Archives For sustainability

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By Carol A Adams, Monash University, ACCA member of Global Forum for Sustainability

This year’s World Cup was supposed to be the “greenest ever”, with FIFA taking measures to account for the event’s greenhouse gas emissions, including an estimated 2.7 million tonnes of carbon dioxide.

As the biggest sporting event on the planet, FIFA is under pressure to take its sustainability measures seriously. It provides a unique opportunity to raise awareness among hundreds of millions of people around the world and the potential to leave a lasting low carbon legacy in the cities that host it.

Accounting for greenhouse gas emissions helps identify where carbon emissions can be reduced. But like any form of accounting it is not an exact science and it is important to be mindful of what matters, what’s the purpose and what can and should be changed.

What’s in…

The key to calculating the size of the carbon footprint of the World Cup is deciding what’s in and what’s not. FIFA applies the Greenhouse Gas Protocol Corporate Standard, which aims to guide organisations in preparing a greenhouse gas emissions inventory that represents a true and fair account of emissions in a standardised way. This allows comparisons, for example, with other sporting events.

FIFA states that its carbon accounting includes the preparation phase and staging both the Confederation Cup and World Cup. That is, FIFA does not just include the World Cup event itself, but all the events leading up to it such as the draws and associated banquets.

FIFA has committed to reporting more than the minimum expected in a greenhouse gas inventory by including what are known as “Scope 3” emissions – indirect emissions that are beyond FIFA’s control. Reporting of Scope 3 emissions is optional. FIFA’s strategy and work on this can be found here.

Scope 3 emissions, of which spectator travel makes up by far the most, were estimated to make up of 98% of the World Cup Staging phase, so when included they make emissions actually under FIFA’s control look relatively small.

…and what’s out

Despite “going beyond the minimum” with its Scope 3 measures, FIFA does not account for emissions associated with infrastructure (known as embodied carbon) arguing that they are not under FIFA’s or the Local Organising Committee’s control or direct influence.

Yet major events could have significant influence through their assessment of bidders for infrastructure projects, including on social and environmental responsibility criteria.

For example, two strategies were used to reduce embodied emissions in London’s Olympic Park. Firstly, the use of low carbon concrete mixes. And second, designing structures that used less materials.

Although not considering these matters within its purview, FIFA has included the construction and demobilisation of temporary facilities.

Without greater effort to reduce and avoid emissions, FIFA’s commitment to buying carbon offsets could be seen as a smoke screen. But FIFA is demanding that bidders now have to provide information against a number of criteria including the management and governance processes in place to ensure the integration of environmental issues in planning.

There are other options for reducing event emissions that are not revealed by FIFA’s accounting: using existing infrastructure wherever possible, minimising embodied carbon in new infrastructure (and making sure it’s used afterwards), as well as filling venues and using good public transport.

Abandoned Olympic venues from around the world.

The power of sport to change the world

With increasing pressure to account for greenhouse emissions, cities like Melbourne whose economies rely on hosting events will need to invest increasingly in public transport, renewable energy sources, energy efficient accommodation and reducing emissions from waste.

As non-government organisations and others step up calls for transparency of the environmental impacts of events, cities that invest in measures to reduce those impacts are increasingly likely to be favourably viewed as venues. ClimateWorks Australia worked with the City of Melbourne on research to inform its approach to developing a road map towards a zero net emissions goal.

This identified a range of energy efficiency and other mitigation opportunities, including for large sporting facilities, which could reduce the city’s emissions by 30% by 2020. In the future such measures may make the difference between a successful and unsuccessful bid for a major event.

An independent United Nations Environment Program (UNEP) report on the 2010 FIFA World Cup in South Africa found that, while the event produced lower carbon emissions than expected, most of this was due to fewer people attending the event. The goal of the 2010 World Cup was “carbon neutral”, but funding constraints meant many planned strategies to reduce or offset emissions weren’t enacted. However, the strategies that were used did appear to work – particularly new, more energy efficient stadiums.

A key innovation of that event was an Environmental Forum comprising of representatives from government departments, host cities and international agencies, such as UNEP, as well as members of the World Cup Local Organising Committee. It’s an approach that will have a lasting influence – a legacy for hosting cities.

