Implementing SDR Sustainable Development Reporting in Your Organisation

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Implementing SDR (Sustainable Development
Reporting) in Your Organisation
IIR Financial Reporting Conference 15 April 2003
Dr. Rodger Spiller Chief Consultant New Zealand
Business Council for Sustainable Development
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• What is Sustainable Development?
• SD is forms of progress that meet the needs of
  the present without compromising the ability of
  future generations to meet their needs.

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• SD encompasses three linked elements
• Economic Profit
• Environmental Planet
• Social People

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• "Our company is focussed on the highest possible
  standards of performance. By that, we don't just
  mean financial performance. We also mean
  environmental and social performance. We see no
  contradiction between these three measures of
  performance. They are entirely complementary -
  and the companies that recognise that first, will
  deliver themselves a significant competitive
  advantage."
• Craig Norgate, CEO, Fonterra
• 8 April 2002

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• Recent developments from financial analysts and
  global competitive analysis demonstrate that
  sustainable development is a hard-nosed business
  opportunity. Its a key component of business
  competitiveness and license to operate.
• WBCSD President Björn Stigson

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Sustainable Development Is about ensuring a
better quality of life for everyone, now and for
generations to come.

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Leadership Forum
February 2000
Sustainable New Zealand Scenario
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ECONOMY
Knowledge-intensive Responsive Niche-focused Clust
ered
Kiwis are confident entrepreneurial
Wealth is created sustainably
SOCIETY
ENVIRONMENT
Proactive Educated Networked Diverse Caring
Stretch goals for Waste reduction Air and water
quality Energy efficiency Biodiversity Restoration
Everyone walks the talk
Leadership Strategic Framework Goals
Indicators Metrics
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Providing business leadership as a catalyst for
change toward sustainable development, and
promoting eco-efficiency, innovation and
responsible entrepreneurship.
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Our Aims

• Business leadership
• Demonstrate best practice
• Policy development
• Global outreach

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• What is Sustainable Development Reporting?
• A clear picture of company SD values and
  principles
• A vision of how the company approaches sustainble
  development
• A transparent picture of performance information
  on enconomic, environmental and social dimensions
• The management response to performance the
  commitment to improvement
• A description of the companys contribution to
  the sustainable development of society
• One part of an overall management system designed
  to deliver a companys strategic objectives
  consistent with sustainable development
• The information on a companys SD values,
  objectives and aspirations through a public
  commitment to continuous improvement ona timeline
  with clear targets.

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SD Management Framework
Source The Shell Report 1999
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Steps in Developing a Strategy
WBCSD CSR Report 2 Developing a CSR Strategy
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NZBCSD SDR Project

• NZ Industry guide on the why and how for SDR
• All member companies required to produce an SDR
  within 3 years of becoming a member
• Website area (www.nzbcsd.org.nz) includes
  industry guide, reporting facility and other
  learning by sharing tools.

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Why produce an SDR?

• Increasing return and reducing risk
• Attracting and retaining employees
• Improving customer sales and loyalty
• Growing supplier commitment
• Contributing to environmental sustainability
• Strenthening community relations

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Increased Financial Return and Reduced Risk for
Shareholders

• It hit us between the eyes when those two
  incidents (disposal of the Brent Spar oil
  platform and the execution of Ken Saro Wiwa in
  Nigeria) to which Shell was linked became
  front-page news around the world. Both were
  glaring examples of the need to communicate
  clearly with all audiences. In both cases we
  simply didnt. We had developed blind spots for
  emerging stakeholders and important issues.
  Simply we had lost the ability to listen. And to
  act effectively on our principles and values.
• Ed Johnson, Chairman, Shell New Zealand.

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The Business Case for SDDow Jones Sustainability
Index
Annualised return 15.8 over 5 years
Leaders in SD - top 10 of companies in 68
sectors and 21 countries
Annualised return 12.5 over 5 years
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Attracting and Retaining Employees

• "The very strong company-wide staff support
  surprised us. For many the SDR process is a
  tangible benefit in working for Meridian."
• Meridian Energy

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Improving Customer Sales and Loyalty

• "A necessary process to measure company against
  company and thus ensure a level playing field".
• Rob Fenwick, Managing Director, Living Earth

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Growing Supplier Commitment
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• I believe that our experience will be a great
  asset as a large portion of New Zealand
  businesses is similar in size to Interface
  Agencies ie small (10 people or less)
• Because it is important to me and the credibility
  of my company, I am trying to ensure that our
  first Triple Bottom Line report does not preach
  and has information that gives a true snapshot of
  where we really are at in regards to
  sustainability. I want to be sure that our
  stakeholders understand that we are asking them
  to help us become sustainable and hold us to
  account by setting benchmarks that we will be
  measured by in future years
• Robb Donze, CEO, Interface Agencies.

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Contributing to Environmental Sustainability

• We simply realise that environment is our most
  important asset. Everything we do must aim to
  protect that asset. If we tamper with the soil
  or alter the climate we dont have a business.
• Richard Riddiford, CEO,
• Palliser Estate Wines of Martinborough

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Strengthening Community Relations

• We need to open up the books, reports with
  greater transparency than ever before, especially
  in this environment in which business is faced.
  We need to maintain an ongoing dialogue with an
  ever broader range of stakeholders, not just
  employees and shareholders, but also neighborhood
  communities.
• Philip Watts, Chairman of the Committee of
  Managing Directors, Royal Dutch/Shell Group of
  Companies.

