Launch of the 5th Annual Review of Sustainability Reporting in South Africa

Research Report Launch EventAfternoon Results Session
King III & GRI+14: 2013 Review of Sustainability Reporting in South Africa 5th Annual Review of Sustainability Reporting Among ALL JSE-Listed Companies & ‘Known GRI Reporters’ Research Results Presentation 25 July 2013 Sandton Convention Centre

13h00 – 13h05 Welcoming Remarks Lauren Stirling, IRAS 13h05 – 13h30Observations & Insights from the Design Team Glenn O’Hearne, Studio 5 13h30 – 14h00Expectations from the Pension Fund Sector Adrian Bertrand, GEPF 14h00 – 14h30Sustainability Data Transparency Index Awards Michael H Rea, IRAS 14h30 – 14h45COMFORT BREAK 14h45 – 15h15International Reporting Alan Knight, TaylorKnight 15h15 – 17h00Our Research Results Michael H Rea, IRAS
Order of Events

King III & GRI+14: Results Session
Welcoming Remarks Lauren Stirling, IRAS

Observations & Insights Glenn O’Hearne, Studio 5

Pension Fund Expectations Adrian Bertrand, GEPF

Sustainability Data Transparency Index (SDTI) Awards Michael H Rea, IRAS

The Sustainability Data Transparency Index – SDTI – is based on: Whether or not we could find public disclosures of quantitative data for 56 ‘reasonable’ selected sustainability indicators, as per the following breakdown: 12 Labour 9 Economic 9 CSI/SED 10 Environmental 11 Health & Safety 5 Governance Scoring is based on the following scale: ‘OK’ 2 A ‘reasonable’ response was found ‘NI’ 1 ‘Needs Improvement’, either in terms of the quality of data, or in terms of how easy it was to find it ‘NC’ 0 ‘Not Covered’, either no response is available, or we simply couldn’t find it
SDTI Awards

“Yes! We know what ‘Materiality’ means!” Despite what many companies complained about, we are not morons, and we did not assume that it would be fair to compare a bank – or a retailer – to a mining company. We did…however…disagree within anyone who thought companies shouldn’t provide quantitative data (i.e., actual ‘numbers’) in their public disclosures. While the primary ranking – Appendix II – does not differentiate based on industry/sector, our review of every single indicator does offer sector-specific break-downs. Thus, our 1st Annual SDTI Awards are offered to those companies leading within their sector, with a minimum SDTI Score of 50.0%. NB: 6 sectors did not have award winners due to the top score being below 50.0%. And the winners are…
SDTI Awards

SDTI Awards

International Reporting Trends Alan Knight, TaylorKnight

Our Research Results Michael H Rea, IRAS

About the Author Acknowledgements Our Reporting Theme Research Scope, Objectives and Approach Sustainability Reporting in SA: Our Research Findings Reporting Assistance Chapter 1: Labour Reporting Assistance Chapter 2: Economic Reporting Assistance Chapter 3: CSI/SED Spend Reporting Assistance Chapter 4: Environmental Reporting Assistance Chapter 5: Health & Safety Reporting Assistance Chapter 6: Governance Independent Third Party Assurance GEPF Discussion Piece Update on the JSE SRI Index Our Personal Favourites 10 Tips to Effective Integrated Sustainability Reporting Appendices Moving Forward
The Table of Contents

If you don’t know who I am, here are the bits you need to know: I’m somewhat of a haemorrhoid in the sustainability reporting space, particularly for consultants who don’t lead by example and/or at least try to practice what they preach practitioners who don’t do their homework, and yet purport to be able to tell people what they ought to do the “Big 4 Accounting Firms” and/or their friends in thought leadership positions who won’t engage with those too small/poor to buy in to discussions (i.e., the GRI and IIRC) An assurance provider – first and foremost – and a promoter of effective sustainability reporting & assurance Someone with 14 years’ experience in the space, and who believes in the principle of ‘to whom much is given, much is expected’…and thus believe I owe it to you to share my experience through this annual research project
About the Author – IFC

This research project would not be possible, if not for the support of the following people/organisations: The IRAS team, including our research interns Studio 5, including their incredibly talented and committed design team, who worked until 03h30 both Monday and Tuesday night! Law Print, not least of which Dave White, who managed to print 200 copies of the report in ONE DAY! Mark Becking – SD Toolkit – for making the SDTI Toolkit (www.sdtiglobal.com) possible Adrian Bertrand & John Oliphant of the Government Employees Pension Fund Corli le Roux and MakhibaMollo of the JSE Linda de Beer, Independent Director, Wits Lecturer and King Committee Member The Other Sustainability Reporting Practitioners who help pay for the research through the placement of ads in the report
Acknowledgements – p.01

