Identifying Materiality in Corporate Sustainability
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Transcript of Identifying Materiality in Corporate Sustainability
Identifying Materiality inCorporate Sustainability
From theoretical underpinningsto practical application
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• What is material?• The evolution of material disclosure• Materiality analysis in action: examples from the field• Discussion and questions
Today’s conversation
What is material?
“[T]opics and indicators that reflect the organization’s significant economic, environmental, and social impacts, or that would substantively influence the assessments and decisions of stakeholders.”
Global Reporting Initiative G3 Sustainability Reporting Guidelines.
“An omitted fact is material if there is a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote”.
TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976).
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“Material information” is defined by the Supreme Court 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. Evaluating the materiality of sustainability issues involves looking beyond conventional measures of assets and liabilities to those embedded in aspects of social and environmental performance and stakeholder relationships, which may hold the key to future business success or failure.
Sustainability Accounting Standards Board
What is material?
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Significant impacts
Stakeholder interests
Economic Environmental Social Governance
Investors Customers Employees Communities SuppliersRegulators Academics NGOs Ecosystems
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Why does materiality matter to companies?
Companies focus on material issues because…
• They pose significant opportunity to build value: Success in addressing material issues can create significant value for brand and financial interest-holders.
• They pose significant risk to reputation and profitability: Failure to address material issues can increase costs, depress sales, erode brand value, and cause the loss of talent.
Business StrategyMateriality analysis leads to a more balanced perception of a company’s critical business issues.
ReportingA robust materiality analysis informs the balance between detail and breadth of coverage in reporting.
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• What is material?• The evolution of material disclosure• Materiality analysis in action: examples from the field• Discussion and questions
Today’s conversation
Material disclosure: The Global Reporting Initiative
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Materiality is a central tenet of reporting under the proposed G4 Sustainability Reporting Guidelines
…especially with regard to Disclosures on Management Approach and the selection of indicators on which a company will report.
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GRI Technical Protocol for Defining Report Content and Boundaries (G3.1 version)
Similar to the Financial Accounting Standards Board—except focused on environmental, social, and governance issues—the SASB will establish an understanding of material sustainability risks and opportunities facing companies, and create industry-based key performance indicators suitable for disclosure in standard filings such as the Form 10-K.
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Material disclosure: Sustainability Accounting Standards Board
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SASB’s materiality mapping process
http://www.sasb.org/materiality/determining-materiality/
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• What is material?• The evolution of material disclosure• Materiality analysis in action: examples from the field• Discussion and questions
Today’s conversation
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Framework LLC’s approach to materiality analysis
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CEMEX’s sustainability strategy focuses on seven priority areas
Materiality applied: linking strategy with reporting at CEMEX
http://www.cemex.com/InvestorCenter/files/2011/CX_SDR2011.pdf
BASF: Integrating materiality into business strategySeptember 2012BASF Corporation
Company Overview:BASF – The Chemical Company
The world’s leading chemical company
Serves all major industries
385 production facilities including six Verbund sites
World-class, innovative, high-value products
Intelligent, sustainable system solutions
2011 Sales: €73.5 Billion
Employees: 111,000+
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Sustainability will become even more important
SUPPLY DEMAND
1976 2010
Annual regenerative
capacity of the planet
Human beings now demand more from
the Earth than can be regenerated
Earth’s resources
Consumption of Earth’s resources
+
Source: Accenture.
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Sustainability in customer industries drives innovations in new growth fields
Health & Nutrition
Consumer GoodsConstructionTransportatio
n Electronics Energy & ResourcesAgriculture
Cus
tom
erin
dust
ries
Gro
wth
fie
lds*
Energymanagement
Wind energy
Rare earth metals recycling
Heat management Enzymes Plant
biotechnologyBatteries
Lightweight composites
Heat management
Functional crop care
Medical OrganicElectronics
Water solutions
Chemistry as enabler
Resources, Environment& Climate
Food & Nutrition Quality of life
BASF Strategy: We create chemistry
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Strategic sustainability issues
BASF assesses sustainability issues and their impact on an ongoing basis
In 2010, about 300 people, including customers, NGOs, investors, scientists, regulators and BASF employees, participated in interviews and surveys to assess the most important sustainability issues
Selected key issues 2011: – Energy and climate– Water– Product stewardship– Personnel development
For more information see www.basf.com/materiality
Energy &Climate
Product steward-
ship
Personneldevelop.