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Key Questions to Address

• How much resource is available?
• Size of the organisation
• Scope of the work to be done
• Level of commitment within the organisation
• In-house versus outsourced work
• What is the scope of the reporting?
• Operational coverage all or some?
• Extent of product life-cycle
• Time period

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Levels of development in SEAAR
Higher Development
High
Scope of SEAAR process stakeholders,
geographies, operating units, issues
High
Stakeholder engagement
Lower Development
Low
Low

• Planning - Vision Targets
• Accounting
• Auditing
• Reporting
• Embedding

• Planning - Vision

Type of SEAAR processes
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Principles of Reporting

• Completeness
• Inclusivity
• Consistency
• Accuracy
• Clarity

• Neutrality
• Timeliness
• Auditability
• Transparency
• Sustainability context

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Identifying Sustainable Development Issues

• Review economic, social and environmental issues
• Investigate these issues
• Reflect on mission, values and objectives
• Consider risks
• Assess environmental impacts
• Engage with stakeholders

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Developing Key Performance Indicators

• Sustainability indicators
• Financial measures
• Narrative statements
• Natural units of measurement

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Developing Key Performance Indicators

• Assistance is available from
• External facilitators and consultants
• Existing business networks
• Other organisations SDRs
• Internal and external stakeholders
• Reporting frameworks, e.g., GRI

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Global Reporting Initiative (GRI) Recommended
Report Content

• CEO statement
• Profile of reporting organisation
• Executive summary and key indicators
• Vision and strategy
• Policies, organisation and management systems
• Performance

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Sustainable Development Indicators

• Economic
• Environmental
• Social

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Examples of Sustainable Development Indicators

• Economic
• Percentage of contracts paid in accordance with
  agreed terms
• Total wages, salaries and benefits paid
• Taxes paid
• Description of indirect economic impact

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Examples of Sustainable Development Indicators

• Environmental
• Direct energy use and energy consumption
• Greenhouse gas emissions
• Total amount of waste by type and destination
• Description and quantification of major
  environmental impacts at each stage of the
  life-cycle of principle products and services

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Examples of Sustainable Development Indicators

• Social
• Occupational accidents and deaths
• Average hours of training per year
• Equal employment opportunity policies and
  programmes
• Involvement and/or contributions to projects of
  value to the greater community

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Gathering Indicator Data

• Questionnaires
• Relatively inexpensive
• Can reach geographically dispersed stakeholders
• Can be anonymous
• Interviews
• Focus groups
• Stakeholder meetings
• Factual data

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Verification and Assurance

• Offers
• Added credibility to the information reported
• Increased assurance to management that what they
  say is supported by evidence
• An additional check to ensure the plausibility of
  collected data and minimise errors
• Increased strength and quality in the report
  preparation process

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Verification and Assurance

• Verification is a formal principle-based process
  to provide an opinion on compliance
• Assurance is third-party judgements about all or
  some of the steps undertaken and outcomes
  generated through the SDR process
• Perspectives are quotes and statement from
  external parties about any aspect of the SDR
  process or the performance reported

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Verification and Assurance

• Independence is critical those providing
  verification or assurance should not be involved
  in preparing or providing advice on the report.
• Essential to clearly outline what has been
  verified or assured and how.

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Publishing the Report

• Present in the most accessible form depending on
  the target audience and the resources available
  in your organisation
• Internet and printed reports is often the most
  useful combination
• The report can be publicised on websites, in
  staff customer newsletters and in advertisements

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Review and Learning for Continuous Improvement

• Reporting has highlighted the need for companies
  to develop and implement
• New strategies, objectives and policies around
  economic, environmental, social issues, impacts
  and behaviour
• New management systems and approaches that are
  consistent with managing impacts and developing
  opportunities
• New behaviours and practices in certain areas
  such as energy usage, waste minimisation and
  training

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Review and Learning for Continuous Improvement

• Reporting helps stakeholders, such as
• The financial community to more accurately assess
  the risks associated with organisations
• Suppliers to recognise opportunities for
  contributing to an organisations commitments
• Stakeholders to make informed choices about
  dealing with an organisation

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Emerging Trends Globally and Locally

• Virtual reporting
• Real-time reporting
• Calls for mandatory reporting
• Extension of SDR into the value-chain
• Good governance

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Global Reporting Initiative and AA1000
GRI goal A common framework for enterprise
level reporting on the linked aspects of
sustainability

• Report on child labour, freedom of association,
  health safety, compensation and benefits,
  workforce diversity, etc

• Report on product performance at selected life
  stages
• Detailed identification of indicators

• Report on corporate ethical standards
  transparency human rights, political activities
  bribery corruption

• Report on financial information, reinvestment
  activities, taxes and other economic impacts

• Report on Customer and Community Issues

Social/ Ethical Issues Governance
Social/Ethical Issues - Labour
Financial issues
Environmental Issues
Issues
Other Social/ Ethical Issues

• Minimum elements of verification statement defined

• Reporting principles, formats, issues and
  indicators

• Report on stakeholder relationships

Stakeholder Engagement
Process
Embedding
Planning
Accounting
Auditing
Reporting