BSS winter article

corPoratE sustainaBiLity

Verifying your green plans Confirming your company’s progress in its sustainability journey

By Peter Love and Melanie Steiner

T

Th is is the fourth in a series of articles designed to assist you in the design, implementation, marketing and now v e r i f ic a t ion of y o u r c o mp a n y ’s sustainability journey.

The fi rst of this series identified and briefl y described nine basic steps to design a successf u l sustainabilit y program: • Prepare an initial plan • Build you team • Select a leader • Secure senior executive support • Identify and research “best practices” in your industry • Benchmark current sustainability performance • Set targets • Defi ne activities/milestones • Include other stakeholders

The second article started by noting the most important step to successfully implementing sustainability projects was to understand the culture of the organization. It then went on to identify 10 steps that will lead to the successful implementation of your program: • Know key business leaders, the business objectives and key barriers they are facing • Build from the existing level of sustainable literacy • Secure an executive champion within your organization • Align sustainability Key Performance Ind icators (K PIs) w it h overa l l corporate business objectives • Clear, transparent and rigorous project management

• Gain momentum by delivering/ documenting a prof itable sustainability win (celebrate wins!)

• Be persistent • Lean on the executive champion • Get t he ana ly sis r ight and be passionate • Take time for yourself, take vacation The third article outlined eight steps t o m a r k e t i n g y o u r c o m p a n y ’s sustainability journey: • R e c o g n i z e t h a t m a r k e t i n g sustainability is an evolving and labile area of corporate practice • S c a n “ m a r k e t i n g c o r p o r a t e sustainability” for the most learning on what works • Audit what competitors are saying about their sustainability initiatives • Benchmark stakeholder perceptions

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corPoratE sustainaBiLity of your corporate sustainabilit y performance now • Establish your marketing objectives overall and for each target audience • Identify marketing partners to work with to develop your messaging • Pre-test major commun icat ions elements • Assess your progress over time, while adjusting your strategy and tactics as needed Now, let’s look at verifying your sustainability journey. More and more, we are seeing organizations undertake assurance related to non-financial or sustainability information. This is for a variety of reasons, including: • Giving management comfort that your sustainability data is accurate • Regulatory requirements (e.g., on greenhouse gas emissions in certain provinces) • Can increase transparency scores with rating agencies • Help to mitigate reputational risk associated with external reporting • Increase credibility of your data to ex terna l sta keholders including shareholders who are starting to rely on sustainability data as part of investment decision-making • Trend towards integrated reporting, requiring more robust non-financial data.

Confidence suffers when information provided is not fit for purpose. Assurance can be used as a tool to help companies confirm the accuracy of their nonfi nancial or sustainability data, which c a n i n t u r n a s sist i n en ha nce d management decision-mak ing and stakeholder relations.

One of the most important fi rst steps if you are planning on embarking on assurance or verif ication of your sustainability data is to make sure you are prepared. If there are found to be “material” errors in your data, you will not be able to obtain a clean opinion.

T h is is why ma ny orga n iz at ions undertake a sort of pre-audit – also called a readiness assessment – before the actual audit in order to identify any deficiencies and to rectify them prior to the audit taking place.

A pre-audit can be conducted using a t h i rd pa r t y ser v ice prov ider, or alternatively through a company’s Internal Audit department. During this process, the auditor will assess your sustainability data to make sure it is

a p p r o p r i a t e (e . g . , c a p a b l e o f verification). In other words, the data will need to be identifi able, capable of being evaluated or measured against audit criteria, and capable of being subje c te d to e v idence-g at her i n g procedures required for the audit.

Once you are ready for the audit, there are a number of key items to consider, including the following: • Selecting a third-party evaluator (qualifications, experience) • Planning the audit – selecting your metrics, reporting criteria and level of assurance • U n d e r s t a n d i n g t h e t y p e o f i n f o r m a t i o n a n d b a c k-u p documentation the evaluator will want from you • Using the results to improve your program • Commu n icat ing t he resu lts to employees, shareholders, broader community.

In selecting a third-party auditor, you should ensure that the fi rm chosen has both the technical and audit-related skills required. As a leading practice, many companies are creating blended teams comprised of a combination of accountants, sustainabilit y experts and engineers to cover all bases. In some instances, auditors will have to be accredited to carry out the services required (e.g., regulatory audits). You shou ld do a t horou gh c he c k of r e q u i r e me nt s b e for e h i r i n g a ny outside firm.

One of the common fi ndings auditors see in both internal assessments and external audits is not properly defi ning the metrics and criteria for the audit.

Th is is a critical fi rst step in audit planning. In terms of metrics, most organizations do not verify their entire sustainabilit y repor t. You shou ld determine which metrics you want verified (e.g., greenhouse gas emissions, percentage of waste to la nd f i l l, philanthropic contributions, etc.).

In choosing what metrics you want audited, you should think about the objectives of assurance, who your audience is, and what is material to them. There is not a “one size fits all” approach. Rather, each organization needs to think about what makes sense for them and their sustainabilit y program. Then you w il l need to determine which criteria you will be

using to audit against (e.g., ISO, Greenhouse Gas Protocol, etc.). You can also self-select your metrics and criteria, as long as they are objective, measurable, complete, and relevant.

The next step is determining which assurance standard you will be using.

The best known global standard is ISAE 3000, which is used to audit nonfi nancial information. It is important to note that this is an accounting standard and can only be used by accountants.

Other standards do exist and it is important to understand which one suits your needs. Additionally, you will need to choose the level of assurance you want: reasonable, limited or a combination of both. Reasonable assurance is a higher standard, and will require a higher degree of testing. First time reporters tend to use limited assurance until they feel they are ready to move to reasonable assurance.

Overall, you will need to get yourself and your team well prepared for the audit. You will be asked for lots of back up documentation including policies, procedures, calculations, invoices and more. You should expect a bit of a bumpier ride in the fi rst year as you work to enhance your processes and cont rols a rou nd susta inabi l it y reporting. Part of the benef it of auditing your sustainability data is to provide you with process improvements that help to increase efficiencies. Many auditors provide a management report alongside the audit opinion, which can be used internally to help you make improvements to your program. You should request this as part of the audit.

The audit opinion can be used externally to communicate to your stakeholders what exactly you have had audited, and the level of assurance used.

We w i s h y o u w e l l o n y o u r sustainability journey. Please share your success and lessons with us and others. BS&S Peter Love and Melanie Steiner are volunteer directors with Rethink Sustainability. Peter is an Adjunct Professor at York University’s Faculty of Environmental Studies and serves on various forprofit and not-for-profit organizations. Melanie Steiner is the Chief Risk Officer of PVH Corp based in New York, one of the largest apparel brands globally. She was previously the Market Leader for Ernst & Young’s Climate Change and Sustainability Services program.

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