Impact good reporting can have on improved performance, and the breadth of the business model

1. Sustainability
and integrated reporting – the
opportunity, developing the
conceptual framework, the impact of
accounting on business

2. So what do I want to get out of today’s
presentation?
• Share knowledge and learn from you
• Get some informed discussion happening
• Provide some reference resources and case studies
• Discuss sustainability
• Provide you with a view on integrated reporting
• Give you my view and some insight into what is happening to
the “business model” – a view that I encourage you to
challenge

3. What do you want to get out of this
morning’s presentation?
Just take 15 seconds –
Make sure you ask about what I don’t cover
that is of interest to you

4. Sustainability
• Financial meaning – the ability to continue in
business
• Environmental meaning – doing no damage –
leaving an opportunity for future generations
• Confusion in the narrative
• OH & S, staff development has also crept into
Sustainability reports

5. Sustainability from an environmental
perspective
• Carbon emissions
• Water usage and management
• Waste management
• Health issues
• Biodiversity
• Population

6. Peter Senge – The Necessary Revolution

7. Sustainability reports
http://www.toyota.com.au/toyota/sustainability
http://www.toyota.com.au/toyota/sustainability/corporate/past
-sustainability-reports?
WT.ac=Sustainability_HP_PastSustainabilityReports

8. Sustainability reports
CPA Australia Sustainability Report 2010
http://www.cpaaustralia.com.au/cps/rde/xbcr/cpa-
site/CPA_Australia_Sustainability_Report_2010.pdf
CPA Australia Annual Report 2011
http://www.cpaaustralia.com.au/cps/rde/xchg/cpa-
site/hs.xsl/annual-report-2011.html

9. Now the Annual Report
http://cpaaustraliaannualreport.realviewdigital.com/

10. Now the Integrated Report
http://cpaaustraliaannualreport.realviewdigital.com/#folio=1

11. GRI Framework
Sustainable Development and the Transparency Imperative
The goal of sustainable development is to “meet the needs of
the present without compromising the ability of future
generations to meet their own needs.”
https://www.globalreporting.org/reporting/latest-
guidelines/g3-1-guidelines/Pages/default.aspx

12. GRI Moving to G4 - developments
The next generation of the GRI Guidelines – G4 – should
address requirements for sustainability data, and enable
reporters to provide relevant information to various
stakeholder groups. It should also improve on content in the
current Guidelines – G3 and G3.1 – with strengthened technical
definitions and improved clarity, helping reporters, information
users and assurance providers.

13. Diversion – a price on Carbon
• Opportunities and issues that will impact on
reporting

14. Implications
• National Greenhouse and Energy Reporting
• NGER’s
» First round of reports – audit comments
» http://www.cleanenergyregulator.gov.au/National-Greenhouse-and-
Energy-Reporting/Auditors/Documents/20656%20NGER%20-
%20Reporting%20Audit%20Program%20-%20Findings.pdf

15. Issues to consider
• Assess liability
• Identify abatement/emission reduction possibilities (power, vehicle,
etc.)
• Review supply chain exposure – and your contracts
• Understand ability to pass through costs (be aware of ACCC
requirements to substantiate any claims)
• Opportunities – can you help your clients develop energy efficient
products/renewable energy opportunities
• Eligibility for government grants
• Understand balance sheet and P & L impacts – update cash flows
• Are there any carbon market opportunities

16. Specific risks
• Carbon emissions
• Water usage and management
• Waste management
• Contracts
• Balance sheet and P & L exposure
• Pricing

17. Issues and opportunities for CPA’s
• Measurement and reporting
• Assurance
• Meaningful analysis
• Supply chain
• Product life cycle
• Cost analysis

18. Areas to consider
• Production process – inputs and outputs
• Resources usage – wastage
• Transport
• IT – technology systems – power usage
• Supply chain
• Recycling – garbage
• Lighting

19. Business impacts of climate change
• Business risks – what are the implications of
not being ahead of the curve?
• Supply chain risks – How will you affect your
suppliers, and what will their impact be on
you – e.g. Toyota model
• Product life cycle issues – Service - Advisory
• Consumer activism

20. MELTING PERMAFROST
COAL MINING
COAL PLANTS
CROP BURNING
OIL PRODUCTION
FOREST BURNING
LAND TRANSPORTATION
LANDFILLS
FERTILIZATION
INDUSTRIAL AGRICULTURE
INDUSTRIAL PROCESSES
Where Do Greenhouse Gases Come
From?
AVIATION
SHIPPING

21. Resources
Sensis SME success stories at
http://about.sensis.com.au/small-business/free-sustainable-
growth-book
Carbon Compass at:
http://www.carboncompass.com.au/
ClimateWorks
http://www.climateworksaustralia.com/low_carbon_growth_plan.
html

22. What is the purpose of Reporting?
• Regulatory purpose
– Compliance?
– Meaningful information?
• Inform stakeholders
– Investors – employees – clients – competitors ?
– Potential investors?
• Wider community
– What is of “general” interest?