It’s all about three things: Context Comparability Materiality Could you live on a per person income of R150/month? While we enjoy the benefits of jobs and city life – be it Joburg, Pretoria, Durban or Cape Town – there are millions of people existing in our periphery who do not have access to even a fraction of what we enjoy! We must understand that abject poverty, limited opportunity, and economic subjugation – as well as a raft of environmental degradation issues – is an important part of the context in which we operate our businesses in South Africa. We must understand that ‘whole ‘ and/or ‘raw’ data – such as a total volume of water consumed – is useless unless we compare that data – in a meaningful way – to our peers. We must accept that materiality may be just as ‘defined for us’ as it is something we define for ourselves.
Our Reporting Theme – pp.02 – 04

Moving away from measuring the GRI tick-boxing skills of reporters, and towards a much more value-adding analysis of data trends…mostly because nobody listened when said, Our GRI Compliance Score is a complete red herring! We reviewed the GRI compliance scores – for the LAST TIME – for all of the GRI-based reports we could find in SA, measuring each report against all 127 of the GRI’s G3 indicators. We identified 56 ‘reasonable’ sustainability data indicators via a process of engagement with reporters and practitioners in SA. We reviewed the annual/integrated annual reports – including stand-alone sustainability reports, where provided – for ALL of the JSE-listed companies, ultimately settling on a population sample of 331 reporting entities (including the ‘known’ non-listed GRI-based reporting entities). We scored each reporting entity against all 56 data points – on a 2 for reasonable, 1 for partial and 0 for no response scale – and created a Sustainability Data Transparency Index (SDTI) Score.
Scope, Objectives & Approach – pp.05-08

We sent our results to ALL companies and asked them to check our homework, leading to no fewer than 60 discussions. We calculated 39 ratios – or data estimations such as ‘calculated person hours worked’ – in order to identify significant trends and/or anomalies. Due to the overwhelming abundance of available data, we transferred the more than 12 500 discrete data points – from a total of 31 445 possible data points – into SDTI Toolkit, an online database , and have created a ‘Pay to Play’ service for companies wishing to use our data for their own research and/or reporting purposes. We wrote what we hope will be useful ‘Reporting Handbook’, ultimately leading to 168 pages of opinions, recommendations and guidance…based on what is arguably THE most robust reporting and assurance experience statements in SA. We have created an online database of GRI-based reports – and assurance statements – which is made available to anyone looking for these resources (available on www.iras.co.za).
Scope, Objectives & Approach – pp. 05-08

134 GRI-based reports were identified, up from 130 last year 31 companies declaring an Application Level got it wrong, including 8 that were assured: 2 NC(A+), 3 NC(B+) and 3 NC(C+) A total of 57 reports were assured, of which 33 were assured by one or more of the “Big 4”, while IRAS continues to be the “leading assurance provider” (by number of engagements) NB: Quality of assurance was a stumbling block for IRAS this past year, requiring a re-think of our ‘quantity goals’. 22 reports were assured using AA1000AS (up from 16 last year) The average GRI Compliance Score for assured reports was 71.8% (71.9% last year)…while the average for non-assured reports was 53.0% (51.1% last year).
Our Research Findings – pp. 09 – 26

The Top 20 GRI reporters – as per GRI Compliance Score – are as follows (see p.18)

Only within some sectors is there a strong positive correlation between GRI uptake and SDTI effectiveness (see p.21).

Only within some sectors is there a strong positive correlation between GRI uptake and SDTI effectiveness (see p.23).

In terms of SDTI scores, anything above 40% is deemed “GOOD”, while anything above 50% is deemed “EXCELLENT!” The average SDTI Score was 33.52% (median = 31.36%). The average SDTI Score for assured reports was 52.6% (29.3% for non-assured reports). Lowest score for an assured report was 28.8%...for the Auditor General of South Africa’s report. The highest score for a non-assured report was 63.6%...for Massmart (ranked 13th overall).

45 of 57 assurance engagements included assurance over specific data points. 61 companies don’t disclose their number of employees. 22 companies don’t provide employee compensation data! 251 companies provide enough data to calculate a Ratio of Executive Compensation Relative to Employee Compensation, or an Income Disparity Ratio. AVI had the highest Income Disparity at 158.1:1 Trencorhad the lowest Income Disparity at 2.3:1 The Average Income Disparity for all 331 companies was 30.8:1 Only 114 companies provide union membership stats. Training Spend per Employee could only be calculated for 87 companies.

Only 57 companies provide HDSA Procurement data Only 68 companies provide R&D Spend data Only 148 companies provide CSI/SED Spend data Only 76 companies provide data for Total Direct Energy Consumption Despite the collective awareness of pressures on electricity supply – and Eskom’s 49M campaign – only 98 companies provide data for Total Electricity Consumption Only 112 companies provide data for CO2 Emissions Only 102 companies provide data for Total Water Consumption Only 106 companies provide data for Number of Fatalities Only 56 companies provide data for Number of Lost Time Injuries

In terms of SDTI scores, anything above 40% is deemed “GOOD”, while anything above 50% is deemed “EXCELLENT!” The average SDTI Score was 33.52% (median = 31.36%). The average SDTI Score for assured reports was 52.6% (29.3% for non-assured reports). Lowest score for an assured report was 28.8%...for the Auditor General of South Africa’s report. The highest score for a non-assured report was 63.6%...for Massmart (ranked 13th overall).

