Integrating climate change information into mainstream corporate reports, Americas focus
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New environmental regulations are being discussed in North and South America and there are broader moves towards integrating non-financial with financial reporting for investors and other stakeholders. This video shows how companies can place their climate change information into their annual financial reports – using CDSB’s Reporting Framework. You will hear perspectives from regulators, business, advisers, investors and non-financial reporting experts. Agenda: - Regulatory context - CDSB's Reporting Framework - Corporate perspective - Integrating financial and non-financial information - Communications perspective - Investor perspective Speakers: - Lois Guthrie – Executive Director, CDSB - Patrick Crawford – Corporate Engagement, CDSB - Amy Pawlicki – Director, Business Reporting Assurance Advisory Services, AICPA - Ben Thompson – Sustainable Business Program Manager, Autodesk - Jonny McCaig – Senior Consultant, Sustainability, Radley Yeldar - Jim Coburn – Senior Manager, Investor Programs, Ceres Please contact Patrick Crawford (patrick.crawford@cdsb.net) if you have any questions about this webinar or on using CDSB’s Reporting Framework.
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Integrating climate change information into mainstream corporate reports, Americas focus
- 4. The'need'for'CDSB’s'Repor<ng'Framework' Objec<ve' The$integra+on$of$climate$change1related$ informa+on$into$mainstream$corporate$repor+ng.$ ''When?' January'2007:'Launched'at'World'Economic'Forum,' Davos,'Switzerland,'as'a'special'project'of'CDP' ''Why?' Standardize'climate'change_related'(natural'capital)' repor<ng'for'fair'and'transparent'markets' Climate'change' informa<on'in'CDP' disclosure' ' CDSB’s' Framework' ''Members' • Main'accountants,' ACCA,'ICAEW'…' • Investors,'e.g.'Investor' Group'on'Climate' Change,'Ceres' • GHG'NGOs'e.g.'GHG' management'ins<tute,' • Business,'e.g.''WRI,' Carbon'Tracker,'TCR' WBCSD,'BT,'WEF' @CDSBGlobal Annual'Report'
- 6. CDSB’s'Repor<ng'Framework'in'Prac<ce' Communicating Climate Change “Reporting from the principle of communication rather than compliance.“ Hermes EOS Investors @CDSBGlobal
- 8. CDSB’s'Repor<ng'Framework'in'Prac<ce CDSB’s$Framework$provides$guidance$on$essen?al$topics:$ + Execu?ve$statement$(2.8,$4.6)$ + Boundaries$(2.20,$4.234.27)$ + Materiality$(2.82.10,$4.6)$ + Connec?ng$with$business$performance$(2.41,$4.64.8)$ + Future$outlook$(2.16,$4.14–4.15)$ @CDSBGlobal
- 11. CDSB Corporate Perspective: Integrated Reporting Ben Thompson Sustainable Business Program Manager © 2013 Autodesk
- 12. Leader in 3D design software From solving today’s business problems to tackling tomorrow’s global challenges, millions of professionals use Autodesk® solutions to imagine, design, and create a better world. © 2013 Autodesk
- 13. A better world will require: TECHNOLOGY: Powerful simulation and analysis tools that reveal consequences of design decisions, thereby enabling users to be more thoughtful and optimize decisions. UNDERSTANDING: Advance understanding of, and commitment to designing within limits of the planet. BREAKTHROUGH INNOVATION: Support and accelerate breakthrough ideas to design and create a better world BUSINESS PRACTICES: Align Autodesk business practices and decisionmaking with our better world vision. © 2013 Autodesk
- 14. BETTER WORLD Process ALIGN OUR BUSINESS People Product © 2013 Autodesk BETTER WORLD TO OUR MISSION
- 15. Integrated Reporting is a Clear, Beneficial Trend 1. Tell a clearer story of company performance 2. Engage with investors on new opportunities 3. Better manage natural capital 4. Standardize and streamline the reporting process © 2013 Autodesk
- 16. Align Sustainability with CFO’s Process & Language 1. Accounting 2. Decision-making 3. Reporting © 2013 Autodesk
- 17. It’s Early, but we’re making progress. ! Many efforts to standardize. ! Questions still exist about creating liability. ! Focus on materiality is essential. ! Keep dialogue open with CFO and IR. © 2013 Autodesk
- 18. Autodesk is a registered trademark of Autodesk, Inc., and/or its subsidiaries and/or affiliates in the USA and/or other countries. All other brand names, product names, or trademarks belong to their respective holders. Autodesk reserves the right to alter product and services offerings, and specifications and pricing at any time without notice, and is not responsible for typographical or graphical errors that may appear in this document. © 2013 Autodesk, Inc. All rights reserved.
