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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

ors

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

S

S

G

G

F

F

0

500

1000

1500

2000

2500

Frameworks WBCSD Library

Nu

mb

er o

f in

dic

ato

rs

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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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

Blower@wbcsd.org

Andy BeanlandManager, Redefining Value

Beanland@wbcsd.org

Johanna TähtinenAssociate, Redefining Value

Tahtinen@wbcsd.org

Lois GuthrieDirector, Redefining Value

Guthrie@wbcsd.org

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Contact us at pdd@wbcsd.org 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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