Prepared for

Integrated Reporting:On-the-Ground Perspectives

March 27, 2013

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Webinar objectives

• Share up-to-the-moment practices and trends in integrated reporting

• Deliver actionable insights and best practices from standards-setting bodies and companies currently working towards integrated disclosure

• Provide information on getting involved in integrated reporting and standards evolution

• Spread the word (event hashtag: #IRnow)

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• Aleksandra Dobkowski-Joy, Principal,

Framework LLC

• Ricky Cronin, Relationships Manager,

International Integrated Reporting Council (IIRC)

• Michael Van Brunt, Director of Sustainability,

Covanta Energy

• Lelanie Sherman, General Manager: Financial and

Management Reporting, Eskom Holdings SOC Limited

• Marisa Mackey, Associate Director of Education,

Sustainability Accounting Standards Board (SASB)

PanelistsAgenda

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About Framework LLC

• Consultancy founded in 2003

• Services and research focused on value creation through managing for sustainability

• Clients represented in the Fortune 500, S&P 500, Dow Jones Sustainability, FTSE4Good and Global FT500 indices

• GRI organizational stakeholder

• Strategic counsel to UN Global Compact U.S. Network

• Woman-owned business certified by WBENC

• Based in Stamford, Conn., plus presence in Seattle and partners in Mexico, Germany

@SustainStrategy

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Framework capabilities

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• Expand the “chat” window of the GoToWebinar control panel

• Select “send question to staff” from the drop-down menu

• Type your question or comment into the chat box

• We will respond to questions throughout the session and at the end of the webinar

Have a question?

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Setting a framework for integrated reportingRicky Cronin, Relationship Manager, IIRC

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Financialreporting

Non-financialreporting

Concise communication of value over time(investor audience)

strategygovernanceperformance

prospects

Financial Manufactured Intellectual

Human Social & Relationship Natural

<IR> Explained

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93% better quality data collection

88% better decision making

72% better internal understanding of the whole business

Value to Businesses

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plans and forecasts

■ Issues central to long-term value are overlooked

■ Markets compensate by pricing in risk

strategic growth

past performance

development plans

business as usual

BUSINESS VALUE TODAY’S REPORT CONTENT

strategic issues

Value to Investors

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AES Brasil

BNDES

Cliffs Natural Resources

Edelman

Jones Lang LaSalle

MASISA S.A.

Microsoft Corporation

Natura

Petrobras

Port Metro Vancouver

Prudential Financial

Teck Resources

The Clorox Company

The Coca-Cola Company

Vancity

Via Gutenberg

IIRC Pilot Program

■ 85 businesses testing <IR> Framework■ 30 members of Investor Network

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Examples Database

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■ Consultation Draft of <IR> Framework to be released April 16 90-day open comment period Will be available on our website: www.theiirc.org

■ Visit the Emerging Integrated Reporting Database: http://examples.theiirc.org/home

■ Join the Pilot Program!

Getting Involved with <IR>

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Preparing for integrated disclosureAleksandra Dobkowski-Joy, Framework LLC

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• Reviewed reports self-identified by co’s as “integrated”

• Listed in GRI Sustainability Disclosure Database- G3 or G3.1 reporter- “Large” or “Multi-National Enterprise”- Published in English- 2011 or 2012 reporting year; 9/12 cut-off date

• Company appears on Fortune’s Global 500 list

• Only evaluated the report identified as integrated

• Download full paper at framework-llc.com

“The State of Integrated Reporting”Framework LLC research

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Sample is diverse in industries, locations

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Category Criteria

Strategic Focus and Forward-Looking Orientation (20%)

Description of Business Model

Description of Strategic Objectives

Discussion of Future Opportunities, Challenges, and Uncertainties

Materiality (40%)

Robustness of Process

Description and Prioritization of Key Material Issues

Materiality Relevance

Connectivity of Information (40%)

Linkage to Financials

Discussion of Environmental, Economic, and Societal Context

Connectivity Between Past, Present and Future Performance

Integrated reporting criteria

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Results of analysis

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Setting the stage for integrated disclosure

Integrated disclosure is evidence of “joined-up” thinking and action:

• strategic planning

• enterprise risk management

• organizational accountability

• internal and external communication

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Getting ready for integration

Check your (org) charts What kind of integration is evident in your company’s organizational and accountability structures?