Case Study: Corrected Income Disparity Ratios at Anglo Gold Ashanti and Gold Fields Initial Income Disparity Ratios – as per our analysis, and post the feedback process – for Anglo Gold Ashanti (AGA) and Gold Fields (GF) were as follows: AGA 203.9 to 1 suggesting that the Average Executive Director (ED) earned 203.9 times what the Average Worker earned GF175.8 to 1 suggesting that the Average ED earned 175.8 times what the Average Worker earned Following extremely useful meetings, these were corrected to 148.2:1 for AGA and 128.1:1 for GF. The problem had NOTHING to do with data reported for ED pay, but rather that not all employee compensation was reported.
Reporting Assistance: pp. 27 – 84

Case Study: Corrected Income Disparity Ratios at Anglo Gold Ashanti and Gold Fields

The Metals & Mining sector reports the most CSI/SED Spend…by far (roughly R3 billion more than Banking & Financial Services)!

Enterprise Development appears to be the #1 CSI/SED investment area, but this is most likely due to inconsistencies in the way in which ED Spend is reported.

See p.64

Both Exxaro and SA Corporate (Real Estate) report more emissions per person hour worked than Eskom – which is highly unlikely, as is Remgro’s being more than Sasol’s.

Setting aside the NGO sector – Cotlands and Little Eden – the highest levels of electricity and water consumption disclosure are not where one might expect it: in the Metals & Mining and/or Energy & Natural Resources sectors (see graphs on p.65).

The 2nd most dangerous company – by number of LTIs – is Standard Bank, between Lonmin (#1) and Sasol (#3).

Eskom is THE most dangerous company, by number of fatalities, with 25 fatal injuries, following by AngloGold Ashanti, Gold Fields (consider income disparity in this context) and Harmony.

When considering Fatal Injury Frequency Rate – which is FAR more relevant that merely # of Fatalities – Mazor is THE most dangerous company! Look at how far down Eskom and AngloGold Ashanti (off the Top 10) are in this context.

Merafe Resources (87.6%) is the only Metals & Mining company within the Top 10 companies with the most HDSA Board Members, with Grand Parade and Don Group both reporting 100% HDSA.

Merafe Resources (43.8.6%) also shows up as the leading Metals & Mining company in terms of Female Board Representation, albeit no company reports more than 50%.

Tables Provided: History of who has assured who in SA…for the past 5 years (p.87) Who assured what data points, as part of the 57 identified assurance engagements (pp.89-90) History of assurance uptake within the ‘Top 10 GRI Reporting Countries’ (P.92)
Independent Third Party Assurance: pp. 85 – 96

Tables Provided – continued: Assurance engagements per provider, by type of assurance (p.93)
Independent Third Party Assurance: pp. 85 – 96

The SRI Index is moving away from ‘private’ to ‘public’…which means that companies will no longer be rated based on information that is not publically disclosed – via annual reports or websites (etc.) – but only on that which is available to ALL stakeholders. Possibly because of the fact that they used to be scored on what could be provided ‘in secret’, 8 SRI Index companies scored quite poorly our SDTI Index (assessed only on public disclosures): Steinhoff a “SRI Best Performer”, yet scored a 26.2% SDTI and ranked 203rd overall RMB 19.49% ranked 261st Growthpoint 35.59% ranked 122nd Tiger Brands35.59% ranked 122nd MMI31.36% ranked 157th Lewis Group29.66% ranked 176th ADvTECH 27.97% ranked 187th Redefine 27.12% ranked 193rd
Update on the JSE SRI Index: pp. 99 – 104

Lauren Altron African Rainbow Minerals Jordan Illovo Sugar Anglo American Platinum Hsien Hulamin Standard Bank Thomas Merafe Resources Royal Bafokeng Platinum Bernardo Naspers Wilderness
Our Personal Favourites: pp. 105 – 114

Introduce yourself! Define & Explain your ‘Materiality Process’! ‘Integrate’ does not necessarily mean ‘combine’! Let the data tell the story. Tell the story around the data! Contextualise through comparability! Ask and answer the ‘So What?’ question! Tick the IIRC and GRI boxes later! Neutrality works! Print it…but if you link it, do it right! Seek value-adding assurance!
10 Tips to Effective Reporting: pp. 115 – 126

Appendix I: Inventory of reports reviewed for SDTI Appendix II: Main SDTI Results Table (‘heat map’) Appendix III: Inventory of GRI-Based Reports Appendix IV: GRI Compliance Score Table (‘heat map’) Appendix V: GRI Uptake Table Appendix VI: Inventory of Sustainability Courses Appendix VII: Useful Contacts & Links
Appendices: pp. 127 – 161

ANY MORE QUESTIONS?

Launch of the 5th Annual Review of Sustainability Reporting in South Africa