sustainability challenges for the high impact sector
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Dan Sonnenberg SR & I. Sustainability Challenges for the High Impact Sector. Business seen increasingly as: A developmental agent An agent of societal change A challenge to local culture An exploiter of environment Responsible for indirect impacts of its activities.

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Presentation Transcript
the business environment
Business seen increasingly as:

A developmental agent

An agent of societal change

A challenge to local culture

An exploiter of environment

Responsible for indirect impacts of its activities

The Business Environment
social license to operate
Business is now answerable to, and can be materially affected by, more than just its shareholders and regulators.

Bottom line: it’s now about the way a business makes money, rather than what it does with its profits.

Social License to Operate
definitions
Confusion of terminology- Corporate Social Responsibility, Sustainable Development, Corporate Citizenship, Corporate Social Investment, Sustainability

You cannot integrate what is not defined

Sustainability as Non-Financial Risk Management

Definitions
corporate sustainability
…is a business approach to create long-term shareholder value by embracing opportunities and managing risks deriving from economic, social and environmental issues in a systematic manner.Corporate Sustainability
jse sri index 1
A response to King II Report’s effect on South African company corporate governance & sustainability reporting

Designed as a sustainability index – social / environmental / economic pillars

Meshes South African priorities, FTSE 4 GOOD and DJSGI criteria.

Developed by the JSE in partnership with SR & I, an Advisory Committee and other stakeholders.

Targets the top 160 companies on the JSE (by market cap)

Process includes dispute resolution, verification & formal ongoing company & stakeholder liaison

JSE SRI Index 1
jse sri index 2
Criteria designed to evaluate a company’s ability to, identify, understand, manage and report on non-financial issues

Values substance over form

Performance against targets over aspirational statement

Recognises the importance of social challenges in South Africa (BEE, EE, HIV/Aids)

No negative screening or weighting, but greater disclosure required from high-impact companies

JSE SRI Index 2
trends 1
Disclosure of ‘social’ and ‘environmental’ greatest strength of the high impact sector

Awareness of environmental impacts and disclosure high, including provision of numerical data

High impact sector above average in GRI usage

Trends 1
trends 2
Social and environmental performance still described in aspirational, anecdotal and episodic manner

Stakeholder ability to compare year-on-year performance still limited

Areas with regulatory disclosure requirements well reported

HIV/Aids disclosure demonstrates that even in the absence of disclosure requirements business can respond to perceived societal information need.

Trends 2
slide10

Social Issues

Society

  • Community
  • Bribery and corruption
  • Political contributions
  • Competition and pricing

Labour practices

and decent work

  • Labour relations
  • Heath and Safety
  • Diversity and Opportunity

Product responsibility

  • Customer health and safety
  • Products and services
  • Advertising
  • Respect for privacy
slide11

Environmental Issues

Materials

Energy

Water

Biodiversity

Emissions, effluents and waste

Suppliers

Products and services

Compliance

Transport

slide12

Economic Issues

Customers

Suppliers

Employees

Providers of capital

Regulators

Communities

corporate governance
Companies’ Act

King II guideline

King II mandatory in the future for listed companies

formal requirement for reporting on non-financial risk management and sustainability

Corporate Governance
policy
The value of formal policies for companies

- Internal

- External

The risks of policies for companies

- Divergence from reality

- Poorly defined and thus unachievable

Good versus bad policies

Clarity of targets

Absence of qualifiers e.g. “where appropriate”

Policy
weasel words
Weasel Words

The highest international standards

Appropriate

Where practical

In line with best practice

Is committed to…

Principles

Complying with

The spirit of

management performance
YOU CANNOT MANAGE WHAT YOU DO NOT MEASURE

Credible risk management explicitly considers all risks and prioritises them

Credible risk management creates targets for management systems

Credible management systems generate data for management use

Management action based upon their data

Include review/audit capability  

Management & Performance
reporting 1
Companies must demonstrate capacity to

identify

understand

manage

report, and

benefit

from challenges

Reporting 1
reporting 2
Although there is a role for PR, non-financial reporting should be guided by principles comparable to statutory disclosure:

Relevant, true, non-selective & fair

Systematic & comparable

Quantitative with context

Reporting 2
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