reporting guide The Singapore Exchange (SGX) has introduced a Sustainability Reporting Guide (the "Guide") for its listed companies. The release of the Guide follows a public consultation process that commenced in August 2010 regarding disclosure and accountability for operating and developing businesses in a sustainable manner (see our earlier story). Within the Guide, the Policy Statement sets out the principles and the Questions and Answers guide listed companies in extending their reporting beyond financial governance to sustainability aspects. The Guide references ISO 26000 Guidance on Social Responsibility and the Global Reporting Initiative (GRI) Sustainability Reporting Guidelines for listed companies seeking detailed guidance on sustainability reporting. The Policy Statement and Sustainability Reporting Guide are applicable to Mainboard and Catalist companies listed on SGX. The Guide is not mandatory, but the AGX encourages all its listed companies to consider sustainability reporting as an integral part of good corporate governance and notes "conceivably, there will be progress towards mandatory reporting through regulations and rules in the future". Both Policy Statement and the Guide are available on www.sgx.com (link to SGX website). Click for SGX announcement (link to the SGX website).   XBRL taxonomy for sustainability reporting to be developed Deloitte and the Global Reporting Initiative (GRI) have announced a collaboration to work on a new eXtensible Business Reporting Language (XBRL) taxonomy for sustainability reporting. The new XBRL taxonomy will enable organisations to deliver sustainability information in XBRL format, with the objective of enabling stakeholders to organise and access sustainability information in a much quicker and easier way. As with XBRL for financial reporting, the use of 'tagged' data will hopefully improve the quality and integrity of sustainability performance data, allowing investors, auditors and other report users to access and compare sustainability information without the need for excessive manual work. In related news, the Professional Accountants in Business (PAIB) Committee of the International Federation of Accountants (IFAC) and ISACA (the organisation responsible for developing international information systems auditing and control standards) have recently published Leveraging XBRL for Value in Organizations. This publication provides guidance on how to leverage the value of XBRL through effective implementation. It includes discussion of non-financial reporting, noting the inherent ability of XBRL to communicate a wide array of types of data, which supports a range of key performance indicators (KPIs) for performance and sustainability reporting (including reporting under the GRI guidelines). Click for: GRI press release (link to the GRI website) IFAC press release on the IFAC/ISACA publication (link to IFAC website) Our XBRL page.   Integrated reporting and sustainability reporting update Following is a summary of recent developments in integrated reporting, sustainability reporting, and related topics: IIRC European roundtable. The Federation of European Accountants (FEE) hosted a European Roundtable on Integrated Reporting for the International Integrated Reporting Committee (IIRC) on Friday 17 June 2011. Topics discussed included how to operationalise integrated reporting (including possible linkages with XBRL), the necessary framework for integrated reporting, and governance of the IIRC. More information is available on the FEE website IFRS Advisory Council consideration of Integrated Reporting. The IFRS Advisory Council meeting currently being held (see agenda below) is receiving a presentation from the IIRC on integrated reporting. The Agenda Paper (PDF 548k, link to IASB website) provides a useful summary of the IIRC's plans and the likely timetable for the issue of the IIRC Discussion Paper Integrated reporting study. Harvard Business School has released the outcomes on a study of integrated reporting. To determine the extent to which corporate and investor behaviour is changing to contribute to a more sustainable society, the state of integrated reporting in 23 countries was analysed, classifying various countries by both the extent of investor interest in integrated reporting and the level of integrated reporting by companies in that country. The report can be accessed on the Harvard Business School website Report on 'natural capital'. The University of Cambridge Natural Capital Leaders Platform, a business-led programme addressing the impacts of natural capital loss and degradation on business and wider society, has released a report arising from the initial phase of its work. The report highlights the need to integrate the economic importance of natural capital into the investment community (following the 2010 TEEB study), which will likely require mandatory regulation with sector-specific sub-directives to help to create an even playing field within the market. The report also recommends incorporating natural capital into national economic indicators. The summary report is available on the University of Cambridge website (PDF 637k) Carbon reporting in the UK. The United Kingdom Department for Environment, Food and Rural Affairs (DEFRA) has launched a public consultation (link to DEFRA website) seeking views on whether regulations should be introduced to make it mandatory for some UK companies to report on their greenhouse gas (GHG) emissions or whether the Government should continue to encourage measuring and reporting of GHG emissions on a voluntary basis. The Carbon Disclosure Project (CDP) has responded (link to CDP website) supporting the introduction of regulations requiring British businesses to report their GHG emissions.   IIRC calls for participants in its Integrated Reporting Pilot Programme The International Integrated Reporting Committee (IIRC) has called for expressions of interest from companies interested in participating in its Integrated Reporting Pilot Programme. The Pilot Programme is designed to assist the IIRC in the development of the Integrated Reporting framework over coming years. The IIRC hopes to test the principles and practicalities of Integrated Reporting through the Pilot Programme, with a view to creating a new global standard in Integrated Reporting in due course. The IIRC is intending to issue a Discussion Paper on Integrated Reporting in the third quarter of 2011. The Pilot Programme is being conducted in three phases. The deadline for lodgement of expressions of interest by companies willing to participate in all phases of the Pilot Programme is 30 June 2011, with expressions of interest for those wishing to join later stages of the programme closing on 29 July 2011. Click for more information (link to IIRC website).   OECD guidance on minerals includes disclosure of amounts paid to governments The Organisation for Economic Co-operation and Development (OECD) has published Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (Guidance). Its stated objective of the guidance is to help companies respect human rights and avoid contributing to conflict through their mineral sourcing practices. The Guidance is also intended to cultivate transparent mineral supply chains and sustainable corporate engagement in the mineral sector with a view to enabling countries to benefit from their natural mineral resources and preventing the extraction and trade of minerals from becoming a source of conflict, human rights abuses, and insecurity. An annex to the Guidance illustrates a 'Model Supply Chain Policy for a Responsible Global Supply Chain of Minerals from Conflict-Affected and High-Risk Areas', which includes the following requirements: Regarding the payment of taxes, fees and royalties due to governments: We will ensure that all taxes, fees, and royalties related to mineral extraction, trade and export from conflict-affected and high-risk areas are paid to governments and, in accordance with the company's position in the supply chain, we commit to disclose such payments in accordance with the principles set forth under the Extractive Industry Transparency Initiative (EITI). While not legally-binding, the guidance states it reflects the common position and political commitment of adhering countries. The disclosure of payments to governments has been a vexed issue from a financial reporting perspective and is also of relevance in sustainability or integrated reporting. For instance, the IASB's Discussion Paper DP/2010/1 Extractive Activities sought constituent feedback on the so-called 'Publish What You Pay' (PWYP) proposals. Click for more information (link to OECD website).
