Getting management right to allow accurate assessment of future value

Stefan Crets Executive Director CSR Europe

2013: unique convergence in Europe

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• Increase in number of companies reporting • Level playing field but sufficient flexibility • Stronger link to what really matters

• Materiality • Impact • Market value & growth

How to make ensure companies are ready ?

How to support the link to

management performance ?

Integrated Performance as a focus

Virtuous cycle of an integrated approach

Integrated Performance reflects the true market value of a company because the real company value is expressed in both financial and non-financial performance

Management

Performance

Reporting

Materiality Analysis /

Due Diligence

Challenges of Better Integration of Financial and Non-Financial Performance

1. Materiality assessment

2. Maturity of management

3. Integration of management

4. Good story telling for better evaluation

4

1. Materiality = Defining Relevant Sustainability Areas to Manage and Report for Business Benefit

Key Success Factors - Informing corporate strategy not only

reporting - Instrumental in setting sustainability

context & identifying risks and opportunities

- Dynamic and evolutionary process - Incorporates short, medium and

long-term view of social, environmental, governance issues impacting business

- It must build on reliable, evidence-based data, observations and conclusions

- Multi-stakeholder engagement is key to success & to avoid myopic view of impacts

Challenges for Companies • Issue identification

• Issue Prioritisation

• Strategic Use

• Review of Materiality Assessment

The real challenge: quantity and quality

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(1) Increase in the number of companies reporting in Europe

0

5,000

10,000

15,000

20,000

Current

(2) Focus on maturity and integration of the management of ESG factors, within companies and within the supply chain

46 61

0

25

50

75

100

Maturity Integration

%

= degree to which KPIs, targets, performance

management & transparency are developed

= degree to which ESG management is linked to

core strategy & management processes

0 1 2 3

Five factors of maturity Carbonemissions

Employeeengagement

Wastemanagement

Customersatisfaction

Supply chainmanagement

Publicperception

Ethical integrity

Innovation

Targets related to non-financial KPIs

Results linked to existing business management model

Results linked to performance management

Results reported externally

Source: VNFP Project 2012, CSR Europe

Average score, n=19

Non-financial KPIs in place

HQ, Affiliates, Supply Chain HQ, Affiliates HQ None of the

operations

2. Maturity: KPIs and reporting but less targets and link to business

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3. Integration: linked to strategy but not really to business

61%

0%

100%

Integration

Integration of NFP Management

CSR fully integrated

CSR not integrated

Average percentage, n=18

Source: VNFP Project 2012, CSR Europe

Integration is the degree to which non-financial performance is linked to the core strategy & management processes of the business

Five drivers of integration

1. Strategy and decision-making

Centralised and coordinated CSR strategy and objectives, feeding into the core business strategy.

2. Management model CSR is part of your management processes

3. Organisational structure

Direct involvement of executives and strategic divisions in CSR decision-making/corporate planning

4. Collaboration Intensive cooperation between operational divisions to implement CSR strategy

5. Stakeholder engagement

Capacity to gather and bring on board stakeholder expectations

This material may not be reprinted or redistributed without the express written consent of CSR Europe

4. Good story telling for better evaluation

• Context is king • Not every performance aspect

is quantifiable • Reliable and robust datasets

on non-financial performance • Communicate strategic goals

and targets on material non-financial areas

• Define communications format according to habits of stakeholders targeted how do investors read sustainability reports?

9

Good story telling for better evaluation

• Clarity on expectations – from investors towards companies

• Good understanding of sector risks • Define how to bring it into

conversations, how to communicate

10

Conclusion

For better risk assessment and value-setting over the mid-term:

– Prepare robust and credible materiality assessment for strategic use

– Ensure material financial and non-financial issues are managed in a mature way

– Integrate non-financial management into the standard business processes

– Communicate with audiences in ways appropriate for them to understand and use your story

11

European Action Plan on Integrated Performance and Reporting

MISSION To equip companies,

governments, investors,

analysts and financial

markets in Europe with the

knowledge and tools to

enhance integrated

performance through

efficient management and

reporting with a view to

improve business

performance and to comply

with legislation.

THE WORK Based on the activities of

existing frameworks and

networks (such as GRI, IIRC,

WBCSD, CDSB, etc.) develop

capacity building and

awareness raising

instruments to support

companies, governments,

associations, investors,

analysts and financial

markets and contribute to

European monitoring of

integrated performance and

reporting.