Archives For CDSB

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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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.