May 2011
OECD updates its Guidelines for Multinational Enterprises, includes disclosure The Organisation for Economic Co-operation and Development (OECD) has published a 2011 update to its Guidelines for Multinational Enterprises. The Guidelines were last updated in 2000 and include recommendations for responsible business conduct that 42 adhering governments encourage their enterprises to observe wherever they operate. The 2011 update includes specific consideration of the need for entities to comply with disclosure requirements, both from a financial and non-financial perspective. An extract from the guidelines follows: General policies The Principles call on the board of the parent entity to ensure the strategic guidance of the enterprise, the effective monitoring of management and to be accountable to the enterprise and to the shareholders, while taking into account the interests of stakeholders. In undertaking these responsibilities, the board needs to ensure the integrity of the enterprise's accounting and financial reporting systems, including independent audit, appropriate control systems, in particular, risk management, and financial and operational control, and compliance with the law and relevant standards. ... Disclosure Enterprises should apply high quality standards for accounting, and financial as well as non-financial disclosure, including environmental and social reporting where they exist. The standards or policies under which information is compiled and published should be reported. An annual audit should be conducted by an independent, competent and qualified auditor in order to provide an external and objective assurance to the board and shareholders that the financial statements fairly represent the financial position and performance of the enterprise in all material respects. Disclosure is addressed in two areas. The first set of disclosure recommendations calls for timely and accurate disclosure on all material matters regarding the corporation, including the financial situation, performance, ownership and governance of the company. ... The Guidelines also encourage a second set of disclosure or communication practices in areas where reporting standards are still evolving such as, for example, social, environmental and risk reporting. This is particularly the case with greenhouse gas emissions, as the scope of their monitoring is expanding to cover direct and indirect, current and future, corporate and product emissions; biodiversity is another example. Click for more information (link to OECD website).   FEE issues guide on sustainability reporting frameworks The Sustainability Group of the Federation of European Accountants (FEE) has issued a guide to commonly used sustainability reporting guidance documents when considering the identification and use of environmental, social and governance (ESG) indicators. The guidance documents selected by the FEE were based on relevance, involvement of European accountancy national institutions, international applicability, and range of technical observations at the international level. Due to a lack of consistency between the documents, FEE suggests a need to find a common methodology on how to use the various documents. In order to reduce the risk of missing material and relevant key performance indicators when deciding what information should be reported, FEE recommends an entity should use the following criteria: relevance, materiality, consistency and reliability. Click for Environmental, Social and Governance (ESG) indicators in annual reports — An introduction to current frameworks (PDF 1,273k, link to FEE website)   IIRC to publish Discussion Paper on Integrated Reporting in June The International Integrated Reporting Committee (IIRC) met in New York on Friday 13th May 2011. At the meeting, the IIRC reviewed a draft Discussion Paper on Integrated Reporting which is due to be published for public consultation in June. The IIRC has not widely publicised the expected contents of the Discussion Paper at this stage. However, at a Australian Business Reporting Leaders Forum (BRLF) meeting held in Sydney on 11 April 2011, Paul Druckman (Co-chair of the IIRC Working Group and Chairman of the Executive Board of HRH The Prince of Wales Accounting for Sustainability (A4S) project) provided an update on the draft Discussion Paper which had been debated at an IIRC working group meeting in London in April The minutes from the BRLF meeting (link to the Australian Society for Knowledge Economics website) outlined the current thinking which included, that at that time: Integrated reporting is still evolving; it will require changes in behaviour and a change in the reporting regime. It is a new way of thinking and reporting against short, medium and long term strategic objectives Integrated reporting is not combined reporting (of financial statements and corporate social responsibility reports), or additional. It is a new and integrated report The objective is to publish the Discussion Paper in June for public comment, and Exposure Draft in 2012, and potentially a Standard in 2013 (subject to IIRC ongoing Governance debate) In addition, it is expected that a pilot programme will run in parallel to trial aspects of the proposed framework over two years – to ensure it is pragmatic and doable. The IIRC is working towards presenting an integrated reporting proposal to the G20 later in 2011. Click for: IIRC announcement (link to IIRC website) More information about the BRLF meeting (link to the Australian Society for Knowledge Economics website – minutes, presentations and other documents are available towards the bottom of the page).   Australian forum discusses how integrated reporting can drive good governance CPA Australia and the Institute of Chartered Accountants in Australia, together with the Professional Accountants in Business (PAIB) Committee of the International Federation of Accountants (IFAC), hosted a forum for local professional accountants in Melbourne, Australia on 13 May 2011. The focus of the forum was on how professional accountants in business can support their organisations to improve governance practices through the integration of financial and non-financial information into their reporting, including a focus on environment, social, and governance (ESG) factors. The key conclusions of the forum were as follows: Integrated reporting needs to reflect an organisation's strategy and values, as well as how it is managed in social, environmental, and economic dimensions of performance The process of integrated reporting, in turn, is a powerful tool to help drive an organisation's strategic agenda, providing management with key drivers of performance Integrated reporting has to be open and transparent by reflecting both improvements in performance as well as weaknesses Pension fund investors, as well as some other institutional investors, are increasingly looking for financial implications of ESG factors to understand how an organisation's strategy and operations are affecting the numbers and key measures of performance. Click for IFAC press release (link to IFAC website).   GRI releases information about sustainability reporting The Global Reporting Initiative (GRI) has released information suggesting that more companies are having their sustainability reports assured, which is considered to result in more accurate and trustworthy data. GRI provides a comprehensive framework for producing sustainability reports, designed to allow entities to assess their sustainability performance and disclose the results in a similar way to financial reporting. According to statistics collected by GRI for 1 January to 31 December 2010, almost half of all sustainability reports globally are being assured. The proportion of sustainability reports being assured increased from 45 percent (510) in 2009 to 47 percent (664) in 2010. Click for GRI press release (link to GRI website).   GRI starts work on updated sustainability reporting guidelines, issues new proposed sector supplements The Global Reporting Initiative (GRI) publishes a 'Sustainability Reporting Framework', widely used by entities in reporting on their sustainability performance. The Framework includes Sustainability Reporting Guidelines (currently in their third version, or "G3 Guidelines") which entities can follow in preparing sustainability reports. The GRI has recently announced: Commencement of the process of developing the fourth generation of the Sustainability Reporting Guidelines ("G4"). The GRI is seeking comments on GRI's current guidance and suggestions for new topics for G4, and hopes to publish a draft of the guidelines in August 2011. Click for announcement (link to GRI website) A second draft of the 'Media Sector Supplement', a tailored version of the G3 Guidelines for the media sector. Feedback on the second draft closes on 4 August 2011. Click for announcement (link to GRI website) The final public comment period for the 'Oil and Gas Sector Supplement', a tailored version of the G3 Guidelines for the sector. Feedback closes on 20 July 2011. Click for announcement (link to GRI website).   Climate Disclosure Standards Board responds to financial institutions research The Climate Disclosure Standards Board (CDSB) has published a report entitled Financial Institutions, Taking Greenhouse Gas Emissions into Account. The report was commissioned and funded by the UK Department of the Environment, Food and Rural Affairs (DEFRA). The report is part of DEFRA's research into the contribution that greenhouse gas reporting makes to the UK achieving its climate change objectives. The report presents the results of an investigation into how financial institutions take account of environmental considerations in making investment decisions. The report recommends reporting policies should be introduced requiring, at the minimum: Companies to disclose their carbon emissions strategies and management programmes Relevant information disclosures to be audited in the same way as are company financial reports Financial institutions of all types to disclose the adjudged effect of taking environmental considerations into account on portfolio risk levels. The Climate Disclosure Standards Board (CDSB) was formed at the 2007 annual meeting of the World Economic Forum in response to increasing demands for standardised reporting guidelines on the inclusion of climate change information in mainstream reports. The CDSB's intended response to the report is reproduced below: CDSB's strategy for addressing the report findings CDSB's strategy and work plan includes various work streams designed to address the findings of the report, including: Further research and engagement with stakeholder through CDSB's engagement programmes Technical research into how companies set organizational boundaries and prepare climate change related information when subject to rules in multiple jurisdictions – this research is designed to help financial institutions to interpret disclosures Development of the Climate Change Reporting Framework to further align with accounting models with which organizations and investors are already familiar – "It is difficult to comprehend something that is not in companies' accounting models" Develop with CDP and other partners global interactive data standards to support presentation and analysis of information through information channels and in formats familiar to investors Continuing work with policy makers and international organizations to influence policy development to support greater uptake of environmental investing. Click for CDSB press release (link to CDSB website).   Guide to corporate ecosystem valuation released The World Business Council for Sustainable Development (WBCSD) has launched a Corporate Ecosystem Valuation (CEV) Guide. The Economics of Ecosystems and Biodiversity study (TEEB) introduced the concept of ecosystem valuation as a practical and influential aid to decision-making (see our earlier story). Going forward, ecosystem valuation is expected to be more consistently incorporated into public policies, regulations, and political decisions. Ecosystem values are also expected to be increasingly considered by the finance sector and business-to-business customers as they assess the biodiversity and ecosystem-related risks and opportunities of investments and supply chains. The CEV Guide to Corporate Ecosystem Valuation is designed to "operationalise" TEEB's key messages and recommendations by providing a practical approach for their effective application at the company level. The International Integrated Reporting Committee (IIRC) is working towards presenting an integrated reporting proposal to the G20 later in 2011 and the work of TEEB and the WBCSD may complement with the proposals presented. Click for: WBCSD press release (link to WBCSD website) Our earlier story on the TEEB report.   IAASB calls for comments on proposed 'overarching' assurance standard The International Auditing and Assurance Standards Board (IAASB) has released for public comment a proposed revised International Standard on Assurance Engagements (ISAE) 3000, Assurance Engagements Other Than Audits or Reviews of Historical Financial Information. The proposed ISAE 3000 is a principles-based standard that is designed to be applied effectively to a broad range of assurance engagements. Such engagements may range from assurance on statements about the effectiveness of internal control, for example, to direct engagements such as performance or 'value for money' audits, to possible future engagements addressing integrated reporting or corporate social responsibility reporting. Comments on the exposure draft close on 1 September 2011. Click for the IAASB announcement (link to IFAC website).