23. Integrated Reporting
• Integrated Reporting is a new approach to corporate reporting that
demonstrates the linkages between an organization’s strategy,
governance and financial performance and the social,
environmental and economic context within which it operates. By
reinforcing these connections, Integrated Reporting can help
business to take more sustainable decisions and enable investors
and other stakeholders to understand how an organization is really
performing.

24. Integrated Reporting
• Conceptual framework
• What can it mean?
• Competitive pressures
• Relevance of reporting – how does it add value to
our understanding of the performance of a business
• http://www.theiirc.org/the-integrated-reporting-
discussion-paper/

25. The percentage of market value represented by physical and financial assets versus intangible factors, some of which are
explained within financial statements, but many of which are not.

26. The world has changed – reporting must too
Source – WBCSD Vision 2050
26
The world population is increasingly urban
Global population by type of area and by region:
1950-2050
Global economic power is shifting
Top 10 economies by GDP in 2050
The global middle class is rapidly expanding
Population in low- and middle-income countries
earning $4,000-$17,000 per capita (purchasing
power parity)
Greenhouse gas emissions keep rising
GHG emissions by regions
Environmental degradation jeopardises
people’s quality of life
People living in areas of water stress by level
of stress
The world could be running out of some
resources
Global supply forecasts according to the implied ultimate
recoverable resources of conventional oil, date of peak production
and the post-peak aggregate decline rate
GrowthDegradation
Source: UN Population Division, World Population
Prospects: The 2008 Revision, 2008
Source: Goldman Sachs, BRICs and Beyond, 2007 Source: World Bank, Global Economic Prospects, 2007
Source: UN Population Division, World Population
Prospects: The 2008 Revision, 2008 Source: Goldman Sachs, BRICs and Beyond, 2007 Source: World Bank, Global Economic Prospects, 2007

27. Reports: Increasing length and complexity
Source: Investis research - PwC
Prudential annual report pages 1850-2008

28. The evolution of Reporting…
28

29. …Integrated Reporting – the Future
29

30. Coordinated, International Action Needed
Now
• Reporting has a fundamental impact on decision-making
• Critical interdependencies need to be made clear
• A clear, concise picture of performance, impacts and
interdependencies, to:
– drive innovation
– be focused on communication and not just on compliance
– support resource allocation decisions consistent with sustained
value creation and with long term economic stability
• Build on the many positive developments to date
• Bring together divergent strands of reporting
30

31. How is Integrated Reporting Different?
Thinking: Disconnected  Integrated
Stewardship: Financial capital  All forms of capital
Focus: Past, financial  Past and future, connected,
strategic
Timeframe: Short term  Short, medium and long term
Trust: Narrow disclosures  Greater transparency
Adaptive: Rule bound  Responsive to individual
circumstances
Concise: Long and complex  Concise and material
Technology
enabled:
Paper based
 Technology enabled
31

32. Central themes
Business model & value creation
32

33. Business Model

34. • Distinction between outputs and outcomes
• The linking of the 6 capitals – and their transformation
within the business model
• Assessing desired outcomes against desired objectives to
refine and modify the business model
Framework

35. What’s the Business Model about?

36. Examples of Business Model Reporting

37. Alternate model

38. Conclusions in relation to IR framework

39. Resources and relationships or “capitals”
• Financial capital: The pool of funds available to the
organization.
• Manufactured capital: Manufactured physical objects, as
distinct from natural physical objects.
• Human capital: People’s skills and experience, and their
motivations to innovate.
• Intellectual capital: Intangibles that provide competitive
advantage.
• Natural capital: Includes water, land, minerals, and forests; and
biodiversity and eco-system health.
• Social capital: The institutions and relationships established
within and between each community, group of stakeholders and
other networks to enhance individual and collective well-being.
Includes an organization’s social license to operate.
39

40. Content Elements
• Organizational overview and business model: What does the organization do
and how does it create and sustain value in the short, medium and long term?
• Operating context, including risks and opportunities: What are the
circumstances under which the organization operates, including the key resources
and relationships on which it depends and the key risks and opportunities that it
faces?
• Strategic objectives and strategies to achieve those objectives: Where does
the organization want to go and how is it going to get there?
• Governance and remuneration: What is the organization’s governance structure,
and how does governance support the strategic objectives of the organization and
relate to the organization’s approach to remuneration?
• Performance: How has the organization performed against its strategic objectives
and related strategies?
• Future outlook: What opportunities, challenges and uncertainties is the
organization likely to encounter in achieving its strategic objectives and what are the
resulting implications for its strategies and future performance?
40

41. Content elements – earlier
version
• Operating context, including risks and
opportunities
• Strategic objectives
• Governance and remuneration
• Performance
• Organizational overview and business
model
• Future outlook
Content elements – current
draft
• Organizational overview and external
environment
• Strategy and resource allocation
• Governance
• Performance
• Business model
• Future outlook
• Opportunities and risks