- 19. Preparation Amy Pawlicki Director – Business Reporting, Assurance & Advisory Services AICPA CDSB Americas Webinar Integrating Climate Change Information into Mainstream Corporate Reports December 3, 2013
- 20. Understanding Current and Evolving Practice " The AICPA Assurance Services Executive Committee Sustainability Reporting Advisory Board was established to better understand companies’ perspectives on sustainability reporting and assurance " The Advisory Board is comprised of company representatives across various industries that have produced or are in the process of producing sustainability reports American Institute of CPAs ® 20
- 21. Understanding Current Practice " Examples of preparation practices currently in use " The focus is more on accuracy of disclosed data rather than completeness (i.e., certain matters may be excluded from reports if their accuracy or relevance is questioned) " Monte Carlo simulation is used to determine and present the level of uncertainty that exists for some data " The level of processes and controls in place for information that is assured is more robust and SOX-like " Materiality is determined following guidelines from various frameworks such as CDP and GRI American Institute of CPAs ® 21
- 22. Understanding Current Practice (cont’d) " Examples of preparation practices currently in use: " Information disclosed is reviewed by the legal team " Anything posted to the company website, including sustainability information, is reviewed by the Disclosure Committee " Cross-discipline (sustainability/finance) checks are performed to ensure any relevant Sustainability information has not been omitted from the 10-K American Institute of CPAs ® 22
- 23. Insights on Evolving Practices " Common themes/trends in sustainability reporting: " Finance and sustainability functions beginning to work together, e.g., by performing cross-discipline checks " Global stakeholder engagement calls being instituted (similar to analyst calls, but for various stakeholders) " Those charged with governance are beginning to take an increasing interest in sustainability reporting " Companies beginning to seek external assurance on their sustainability reports or portions thereof " Reports moving from printed to online-only reports " Annual reporting moving to quarterly or more real-time reporting American Institute of CPAs ® 23
- 24. Preparation Challenges " Common challenges in current reporting practices: " Numerous requests to complete surveys/questionnaires strain company time and resources " The existence of multiple sustainability reporting frameworks can be confusing to navigate " Silos and insufficient connectivity between operating and business units " Manual process, challenge to find and implement appropriate processes and systems " Challenges in applying traditional report preparation practices to nonfinancial information (e.g. materiality, internal controls and assurance) American Institute of CPAs ® 24
- 25. CGMA Report: From Insight to Impact, Unlocking Opportunities in Big Data American Institute of CPAs ®
- 26. The Role of Integrated Thinking in Sustainability Report Preparation " The International Integrated Reporting Council (IIRC) defines Integrated Thinking as: " the active consideration by an organization of the relationships between its various operating and functional units and the capitals that the organization uses or affects. " Applying Integrated Thinking to sustainability reporting " The more that integrated thinking is embedded into an organization’s activities, the more naturally will the connectivity of information flow into management reporting, analysis and decision-making. It also leads to better integration of the information systems that support internal and external reporting and communication, including preparation of the integrated report. American Institute of CPAs ® 26
- 27. ©Radley Yeldar Ltd 27 Learning from the leaders Effective climate change storytelling Ben Richards, Radley Yeldar 3 December 2013 Say hello via Twitter @radleyyeldar
- 28. ©Radley Yeldar Ltd 28 A bit about Radley Yeldar We help the world’s bravest, brightest and best fulfil their potential Strategy Identity Culture Performance Communications
- 29. ©Radley Yeldar Ltd 31 The power of storytelling Why storytelling matters Working out your organisation’s climate change story will help to make you credible and distinctive ...in turn making it easier for stakeholders to trust you and to become advocates for your approach ...which helps drive performance
- 30. ©Radley Yeldar Ltd 32 What’s in a good story? The six C’s of effective climate storytelling 1. Clear 2. Credible 3. Committed 4. Compelling 5. Collaborative 6. Connected
- 31. ©Radley Yeldar Ltd 33 Who’s doing a good job? Johnson and Johnson – clear
- 32. ©Radley Yeldar Ltd 34 Who’s doing a good job? European example GSK – clear
- 33. ©Radley Yeldar Ltd 35 Who’s doing a good job? Johnson and Johnson – credible
- 34. ©Radley Yeldar Ltd 36 Who’s doing a good job? SAP – connected
- 35. ©Radley Yeldar Ltd 37 Who’s doing a good job? HP – committed
- 36. ©Radley Yeldar Ltd 38 Who’s doing a good job? European example Unilever – committed
- 37. ©Radley Yeldar Ltd 39 Who’s doing a good job? Home Depot – compelling
- 38. ©Radley Yeldar Ltd 40 Who’s doing a good job? Cisco Systems – collaborative
- 39. ©Radley Yeldar Ltd 41 Learning from the leaders Key takeaways… 1. Keep it simple 2. Join it up 3. Show progress
- 40. ©Radley Yeldar Ltd 42 For more best practice insight… Radley Yeldar’s research Visit ry.com for more publications.
