Stefan crets
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Getting management right to allow accurate assessment of future value
Stefan Crets Executive Director CSR Europe
2013: unique convergence in Europe
This material may not be reprinted or redistributed without the express written consent of CSR Europe
• 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
This material may not be reprinted or redistributed without the express written consent of CSR Europe
(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
This material may not be reprinted or redistributed without the express written consent of CSR Europe
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.