Quarterly Global Market Scan

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1 Quarterly Global Market Scan The EU Non-Financial Reporting Directive - what does it mean for my company? 22 April 2016

2 How to use Webex

3 Agenda Time Description 15:00-15:05 Opening by Sabine Content, GRI Deputy Director Corporate & Stakeholder Relations 15:05 15:25 Bernd Kasemir, Sustainserv Managing Partner Overview of the EU NFR Directive (Scope, main disclosures timeline, EC consultation on non-binding guidelines) 15:25 15:40 Wim Bartels, KPMG Partner & Global Head of Sustainability Reporting and Assurance Next steps for companies, overview of reporting practices 15:40 15:55 Q&A 15:55 16:00 Closing, Sabine Content

4 Key points on the EU NFR Directive The EU Non-Financial Reporting Directive what does it mean for your company? Bernd Kasemir, Managing Partner Sustainserv GRI GOLD Community webinar, April 22, 2016

5 Brief introduction Managing partner at Sustainserv, an international sustainability management consultancy with offices in Zurich and Boston Support for our clients: strategy, KPI s, communication, change management 15 years in business, GRI Training Partner, more than 200 CSR reports GRI GOLD Community webinar, April 22,

6 Table of contents Goals of NFR Directive Implementation in national law Close link to financial reporting Content of «non-financial statement» Methods for reporting Timeline Key drivers for reporting Questions for you to consider GRI GOLD Community webinar, April 22,

7 Goals of the NFR Directive EU Directive 2014/95/EU on Non-Financial Reporting (aka CSR Directive) Aims to raise to a similar high level across all Member States the transparency of the social and environmental information provided by undertakings in all sectors Amends earlier Directive (2013/34/EU) that regulates financial reporting and mainly targets companies of more than 250 employees To avoid undue burden on smaller companies, limited to stock-listed companies, banks and insurances of more than 500 employees. But Member States can expand scope. GRI GOLD Community webinar, April 22,

8 Implementation on national level Implementation (transposition) to national law required until December 2016 Example Denmark Law published While early estimates of companies directly affected across the EU are at about 6,000 companies, more than 1,000 will be covered in Denmark alone Key reason: lowering of threshold to 250 employees Example Germany Draft legislation in consultation process by Federal Ministry for Justice and Consumer Protection Draft very close to EU Directive requirements Possible extension of scope: GmbH & Co KG s (limited liability companies) and cooperatives could be included GRI GOLD Community webinar, April 22,

9 Some examples for national implementation ( ) - (1) - (2) ( ) (1) 2012: Grenelle II (2) 2013: UK Companies Act: Mandatory Greenhouse Gas Reporting GRI GOLD Community webinar, April 22,

10 Close link to financial report obligations Management report specified as the default part of corporate reporting where nonfinancial statement should be included. Member States may allow companies to issue the non-financial statement as a separate report, if it is published together with the management report, and covers the same financial year as the management report. For example, the German draft legislation allows this option Statutory audit firm will have to check whether non-financial statement has been provided Not required by NFR Directive that content to checked as well, but member states may require that the information is verified by an independent assurance provider. Subsidiaries have to report unless they are covered in consolidated management report of parent company meeting the requirements GRI GOLD Community webinar, April 22,

11 Content of non-financial statement Suggestions (should, may, could) and as appropriate/necessary Environmental Employee/social H. rights/anti-corrupt. Environmental impacts Ensure gender equality Prevention h.r. abuse Health & safety impacts ILO conventions Instruments to fight Energy use Working conditions - corruption - Renewable energy Health & safety at work - bribery - Non-renewable energy Social dialogue GHG emissions Water use Air pollution Worker consultation Trade union rights Community dialogue - For large undertakings also diversity policies for supervisory and executive bodies (as part of corporate governance statement) GRI GOLD Community webinar, April 22,

12 Methods for reporting Materiality (as appropriate/to the extent necessary) EU Commission consultation on their upcoming non-binding guidelines on methodology for reporting closed last week Included question of materiality approach vs. comprehensive list of KPI s Frameworks to use No specific reporting framework mandatory Directive suggests that companies may rely on ISO or the GRI guidelines in addition to a number of EU, UN, ILO, OECD and national frameworks. GRI GOLD Community webinar, April 22,

13 Timeline Timeline for implementation in national law Required by December 6, 2016 Timeline for reporting by companies Financial year starting January 1, 2017 Or financial year starting during calendar year 2017 GRI GOLD Community webinar, April 22,

14 Key drivers for reporting Responsibility at the top Collective responsibility by members of the administrative, management and supervisory bodies that annual financial statement, management report, corporate governance statement (if separate) and the non-financial statement (if separate) are drawn up and published in accordance with the requirements. Comply or explain Non-financial (environmental, social/employee, human-rights, anti-corruption and anti-bribery) policies to be described. Or to be disclosed that there are no policies, and why. Indirect mandate: Reporting companies required to disclose principle non-financial risks where relevant and proportionate of its business relationships Possibly main impact of the directive. If you are supplier to large companies that have to report, you ll likely receive disclosure requests from them down the road. GRI GOLD Community webinar, April 22,

