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Sustainability Challenges for the High Impact Sector

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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Sustainability Challenges for the High Impact Sector

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  1. Dan Sonnenberg SR & I Sustainability Challenges for the High Impact Sector

  2. 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

  3. 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

  4. 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

  5. …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

  6. 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

  7. 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

  8. 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

  9. 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

  10. 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

  11. Environmental Issues Materials Energy Water Biodiversity Emissions, effluents and waste Suppliers Products and services Compliance Transport

  12. Economic Issues Customers Suppliers Employees Providers of capital Regulators Communities

  13. 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

  14. 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

  15. Weasel Words The highest international standards Appropriate Where practical In line with best practice Is committed to… Principles Complying with The spirit of

  16. 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

  17. Companies must demonstrate capacity to identify understand manage report, and benefit from challenges Reporting 1

  18. 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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