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Disclosure Dilemmas and Decisions3 April 2019
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1 Introduction
Understanding dilemmas
ESG Disclosure Handbook Lois Guthrie, WBCSD
ESG Indicator Library Martin Viehöver, KPMG
Pulse check
Today’s agenda
Future Plans Arjan de Draaijer, KPMG; Luke Blower, WBCSD; David Astley, CDSB
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How do you feel when you think about preparing for next year’s reporting cycle?
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Photo by Stephen Leonardi on Unsplash
Is it like this…
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Photo by Matthew Henry on Unsplash
…or more the like this….?
1. Grab some post-its and a pen.
2. Turn to your left or right and find a partner
3. Discuss the question above.
4. Try to agree on up to 3 dilemmas in 5 minutes only.
Understanding dilemmas
What are the primary dilemmas that you face when preparing your disclosures?
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5 Minutes: QUICK FIRE PAIRS 10 Minutes: FEEDBACK & VOTING
1. Each pair will be invited to share their 3 dilemmas
2. If you agree or have identified the same dilemma, HANDS UP!
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ESG Disclosure HandbookLois Guthrie (WBCSD)
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ESG Disclosure Handbook
The ESG Disclosure Handbook offers guidance and process to help companies navigate the many choices associated with ESG reporting.
Consultation draft was published in October 2018. 200 individuals contributed, with comments from IFAC, IIRC, GRI, A4S, Deloitte, PwC among others.
The revised version is launched today and available to download from the WBCSD website.
Rationale for the Handbook
Navigating and negotiating:
• Information needs of multiple stakeholders
• Multiple reporting provisions
• Internal objectives for reporting
• External objectives for reporting
• Concerns about reporting “volume and clutter” obscuring important information
• Dangers of boilerplate reporting
The role of judgement
Role of judgement:
• Independent and unbiased
• Comprehensive fact gathering
• Evaluate options
• Limit errors and risks
• Improve quality
• Support assurance
• Raise confidence
• Enhance coherence
• Explain approach
Internal Information
JudgementExternal
disclosure
Process: Six key questions
Why?
For whom?
Where?What?
How?
How much?
The ESG Disclosure judgement process comprises six key questions that offer a simple, clear and practical way of optimizing confidence in externally reported ESG information.
A. Evaluate
B. Decide
C. Document
Process: Evaluate, Decide, Document
A. Evaluate criteria (neutral, objective, evidence-based)• Supports objectives and purpose of reporting• Has business value• Meets the needs of the intended audience• Is supportable and useful• Can be clearly communicated
B. Decide (subjective based on evaluation)• Assumptions• Opinions• Experts
C. Document• Final conclusion• Sensitivities and uncertainties
Why report ESG information?
Reasons:
• Have to in response to compliance requirements
• EU Directive
• Want to in order to communicate important information to stakeholders
• Describe value creation & long-term value drivers
• Progress against commitments, objectives & strategy
• Ought to in order to align with peer practice or contribute to policy goals
• Contribution to SDGs & Paris
For whom should ESG information be reported?
Investors
CustomerAcademia
SuppliersPeers
Media Employees
NGOs Regulators
Audiences
Relationships and connections:
• Responsibility
• Influence
• Proximity
• Dependency
• Representation
Where should ESG information be reported?
Where ESG information is reported should align with the objectives the information seeks to achieve and the information needs of the intended user(s).
Annual Report
Integrated Report
Sustainability Report
Topic-specific report
Data portals
Factsheets
Management presentations
What ESG information should be reported?
Consider:
• Subject matter (e.g. training & development, waste, climate change, water etc.)
• Content categories (e.g. strategy, risk, governance, targets, etc.);
• Perspectives – inside out & outside in
• Information types – operational, analytical, forward-looking
• Indicator types – evidence, explain, measure, value
• Purpose – integration, operation, mitigation, adaptation, transition & transformation
What ESG information you decide to report depends on the objective of the report, requirements of reporting provisions and the intended audience.
How should ESG information be prepared & presented?
