Measuring and reporting sustainability performance in the public sector

Transcription

1 Measuring and reporting sustainability performance in the public sector FMI PD week: Financial Reporting 25 November 2014 Cathy Cobey, CPA.CA Associate Partner Climate Change & Sustainability Services

2 Agenda 1 Sustainability reporting 2 Sustainability reporting process 3 Integrated reporting 4 Questions and group dialogue 2

3 Sustainability reporting

4 Measuring sustainability performance Social Environmental: Energy fuel, oil, alternative Water Greenhouse gases Waste reduction Recycling Reprocessing/re-use Agriculture/organic foods Biodiversity Sustainable Environmental Economic Economic: Accountability / transparency Governance Stakeholder value Economic performance Financial objectives Social: Public policy and advocacy Community investments Working conditions Health/nutrition Diversity Human rights Socially responsible investing Anticorruption and bribery Safety 4

5 Existing Canadian Government reporting Canadian Index of Wellbeing HR Reports Social Sustainable Environmental Economic Federal Sustainable Development Strategy (FSDS) Canadian Environmental Sustainability Indicators (CESI) Annual Financial Report Departmental Performance Reports 5

6 Drivers for enhanced sustainability reporting Demonstrate leadership Report on what matters most Quantify and demonstrate non-financial improvements to public well-being Benchmark performance against government priorities Report to, and engage with public service employees on sustainability initiatives Improve transparency and accountability on full impacts on resources used in delivering public services Improved risk management Measure and report on the ability of public agencies to meet its future obligations for providing services 6

7 Sustainability reporting process

8 Sustainability reporting process Meeting the needs of stakeholders: Providing relevant, reliable and credible information: How is our organization or agency perceived externally? What are our peers and affiliates doing? Do we know which stakeholders are relying on our sustainability information? What do our stakeholders care about? Are we consistent in our reporting to stakeholders? Do we have a good understanding of our risks and opportunities associated with sustainability? Have we clearly identified our material sustainability issues, and are they being managed? Do we need a more rigorous process to ensure that our reporting is credible? What level of assurance are we currently obtaining? Is it sufficient? 8

9 Trends for sustainability reporting Quantity quality Breadth depth G3.1 Report Direct indirect G4 Report Data influence / impact Boiler plate unique / relevant Integrate business & sustainability 9

10 Definitions of materiality Financial reporting: materiality is a threshold for influencing the economic decisions of those using an organization s financial statements (i.e., investors) Sustainability reporting: considered with a wider range of impacts and stakeholders. Not limited only to those sustainability topics that have a significant financial impact on the organization. Also consider impacts that affect the ability to meet the needs of the present without compromising the needs of future generations. Often a source of tension 10

11 Differences between materiality Financial reporting Sustainability reporting Concept Stakeholders Type of impacts / decisions Threshold for influencing the decisions of stakeholders Public, politicians, bondholders Economic Public, politicians, employees, clients, local communities, governments, NGOs, etc. Economic, environmental & social Orientation Historical Future-looking Timeframe Short-term Short- and long-term Boundary Reporting organization Reporting organization, stakeholders, economy, environment & society Measurement (primary) Quantitative ($$) Qualitative (impact / influence) 11

12 Barriers to quantifying ESG impacts 1. No monetary value, or price doesn t accurately reflect value 2. Conflicting values and need for prioritization 3. Longer term / future horizon 4. Opening up to liability issues 5. Unpredictable e.g., changing scientific landscape, changing values, regulatory uncertainty 6. Difficult to measure progress 7. Lack of historical information / measure progress 8. Complexities of interactions within the system e.g. impact throughout value chain dependencies 9. Uncertainty over outcome and severity of outcome 10. Decision makers may not have sight or appropriate understanding of all the relevant issues 12

13 The challenges of sustainability reporting Creating a winning multi-disciplinary team Balancing between disclosing future strategic objectives (narrative) and the targets (quantitative) for achieving these Creating awareness with senior management and securing their sponsorship Fostering a culture of integrated thinking thinking outside of the box Balance between disclosing information and maintaining competitiveness Thinking about sustainability reporting as a process instead of just another report Demonstrating the linkages between non-financial impacts, outputs, outcomes and value creation, depletion, stasis Increasing requirements on processes and systems in managing and reporting non financial information Agreeing a practical approach to how to embed sustainability reporting and a realistic timeline for how to achieve this Creating a holistic view of how value is created and destroyed across the full value chain 13

14 Public sector sustainability examples UK Cabinet Office Annual Report and Accounts Extract from 14

15 Public sector sustainability examples UK Environment Agency Annual Report and Accounts Extract from 15

16 Public sector sustainability examples Sustainable Australian Report 2013 Extract from 16

17 Integrated reporting

18 From traditional to integrated reporting Financial Statements Financial statements Financial statements Management commentary Governance & remuneration Environmental reporting Management commentary Governance & remuneration Sustainability reporting Governance & remuneration Financial statements Management commentary Integrated report Sustainability report Integrated reporting is more than merging financial and non-financial reporting information it s about disclosing value. Public Sector Pioneer Network is just developing a global network to develop an integrated reporting structure for public sector entities. 18

19 Impact of capitals on an organization s value By the application and transformation of different types of capital, the organization creates, changes or destroys value for themselves and others. A sustainable business strategy and model may have a direct or indirect impact on an organization s financial performance by creating intangible value and externalities, which in turn have the potential to influence future financial performance. Society and organizations Financial Manufactured Intellectual Human Social and relationship Natural Financial Manufactured Intellectual Human Social and relationship Natural Operational model 19

20 Questions and group dialogue

21 EY Assurance Tax Transactions Advisory About Ernst & Young Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 167,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential. For more information, please visit ey.com/ca Ernst & Young LLP All rights reserved.