Does your CSO work in isolation? Are there high-level cross-functional groups that regularly review material (including ESG) issues?

Embrace materiality Have you conducted a materiality analysis?

How aligned are corporate vision, strategy, goals, and targets with material issues?

Mind the gap Is there congruence between the material issues in your sustainability report and the risk factors in your annual financial report?

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Getting ready for integration, continued…

Speak the language Are you communicating effectively with your CFO, CEO, and investor relations department?

Are you eliminating “divisive” language that inadvertently creates a false dichotomy between ESG and financial issues?

Lather, rinse, and repeat

Are you prototyping integrated thinking and disclosure on scales both large and small? For example: application of reporting standards, contextual goal setting, communication with investors, etc.

“Investors have actually been asking about sustainability for years; they just don’t call it that.”- Erika Karp UBS Managing Director and Head of Global Sector Research

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Towards more integrated disclosureMichael Van Brunt, Covanta Energy

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Covanta’s mission: clean energy from waste

About CovantaCovanta’s mission is to be the world's leading

EfW company. We believe that waste is a

valuable resource that can be a source of clean,

safe, and renewable energy and environmental,

social, and economic benefits.

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Covanta 2010/2011 Corporate Sustainability Report

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Covanta reporting objectives

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Disclose material information to stakeholders•Communicate strategic approach to sustainability•Provide data/narratives around priority (material) issues•Incorporate stakeholder viewpoints and concerns

Advance integration of sustainability initiatives and core business objectives•Establish goals/targets for material issues•Begin quantifying financial impacts of sustainability

Gain recognition for sustainability efforts•Elevate Covanta’s reputational profile•Educate/inform stakeholders on Covanta’s approach to renewable energy, EfW, recycling, etc.

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Materiality matrix• Report focuses on material issues

• Material issues are of high concern to stakeholders and have a significant impact on Covanta

Preparation for reporting: materiality analysis

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Clean World Initiative• Covanta’s business strategy is

driven by Covanta’s Clean World Initiative (CWI)—a set of policies and overarching objectives directing continuous improvement and innovation in our environmental, health, and safety; research and development; public policy; and community outreach efforts.

Integrating sustainability into strategy and operations

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Financial linkages in Operations goals/targets

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Eskom’s integrated reporting journeyLelanie Sherman, Eskom

In support of

Eskom at a glance

• For the year ended 31 March 2012:• Electricity sales of 224 785GWh• Electricity revenues of R113.0

billion

• As at 31 March 2012:• 43 473 employees• 4.9 million customers • Net maximum generating capacity

of 41 647MW • 372 031km of cables and power

lines

• Our financial year-end is 31 March

Generation capacity– 31 March 2012

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Nuclear

Gas

Coal

Hydro

Pumped Storage

85.0%

5.8%

4.4%

3.4%1.4%

41.7GWnet maximum

capacity

• Strategic 100% state-owned electricity utility, strongly supported by the South African government

• Supplies approximately 95% of South Africa’s electricity and more than 40% of Africa’s electricity

In support ofIn support of

Eskom’s Integrated Reporting Journey

1994First

Environmental Report for

Eskom

2002First Integrated Annual Report

(including Financial and Sustainability

information)

2008Integrated Annual

Results with first B+ GRI declaration

2011Integrated Annual Results with B+ GRI declaration

2012Integrated report aligned with IIRC and IRC of SA

discussion papersB+ GRI declaration

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Eskom sees the Integrated Report as a key tool to honour the commitment to transparency to Eskom’s stakeholders and to improve on reporting, internally and externally, regarding the way Eskom manages the business and makes decisions based on integrated information.

Integrated reporting, when done properly, is an excellent platform to discuss historic performance, but more importantly, to communicate Eskom’s objectives, future plans, risk assessments and action plans, etc. with internal and external stakeholders.

