Webinar on An Evolving Corporate Reporting Landscape

Transcription

1 Webinar on An Evolving Corporate Reporting Landscape Speakers: June 25, Wesley Gee (Sustainability Reporting) 2. Alan Willis, CPA, CA (Integrated Reporting; SASB Standards) Moderator: Julie Desjardins, CPA, CA 1

2 Agenda 1. Introduction: Purpose of the Webinar 2. Sustainability Reporting & the Global Reporting Initiative (GRI) Guidelines 3. Integrated Reporting & the International Integrated Reporting Council (IIRC) Integrated Reporting Framework 4. Environmental, Social & Governance (ESG) Disclosures in Securities Filings & the Sustainability Accounting Standards Board (SASB) Standards 5. Questions and Answers 2

3 Purpose of Webinar To improve understanding of voluntary reporting guidance related to: GRI Sustainability Reporting Guidelines IIRC Integrated Reporting Framework SASB Standards To comment broadly on how the above compare with each other and with CPA Canada s Management s Discussion and Analysis (MD&A) Guidance on Preparation and Disclosure To summarize new CPA Canada publication An Evolving Corporate Landscape A Briefing on Sustainability Reporting, Integrated Reporting and Environmental, Social and Governance Reporting, June

4 Background Corporate reporting landscape is becoming more complex New voluntary reporting guidance continues to emerge Investors and other stakeholders increasingly want relevant information about sustainability Sustainability reporting has been occurring for decades; integrated reporting is a recent development; SASB uptake has yet to emerge 4

5 SUSTAINABILITY REPORTING and the Global Reporting Initiative (GRI) Guidelines

6 What is Sustainability Reporting? Sustainability* reporting refers to a variety of approaches that organizations can take to communicate their environmental, social and economic priorities, policies, programs and performance. * Sustainability refers to development that meets the needs of the present without compromising the ability of future generations to meet their own needs (Brundtland, 1987). 6

7 What is Sustainability Reporting? Many of Canada s largest publicly traded companies report on their sustainability performance (83% of Canada's 100 largest companies reported on sustainability in 2013). Globally, in 2013, 95% of the Fortune Global 250 (multinational) companies provided information relating to their sustainability policies and performance. 7

8 Who is the Audience for Sustainability Reports? Consumers: help choose preferred product and service providers Businesses: assess potential customers, partners and suppliers Board members and executives: want more information about priorities and practices, and want to compare with clients and competitors Employees: want to be informed about, and engaged by, their company s sustainability activities. Students: evaluate prospective employers Regulators: learn more about risk management and strategic performance at a company and within a sector Investors and financial analysts: form projections and decisions based on their assessments of future risks and opportunities 8

9 What is the Purpose of Sustainability Reports? To communicate an organization s sustainability priorities, policies, programs and performance to its stakeholders To build trust if organizations can show their understanding of, and ability to address, critical issues which often extend beyond a traditional financial reporting scope To be a strategic tool in strengthening key stakeholder relations as well as building and maintaining brand and reputation To strengthen the reporting process to shape and improve an organization s sustainability strategy and performance 9

10 About the GRI Guidelines Most widely recognized standard for sustainability reporting Canada: 101 organizations reported using the GRI Guidelines in Globally: 3,300+ organizations worldwide reported in 2013 Mission: make sustainability reporting standard practice for all companies and organizations; to promote the use of sustainability reporting as a way for organizations to become more sustainable and contribute to sustainable development Introduced in 2000; the fourth generation of the Guidelines (G4) was released in 2013 so that organizations will transition to the G4 by December 31,

11 Components of the GRI Guidelines 1. Reporting Principles 2. In Accordance Criteria 3. General and Specific Standard Disclosures Growing emphases on supply chain integrity, governance and materiality : Materiality refers to topics and indicators that represent an organization s significant economic, environmental and social impacts; or that substantively influence the assessments and decisions of stakeholders. (Source: GRI) 11

12 Components of the GRI Guidelines GRI Reporting Principles GRI Reporting Principles Content Stakeholder inclusiveness Sustainability context Materiality Completeness Quality Balance Comparability Accuracy Timeliness Clarity Reliability 12