Consider:
• Information type
• Reporting principles
• Accessibility
• Standardization
• Reliability and assurance
How information should be presented is largely dependent on the answers to what, for whom and why questions.
How much ESG information should be reported?
Consider:
• Clarity & connectivity
• Material
• Duplication
• Objective & audience match
• Dangers of boilerplate
• Commercial sensitivities, competition and potential liabilities
How much is finding the balance between reporting being true, fair, clear and balanced with being concise and containing material information.
Applying materiality in the judgement process
1. Take account of guidance, definitions and prescriptions about materiality
2. Prioritize information for audiences
3. Assess the potential magnitude, likelihood and impact of issues
4. Assess interconnections
5. Prioritize issues that are specific to the reporting organization.
Source: World Economic Forum
Materiality should determine how much information to include in corporate reports to achieve the reporting objectives and make the information useful for the audience.
Questions?
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ESG Indicator LibraryMartin Viehöver, KPMG
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Supporting external disclosure
The ESG Indicator Library is intended as an enabler to support more effective and efficient external disclosure. In practice, it collates and consolidates ESG indicators that originate from various sources, to support you when preparing reports and developing reporting practices.
Identifying similarities, differences and gaps
By researching and assessing the ESG indicator landscape we have identified similarities, differences, gaps and harmonization opportunities.
ESG Indicator LibraryThe ESG indicator library seeks to organize, categorize and structure ESG indicators from various sources on a central online resource.
Not legal framework? Not a mandatory/regulatory framework
Free?Is it a for freely available
ESG indicators?Does it contain measurable ESG indicators?Duplicate?Are the indicators a duplicate of another framework?
International?Intended to be used or widely used internationally?
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ESG indicator library research – framework selection
ESG indicator library research – framework selection
This frameworks selection left us with 9 frameworks for the mining and mapping process
ESG indicator library research – mining & mapping
Refers to the process of retrieving measurable indicators from the frameworks selected as in scope.
Data mining
Refers to the process of creating generic indicators and mapping the different frameworks to these generic indicators.
Framework mapping
>=4607
22771424
>=0
>=500
>=1000
>=1500
>=2000
>=2500
>=3000
>=3500
>=4000
>=4500
>=5000
1. Original data 2. Mining result 3. Mapping result
Ind
icat
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WBCSD ESG Indicator Library Condensation Results
>= -51% -37%
UN GC, 11
UNCTD, 18
CGF, 30
CDSB, 42
CDP, 141
EFFAS, 260
GRI, 447
WICI, 482
SASB, 846
0 500 1000
ESG & F Indicators
ESG Indicator Library research – indicators by ESGF
EE
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G
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F
F
0
500
1000
1500
2000
2500
Frameworks WBCSD Library
Nu
mb
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f in
dic
ato
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Mapping indicators by ESGF
2,277
1,424 (-37%)
104 (-48%)
344 (-40%)
499 (-39%)
477 (-30%)
ESG Indicator Library now available
Now available on www.reportingexchange.com. Register or login and select Indicators from the Search option.
How will the ESG Indicator Library help?
1. Use Indicator Library subjects to see which topics may be relevant, e.g. to be used in your materiality assessment
2. Identify indicators linked to material subjects that are aligned across reporting frameworks
3. You may use these to feed in to strategy updates
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Future plans: Alignment of the reporting landscapeDavid Astley, CDSB
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Alignment research: What we have done
• Use and build on the evidence base and knowledge developed by Redefining Value –Reporting Exchange, Indicator Library, Reporting Matters
• Explore and attempt to understand the state of alignment in sustainability reporting
• Where do we find coalescence and divergence?
• Are there areas of ESG reporting ready for development?
• What steps can be taken to improve the ESG reporting landscape?