April 2011
Push for sustainability reporting The push towards the more widespread adoption of sustainability reporting continues, with two recent developments. The Global Reporting Initiative (GRI) has launched the 'Report or Explain Campaign Forum' to encourage more companies to be transparent about their impacts on the world. The Campaign Forum spotlights initiatives that are driving a 'report or explain approach' to sustainability reporting, and features an information bank on global policy developments. Carbon Action is a new investor led initiative from the Carbon Disclosure Project (CDP) to request companies to implement cost-effective greenhouse gas emissions reductions. The world's largest companies in the FTSE Global Equity Index Series (the Global 500) are being sent a request to join the Carbon Action programme. Companies will be asked to demonstrate their actions by disclosing them, including any examples of best practice, through the established 2011 CDP information system. The International Integrated Reporting Committee (IIRC) is working towards presenting an integrated reporting proposal to the G20 later in 2011, which may include a 'report or explain' regulatory proposal. The Climate Disclosure Standards Board (CDSB), of which the CDP is the Secretariat, and the GRI are both involved in the IIRC. Click for: GRI press release (link to GRI website) CDP press release (link to CDP website).   Responses to the EU consultation on disclosure of non-financial information by companies In November 2010, the Services of the Internal Market and Services Directorate General of the European Commission started a public consultation in order to gather stakeholders' views on ways to improve the disclosure by enterprises of non-financial information (e.g. social and environmental). In recent years, there have been calls to improve the comparability, reliability, and relevance of information disclosed by enterprises. The Commission has now posted to its website the responses received and a summary report of the consultation (link to EC website, please scroll down for comment letters and summary report). The report states: Half of the respondents describe the current regime applicable in their respective jurisdiction as poor or very poor. For many, the current EU legislative framework lacks transparency. [...] With respect to improving the current regime on non-financial disclosure, a majority of those suggesting improvements to the current situation considered that EU should draw on frameworks already developed at international level [e.g. GRI, UN Global Compact] rather than elaborate new standards and principles. [...] On the issue of which companies should be covered by enhanced requirements, the majority of respondents recognised the importance and relevance of company size. A significant majority argued in favour of excluding small businesses from mandatory requirements. The fact whether a company is listed on financial markets was not considered to be of great relevance.   IIRC to hold meeting in New York in May to discuss integrated reporting The International Integrated Reporting Committee (IIRC) will be meeting in New York City on Friday 13th May 2011. The key objective of the meeting will be to discuss and agree a Discussion Paper on Integrated Reporting that is to be released for business and investor testing and public consultation in June 2011 and plans to present proposals for an IR framework at the time of the G20 Finance Ministers meeting in October 2011. The IIRC is also undertaking a pilot programme is to give organisations the opportunity to test and provide feedback on the development of the Integrated Reporting framework. The initial phase of the pilot programme will involve company and investor testing of the Integrated Reporting Discussion Paper in June to July 2011. The initial phase will be followed by a full pilot programme which will commence in September 2011 for a two year reporting cycle. Click for: IIRC announcement (link to IIRC website) More information about the pilot programme (link to IIRC website).
March 2011
Leveraging sustainability initiatives for finance transformation Deloitte (United States) has released Toward greener pastures: How to leverage sustainability initiatives for finance transformation (PDF 132k). The report notes that sustainability, as it creates these new demands, can also become a catalyst for finance transformation initiatives intended to help the business grow, improve efficiency, and manage risk and compliance. The report identifies six key areas in which sustainability initiatives can trigger finance transformation and ways that those triggers can create opportunities to improve reporting, transparency, and business performance, as well as mitigate business risk. Click for Toward greener pastures: How to leverage sustainability initiatives for finance transformation (PDF 132k).   UNCTAD releases report on corporate governance reform The United Nations Conference on Trade and Development (UNCTAD) has released Corporate Governance in the Wake of the Financial Crisis – Selected international views, a compilation of perspectives on the corporate governance-related causes and remedies of the global financial crisis. Whilst many of the views expressed in the compilation are the personal views of the authors of each section, the report provides a summary of the overall 'key messages', including many regarding corporate governance in financial institutions and more generally, and shareholder rights. The International Accounting Standards Board (IASB), its governance and international convergence are also mentioned, including the need for global standards of financial reporting requirements. The messages directly relevant to financial reporting are reproduced below: There has been a recent international convergence in thinking about corporate governance problems and remedies, which to a large extent has been driven by multilateral financial reform efforts, such as those of the G20. International standard setting bodies can promote convergence by designing principles-based guidance that is globally applicable but can be implemented in particular national and regional contexts. Several national corporate governance reform efforts are, for the first time, using the language of 'sustainability' and 'stakeholder governance'. There is a need to transform the concept of 'sustainability' into more concrete measures of corporate performance and embed sustainability into a new model of 'stakeholder governance'. The report can accessed on the UNCTAD website (publication ID UNCTAD/DIAE/ED/2010/2).   GRI updates its Sustainability Reporting Guidelines The Global Reporting Initiative (GRI) has released its G3.1 Sustainability Reporting Guidelines ("G3.1"). The Guidelines are an essential part of GRI's Reporting Framework which provides guidance on how organisations can disclose their sustainability performance. G3.1 is an update and completion of the third generation of GRI's Sustainability Reporting Guidelines and includes expanded guidance for reporting on human rights, local community impacts, and gender. In conjunction with the new reporting guidelines, GRI has also released guidance to help companies determine what to measure and report on, called The Technical Protocol – Applying the Report Content Principles, designed to enable organisations to produce relevant reports more easily. More companies are choosing to produce the GRI guidelines in producing a sustainability report. For instance, 17 out of 18 members of the International Council on Mining and Metals (ICMM), which includes many of the world's biggest resources companies, disclosed social and environmental data in line with GRI standards in 2010. Click for: GRI press release (link to GRI website) More information on the G3.1 guidelines (link to GRI website) ICMM press release (link to ICMM website).   