13 Components of the GRI Guidelines Specific Standard Disclosures Categories Aspect Specific standard disclosures Economic Economic performance Direct economic value generated and distributed Market presence Procurement practices Proportion of senior management hired from the local community Proportion of spending on local suppliers Environmental Materials Materials used by weight or volume Energy Energy consumption within the organization Water Biodiversity Emissions Total water withdrawal by source Habitats protected or restored Direct greenhouse gas (GHG) emissions Social Labour practices and decent work Number of new employee hires and turnover Human rights Society Product responsibility Number of incidents of discrimination and corrective actions taken Confirmed incidents of corruption and actions taken Sale of banned or disputed products 13

14 Additional GRI (Sector Specific) Disclosures Sector supplement disclosures: Airport operators Construction and real estate Electric utilities Event organizers Financial services Food processing Media Mining and metals NGOs Oil and gas 14

15 Comparability to CPA Canada Guidance on MD&A Disclosure 1. Completeness and materiality MD&As should be complete, fair and balanced, and provide information that is material to the decision-making needs of users 2. Strategic perspective MD&As should focus on strategy for generating value for investors over time 3. Usefulness To be useful, MD&As should be relevant, understandable and comparable 4. Through the eyes of management An entity should disclose information in the MD&A that enables readers to review an organization and its performance as if they were looking through the eyes of management 15

16 Sustainability Reporting Assurance Organizations may seek independent assurance for all or specific portions of their reporting, to increase the reliability of the information being disclosed and to respond to stakeholder expectations. Assurance is primarily provided by third party organizations that provide data and process-based assurance and/or those that provide technical or issuespecific expertise and commentary. The GRI encourages organizations to seek assurance; assurance is the topic of one of the General Standard Disclosures in the G4 Guidelines. 16

17 INTEGRATED REPORTING and the IIRC Integrated Reporting Framework

18 DEFINITION of INTEGRATED REPORT (IR) In the words of the International Integrated Reporting Council (IIRC): An integrated report is a concise communication about how an organization s strategy, governance, performance and prospects, in the context of its external environment, lead to the creation of value in the short, medium and long term * * International Integrated Reporting Framework (IR Framework), released by the IIRC, December

19 PURPOSE OF IR Communicate concisely about value creation to providers of financial capital Concisely means: Connect and report in an identifiable communication key aspects* of financial statements, MD&A (NB. CPA Canada Guidance disclosure principles and framework), AIF, earnings releases, corporate governance disclosures, sustainability reports, etc. Integrated does not mean: Combine financial reporting, sustainability report, governance disclosures, etc. in a single document * Note: Materiality definition follows in a minute! 19

20 IIRC s AIM FOR IR OVER TIME Become the world s corporate reporting norm IR aims to improve the quality of information available to providers of financial capital to enable a more efficient and productive allocation of capital. (Executive Summary, IR Framework) S. Africa is the only country where a form of IR is already mandatory (for JSE-listed companies); Comment: IR is not a new form of or replacement for sustainability/csr reporting! 20

21 PRIMARY AUDIENCE FOR IR Providers of financial capital but may benefit all stakeholders interested in an organization s ability to create value over time Providers of financial capital are interested in: value an organization creates over time for itself, and for others who may affect the organization s ability to create value for itself an organization s business model or process for creating value, linking resources and relationships on which it depends as inputs with outputs and outcomes, i.e. impacts on resources and relationships on which it depends 21

22 Resources and relationships: Capitals A fundamental concept of the IR Framework is to consider the resources and relationships on which an organization depends as capitals : Financial capital Manufactured capital Intellectual capital Human capital Social and relationship capital Natural capital 22

23 Components of the IR Framework: 1. Guiding Principles Strategic focus and future orientation * Connectivity of information * Stakeholder relationships Materiality * Conciseness Reliability and completeness * Consistency and comparability * * Comparable to CPA Canada MD&A Guidance 23

24 Components of the IR Framework 2. Content Elements Organizational overview and external environment * Governance Business Model * Risks and opportunities * Strategy and resource allocation * Performance * Outlook * Basis of preparation and presentation General reporting guidance * Comparable to CPA Canada MD&A Guidance 24

25 MATERIALITY More a Guiding Principle than a definition An integrated report should disclose information about matters that substantively affect the organization s ability to create value over the short, medium and long term A materiality determination process is set out in Guiding Principle 3D of the IR Framework A summary of the determination process followed should be disclosed in an integrated report (IR Framework Content Element 4H) 25