Nearly 2000 reporting provisions
Over 1000 unique
indicators
2500 material issues
disclosed by nearly 150 companies
Alignment research: What we have done
Alignment research: Key findings
1. Evidence of agreement between regulators, standards setters and companies on 30 key ESG issues – Basis for improving reporting landscape
2. 10 further emergent ESG issues identified – Areas for development work by regulators and standard setters
3. Considerable agreement between these 40 ESG issues and existing research and methods – UNCTAD, ISAR, EFFAS, EPIC, CFA, FTSE Russell, MSCI
4. Evidence of alignment is, however, surface level –Regulation and indicators show divergence in methods and scope
Alignment research: What next?
• What next?
1. Summary of findings to be developed and circulated in Q2.
2. Section of Reporting matters will be dedicated to this research
• Armed with these research findings, what are the most beneficial avenues of effort?
• Feed into the Corporate Reporting Dialogue?
• Call to action for regulators, standard setters, business and investors?
• Publish a WBCSD position paper with member input?
• Any other ideas?
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Future plans: understanding user perspectivesArjan de Draaijer, KPMG
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Investor needs:
Material topics, Forward looking, Comparability, Timely, Reliable
ESG disclosures
Thick reports, addressing wide variety of users, limited link to corporate strategy and long term
value, standard checking
Connecting prepares and users
Investor needs:
Material topics, Forward looking, Comparability, Timely, Reliable
Objective: disclose relevant, material, decision-useful information:
• Understand investors decision making processes
• Involve investor relations: develop investor engagement strategy
ESG disclosures
Thick reports, addressing wide variety of users, limited link to corporate strategy and long term
value, standard checking
Connecting prepares and users
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Future plans: engagement opportunitiesLuke Blower, WBCSD
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Indicator Library: what next?
Supporting Corporate Reporting Dialogue Better Alignment project
Complimentary research & feedback on categories
Data set analysis - gaps, development opportunities
Complimentary categories e.g. input, output, impact – operation, mitigation, adaptation, transition
Handbook: what next?
Sign up for a deep-dive review
Deep-dive disclosure review will complement Reporting matters and TCFD Preparer Forum gap analysis
Based on Handbook steps and questions
No cost and 20 slots available in 2019
Feedback via teleconference or face to face meeting in Lisbon
Look out for workshops & Reporting Matters feature
Potentially in London, New York, Delhi & Singapore
Reporting Matters will highlight role of judgement and materiality
Join our working group
Review and guide preparer/user gap plans
Provide detailed feedback to the Better Alignment project
Pilot the Handbook and Indicator Library
Share your views
Challenges & opportunties associated with disclosure
Member dialogue to identify and develop responses and positions
Topics could include ratings & rankings and sustainability questionaiires
Shape future PDD plans
Download the Handbook Explore the Indicator Library
Actions
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Pulse check
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Questions? Comments? Thoughts?
Redefining Value Montreux Sessions
Monday11:00 - 13:00 Investing Responsibly. Retiring Responsibly11:00 - 16:00 Social & Human Capital Workshop
Wednesday 09:00 - 10:30 Briefing Session Redefining Value11:00 - 13:00 Performance & Risk Management14:30 - 16:00 Disclosure Dilemmas & Decisions
Thursday09:00 - 10:30 Building Resilience through Enterprise Risk Management11:00 - 13:00 Turning Sustainability into a Competitive Advantage
Stay in touch
Luke BlowerAssociate, Redefining Value
Andy BeanlandManager, Redefining Value
Johanna TähtinenAssociate, Redefining Value
Lois GuthrieDirector, Redefining Value
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Contact us at [email protected] or directly using the details below.
WBCSD (Geneva)Maison de la Paix l CheminEugène-Rigot 2BCP 2075 1211 Geneva 1Switzerland
WBCSD (New York)747 Third Avenue Suite M205, New YorkNY 10017, United StatesUSA
WBCSD (Delhi)WBCSD India, 4th Floor, Worldmark 2,Aerocity New Delhi 110 037India
WBCSD (Singapore)WBCSD Asia Pacific Ltd.theBridge2 Science Park DriveSingapore 118222Singapore
WBCSD (London)WeWork Mansion House33 Queen StreetLondon EC4R 1BRUK
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