Second edition of IFAC's Sustainability Framework incorporates integrated reporting The Professional Accountants in Business (PAIB) Committee of the International Federation of Accountants (IFAC) has released the second edition of the IFAC Sustainability Framework. The IFAC Sustainability Framework provides guidance on embedding sustainability into an organisation and can be applied to entities of all sizes and complexities. IFAC considers the accountancy profession and professional accountants as an essential part of ensuring organisations better integrate and account for sustainability. The second edition of the Framework extends the first edition's theme of integration from a business strategy and operational perspective to that of an integrated reporting perspective. The reporting perspective has been updated to provide guidance on how to improve stakeholder communications, based on sustainability reporting and providing an integrated view of environmental, social, and financial performance. (See also our earlier story on IFAC's report highlighting significant changes to financial reporting.) An extract from the Framework in relation to financial reporting is outlined below: How professional accountants and their organizations can facilitate improved reporting Developing a reporting strategy to enable high-quality reporting and disclosure that provides a complete picture of an organization's performance for a range of stakeholders Reflecting sustainability impacts in financial statements, particularly focusing on environmental impacts on assets, liabilities, income, and expenditure [includes a discussion on IFRSs relevant to environmental issues] Narrative reporting for enhanced transparency and closing the reporting gap that occurs when information that is important in running an organization is not captured in financial statements Understanding and reconciling approaches to applying materiality to sustainability reporting Establishing an approach to external assurance and review that adds credibility to an organization's reporting, and provides internal benefits such as helping to improve underlying reporting processes. The G20 is expected to consider a call for integrated reporting later in the year. IFAC's Sustainability Framework 2.0 can be accessed through the IFAC website. Click for IFAC press release (link to IFAC website).   You Can Only Manage What You Recognise Accounting for sustainability and the integrated reporting which will bring it about is gaining traction around the world. As our regular resident columnist Robert Bruce reports, companies need to think long-term but act now. Click for The Bruce Column.   IFAC report recommends 'fundamental changes' to financial reporting The International Federation of Accountants (IFAC) has published a report Integrating the Business Reporting Supply Chain based on interviews with leading business figures around the world which points to the need for significant changes in financial reporting. 'Elemental changes to the current format of financial reporting need to be made to increase its relevance and stakeholder value and stem the increasing complexity that has plagued financial reporting in recent years', it says. Those changes should include: 'developing a new form of reporting that integrates an organization's social and environmental performance with its economic performance, in a simplified manner'. Click for IFAC press release (link to IFAC website).   United Nations Global Compact launches 'Differentiation Programme' on sustainability performance and reporting The United Nations (UN) Global Compact has officially launched the 'Differentiation Programme', a practical framework to help business participants improve sustainability performance and disclosure practices. The UN Global Compact is a voluntary corporate responsibility initiative which currently involves over 8700 corporate participants and other stakeholders from over 130 countries. The UN Global Compact seeks to ensure participating businesses commit to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labour, environment and anti-corruption. The eighth principle involves undertaking initiatives to promote greater environmental responsibility and includes consideration of communication and reporting tools such as corporate environmental reporting and sustainability reporting. Participants in the Global Compact submit an annual Communication on Progress (COP) describing their levels of implementation of the ten Global Compact principles and related areas. The Differentiation Programme framework, partially developed in collaboration with the Global Reporting Initiative (GRI), allows companies to differentiate themselves based on the extent to which their COP describes their implementation. Upon submitting their next COPs, companies will be categorised as "GC Active" or can self-declare themselves "GC Advanced" based on their disclosure on progress made in implementing the ten principles and contributing to broader UN goals. In an effort to demonstrate the synergies between the Global Compact and the GRI, the two initiatives are working together to imbed the GRI Sustainability Reporting Guidelines ("GRI Guidelines") at both levels of the differentiation programme. Click for UN Global Compact press release (link to UNGC website). Further information about GRI's participation in the initiative can be found in this GRI article (link to GRI website).   World Economic Forum report focuses on sustainable investing The World Economic Forum (WEF) has released Accelerating the Transition towards Sustainable Investing – Strategic Options for Investors, Corporations and other Key Stakeholders. The paper asks 'What are key pathways for investors, corporations and other key stakeholders in the investment value chain to accelerate the transition towards sustainable investing?' The report notes that financial markets have great potential to accelerate the transition towards sustainable business practices and sustainable models of economic development, to further stimulate the integration of environmental, social and governance (ESG) factors into mainstream investment analysis. Whilst the report focuses on a wide range of possible initiatives, accounting bodies are seen as key players in developing standards for ESG disclosure and stimulating integrated reporting. Click for access to the report (link to WEF website).
February 2011
GRI responds to EC consultation on disclosure of non-financial information The Global Reporting Initiative (GRI) has submitted a reply to the public consultation of the Services of the Internal Market and Services Directorate General of the European Commission on stakeholders' views on ways to improve the disclosure by enterprises of non- financial information (e.g. social and environmental). In line with other responses GRI states that companies' stakeholders, including directly affected communities and the public at large, need comprehensive and credible information on corporate social and environmental impacts to identify problems with and monitor progress of the companies they deal with. GRI observes that the current system does not create a level playing field among business, as in most EU countries reporting by companies on their non-financial impacts is voluntary. Yet GRI also warns that the European Commission need not "reinvent the wheel" since there already are "guidelines that enable all companies and other organizations to produce comparable reports on their sustainability performance". According to GRI what is needed is mandatory application, not new standards. Click for: GRI press release (link to GRI website).   World Economic Forum discusses integrated reporting The 2011 Annual Meeting of the World Economic Forum (WEF), recently held in Davos-Klosters, included a session entitled 'Accounting for New Realities: Redesigning Corporate Reporting'. Participants debated the merits and challenges of adopting a new framework for an integrated corporate reporting system for the 21st century. Coming out of the global financial crisis, there is an ongoing debate on the relevance of corporate reporting and whether it should include such externalities as environmental, social and governance performance. Increasingly, companies are producing, mostly on a voluntary basis, corporate social responsibility or sustainability reports, but these can vary widely in relevance and quality, largely because there is no global standard. A summary of the outcomes from the session is reproduced below (with the kind permission of the WEF): Key points There is a certain degree of deficiency in today's corporate reporting models Any new accounting format should focus on internalising externalities, such as environmental and social impacts Good thought leadership is needed to further the debate on developing a concise, comprehensive and comparable integrated reporting framework. Source: World Economic Forum Annual Meeting 2011 Click for: WEF session summary (link to WEF website) Deloitte at Davos: 2011 participation.   New sustainability resources and proposals from the Global Reporting Initiative The Global Reporting Initiative (GRI) publishes a widely used 'Sustainability Reporting Framework'. The Framework includes Sustainability Reporting Guidelines (currently in their third version, or "G3 Guidelines") which entities can follow in preparing sustainability reports. The GRI has recently publicly issued a number of documents and resources: a new "G3 Checklist" designed to help reporting organisations further implement the guidelines in their sustainability reporting a draft Construction and Real Estate Sector Supplement, sector-specific sustainability reporting guidance for organisations in these fields progress towards a Oil and Gas Sector Supplement, a version of the G3 Guidelines tailored for the oil and gas sector (the final draft Supplement is expected to be released around March 2011) Arabic and Bulgarian translations of the Level C Reporting template, which can be used to prepare a basic sustainability report (other translations are also available). The GRI website can be accessed at www.globalreporting.org.