Water
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Health protectionHealth Performance Index comprises five criteria; Goal: score of at least 0.9 (maximal 1.0)
Reported cases of occupational disease Medical emergency planning First aid
Preventive medicine Health promotion
Overview of our goals
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Environment(by 2020)
Health(each year)
Safety and security(by 2020)
Water Drinking water for
production -50% Sustainable water
management in water stress areas 100 %
Occupational Safety Work-related
accidents -80%
Transportation safety Transportation
accidents -70%
Product safety “Safety check”
for more than 99% of our products
Energy and climate protection Greenhouse gases
(specific) -40% Energy efficiency +35 % Reduce (specific) greenhouse
gas Emissions from natural gas transport at Wingas -10%
Emissions to water Organic substances -80%
Emissions to air Air pollutants -70%
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Transport 4
Energy and climateHelping our customers shrink their carbon footprint
Without the use of BASF products: 1768With use of BASF products: 1438
CO2e emissions at customers [million metric tons of CO2e/year]:
Emissions along the entire value-adding chain
[million metric tons CO2e/year]:
CO2e emissions from BASF’s production(GHG Protocol Scope 1&2)
CO2e emissions along the value-adding chain (GHG Protocol Scope 3)
Emissions avoided:330 million metric tons
CO2e/year
BASF production
Suppliers
Use ofBASF end products
Disposal
Other sources
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65
50
30
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We help our customers to
reduce their “carbon footprint”.
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BASF is a strategic partner in the European Water Partnership and member of the WBCSD water leadership team
Majority of water (~90%) used by BASF is used for cooling
Global analysis of production sites in 2010 determined that one fifth of sites are located in regions with high water stress
These sites account for about 7% of BASF’s total water demand (but less than 1% of fresh water use)
WaterResponsible use of water resources is key priority
Red high water stress index (≥ 0.9)Blue low water stress index (≤ 0.1)Green BASF sitesWSI Data: Pfister et al., 2009
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Water Solutions
BASF Strategy: We create chemistry
Market size: €20 billion BASF sales potential: > €800 million
Business potential 2020
High-performance flocculants, desalinization and antifouling chemicals & polymers used in membranes (BASF & Ciba)
Acquired know-how on membrane technologies and module systems (inge watertechnologies)
Existing activities
Position BASF as the leading supplier of innovative chemical solutions worldwide
Forward integration into membrane technologies Leverage synergies to develop improved additives,
flocculants and polymers
Targets
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Leading edge tools include material sustainability issues
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CREATING SUSTAINABLE IMPACT
September 2012
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Bloomberg defines materiality for sustainability / financial as a function of time and visibility
TIME
MATERIALITY
LOW
HIGH
NEAR FAR
Financial
Financial / Sustainability
Sustainability
Long term, unknown effect
Harder to define, but very valuable
Well known, fully discounted
Bloomberg focuses
here
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We developed a framework to continually evaluate opportunities and determine investment attractiveness
Description
Specific Indicators
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Carbon emissions equivalents
Non-biodegradable solid waste
Toxic waste Water usage Deforestation Impact on plant life,
animal life land resources (e.g. strip mining)
Environmental Benefits
Measures impact on the environment from BLP’s business operations.
Measures financial impact of the change to the company.
Financial Benefits
Incremental operating expense (one time and recurring)
Incremental capital expenditures
Incremental FTE resources required
Operating expense savings
ROI (Return on Investment)
NPV (Net Present Value)
Payback period
Measures the extent to which the change fits with the overall BLP culture.
Company Fit
Fit with perception of BLP as a progressive company
Impact on employee satisfaction
Impact on employee interaction / shape culture (hard working, passionate, customer-centric, intuitive, etc.)
