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Measuring and reporting sustainability performance in the public sector
FMI PD week: Financial Reporting
25 November 2014
Cathy Cobey, CPA.CA
Associate Partner
Climate Change & Sustainability Services
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Sustainability reporting
Sustainability reporting process
Integrated reporting
Questions and group dialogue
Agenda
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Sustainability reporting
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Measuring sustainability performance
Environmental Economic
Social
Sustainable
Social:
► Public policy and
advocacy
► Community investments
► Working conditions
► Health/nutrition
► Diversity
► Human rights
► Socially responsible
investing
► Anticorruption and
bribery
► Safety
Environmental:
► Energy – fuel, oil,
alternative
► Water
► Greenhouse gases
► Waste reduction
► Recycling
► Reprocessing/re-use
► Agriculture/organic foods
► Biodiversity
Economic:
► Accountability / transparency
► Governance
► Stakeholder value
► Economic performance
► Financial objectives
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Existing Canadian Government reporting
Environmental Economic
Social
Sustainable
Annual Financial Report
Departmental Performance Reports Federal Sustainable Development
Strategy (FSDS)
Canadian Environmental Sustainability
Indicators (CESI)
Canadian Index of Wellbeing
HR Reports
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Drivers for enhanced sustainability reporting
► Demonstrate leadership
► Report on what matters most
► Quantify and demonstrate non-financial improvements to public ‘well-being’
► Benchmark performance against government priorities
► Report to, and engage with public service employees on sustainability initiatives
► Improve transparency and accountability on full impacts on resources used in delivering public services
► Improved risk management
► Measure and report on the ability of public agencies to meet its future obligations for providing services
Sustainability reporting process
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Sustainability reporting process
How is our organization or agency
perceived externally?
What are our peers and affiliates
doing?
Do we know which stakeholders are
relying on our sustainability
information?
What do our stakeholders care
about?
Are we consistent in our reporting to
stakeholders?
Meeting the needs of stakeholders:
Do we have a good understanding
of our risks and opportunities
associated with sustainability?
Have we clearly identified our
material sustainability issues, and
are they being managed?
Do we need a more rigorous
process to ensure that our
reporting is credible?
What level of assurance are we
currently obtaining? Is it sufficient?
Providing relevant, reliable and
credible information:
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G4 Report
Quantity → quality
Direct → indirect
Boiler plate → unique / relevant Integrate business & sustainability
Data → influence / impact
Breadth → depth
Trends for sustainability reporting
G3.1 Report
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Definitions of materiality
► Financial reporting: materiality is a threshold for influencing the economic decisions of those
using an organization’s financial statements (i.e., investors)
► Sustainability reporting: considered with a wider range of impacts and stakeholders.
► Not limited only to those sustainability topics that have a significant financial impact on
the organization.
► Also consider impacts that affect the ability to meet the needs of the present without
compromising the needs of future generations.
Often a source of tension
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Differences between materiality
Financial reporting Sustainability reporting
Concept Threshold for influencing the decisions of stakeholders
Stakeholders Public, politicians, bond-
holders
Public, politicians, employees,
clients, local communities,
governments, NGOs, etc.
Type of impacts /
decisions
Economic Economic, environmental &
social
Orientation Historical Future-looking
Timeframe Short-term Short- and long-term
Boundary Reporting organization Reporting organization,
stakeholders, economy,
environment & society
Measurement
(primary)
Quantitative ($$) Qualitative (impact / influence)
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Barriers to quantifying ESG impacts
1. No monetary value, or price doesn’t accurately
reflect value
2. Conflicting values and need for prioritization
3. Longer term / future horizon
4. Opening up to liability issues
5. Unpredictable e.g., changing scientific landscape,
changing values, regulatory uncertainty
6. Difficult to measure progress
7. Lack of historical information / measure progress
8. Complexities of interactions within the system e.g.
impact throughout value chain – dependencies
9. Uncertainty over outcome and severity of outcome
10. Decision makers may not have sight or appropriate
understanding of all the relevant issues
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The challenges of sustainability reporting
Creating awareness with senior
management and securing their
sponsorship Balancing between disclosing future
strategic objectives (narrative) and the
targets (quantitative) for achieving these
Thinking about sustainability
reporting as a process instead of
“just another report”
Creating a winning
multi-disciplinary team
Increasing requirements on
processes and systems in managing
and reporting non financial
information
Agreeing a practical approach
to how to embed sustainability
reporting and a realistic timeline for
how to achieve this
Demonstrating the linkages
between non-financial impacts,
outputs, outcomes and value
creation, depletion, stasis
Fostering a culture of
‘integrated thinking’ – thinking
outside of the box
Creating a holistic view of
how value is created and
destroyed across the full
value chain
Balance between disclosing
information and maintaining
competitiveness
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Public sector sustainability examples UK Cabinet Office Annual Report and Accounts 2013-2014
Extract from https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/325328/41432_HC_Cabinet_Office_annual_report_2013-14_accessible.pdf
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Public sector sustainability examples UK Environment Agency Annual Report and Accounts 2013-2014
Extract from https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/326016/41276_HC_357_Env_Agency_ARA_accessible.pdf
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Public sector sustainability examples Sustainable Australian Report 2013
Extract from http://www.environment.gov.au/system/files/resources/e55f5f00-b5ed-4a77-b977-da3764da72e3/files/sustainable-report-full.pdf
Integrated reporting
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From traditional to integrated reporting
► Integrated reporting is more than merging financial and non-financial reporting information – it’s
about disclosing value.
► Public Sector Pioneer Network is just developing a global network to develop an integrated reporting
structure for public sector entities.
1960 1980 2000 2020
Financial Statements
Financial statements
Management commentary
Governance &
remuneration
Environmental reporting
Financial statements
Management commentary
Governance & remuneration
Sustainability reporting
Integrated
report
Governance &
remuneration
Sustainability
report
Financial
statements
Management
commentary
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Impact of capitals on an organization’s value
By the application and transformation of different types of capital, the organization creates, changes or
destroys value for themselves and others. A sustainable business strategy and model may have a direct
or indirect impact on an organization’s financial performance by creating intangible value and
externalities, which in turn have the potential to influence future financial performance.
► Financial
► Manufactured
► Intellectual
► Human
► Social and relationship
► Natural
► Financial
► Manufactured
► Intellectual
► Human
► Social and relationship
► Natural
Operational
model
Society
and
organizations
Questions and group dialogue
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