Sport is central to our lives and has an incredible power to change how we feel and how we behave. Indeed, under Nelson Mandela’s leadership, rugby went a long way to bringing black and white South Africans together at a critical time and in a way that nothing else could.

By using its influence as the world’s largest sporting event, FIFA could leave a lasting environmental legacy by looking beyond that which it currently measures. In this way it can become a model for sustainable planning of large international events in the future.

More information will perhaps become available in the coming months, but based on available information, it seems that FIFA is hiding behind data and carbon offsets and lacks a strategy to make a real impact.

The Conversation

Carol Adams is a Professor at Monash University. Monash University and The Myer Foundation are founding partners of ClimateWorks Australia.

This article was originally published on The Conversation.
Read the original article.

Katie Schmitz Eulitt, SASB

By Katie Schmitz Eulitt, Director of Stakeholder Engagement, Sustainability Accounting Standards Board (SASB)

A recent ACCA report discussed how differing definitions of materiality affect the boundaries of materiality decisions made by companies. In light of this report, we wanted to offer SASB’s perspective on natural capital and materiality in the context of mandatory disclosure to the Securities & Exchange Commission (SEC).

SASB develops sustainability accounting standards for publicly-listed U.S. companies. The standards are designed for the disclosure of material sustainability issues in SEC filings. By the end of 2014, SASB will have issued standards for 45 industries. By early 2016, SASB standards for more than 80 industries in ten sectors will be available.

While FASB and US GAAP exist for the purpose of disclosing corporate performance through metrics focused on financial capital, SASB’s concern is with accounting for material non-financial issues, including environmental and social capitals that are not accurately priced. SASB is defining parameters that express a true and fair representation of performance on non-financial issues, for investors and analysts to use in evaluating companies. This picture includes attention to the management of critical capitals, vulnerability to depletion, and risks associated with mismanagement. SASB’s approach to sustainability accounting consists of determining standard disclosure and metrics to account for companies’ performance on material sustainability issues.

So, how will SASB standards change corporate performance? By helping companies to account for all forms of capital. Accounting for sustainability impacts means measuring, verifying, and reporting—in other words, being accountable for—the environmental, social, and governance (ESG) performance of an organization. Sustainability accounting standards are intended to complement financial accounting standards. The goal is for investors to be able to evaluate financial fundamentals and sustainability fundamentals side by side. With this information, investors can assess ESG risks and opportunities in an investment portfolio, and companies can improve performance on the ESG issues most relevant to their business success.

The impacts of business on society and the environment, as well as the impact of sustainability issues on business, are often headline news. The perfect storm of global population density, food and water security issues, and extreme weather events is not predicted to subside. Thus, companies need to better understand how these factors inhibit and/or enhance their ability to create value, for shareholders and society alike. SASB’s industry-specific guidelines help companies identify the ESG issues that are likely to be material to their business, and provide investors with the ability to compare company performance on these issues. SASB is using a rigorous method to develop standards that are tailored to each industry. By identifying the minimum set of material issues for every industry, SASB standards surface the information that truly matters. SASB standards are designed to be cost-effective for companies and decision-useful for investors.

Our standards abide by the U.S. Supreme Court’s definition of material information, 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.” Regulation S-K requires corporations to disclose material information to investors in the Form 10-K. While FASB provides standards for the disclosure of material financial information, there are no standards for the disclosure of material non-financial information. SASB is emerging to fill this need.

We encourage everyone interested in materiality, natural capital, and the U.S. capital markets to participate in SASB’s standards development process. Sign up for industry working groups, participate in public comment periods, download and use our standards.

Jarlath Molloy

Dr Jarlath Molloy CPhys, CDSB Technical Manager

A wide range of voluntary and mandatory external drivers influence reporting in the environment and sustainability domain. For example, many organisations may prepare and publish a range of information requested by CDP, Global Reporting Initiative, International Organization for Standardization, OECD guidelines for multinational enterprises, Principles for Responsible Investment, UN Global Compact, Water Accounting Standards Board (WASB) and this list may soon include CEO Water Mandate, International Integrated Reporting Council and Sustainability Accounting Standards Board (SASB). A question you could legitimately ask is whether there is a need for yet another Framework?