January 2011
Harvard Business School e-book on integrated reporting Harvard Business School has made available a free e-book entitled The Landscape of Integrated Reporting: Reflections and Next Steps. On 14-15 October 2010, "A Workshop on Integrated Reporting: Frameworks and Action Plan" was held at the Harvard Business School, which discussed the concept of integrated reporting, what its contribution could be to creating a more sustainable society, and what must be done to ensure its rapid and broad adoption in a high quality way. Attendees included companies, analysts and investors, NGOs, regulators and standard setters, accounting firms, technology and data vendors, academics, students, and civil society. Following the workshop, the Harvard Business School decided to publish a free "e-book". Everyone who attended the workshop was invited to write a contribution for the book, which saw 64 pieces contributed totalling some 110,000 words. The objective of the book is to capture the current state of integrated reporting in the world, highlight the critical issues that must be addressed to ensure its rapid and broad adoption, and offer many good suggestions for an effective action strategy to make this happen. With the International Integrated Reporting Committee (IIRC) aiming to issue an international discussion paper later in 2011 and include integrated reporting on the agenda of the G20 meeting in November 2011, the e-book may be useful reading for those interested in understanding the developing push towards integrated reporting. The e-book can be accessed for free through the Smashwords website. The Harvard Business School has also published an Executive summary (link to HBS website, PDF 2130k) of the workshop.   South Africa releases integrated reporting guidelines The Integrated Reporting Committee' (IRC) of South Africa has released for comment a Discussion Paper Framework for Integrated Reporting and the Integrated Report. In February 2010, the Johannesburg Stock Exchange (JSE), through its Listings Requirements, made it compulsory for all listed companies to comply with the King Code of Governance Principles for South Africa 2009 ("King III"), which includes the requirement for a company to produce an integrated report for its financial year starting on and after 1 March 2010, or to explain why it was not doing so. The IRC was established in May 2010 to develop guidelines on good practice in integrated reporting in meeting these requirements. The IRC Discussion Paper is designed to provide principles and guidance on the creation of an integrated report. It discusses the key reporting principles (scope, boundaries, content), suggested elements to be included in the integrated report and assurance on reported information. An extract from the Discussion Paper follows: "... the overarching objective of integrated reporting is to enable stakeholders to assess the ability of an organisation to create and sustain value over the short-, medium- and long-term. The users of an organisation's integrated report should be able to determine from the report whether the organisation's governing structure has sufficiently applied its collective mind in identifying the social, environmental, economic and financial issues that impact on the organisation's business, and whether these issues have been appropriately incorporated into its strategy. An integrated report is not simply an amalgamation of the financial statements and the sustainability report. It incorporates, in clear language, material information from these and other sources to enable stakeholders to evaluate the organisation's performance and to make an informed assessment about its ability to create and sustain value. An integrated report should provide stakeholders with a concise overview of an organisation, integrating and connecting important information about strategy, risks and opportunities and relating them to social, environmental, economic and financial issues." The International Integrated Reporting Committee (IIRC), formed in July 2010, also aims to issue an international discussion paper later in 2011 and include integrated reporting on the agenda of the G20 meeting in November 2011. However, the urgent need for guidance in South Africa has seen the issue of the Discussion Paper in advance of global initiatives, and may be a useful indicator of what may emerge globally. The Discussion Paper is open for comment until 25 April 2011. Click for press release (link to Sustainability SA website, Word document).   Financial institutions call for more climate change information The United Nations Environment Programme Finance Initiative (UNEP FI) and the Sustainable Business Institute Germany (SBI) have released a report, Advancing adaptation through climate information services – Results of a global survey on the information requirements of the financial sector. The report, sponsored by the German Federal Ministry of Education and Research, presents the results of an international survey undertaken by the Climate Change Working Group (CCWG) of the UNEP FI and the SBI. More than 60 institutions, from both developed and developing countries, took part in the survey. The report concludes the availability of and access to climate change information remains insufficient. It notes the increasing financial relevance of climate change and highlights the fact that insurers and lenders need better information regarding the physical and economic impacts of the world's changing weather patterns. The survey identified that information gaps can be closed by continued research towards more reliable climate modelling and forecasting, as well as enhanced translation of scientific knowledge and existing information into user-friendly information. Click for press release (link to United Nations Environment Programme website).   GRI publishes sustainability reporting guidelines in Arabic, launches Focal Point USA The Global Reporting Initiative (GRI) has announced the launch of the GRI Sustainability Reporting Guidelines in Arabic. The new Arabic Guidelines are a result of collaboration between GRI and The Egyptian Corporate Responsibility Center (ECRC). The GRI Sustainability Reporting Framework is designed to enable large and small companies, non-profit organisations and government bodies worldwide to assess their sustainability performance and disclose the results. The Arabic Guidelines will enable organisations in the Middle East to be more transparent about their sustainability performance, supporting GRI's goal to "mainstream" sustainability reporting worldwide. Also, GRI's Focal Point USA will be officially launched at the New York Stock Exchange on Monday 31 January 2011. The Focal Point USA began operations in October 2010 and aims to address the needs of the unique marketplace in the USA and to boost the quality and quantity of sustainability reports coming from US organisations. The rapidly upward trend in sustainability reporting globally, and particularly in Europe, has not been mirrored in the USA yet. Click for GRI press releases (links to GRI website): GRI press release on new Arabic Guidelines GRI press release on new Focal Point USA.   IAASB proposes assurance standard to strengthen reporting on greenhouse gases The International Auditing and Assurance Standards Board (IAASB) released for comment a proposed new International Standard on Assurance Engagements (ISAE) 3410 Assurance Engagements on Greenhouse Gas Statements. The proposed standard addresses the practitioner's responsibilities in identifying, assessing, and responding to risks of material misstatement, and contains illustrative assurance reports on greenhouse gas statements. The proposed requirements and guidance also recognise that most engagements will be undertaken by a multidisciplinary team, so they address the need for the assurance practitioner to integrate experts – in engineering or environmental science, for example – into various stages of the engagement. Comments on the exposure draft are requested by 10 June 2011. Click for IAASB press release (link to IFAC website).   IIRC round table series on integrated reporting The International Integrated Reporting Committee (IIRC) has launched a series of round tables to be held in different regions in order to inform stakeholders about the IIRC's work and enable them to share their thinking on integrated reporting with the IIRC. The first of the round table events is to be held on 19 January 2011 in Mumbai. The IIRC round table will be part of the "Responsible Investment: Mainstreaming of Environmental, Social, Governance Factors" event hosted by German Development Corporation (Deutsche Gesellschaft für Technische Zusammenarbeit, GTZ) and the India focal point of the The Global Reporting Initiative (GRI). The International Integrated Reporting Committee (IIRC) was formed in August 2010 and aims to create a globally accepted framework for accounting for sustainability, bringing together financial, environmental, social and governance information in an "integrated" format. Click for: IIRC press release including event programme (link to IIRC website) GTZ press release (link to GTZ website).