In support ofIn support of

Eskom’s Integrated Reporting Journey (cont)

What changed in 2012 for Eskom Reporting:

• Integrated Reporting Steering Committee (IRSC), an official sub-committee of the executive management committee(Exco), established and chaired by Finance Director – supported by various working committees – guiding, monitoring and approval of <IR>

• We aligned our quarterly internal reporting to Exco and Board with external reporting - improving consistency of information flow and the process of compiling the reports gets easier (practice makes perfect)

• We changed from one big report (A4, >360 pages) to 1 smaller printed report (A5, 160 pages) and 2 internet based reports

• Integrated report included summarised financial statements (web report and hard copy)

• Divisional report (web report)

• Full annual financial statements (web report)

• We improved our Internet functionality – making it more user friendly and connecting Eskom’s reports

• Released an interim Integrated Report in November 2012 – a first!

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In support ofIn support of

Eskom’s Integrated Reporting Journey (cont)

Within the Integrated report for 2012, Eskom’s key focus was:

• Reducing the length of the report, whilst improving the quality of the information we share• Materiality

• Stakeholder Engagement

• Demonstrating connectivity within our report with the key focus of bringing in our strategic priorities and how it connects with our results

• Improving our internal processes of producing the various reports • Use of standardised templates to submit information to the core reporting team

• Small core reporting team that has the final editorial rights

• Piloting software that assist with the writing – improved version control, track changes, integration and cross referencing of numbers

• A lot of planning upfront – who, what, where and how

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In support ofIn support of

Eskom’s Integrated Reporting Journey (cont)

For the 2013 Integrated report, the key focus is:

• Improving our application of Materiality and Stakeholder Engagement

• Improving the way we “connect the dots” for the stakeholders

• Bringing in Eskom’s business model

• Continued improvement in our processes for compiling our reports

• Further enhancement in our use of the Internet

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Driving integration of financial and ESG disclosure

Marisa Mackey, SASB

The Sustainability Accounting Standards Board is a US-based non-profit engaged in the creation and dissemination of sustainability accounting standards for use by publicly-listed corporations in the US in disclosing material sustainability issues for the benefit of investors and the public.

It will move corporations from transparency to performance, promote sustainable value creation, ultimately enhancing industry competitiveness and addressing sustainability challenges.

Sustainability Accounting Standards Board

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Materiality Mapfor 89 Industries

Online ExpertForum (IWGs)

Industry KPIs and Disclosure Protocols

04/11/2023 © 2012 SASB™ CONFIDENTIAL & PROPRIETARY

Training & Certification

The most stable markets in the world…

© 2012 SASB™ CONFIDENTIAL & PROPRIETARY

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Founded in the US in 1973, The Financial Accounting Standards Board takes responsibility for establishing Generally Accepted Accounting Principles, or GAAP, on behalf of the SEC.

The SEC mandates certain content and disclosures in SEC filings, such as audited financial statements and Management’s Discussion and Analysis (MD&A).

These filings, and the standards that underlie them, play a fundamental role in making our markets the most efficient, liquid, and resilient in the world.

A primary goal of United States securities laws is to promote honest and efficient markets and informed investment decisions through full and fair disclosure of material issues.

04/11/2023

A changing world

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Corporate growth and success are no longer constrained solely by the availability of financial capital.

Global resource constraints and management of environmental and social issues are integral to the long term success and sustainable value creation of companies.

Inadequate pricing of externalities present a skewed view of performance for resource intensive companies.

Governments are less able to regulate the complex interactions, dependencies, and impacts of companies on society.

Reporting to investors and the public must reflect a balanced view of risks and opportunities across all forms of capital a company employs.

