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Dr. Adrian de Groot Ruiz Intire Future of Corporate Reporting 21/3/19


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Who

Why

What

How


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Selection of Customers

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Published Framework for Impact Statements beta version

Expert consultation from MarchJuly

Public consultation fall

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Short term profit

Impact

Business relevance of impact is increasing as we get smarter

Negative impact = risk (Carbon tax)

Positive impact = opportunity (Health)

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Long term value creation for all it stakeholders

“The social responsibility of the firm is to increase its profits� (Milton Friedman, 1970)

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If businessmen do have a social responsibility other than making maximum profits for stockholders, how are they to know what it is? (Friedman, 1962)

Aim Information Financial Statements

Financial Statements + Impact Statements

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Manage profit

Manage profit and impact

Profit maximization

Profit maximization + Nice reports

Profit maximization

Profit optimization + Impact optimization


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Integrated Profit & Loss

+ – + –

+ –

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Hundreds of indicators?

One number?

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1) Create value for investors, short-term and long-term 2) Create net value for each other stakeholder, including clients, employees, and communities 3) Do no harm by respecting the rights of its stakeholders and avoid imposing external costs; 4) Contribute to sustainable development in line with the UN’s SDGs.

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1) Create value for investors, short-term and long-term

1) Investor value creation statement

2) Create net value for each other stakeholder, including clients, employees, and communities

2) Value creation statement

3) Do no harm by respecting the rights of its stakeholders and avoid imposing external costs;

3) External cost statement

4) Contribute to sustainable development in line with the UN’s SDGs.

4) SDG Statement

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Source: BAM Annual Report 2014 Copyright 2019 Impact Institute . All rights reserved.


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By attaching an economic value to the positive and negative aspects of each dimension, we can gain valuable insights into how we can drive longer-term value not only for our shareholders, but also for the environment, people and society at large. Ton BĂźchner, AkzoNobel CEO Copyright 2019 Impact Institute . All rights reserved.

Source: AkzoNobel Annual Report 2014


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Source: Alliander Annual Report 2016 Copyright 2019 Impact Institute . All rights reserved.


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Maturity

From reporting to integrated decision making: taking the next step by using insight into value creation 2012-2017 Pilots

2018 Report bankwide impact

Medium term Steering on long term value KPIs Mature reporting on impact

Long term Integration of longterm value creation metrics into decision making processes

Time

Source: Alliander Annual Report 2016 Copyright 2019 Impact Institute . All rights reserved.


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Investments in fixed assets

Increase in brand value enables attracting and maintaining clients

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Health issues, such as burn-outs for our employees, and safety incidents in our value chain

Some data breaches occurred, which affected well-being of our clients

We have a shared responsibility for human right violations in our value chains. Business activity from our lending and investments resulted in air pollution, land transformation and climate change

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• Loans to upgrade infrastructure, improve energy efficiency and retrofit industries with cleaner technologies • Stepping up financing for circular economy activities

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• Mission 2030: upgrading clients’ residential and commercial properties to average A label for energy efficiency • Green financing through our green bonds, Energy Transition Fund and Green Bank in the Netherlands • Working with clients to increase their sustainable investments


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created for our 1 Value stakeholders

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created for our 2 Value investors

3 Do no harm

to Sustainable 4 Contribution Development according SDGs


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Stag e Steps Key elements to consider

FRAME

SCOPE

MEASUREMENT AND VALUATION

REPORTING

ACT

Why?

What?

How?

What next?

Which?

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Get Started

Define the Objective

Scope the Determine Assessment the impacts

The reasoning to report the societal impact statements.

Define the objective based on the organization’s vision, mission, value, KPI’s, etc.

Define the scope of: - Business - Value chain - Impacts - Time to report the societal impact statements.

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List of impacts which are material to the organization.

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Define the impact framework

Measure impacts

Value impacts

Attribute and aggregate impacts

Interpret and test the results

Write down impact pathways of all material impacts.

Design the calculation model

Attribute impacts to the stakeholders that are coresponsible.

The process and the results of the assessment need to be validated, justified and verified by the relevant parties. The results are presented in the form of different statements: - IP&L - Value Creation - External Cost - SDGs

Collect the best available data

Define the frameworks for measurement Quantify the and valuation impacts in of all impacts scope in scope.

Monetize the impacts of different capitals to the same units.

Aggregate impacts to serve higher level of information.

10 Report

The results need to be disclosed and published objectively and transparently.

11 Steer Impacts

Organizati on makes a plan to steer on increasing the positive impacts and decreasing the negative impacts


Integrated Profit and Loss Statement Overview of all material impacts that result from the organization’s activity, organized by stakeholder affected and type of capital involved

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Investor Value Creation Statement

Stakeholder Value Creation Statement

External Cost Statement

SDG Contribution Statement

Organizational Objective : Create sufficiently large long-term value for investors

Organizational Objective : “License to operate”: Create substantive value for all stakeholders involved

Organizational Objective : “Do no harm”: Minimize negative externalities of operations

Organizational Objective : Contribute positively to achieving the Sustainable Development Goals


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Step

Measure outputs

Estimate outcome

Estimate impact

Value impact € € € € € €

Stylized Example 1

Methane emissions (1ton)

Global warming potential (21 TCO2-eq)

Various effects (on e.g. agriculture, coastal areas, pollution)

Monetize impact 21 x €115 = € 2,415

Stylized Example 2

Accident leading to short term injury to eyes of 1 person

0.08 disability weight for 19 days

Various effects (e.g. discomfort) lead to 0.004 reduction of Disability Adjusted Life Years

Monetize impact 0.004 x €75,000 = €300

Benefits

Know what is going on

Consistent measurement framework

Objectifying value by rigor and consensus

Single business currency everyone understands

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Understanding value creation Strategy

Identifying risks & opportunities Informing growth strategy Creating awareness about impact

INTERNAL

Steering

Stimulating bottom-up action Identify value drives and set targets

Include impact considerations in investment decisions Investing

Optimize impact and make trade-offs in informed manner Improve financial forecasts and quantify business risks

Impact measurement & valuation

Create transparency about impact Reporting

Integrated P&L for Integrated Report Report on Impact KPIs Include in journey and create common language

EXTERNAL

Stake holders

Create appreciation about value creation Create understanding about trade-offs

Understand strengths and vulnerabilities Branding

Communicate in credible manner about value creation Position sustainable products and services

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Integrated Profit and Loss and other Impact Statements  

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