December 2010
2010 Corporate Responsibility Report Deloitte has published its 2010 Corporate Responsibility Report. The report has been checked by the Global Reporting Initiative (GRI) and also serves as Deloitte's Communication on Progress to the United Nations Global Compact for 2009-2010. The performance measures for community investment and environment are based on widely recognised guidelines and offer an example of which performance measures and data can be used in integrated reporting: For reporting on community investment, standards from the Committee Encouraging Corporate Philanthropy and the London Benchmarking Group were observed: The monetary value of community activities by member firm people was estimated according to the type of service performed. The value of volunteer work is based on local member firms' staff cost. Pro bono work, defined as work that the member firms might otherwise sell but that was performed for free or at a discount below firm cost, has been valued at local member firms' market rate for client service, less whatever fees organisations might have paid. Estimates of carbon emissions were prepared according to the Greenhouse Gas Protocol created by the World Resource Institute and the World Business Council for Sustainable Development. Deloitte and the member firms have applied the most recent, authoritative, and locally specific carbon dioxide emissions factors available for the countries in the report's scope. Performance data was obtained from financial reporting systems, other internal records, and outside sources such as travel agencies, utilities, and property managers. Click for access to Deloitte's 2010 Corporate Responsibility Report.   Survey on accounting for sustainability practices released by CIMA, AICPA and CICA The Chartered Institute of Management Accountants (CIMA), the American Institute of Certified Public Accountants (AICPA), and the Canadian Institute of Chartered Accountants (CICA) have released Evolution of corporate sustainability practices – Perspectives from the UK, US and Canada, a survey measuring the state of accounting for sustainability in the UK and North America. CIMA, AICPA, and CICA surveyed organisational leaders and conducted interviews with sustainability executives from leading organisations to examine key characteristics of business sustainability, and the level of finance function involvement in corporate sustainability initiatives. Although the results may reflect a higher degree of interest in sustainability among respondents who opted to participate in the survey (and so may not necessarily reflect the entire population), the survey is of interest as the global financial community pushes towards more integrated reporting. Key findings include: Although compliance with regulatory requirements still remains the most common driver of business sustainability, profitability and other strategic factors are also significant Large companies have more robust sustainability capabilities than small companies Contributions by an entity's finance function to sustainability programs are highly valued, yet underdeveloped UK based organisations appear to be ahead in implementing sustainability practices and finance function involvement compared to their North American counterparts. Click for press release (link to CICA website). The report is available at www.cica.ca/sustainability. CIMA, AICPA and CICA are all founding members of the Accounting Bodies Network of the Prince's Accounting for Sustainability (A4S) Project, which is meeting in London. The Princes of Wales' speech to the meeting is available here. An excerpt: "The new integrated reporting model which the IIRC [International Integrated Reporting Committee] is helping to develop will address each of these issues – the failure to value and price our natural capital, the narrowness and retrospective emphasis of most accounting information and our disproportionate focus on the short-term. ...my A4S Project's main achievement in 2010 was helping to establish the IIRC. And I very much hope that one of its main achievements in 2011 will be working out how we can better value natural capital. As soon as possible we have to start putting a price on the multi-trillion dollar contribution that natural capital makes to the world's economy. The problem is time is simply not on our side, but the task is not impossible."   OECD and GRI form partnership to promote sustainability reporting The Global Reporting Initiative (GRI) and the Organisation for Economic Co-operation and Development (OECD) have announced a Memorandum of Understanding forming a partnership which aims to give companies greater guidance and support on how to conduct their business responsibly and report on their sustainability performance. The partnership is designed to help companies make greater use of the OECD Guidelines for Multinational Enterprises and the GRI Sustainability Reporting Framework, with the objective of bringing increased coherence and consistency to their efforts to act more responsibly and be more transparent about their sustainability. The OECD Guidelines for Multinational Enterprises and the GRI Sustainability Reporting Framework are based on and promote the same internationally agreed standards and principles for responsible business conduct, including social and human rights and economic and environmental matters. The GRI Sustainability Reporting Framework provides guidance on how to measure sustainability performance and the OECD Guidelines for Multinational Enterprises provides a benchmark to assess such performance. Click for: OECD/GRI press release (link to OECD website) OECD Guidelines for Multinational Enterprises (link to OECD website) GRI Sustainability Reporting Framework.   IFAC and A4S community website on sustainability reporting The International Federation of Accountants (IFAC) and The Prince's Accounting for Sustainability Project (A4S) have created a 'community website' on sustainability reporting. The objective of the website is to help business leaders, finance professionals, academics, professional accountancy bodies and others exchange ideas and share good practice on how environmental and social performance can be better connected with strategy and financial performance, and embedded into day-to-day operations and decision-making. One of the aspects of the site is a discussion forum on various topics. The forum is currently discussing "Accountants and integrated reporting - A look at key challenges". This online discussion is focused on reflections from the World Congress of Accountants held in Kuala Lumpur in November 2010 and seeks to answer the question "Integrated reporting means different things to different people. What do you think 'integrated reporting' should look like?" The outcomes from the discussion are expected to be passed onto the International Integrated Reporting Committee (IIRC) to take into account in its activities and recommendations on integrated reporting during 2011. Click for IFAC/A4S community website on sustainability reporting.
November 2010
EC consultation on disclosure of non-financial information by companies The Services of the Internal Market and Services Directorate General of the European Commission are conducting a public consultation in order to gather stakeholders' views on ways to improve the disclosure by enterprises of non-financial information (e.g. social and environmental). In recent years, there have been calls to improve the comparability, reliability, and relevance of information disclosed by enterprises. A better focus on sustainability issues by companies and investors could help European companies respond to, and derive business opportunities from, long-term global challenges, such as increased global competition, resource shortages, climate change, and the fight against poverty. Better disclosure of social and environmental information could enhance the accountability of enterprises, and so contribute to higher levels of trust in business on the part of citizens. On the other hand disclosure of more non-financial information may unduly increase the administrative burden of companies, adding to the length of annual reports which are already considered by many to be too long. In this context, the EC is conducting the consultation that can be accessed here.   Canadian publication and webcast on CSA environmental reporting guidance On 27 October 2010, the Canadian Securities Administrators (CSA) issued CSA Staff Notice 51-333 Environmental Reporting Guidance. The result of a multi-stakeholder development process, the guidance provides report issuers with important insights into environmental disclosure and compliance requirements. Deloitte (Canada) recently published Environmental Reporting Guidance: CSA Staff Notice 51-333 - What does it mean, why does it matter and where do you go from here? The report outlines key insights from the new guidelines, provides key questions to consider, and includes a step-by-step response to prepare, implement, and govern effective environmental disclosure. The publication is available in both English (PDF 146k) and French (PDF 846k). In addition, on Wednesday, 8 December 2010, Deloitte (Canada) will be hosting a webcast in conjunction with Tory's LLP and the Ontario Securities Commission (OSC) to share perspectives on the guidance. Details are below: Topic: CSA Staff Notice 51-333 – Environmental Reporting Guidance: How will it affect you? Date and time: Wednesday, 8 December 2010, 11:00 am - 12:30 pm EST (CA) More information on the webcast and registration: click here Click for: Environmental Reporting Guidance: CSA Staff Notice 51-333 - What does it mean, why does it matter and where do you go from here? (English, PDF 146k) Avis 51-333 du personnel des ACVM: Indications en matière d'information environnementale - En quoi est-ce important? Quelles en sont les conséquences? (French, PDF 846k) CSA press release on CSA Staff Notice 51-333 (link to CSA website) CSA Staff Notice 51-333 (link to Ontario Securities Commission website) Our Canada country page.   CSA issue additional environmental reporting guidance The Canadian Securities Administrators (CSA) have published CSA Staff Notice 51-533 Environmental Reporting Guidance. The Notice should assist issuers in assessing which information must be disclosed on material environmental matters, such as risks related to weather patterns or environmental legislation. It provides guidance on compliance with disclosure rules in the following areas: Environmental risks and related matters; Environmental risk oversight and management; Forward-looking information requirements as they relate to environmental goals and targets; and Impact of adoption of International Financial Reporting Standards (IFRSs) on disclosure of environmental liabilities. The Staff Notice notes that IFRSs contain some important differences from Canadian GAAP for recognition and measurement of provisions (including environmental provisions) and offers a detailed comparison. Click for CSA press release (link to CSA website), CSA Staff Notice 51-533 (link to Ontario Securities Commission website) and our Canada country page.