The Climate Disclosure Standards Board (CDSB) is a consortium of business and environmental organisations formed at the World Economic Forum’s annual Davos meeting in 2007 and has been chaired by the managing director of WEF since. CDP has kindly provided secretariat support to us since our inception. We are supported by a group of leading industrial and financial services companies together with governmental and non-governmental representatives, who act in an advisory capacity to CDSB. A Technical Working Group formed of representatives of the major accounting firms and professional bodies, including ACCA, coordinates CDSB’s work program with expert input from academics and specialist collaborators.

We are committed to the integration of climate change-related information into mainstream corporate reporting. The Framework is designed to allow investors to assess the relationship between environmental performance and risks, and the organisation’s strategy and prospects. Moreover, it will encourage analysis and decisions which recognise the dependence of economic and financial stability on a healthy environment.

With the inclusion of this information in a mainstream report, the organisation’s environmental performance and risk is subject to the same International Financial Reporting Standards and assurance requirements as financial information. This information is centrally deposited with the competent national authority in a timely fashion and is publically available. We are working with regulators, CDP and the Fujitsu Research Institute to develop an eXtensible Business Reporting Language (XBRL) taxonomy to enable digital, structured communication and exchange of this information and closer alignment with financials in mainstream reports.

What sets CDSB apart from the chorus is that we set out to specifically harmonise reporting of environmental and sustainability risk. We have identified how the other reporting requirements link to each other and to our updated Framework. With the addition of cross-references to CDP, CEO Water Mandate, GRI, IIRC, OECD, PRI, UNGC, WASB and others we compliment their work, adding value by drawing it together in a meaningful narrative for responsible investors.

Our focus to date has been on risks and opportunities that climate change presents to an organisation’s strategy, financial performance and condition. The consultation we have just launched expands that scope into forest commodity risks (i.e. the drivers of deforestation) and water. The public consultation for the updated CDSB Framework opened on 17 February and will run until 19 May 2014. We invite you to comment on the draft and tell us if and how we can do more to address your needs and expectations. Visit http://www.cdsb.net/climate-change-reporting-framework/framework-consultation for more information and to sign up for our consultation briefing webinars on 19 March 2014.

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By Dr Carol A Adams FCCA, member of ACCA’s Global Forum on Sustainability

If you are confused about what integrated reporting is, rest assured you are not the only one.

A lot of people think it’s about putting together your financial and sustainability reports. Wrong. It is much more than that – and much less. It will not replace either a financial or sustainability report – both must be in place for integrated reporting. But starting to think about the connections between the financials, the relationships your organisation has with its key stakeholders and how it makes use of natural resources, for a start, is a step in the right direction.

Integrated reporting requires thinking about ‘value’ beyond financial terms – a long overdue development given that around 80% of the value of company is typically in intangible assets.

Building strong relationships with stakeholders, building a loyal customer base, developing intellectual capital and managing environmental risks, etc, tend to fall off the radar when corporate execs think short-term. But they are critical to long-term success. Integrated reporting keeps the focus on long-term strategy and integrated reports are forward-looking documents covering strategy, the context in which it will be delivered and how the company has, and will, create value for providers of capital and others in the short, medium and long-term. The International <IR> Framework recognises that long-term success depends, amongst other things, on sound management, relationships, a satisfied workforce and the availability of natural resources.

Much of the information companies are providing to investors is not in their annual review or financial statements – further evidence of the need for change. An integrated report fills some of the gap and allows an organisation to tell providers of capital, and others, how it creates value for them.

If you asked your colleagues how they would describe your business model would they have the same view as you? Probably not. Many corporate execs think about their business model in narrow financial terms or from the perspective about the bit of the business they are responsible for. But if the senior exec work together in conceptualising the business model and start to think about inputs and outcomes in broader terms, a different picture about what needs to be managed and what adds value emerges.

The six capitals concept is intended to facilitate this broader thinking about value and the business model. ACCA has been at the forefront of its development coordinating the work of the IIRC’s Technical Collaboration Group on the capitals and funding my involvement.

Some companies are taking a first step towards integrated reporting by getting their financial and sustainability people working together. This is advantageous in that accountants could better understand social and environmental risks and their impact on reputation and the bottom line whilst sustainability teams need to develop skills in making a business case for their work. But the integrated thinking that goes behind integrated reporting needs to involve all the senior execs. And the Board.