The world population is increasingly urbanGlobal population by type of area and by region: 1950-2050

Gro

wth

Source: UN Population Division, World Population Prospects: The 2008 Revision, 2008

The world could be running out of some resourcesGlobal supply forecasts according to the implied ultimate recoverable resources of conventional oil, date of peak production and the post-peak aggregate decline rate

Source: World Bank, Global Economic Prospects, 2007

© 2012 SASB™ CONFIDENTIAL & PROPRIETARY

04/11/2023

1975 1985 1995 2005 20100%

20%

40%

60%

80%

100%

Intangible Assets Tangible Assests

Changing valuations

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Source: Ocean Tomo

Components of S&P 500 Market Value

04/11/2023 © 2012 SASB™ CONFIDENTIAL & PROPRIETARY

Materiality Matters

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The Supreme Court’s Definition

“Material information” is defined as presenting a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the “total mix” of information made available.

(TSC Indus. V. Northway, Inc., 426 U.S. 438 (1976) and Basic v. Levinson, 485 U.S. 224 (1988))

SASB adheres to the materiality of information requiring disclosure as defined by U.S. regulation, SEC rulings, and judicial review, effectively bridging the gap between financial reporting and sustainability reporting. An integrated view of materiality is essential for integrated reporting.

• Rule 12b-2

• Rule 12b-20

• Rule 10b-5

• Rule 210.1-02 (Regulation S-X)

• Rule 210.4-01 (a)

• (Regulation S-X)

• Rule 210.4-02 (Regulation S-X)

• Item 101, 103, and 303 (Regulation S-K)

• Staff Accounting Bulletin No. 99

SEC materiality

04/11/2023 © 2012 SASB™ CONFIDENTIAL & PROPRIETARY

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Integrated Reporting

SEC, FASB and SASB

SASB Materiality Map and KPIs

US GAAP

04/11/2023 © 2012 SASB™ CONFIDENTIAL & PROPRIETARY

SASB completes the picture on corporate performance

Creating a race to the top

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Comparable information in a public eye will encourage companies to compete on key dimensions of sustainability, and investors to drive capital to the most sustainable outcomes.

SASB KPIs

04/11/2023 © 2012 SASB™ CONFIDENTIAL & PROPRIETARY

10 sectors in 10 quarters

Time Frame SectorQ4, 2012 Health Care Services

Q1, 2013 Financials

Q2, 2013 Technology & Communication

Q3, 2013 Non-Renewable Resources

Q4, 2013 Transportation

Q1, 2014 Services

Q2, 2014 Resource Transformation

Q3, 2014 Consumption

Q4, 2014 Renewable Resources & Alt. Energy

Q1, 2015 Infrastructure

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SASB’s rigorous, ANSI compliant standards setting process

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Industry Research

SASB

KPI Harvesting

SASB

Prepare Strawmen

SASB

Prepare Draft for Public Comment

SASB

30 Day Comment

Public

Response to Comments

30 Days

SASB

Prepare final draft of KPIs for Standards Council

30 Days

SASB

Finalization of KPIs for all industries in a sector and release preparation

30 Days

SASB

Standards Council Review

of draft standards after comment

Stds. Council

Review Material Issues

SASB

3-Month Refinement

IWG ForumDisbanded

IWG Review

IWG Forum

3-Month Refinement Phase (Continued)

KPIsRelease of

Sector KPIs for Public use and

Industry pilot

Prior Work• Recruit

IWGs• Liaise

with Industry Groups

2-Month Intensive Development Phase

4-Month Preparation Phase

04/11/2023 © 2012 SASB™ CONFIDENTIAL & PROPRIETARY

Standards Council Process Review

Launch of IWG Forum

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Get involved!

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What you can do

• Review and comment on the discussion draft of the IIRC reporting framework to be released April 16, 2013. 

• Help pioneer sustainability standards for your industry by registering for a SASB industry working group. The group for Technology and Communications kicks off on May 1.

• Attend or monitor the 2013 GRI Conference on Sustainability and Reporting (May 22-24), which will include discussion of how the G4 relates to integrated reporting.

• Participate in Framework’s Sustainability Integration webinar on May 1… stay tuned for details!

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Resources

• A recording of this webinar, along with materials from the IIRC, SASB, Covanta, Eskom, and Framework LLC, will be available on our site, framework-llc.com

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Thank You!

© 2013 Framework LLC

Aleksandra Dobkowski-Joyadjoy@framework-llc.com(203) 563-0644

@SustainStrategy