September 2010
Singapore Exchange encourages sustainability reporting Singapore Exchange ("SGX") has issued a proposed "Policy Statement on Sustainability Reporting" and accompanying Guide for SGX listed companies to use in formulating their sustainability reporting. The proposed sustainability reporting is voluntary. SGX is of the view that as more companies become inspired to adopt sustainability reporting, it will be natural to take the next step on guidelines and standards leading to rules. Following is an extract from the proposed guidelines: The Exchange encourages the adoption of internationally accepted reporting frameworks, such as the Global Reporting Initiative (GRI) Reporting Framework, in disclosing the issuer's sustainability performance. The GRI Reporting Framework is universally applicable to all organisations and sets out general principles and indicators that issuers can use to measure and report their economic, environment and social performance. The proposals are open for comment until 29 October 2010. Click for: SGX press release (link to SGX website) Access to the proposed Policy Statement and Guidelines (link to SGX website) Our Singapore country page.
August 2010
International Integrated Reporting Committee (IIRC) formed to pursue sustainability accounting framework The Prince's Accounting for Sustainability Project (A4S) and the Global Reporting Initiative (GRI) have announced the formation of the International Integrated Reporting Committee (IIRC). The IIRC aims to create a globally accepted framework for accounting for sustainability, bringing together financial, environmental, social and governance information in an "integrated" format. The IIRC brings together a cross section of representatives from civil society and the corporate, accounting, securities, regulatory, NGO, IGO and standard-setting sectors. It comprises a Steering Committee and a Working Group. The Steering Committee is chaired by Sir Michael Peat, Principal Private Secretary to TRH The Prince of Wales and the Duchess of Cornwall. Membership of the IIRC Steering Committee includes Sir David Tweedie (IASB Chairman), Robert H. Herz (FASB Chairman), Jane Diplock, (Chairperson, IOSCO Executive Committee), Robert Bunting (IFAC President), Jim Quigley (Chief Executive Officer of Deloitte), and many others. More information about the IIRC follows: Purpose of the IIRC The IIRC is being created to respond to the need for a concise, clear, comprehensive and comparable integrated reporting framework structured around the organisation's strategic objectives, its governance and business model and integrating both material financial and non-financial information. The objectives for an integrated reporting framework are to: support the information needs of long-term investors, by showing the broader and longer-term consequences of decision-making reflect the interconnections between environmental, social, governance and financial factors in decisions that affect long-term performance and condition, making clear the link between sustainability and economic value provide the necessary framework for environmental and social factors to be taken into account systematically in reporting and decision-making rebalance performance metrics away from an undue emphasis on short term financial performance bring reporting closer to the information used by management to run the business on a day-to-day basis. Role of the IIRC The role of the IIRC is to: raise awareness of this issue and develop a consensus among governments, listing authorities, business, investors, accounting bodies and standard setters for the best way to address it develop an overarching integrated reporting framework setting out the scope of integrated reporting and its key components identify priority areas where additional work is needed and provide a plan for development consider whether standards in this area should be voluntary or mandatory and facilitate collaboration between standard-setters and convergence in the standards needed to underpin integrated reporting promote the adoption of integrated reporting by relevant regulators and report preparers. Click for press release (PDF 66k). The IIRC website can be accessed at www.integratedreporting.org.
July 2010
TEEB study calls for integration of biodiversity information into annual reports The Economics of Ecosystems and Biodiversity (TEEB) study is an international initiative to draw attention to the global economic benefits of biodiversity, to highlight the growing costs of biodiversity loss and ecosystem degradation, and to draw together expertise from the fields of science, economics and policy to enable practical actions moving forward. TEEB is hosted by the United Nations Environment Programme and supported by the European Commission, the German Federal Environment Ministry, the UK Government's Department for Environment, Food and Rural Affairs, UK Department for International Development, Norway's Ministry for Foreign Affairs; The Netherlands' Interministerial Program Biodiversity, and the Swedish International Development Cooperation Agency. TEEB – The Economics of Ecosystems and Biodiversity – Report for Business has been released, calling for more information to be provided in annual reports about biodiversity and ecosystem services (BES) impacts. Chapter 3 of the report describes recent initiatives to enable businesses to measure, value and report their impacts and dependencies on biodiversity and ecosystem services, and outlines further work needed in this area. The report notes the IASB's existing recognition requirements are 'disconnected' from biodiversity reporting. The report also calls for biodiversity information to be more integrated into annual reports. The full report is available at The Economics of Ecosystems and Biodiversity website. An extract: Financial accounting standards and BES Financial accounting and reporting differs from life cycle accounting, environmental performance measurement, and other types of management accounting in that it is primarily intended to serve external audiences rather than internal users. Defining the purpose of financial reporting in terms of the needs of a narrow class of stakeholders – i.e. investors and lenders – influences the extent to which such reporting can address issues such as BES. This is because the criteria developed to ensure relevant and reliable financial reporting for the purposes highlighted above are almost inevitably framed in such a way as to exclude so-called 'intangible' issues, such as BES impacts or dependencies. At the heart of this disconnect is the accounting concept of 'recognition'… The vast majority of ecosystem services and the vast bulk of biodiversity fall outside these recognition criteria and are thus neither accounted for internally by organisations (in the public or private sectors) nor are they (or management's stewardship of them) reported externally in conventional financial statements. Integrated reporting Increasingly, many stakeholders are exploring how to integrate financial and non-financial information in a single report that provides a balanced and meaningful picture of a company. Alongside the pioneering efforts of individual companies, other networks and standards bodies are also exploring how to promote more integrated reporting. With respect to BES, the challenge is how to manage and track information within a company and how to ensure that the economic values of BES are properly reflected at a level of detail that can influence corporate financial analysis.
March 2010
Notes from IFRS Foundation Trustees meeting The Trustees of the IFRS Foundation (formerly IASC Foundation) are meeting in London on 30-31 March 2010. The meeting on 30 March is open to public observation. Presented below are the preliminary and unofficial notes taken by Deloitte observers at the 30 March session. The Trustees will hold a public meeting with the Monitoring Board on 1 April. Meeting of the Trustees of the IFRS Foundation, 30 March 2010, London [Extract relevant to sustainability reporting] IFRS Foundation Review Tom Seidenstein, IFRS Foundation Chief Operating Officer, noted that the Trustees had agreed to undertake a full strategic review of the IFRS Foundation for the period immediately after June 2011. This review would likely address the period 2011-2016 and would involve public consultation with all stakeholders and involve the Monitoring Board. In deciding the broad topics that will form the basis for the review, Trustees clarified staff proposals and offered suggestions about the broader context. For example, if the IASB completes the 2011 suite of Standards successfully, it would be appropriate that the Trustees seek to enforce the IFRS brand and promote consistency of application of the Standards. In addition, the Trustees should consider what corporate reporting might look like in 2016 and consider the IASB's involvement (if any) with such areas as sustainability and carbon reporting. These topics would be in addition to the fundamental issues of governance and funding. The assistance and expertise represented on the Advisory Council would be instrumental in both framing and executing the review. As a result of the discussions, the Trustees agreed that the strategic review should concentrate on three major themes: governance, oversight and effectiveness of the IFRS Foundation and related bodies; funding the organisation; and enhancing stakeholder engagement. The full notes from the meeting are available Here.   International standards crucial to investors and financial stability The International Federation of Accountants (IFAC) has published its Third Annual Global Leadership Survey. More than 110 presidents and chief executive officers from IFAC's member bodies, associates, and regional accountancy organisations participated in the survey. Those global leaders of the profession felt that the adoption, implementation, and enforcement of international financial standards is crucial to investor protection and financial stability. Here are a few excerpts relevant to international standards: Looking forward, respondents identified a number of areas they expect to be of growing interest to the accountancy profession, including addressing the needs of SMEs and the role of SMPs, progressing corporate social responsibility, including sustainability, transitioning to International Standards on Auditing (ISAs), and dealing with a changing regulatory landscape. Respondents believe that it is very important for IFAC to influence the way the world feels about the standards and practices used by the accountancy profession. In particular, nearly all respondents (98%) believe that it is 'Very important' or 'Important' for IFAC to influence confidence in international standards, as well as their adoption, implementation, and enforcement (of IFAC-published standards and International Financial Reporting Standards [IFRSs]). In the coming three years, respondents believe that it will be important for IFAC to continue to influence the outcomes relating to international standards. The effective implementation of IFRS for SMEs, issued by the International Accounting Standards Board (IASB), was selected as an area where IFAC should increase its influence. The Global Leadership Survey Report is copyrighted by IFAC and posted on IAS Plus with IFAC's kind permission. Click for: Global Leadership Survey Report (PDF 679k) IFAC Press Release (PDF 26k) IFAC Web Page with Policy Position Papers and Reports
February 2010
Deloitte paper on 'cap and trade programs' Deloitte's Climate Change and Sustainability Services team has published a paper on Cap and Trade Programs for Greenhouse Gas. Concern for the potential implications of climate change is leading governments to consider policies and programs designed to reduce greenhouse gas emissions. Cap and trade programs are one option that is considered to be effective in creating a financial incentive for emissions reductions for large emitters in industrial sectors. The purpose of the paper is to present the key characteristics of greenhouse gas emissions cap and trade programs. A knowledge of cap and trade mechanisms is essential to understanding the impact on business, including carbon management, accounting, and tax implications. The IASB's Emissions Trading Schemes Project The IASB has on its agenda a project on Emissions Trading Schemes. The goal of that project, being conducted jointly with the US FASB, is to develop comprehensive guidance on the accounting for emissions trading schemes. The Board has decided tentatively that if an entity receives emission allowances free of charge from the government: The entity should recognise the allowances as assets and measure them initially at fair value. Because the entity incurs an obligation to reduce its emissions below the level represented by those allowances (ie its cap), the entity should recognise a liability that represents its promise to pay allowances throughout the commitment period. The liability exists irrespective of whether the entity has already emitted. Click to download Cap and Trade Programs for Greenhouse Gas (PDF 1,123k).