26 About the IIRC International coalition set up in UK by A4S and GRI in 2010, now the de facto global authority on IR Council members include: Accounting bodies and standards setters (incl. IASB, IFAC, GAA) Institutional investors & financial institutions (incl. PRI & ICGN) Securities regulators (IOSCO) Accounting firms (incl. Big Six ) Business NGOs (incl. WBCSD, BSR, WEF) Multinational companies GRI, CERES, CDP, SASB, A4S 26

27 Extent of IR Self-declared or According to IR Framework? Self-declared = <600 in 2013 (3% from N. America) According to IR Framework * = >150 companies by 2013 (N.A.= n.a) 3 Canadian companies in IIRC Pilot Programme of >100 companies (Vancity, Teck Resources, Port Metro Vancouver) PotashCorp has website for Integrated Reporting Centre * to a considerable extent, but not necessarily 100% in accordance with 27

28 One example: PotashCorp Integrated Reporting Center, 2014 IR: Our Reporting Approach As a publicly traded company, we are in business to be profitable for our shareholders and build sustainable value over the long term. We know this cannot be accomplished without understanding the needs of our many stakeholders that contribute to PotashCorp's success. When we help our customers, employees and communities prosper and keep our people and environment free from harm our investors and everyone associated with our business can thrive. This is how we run our business, and our aim in integrated reporting is to discuss financial and non-financial elements in a way that explains how we create value for our stakeholders, and makes their interdependence clear. 28

29 Environmental, Social & Governance Disclosures in SEC Filings and The SASB Standards

30 What exactly are the SASB standards? Recommendations/guidance as to voluntary, not mandatory, disclosures about environmental, social & governance issues ( topics ) that may have a material impact on a business and should therefore be considered for inclusion by SEC registrants in 10K (or 20F) filings* Industry-specific, covering c.80 industries in 10 broad sectors Not a new accounting or reporting framework Not endorsed or referenced by the SEC * NB. the Feb interpretive release by SEC about climate change disclosures 30

31 Who will use the SASB standards? Primarily US companies that prepare and file SEC Form 10K (NB. MD&A), and possibly foreign registrants filing Form 20F. Institutional investors in SEC-registered companies, as users of information provided in company filings, may also be expected to use the SASB standards to guide their assessment of ESG issues that might impact the current and future performance and value of a given company, and in industry-wide comparisons. Fund-managers and analysts are similarly likely to become users of the standards, especially where driven by contractual expectations of clients. 31

32 What is the SASB? An independent US non-profit organization founded in 2011 Based in San Francisco, California; founders include Jean Rogers (CEO) and Steve Lydenburg Board of directors includes M. Bloomberg, Bob Herz (ex FASB) and two former SEC Commissioners Operates through a Standards Council, Industry Working Groups (former Advisory Council now disbanded) and public comment process 32

33 What are the ESG topics deemed material in various industries? Examples, for which detailed accounting metrics are provided, include Greenhouse gas emissions Air quality Water management Biodiversity impacts Community relations Labour relations Workforce safety & well-being Transparency in payments 33

34 What Principles guide the development of the accounting metrics for the identified ESG topics? SASB has established Principles for all disclosures and metrics to be: Relevant Useful* Applicable Cost-effective Comparable* Complete* Directional* Auditable * Somewhat comparable to CPA Canada MD&A Guidance 34

35 What are the 10 industry sectors for which SASB is developing ESG disclosure standards? To be completed by 2016: Health Care Financials Technology & Communications Non-renewable Resources Transportation Services Resource Transformation Consumption I & II Renewable Resources & Alternative Energy Infrastructure 35

36 Materiality Definition SASB uses the same US Supreme Court definition that the SEC uses: The U.S. Supreme Court has defined material information as presenting a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the total mix of information made available. Clearly different from the GRI and IIRC concepts and definitions of materiality! 36

37 To what extent have the SASB standards been used to date in SEC filings? Short answer: It s too soon to say! 37

38 IN SUMMARY: 38

39 Observations on Evolving Reporting Landscape So where s this headed? GRI Guidelines (since 2000): aim to make sustainability reporting more useful to a broad stakeholder audience concerned with accountability & transparency wide and growing global use IR Framework (since 2013): aims to enable organizations to communicate concisely to providers of financial capita how they create value over time limited global uptake to date (early days) SASB standards ( ): provide industry specific guidance for SEC registrants in deciding on ESG disclosures in 10K/20F filings - no evidence yet of application in actual filings (too soon to say) 39

40 Questions & Answers Thank you! Please provide your comments to: Rosemary McGuire Principal, Research, Guidance & Support 40