- 41. ©Radley Yeldar Ltd 43 Stay in touch Contact details: Ben Richards b.richards@ry.com Radley Yeldar Ltd 24 Charlotte Road London EC2A 3PB T 020 7033 0700 F 020 7033 0800 www.ry.com
- 44. Key$reports' THE 21 CENTURY INVESTOR: DISCLOSING CLIMATE RISKS & OPPORTUNITIES IN SEC FILINGS ST CERES BLUEPRINT FOR SUSTAINABLE INVESTING A GUIDE FOR CORPORATE EXECUTIVES, ATTORNEYS & DIRECTORS Monday, February 8, 2010 June 2013 Authored by February 2011 Peter Ellsworth, Ceres Kirsten Snow Spalding, Ceres Part III Securities and Exchange Commission Authored by Jim Coburn Sean H. Donahue Suriya Jayanti FEATURING INVESTOR EXPECTATIONS FOR QUALITY DISCLOSURE 17 CFR Parts 211, 231 and 241 Commission Guidance Regarding Disclosure Related to Climate Change; Final Rule RULES2 46'
- 45. Report Findings in Numbers (S&P 500) 499 74 7 The number of companies making a sustainability disclosure in a finan‐ cial filing or linking financial perfor‐ mance to a sustainability initiative The percentage of companies placing a dollar figure on a sustainability‐related topic. Number of companies with an integrated financial and sustainability report State$of$integrated$repor?ng:$S&P$500' Report Findings in Numbers (S&P 500) 68 499 74 The number of companies making a sustainability disclosure in a finan‐ cial filing or linking financial perfor‐ Percent talking about employment mance to a sustainability initiative The percentage of companies placing a dollar figure on a sustainability‐related topic. Percent with a sustainability‐related monetary estimate in a Form 10‐K Percent mentioning environmental management 67 65 66 68 43 7 Percent linking executive pay to sustainability criteria Number of companies with an integrated financial and sustainability report 76 43 Percent discussing climate change Percent with sustainability reporting 63 19 waste Percent with a sustainability‐related dollar figure in an annual report Percent mentioning environmental Percent linking executive pay to management sustainability criteria Source:$Peter$DeSimone,$IRRC$Ins?tute,$Sustainable$Investments$Ins?tute,$Integrated)Financial)&)Sustainability)Repor7ng)in)the)U.S.,) April)2013$ disclosing on hazardous Percent 47'
- 46. 21ST CENTURY INVESTOR: CERES BLUEPRIN FOR SUSTAINABLE INVESTING $Investor$perspec?ves$on$material$sustainability$issues$ INVESTMENT GOVERNANCE ᮢ INVESTMENT PRACTICES ᮢ Step 1: Develop Investment Beliefs Step 3: Assess Materiality The Board of Trustees, or highest level of fiduciary authority, will establish core investment principles that include a commitment to sustainable investment. The trustees, in collaboration with investment and governance staff, consultants, managers, and sector & issue experts will identify the sustainability issues and risk factors that are material to the fund. Step 2: Implement Trustee Oversight The Board of Trustees, or highest level of fiduciary authority, will establish oversight of sustainable investment initiatives and accountability for implementation. Step 4: Review Asset Allocation The trustees, in collaboration with the CIO, investment staff, consultants, managers and sector & issue experts will evaluate asset allocation models for material sustainability risks. Step 5: Integrate ESG into Investment Strategy Trustees, investment staff, consultants and managers will select sustainability strategies best suited to the fund’s riskadjusted return objectives. Step 6: Incorporate ESG into ASSET STEWARDSHIP ᮢ Step 8: Align Active Ownersh and Proxy Voting With Sustainable Investment Goals Trustees, investment and govern staff, and investment managers establish engagement strategies proxy voting guidelines consisten sustainable investment goals. Step 9: Support Policies and Market Initiatives that Promo a Sustainable Global Econom Asset owners & investment man will support market & policy initia that advance sustainable investm initiatives and promote a sustain global economy. 48'