December 2009
Call for sustainability disclosure standards More than a dozen accountancy institutes around the world have jointly written an open letter to the political leaders attending the Copenhagen Convention on Climate Change calling for a single set of universally accepted standards for climate change related disclosures. The signatories believe that an 80% reduction in greenhouse gas emissions by 2050, supported by the G8 summit in July 2009, requires clear measurement and disclosure standards. They call on the political leaders in Copenhagen to endorse the establishment of an independent standard setting body to develop universal standards for those disclosures. And they urge development of an assurance standard for sustainability disclosures. Click to Download the Open Letter (PDF 159k). Here is an excerpt: We call for a set of universally accepted standards for the disclosure to shareholders of climate change-related information1 connected to financial performance and to mainstream financial reporting.2 We propose that policy makers endorse collaboration between all relevant stakeholders to form an independent standard setter charged with achieving these goals. We call on policy-makers to endorse the establishment of an independent, stakeholder-led standard setting body with appropriate accountability to public authorities, tasked with the development of a single set of universal standards for businesses to make climate change-related disclosures, linked to financial performance and mainstream financial reports. We believe that this will promote provision of more trusted, accurate and reliable information to investors and other stakeholders, thus enabling them to make better-informed decisions and drive the scale of behavioral change necessary to achieve a low-carbon economy.
August 2009
IFAC asks G20 to adopt global standards The International Federation of Accountants (IFAC) has urged G20 leaders, at their 23-24 September 2009 meeting in Pittsburgh, Pennsylvania, USA, to encourage adoption and implementation of global accounting, auditing, and auditor independence standards. IFAC also asks that further steps be taken to enhance the governance of the International Accounting Standards Board. IFAC's letter also includes recommendations on enhancing corporate governance, strengthening of the accountancy profession in developing countries, and developing new tools and metrics to achieve global sustainability. IFAC also asks the G20 to facilitate debate to resolve issues between financial reporting – designed to communicate business performance to investors – and prudential reporting-used to monitor and maintain financial stability. Click for: IFAC Letter to G20 (PDF 229k) IFAC Press Release (PDF 17k).
August 2006
IFAC papers on sustainability management and reporting To help professional accountants in business better understand how they can advance, measure, and report on sustainable economic development, the Professional Accountants in Business (PAIB) Committee of the International Federation of Accountants (IFAC) has published two new information papers on the topic: Why Sustainability Counts for Professional Accountants in Business provides an overview of enterprise sustainability and sets out the business case for addressing the risks and opportunities of sustainable development at the enterprise level. It also discusses the ways in which professional accountants in business, especially those working for organisations with significant environmental or social impacts, will be involved with the measurement, recording and interpretation of sustainability-related information Professional Accountants in Business – At the Heart of Sustainability? provides first-hand commentary from eleven senior professionals working in various enterprises around the world on the role of PAIBs and the challenges they face in promoting and implementing sustainable development strategies. Click for IFAC Press Release (PDF 80k). The press release includes hyperlinks for downloading the papers from IFAC's website. Downloading is free, but registration is required.
February 2006
IFAC paper on auditing sustainability reports The International Federation of Accountants (IFAC) has issued a consultation paper that explores the assurance aspects of the Global Reporting Initiative's (GRI's) proposed new Sustainability Reporting Guidelines (G3). The GRI, which develops global reporting guidelines on the economic, environmental, and social performance of organisations, has released draft guidelines designed to enhance the comparability, clarity, ease of use, and assurability of sustainability reports. IFAC's consultation paper, Assurance Aspects of G3 - The Global Reporting Initiative's 2006 Draft Sustainability Reporting Guidelines, explores issues in the proposed G3 Guidelines that specifically relate to assurance reporting. The paper is aimed primarily at professional accountants with some familiarity with sustainability assurance. IFAC requests comments by 31 March 2006. Click to download: Draft G3 Guidelines for Comment (PDF 730k) (GRI requests comments by 31 March 2006 via a comment form on its website www.grigf3.org) IFAC Consultation Paper (PDF 610k).
May 2005
Prince of Wales urges 'sustainability reporting' In a speech on 25 May 2005 at the Annual Dinner of the Institute of Chartered Accountants in England & Wales (ICAEW), The Prince of Wales noted that the accountancy profession has a key role to play in developing methodologies for helping decision-makers to successfully weigh up the long-term costs and benefits of sustainable procurement. He called on the profession to work with economists, academics, and the government to identify ways in which sustainability can be brought centre stage in the decision making process and supported by the appropriate cost benefit analysis. He said: "Accounting mechanisms have not, for the moment at least, kept pace with our requirements for sustainability information. And I would suggest we need that information as a matter of real urgency if we are to avert a growing series of man-made catastrophes in our over-crowded world." In conjunction with his speech, The Prince of Wales launched the first report from the Accounting for Sustainability Group, a task force convened to examine how public sector procurement policy can contribute towards sustainability and influence the whole economy in a more sustainable direction. Click to: Download the Report (PDF 465k) ICAEW Press Release (PDF 34k).
January 2005
EU emissions trading - accounting and auditing issues The European Federation of Accountants (FEE) has published an Alert on financial reporting and auditing issues arising from the European Union's Greenhouse Gas Emissions Trading Scheme, which went into effect on 1 January 2005. The International Financial Reporting Interpretations Committee (IFRIC) recently issued IFRIC 3 Emission Rights, which is discussed in the FEE report. The FEE Alert may be downloaded without charge from the FEE Website (click 'Fee Publications' then 'Sustainability').