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The framework enabled Bloomberg identify and execute high value projects with multiple benefits
Aware87%
Neutral7%
Unaware5%
Released The Sustainability Edge in May, Bloomberg’s first public sustainability report. We achieved a Global Reporting Initiative B+ Application Level and a glowing review from the Corporate Register titled “Bloomberg: A paragon of what they preach”.
With Markets Magazine and Bloomberg Businessweek FSC certified, Bloomberg is the only multimedia company in the world with 100% of its portfolio to be sustainably produced.
By 2012, nearly 50% of our colleagues will work in certified LEED offices around the world
Ground broken on Solar Array at Skillman campus in 2011. Project will generate 2.8M kWh, approximately 58% of Building 100’s annual electricity consumption.
Notable Achievements
North America6
Latin America9
EMEA15
Asia5
Regional Projects: Distribution
BGREENAwareness
BGREEN/Other
InfoSys
Engineering
Marketing
Global Real Estate
Prof. Dev.
Markets Mag
Asset Mgmt
Facilities
40%
4%
4%
4%
4%
5%
5%
8%
25%
Project distribution by Department
Avoided equivalent of one year of
emissions from operations
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During this time, we’ve continued to learn and extend our efforts beyond operations
Collaborating with and supporting NGOs driving sustainability standard setting , disclosure and market development through voluntary, multi stakeholder efforts
Philanthropic Activity
▪ Grants- Provided grants in partnership with customers
to environmental organizations to improve environmental data for financial integration
▪ Sponsorship- Support for sustainability events and initiatives
that bring together finance, industry governments and non-profits to address environmental challenges
▪ Best of Bloomberg
- Identify and co-deliver targeted sustainability specific volunteer programs for employees in multiple locations to educate and engage them in areas important to Bloomberg
• Leveraging Bloomberg’s core strengths to develop products that accelerate solutions to environmental challenges and successful business opportunities for Bloomberg
Product Development
▪ ESG Data- created environmental, social and governance
data sets to provide better insight into how companies are managed ‘beyond financials’
▪ BNEF Acquisition- added leading clean energy and carbon market
research and information provider into Bloomberg suite of products
▪ Sustainability website
- Launched a sustainability channel on Bloomberg.com covering related issues to inform and hold the interest of the C-suite
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To continue, we need a framework to leverage existing guiding principles and objectives from multiple groups…
Operations
Responsible Forestry Management
Environmental Standards & Transparency
Green Building & Energy Efficiency
Electronics Efficiency& E-Waste
Supply Chain Risk
Product
New Customers
Risk Mgmt / Analytics
New Markets
Building the Brand
Enhanced Content
PhilanthropyEmployee Engagement Volunteer Projects
Brand/ Reputational Management
Community Engagement/Regional Presence
Education / Training Environmental
Impact reduction
Social Investment
Operating Cost reduction
Revenue Generation
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6 key tenets to drive success
A COORDINATED, UNIQUE AND AGGRESSIVE APPROACH TO ALIGN PHILANTHROPY, OPERATIONS AND PRODUCT TO
CREATE UNPRECEDENTED ‘SUSTAINABLE IMPACT’
1PHILANTHROPY
SYNDICATING SUSTAINABLE
SOLUTIONS TO OUR PARTNERS 3
PRODUCT
BLOOMBERG SUTAINABILITY
PRODUCT STRATEGY2OPERATIONS
BLOOMBERG BGREEN
SOLUTIONS
….to create a more robust sustainability integration effort that drives value throughout the organization
Anchor Initiative
Sustainability Accounting
Standards Board (SASB)
Department level Corporate
Carbon Assessment
Independent Sustainable
Finance Product Group
PEOPLE PLANET PROFIT
PartnerEngagement
Business Opportunities
Operational Excellence
Thought Leadership
Financial Integration
Market Development
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• What is material?• The evolution of material disclosure• Materiality analysis in action: examples from the field• Discussion and questions
Today’s conversation
• Who decides? What stakeholder audiences or internal criteria are most important to a materiality determination?
• A difference of opinion: How can we arrive at a consistent definition of materiality and thresholds?
• Process and outcomes: Is the publication of approaches to materiality analysis processes and lists of sector-based material issues (by SASB and GRI) helpful and sufficient?
• More data vs. more material data: a false choice?
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Discussion and questions