- 48. In voluntary communications (complete) Page 5 Module: Risks and Opportunities [Investor] Page: 5. Climate Change Risks $Investor$perspec?ves$on$material$climate$issues$ 5.1 Have you identified any climate change risks (current or future) that have the potential to generate a substantive change in your business operations, revenue or expenditure? Tick all that apply • 'Align'mandatory'and'voluntary'repor<ng:'i.e.,'CDP'ques<onnaire,' Risks driven by changes in regulation risks'&'opportuni<es—ques<ons'5'&'6:' Risks driven by changes in physical climate parameters 5.1a Please describe your risks driven by changes in regulation ID RR01 Risk driver Air pollution limits Description ACE is among the largest and most advanced global underwriters of environmental liabilities and pollution risk, with ACE Environmental Risk units in North America, Europe, Asia and Latin America. Typical cover includes Potential impact Other: Increased probabilistic risk exposure Timeframe Direct/ Indirect Likelihood Magnitude of impact 1-5 years Indirect (Client) Very likely Medium-high 50'
- 49. $Investor$perspec?ves$on$material$climate$issues$ • Use'developing'sector_specific'standards:'i.e.,'SASB’s'health' care'sector'standards'(released'July'’13).''Excerpt:' Sustainability issues for Health Care Sustainability issues for Health Care and vetting processes Results of our evidence-based research Results of our evidence-based research and vetting processes Biotechnology and Medical Equipment Capital Environmental Social Capital Environmental l Social Capital Capital Biotechnology and Pharmaceuticals Pharmaceuticals Health Care Delivery Care Medical Equipment Health and SuppliesHealth Care Delivery and Supplies Distribution Energy, water Energy, water and and waste efficiency waste efficiency Energy, Energy, water and water andEnergy, water Energy, water and and waste efficiency efficiency waste efficiency waste waste efficiency Fuel efficiency Climate change Climate change impacts on human impacts on human health health Safety of clinical trial participants clinical trial Safety of Access to Medicines participants Counterfeit drugs Access to Medicines Counterfeit drugs Ethical marketing Employee recruitment, Ethical marketing Quality of care and Product safety patient satisfaction Product safety Quality of care and Affordability and fair Access for low-income satisfaction patient pricing patients Counterfeit drugs Affordability and fair Access for low-income Patient privacy and pricing patients electronic health Patient privacy and Ethical marketing records Health Care Managed Distribution Care M Fuel efficiency Climate change impacts on human health Clim imp hea Product safety Ethical marketing electronic health records Employee recruitment, Product safety Access to coverage Customer privacy and Counterfeit drugs standards technology 51' Acc Cu tec
- 51. Climate Disclosure Sta Enhanced$repor?ng$and$use$of$CDSB$framework$ • 'Sustainability'leadership:'be'beuer'prepared'for'rapidly'changing' and oppo 2. Risks Risks of climate change for sustainability'demands;'help'shape'integrated'repor<ng' Disclosure about risks shall include an explanation • 'Encourages'companies'to'hone'in'on'key'material'issues'for'repor<ng'&' the organization’s exposure to for'risk'management' current and anticipated (longClimate Disclosure Standards Board (CDSB) and qualitative assessment of climate change for resources • 'Improves'collabora<on'between'sustainability,'accoun<ng'&'legal'teams' risks associated with climate change. • 'CDSB'framework'helps'investors'understand'key'issues'companies'face:' 2. Risks Disclosure about risks shall include an explanation and qualitative assessment of organization’s exposure climate the organization’s position onto change since the last report current and anticipated (long- and an explanation of the reason for risksthe change. with climate associated change. Disclosures should include Risks and opportunities Disclosure about opportunities shall include an explanation and qualitative assessment of current and anticipated (long-term and short- associated with climate change. 53'