If you would like to know more about integrated reporting, see some examples of good reporting practice and speak with some peers about the challenges and benefits, register for the Master Class in London on 14 March hosted by ACCA. You will hear from Eileen Rae, Director-Finance, ACCA and Jonathan Labrey, Communications Director at the International Integrated Reporting Council (IIRC). Eileen will discuss the preparation of ACCA’s second integrated report. A copy of
of my book Understanding Integrated Reporting: the concise guide to integrated thinking and the future of corporate reporting will also be given.

Sustainability

By Patrick Crawford, corporate engagement, Climate Disclosure Standards Board (CDSB)

At the recent non-financial reporting conference in London, in association with ACCA and Deloitte, commentators including Richard Howitt MEP, noted that 80% of shareholder value is now from intangible rather than physical and financial assets.

Coincident with this conference, Eurosif and ACCA launched their investor survey on non-financial reporting. The key findings from 90 investors support the need for integrating non-financial and financial reporting:

  • Non-financial reporting must be comparable across companies.
  • Non-financial information should be better integrated with financial information
  • Quantitative key performance indicators (KPIs) are essential and Qualitative policy statements are very important to assess financial materiality.

Rather than information that simply complies with reporting requirements, investors are seeking reports that communicate performance, including clear insights into issues that have a material impact on a company’s current and future performance. Communicating performance is of value to investor decision-making but equally to businesses as the integration of non-financial and financial information opens up new avenues of communication within the company, providing additional perspectives to their Boards.

My clear sense on leaving the non-financial conference was that investors are using this non-financial information now but they need more help in understanding the impacts on the business. A company’s response to these issues adds value by reducing risks and creating opportunities for the future. Placing ‘sustainability’ into its own report has been a useful first step for companies but there are still many people who say they do not know what ‘sustainability’ means. However, they all have views on what is needed for a business to be ‘sustainable’ in the long-term. Connecting these material issues with financial results requires integrated thinking as much as integrated reporting.

We know that many companies are taking these issues seriously, but until now there has been no structured means of communicating performance in mainstream reports in a consistent and compatible way with financial accounting standards.

The Climate Disclosure Standards Board (CDSB) was created at the World Economic Forum at Davos in 2007 by a group of international business organisations in response to the absence of a structured means of providing climate change-related information in mainstream reports. CDSB’s Technical Working Group drives its work and includes representatives from key global institutions including the main accountancy firms, professional accountancy institutions, investors, report preparers and governments. CDSB’s Reporting Framework is designed to integrate non-financial and financial information in a credible and standardised way.

As the CDSB Framework adopts relevant principles from existing financial standards, companies, accountants and corporate report preparers will find the Framework familiar and useable. CDSB works closely and collaboratively with other global sustainability bodies such as World Business Council for Sustainable Development (WBCSD) and World Resource Institute (WRI). In addition CDSB and CDP (formerly Carbon Disclosure Project) have MoUs with the International Integrated Reporting Council (IIRC), Global Reporting Initiative (GRI) and the US Sustainability Accounting Standards Board (SASB).

CDSB is managed as a special project of CDP. More than 4,200 companies who report their climate change emissions using the CDP process are already ahead of the game. By using CDSB’s Framework they can apply the lens of materiality to their CDP response, incorporating the risks and opportunities from climate change and the growing scarcity of natural resources in their annual reports in a transparent, consistent and comparable way.

The Framework is designed to be ‘Standards Ready’, ready to be adopted by governments in support of the introduction of national regulation on disclosure of climate change and other non-financial impacts. DEFRA’s official guidance cites CDSB’s Reporting Framework as one mean of compliance with UK mandatory requirements to report GHG emissions. Using the Framework provides a means of preparing a company for the increasing amount of regulation that is being discussed and drafted around the world.

To assist companies and report preparers in using the Framework CDSB, with the support of ACCA, has produced a guidance document available here. The CDSB website includes other resources, including recordings of recent webinars introducing the Framework.

  • If you would like any further information about integrating non-financial with financial information using CDSB’s Framework, please contact Patrick.crawford@cdsb.net, or visit www.CDSB.net to download CDSB’s Framework and Guidance.