15 Questions for you to consider Also Q&A discussion at the end of this webinar Are you covered directly? Do you expect supply chain pressure for disclosure? Are you supplier to large companies likely to be covered? Have your customers already asked you for environmental and social information (RFP s etc.)? Would you have policies and metrics in place to respond if needed? Have you done a materiality assessment to understand what to focus on? If you would report due to legal requirements of supply chain pressure Would it be best for you to reduce to the max? Would it be best for you to use this as an opportunity for market differentiation? GRI GOLD Community webinar, April 22,

617 330 5001 Sustainserv GmbH Gartenstrasse 16 8002

16 Thank you! Sustainserv, Inc. 31 State Street, 10th Floor Boston MA USA T Sustainserv GmbH Gartenstrasse Zurich Switzerland T info@sustainserv.com

17 Implications of the NFI Directive for your company: a big opportunity Wim Bartels, Global Head of Sustainability Assurance & Reporting at KPMG 22 April 2016

18 The opportunities from the NFI Directive Integrating your (CSR) reporting in mainstream reporting Connecting CSR issues to the business model Focusing on the financially material CSR issues that matter to strategy Redefining the value of CSR to the business Further strengthening systems and controls 2016 KPMG Staffing & Facility Services B.V., registered with the trade register in the Netherlands under number , is a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 18

Integrating CSR into mainstream reporting 56% 51% 20% 4% 2008 2011 2013 2015 Base: N100 companies Source: KPMG

, registered with the trade register in the Netherlands under number 33263682, is a member firm of the KPMG

19 Integrating CSR into mainstream reporting 56% 51% 20% 4% Base: N100 companies Source: KPMG Survey of Corporate Responsibility Reporting KPMG Staffing & Facility Services B.V., registered with the trade register in the Netherlands under number , is a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 19

Business model Connecting CSR to the business model Source: KPN Annual Report, 2015 2016 KPMG

, registered with the trade register in the Netherlands under number 33263682, is a member firm

20 Business model Connecting CSR to the business model Source: KPN Annual Report, KPMG Staffing & Facility Services B.V., registered with the trade register in the Netherlands under number , is a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 20

21 Risks related to CSR matters Focusing on financially material issues that matter to strategy Source: AkzoNobel Annual Report KPMG Staffing & Facility Services B.V., registered with the trade register in the Netherlands under number , is a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 21

Policies & outcome of policies, including KPIs Redefining the value of CSR to the business Source: Unilever Annual Accounts 2015 2016 KPMG Staffing & Facility Services B.V.

22 Policies & outcome of policies, including KPIs Redefining the value of CSR to the business Source: Unilever Annual Accounts KPMG Staffing & Facility Services B.V., registered with the trade register in the Netherlands under number , is a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 22

23 Further strengthening systems and controls 1. Control environment 2. Risk Assessment 5.Monitoring 3. Control activities 4. Information & communication 2016 KPMG Staffing & Facility Services B.V., registered with the trade register in the Netherlands under number , is a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 23

24 Questions for you to consider Have we considered to include the material CSR information in the annual report and decided about its placement? Is our business model sufficiently explained in the annual report and how could a visualization of our business model assist in better understanding the relevance of CSR for our business? How could we further strengthen the integration of CSR risks into our risk management processes to better inform and connect to strategy? To what extent do the CSR aspects defined inspire to redefine the value of CSR to our business and the purpose of our company? Are we sufficiently comfortable that the relevant KPIs for our CSR issues are properly embedded in internal control and reporting processes to deliver reliable outputs? 2016 KPMG Staffing & Facility Services B.V., registered with the trade register in the Netherlands under number , is a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 24

25 Thank you KPMG on social media KPMG app 2016 KPMG Staffing & Facility Services B.V., registered with the trade register in the Netherlands under number , is a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks of KPMG International.

26 Q&A

Linkage document https://www.globalreporting.

27 Linkage document g/resourcelibrary/gri_g4_eu %20Directive_Linkage.pdf

28 5 th GRI Global Conference Join us at the 5 th GRI Global Conference 2016 Empowering Sustainable Decisions May, Amsterdam, #GRI2016 Register here:

29 Upcoming webinars Date Topic 28 April Insights and experiences from the Corporate Leadership Group on Reporting May G4 Forefront technical series: Session 2 - Materiality and Boundaries 4 May A la Vanguardia con G4 Spanish technical series: Sesión 2 - Materialidad y Cobertura 11 May SDG UN Update 26 May Update: National legislation roll out and what the 2015 reports show us

30 Thank you GRI Barbara Strozzilaan HN Amsterdam The Netherlands Amsterdam New York Beijing Sydney New Delhi Johannesburg Bogota São Paulo

Impact of the EU Directive on Non-Financial Reporting

Impact of the EU Directive on Non-Financial Reporting What does this latest development in CR disclosure requirements mean for you? In October 2014, the EU issued its directive on corporate disclosure