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2 The difference between Integrated and Sustainability Reporting Reana Rossouw Next Generation Consultants 2

3 3 Sustainability Reporting is The practice of measuring, disclosing and being accountable to both internal and external stakeholders for an organisation s progress towards a more sustainable future Documenting the journey of progress against organisational performance targets against specific economic, environmental, social and governance goals and metrics that support sustainable development Confirms how sustainability is considered and integrated into business strategy and execution Prepared in accordance with the Global Reporting Initiative (GRI) guidelines

4 4 Integrated Reporting is A process that results in communication by an organisation, most visibly a periodic integrated report, about value creation over time A concise communication about how an organisation s strategy, governance, performance and prospects, in the context of its external environment, lead to the creation of value over the short, medium and long term Prepared primarily for providers of financial capital in order to support their financial capital allocation assessments In accordance with the International Integrated Reporting Council s (IIRC) guidelines

5 5 Differences between IR and SR It is worth noting that sustainability reporting: targets a wider stakeholder audience than integrated reporting which focuses primarily on providers of financial capital, particularly those with a long term future view focuses on impacts on the environment, society and the economy, rather than on the effects of the capitals on value creation over time, as in Integrated Reporting As such, sustainability reporting is less likely to focus on the connectivity between various capitals or the strategic relevance of the capitals to value creation, and is more likely to include many disclosures that would not be material for inclusion in an integrated report.

6 6 An integrated report WHAT IT IS One output of the IR process, speaking primarily to the providers of capital A concise overview of the business, its strategy, governance, performance and prospects A reflection on how the organisation creates value over time WHAT IT s NOT A combination of the financial (AR) and nonfinancial (SR) information An attempt to address all stakeholders in one report An attempt to convince readers that sustainability is important to the organisation

7 7 Core Content Elements An Integrated Report should answer the following questions: Organisational overview and external environment What the organisation does and the circumstances under which it operates Governance How the governance structure support the ability to create value over time Opportunities and risks That affect the organisation s ability to create value over time and how the organisation is dealing with it Strategy and resource allocation What challenges and uncertainties is the organisation likely to encounter in pursuing its strategy, and what are the potential implications for its business model and future performance Business model What it is and to what extend it is resilient Performance The extent to which strategic objectives has been achieved and the outcomes in terms of effects on the capitals Future outlook Where does the organisation want to go and how does it intend to get there

8 8 Core plus principle based requirements In particular an IR should include: The organisation s materiality determination process The reporting boundary and how it has been determined The governance body with oversight responsibilities The nature and magnitude of the material trade-offs that influence value creation over time The reason why the organisation considers any of the capitals identified in the framework to be immaterial given its particular circumstances, if that is the case

9 9 Key Processes Ensure executive engagement in the IR process Ensure they understand what an IR is / is not Focus on material issues Key value drivers that will influence or affect value creation Do the analysis for the report readers Identify value drivers, the resources and relationships impacting these, critically reflect on the risks and opportunities that impact value, show a strong link between strategy to relevant (concise) KPI s Address key governance issues Typically remuneration, assurance, King III Effectively present the information Information should allow for the making of decisions by key stakeholders, be balanced and in particular forward looking

10 10 In closing (1) Set the scene Provide an overview of the business and the environment (markets) in which it operates to contextualise the report for the reader Live it, breathe it Clearly describe the sustainability strategy over the short, medium and long term, demonstrate how it is integrated in core business models and permeates the organisation, its objectives, values and deliverables What gets measured gets done Identify KPI s that is relevant to the business, industry and strategy. Explain why they are relevant, and how they are measured and monitored and linked to performance targets The good, the bad and the ugly Present information in a transparent and balanced way. Explain why, where and when improvements will be made. Avoid glossing over under performance, under delivered or negative and poor performance

11 11 In closing (2) Snakes and ladders Clearly explain risks and opportunities - the relevance and implications on strategy, operational execution and performance management It s a material world Demonstrate an understanding of key material issues, the relevance thereof to stakeholders and report only on those most material Cash is still king Illustrate the impact of sustainability on the bottom line. Identify and define potential ways and means to maximise the potential economic benefits going forward The great beyond Consider relevant upstream and downstream value chain aspects in order to take into account all economic, social and environmental aspects

12 12 In closing (3) Pay as you go Explain how directors and staff are incentivised to deliver on the business strategy and the goals and targets set ensure readers can understand the link between performance and remuneration Ask around Explain how the company engaged and how the input and feedback of stakeholders has shaped and informed strategy and actions Reach out Use multiple communication channels. Ensure that the medium, content and style are tailored to both the audience and the message delivered Big brother Explain how the governance system works. Identify those responsible for strategy and execution, describe the policies implemented and how it is managed Prove it Ensure the credibility of the report content consider references to independent studies, case studies, external benchmarking, expert review panels, or conventional assurance.

13 Contact 13 Reana Rossouw Specialists in Development za Web: PLEASE NOTE: THIS PRESENTATION IS PART OF A LARGER BODY OF RESEARCH! THIS INFORMATION IS COPYWRITED AND THE INTELLECTUAL PROPERTY OF NEXT GENERATION CONSULTANTS