Key Performance Indicators (KPIs) and actions taken

• The actions taken to address each material sustainability issue, including steps to mitigate key risks or capitalise on opportunities identified, in support of delivery of the business strategy.
• The Key Performance Indicators (KPIs) selected to measure performance, including the accounting policy adopted for each indicator, and the relationship to business performance, if possible quantified in financial terms.
• A description of how management is incentivised to deliver intended outcomes, including the link with governance, remuneration and rewards.

1. Identify the actions taken to address each of the material environmental and social issues resulting from Step 1.
2. Establish the intended outcome for each action, ensuring there is an explanation of how it will:
• help the organization achieve its strategic objectives; and
• help achieve a more sustainable society and environment.

3. Set out how progress towards intended outcomes will be measured, identifying KPIs for each material issue, as relevant. KPIs should:

   • enable comparability from year to year and with other organizations, and as such should be:

     • based on generally accepted indicators, where available at sector, national or international levels (for example, Global Reporting Initiative indicators), and tagged using XBRL (eXtensible Business Reporting Language) where relevant taxonomies exist; and
     • aligned with national or internationally agreed measures of sustainable development;
   • form part of the ongoing decision-making and reporting processes within the organization, rather than being reported on an annual basis for external purposes only;
   • be either narrative or quantitative in nature; and

   • be underpinned by disclosure of the following elements to facilitate verifiability and understandability (either within the report or made available to users on the company's website):

     • definition;
     • calculation methodology;
     • underlying assumptions;
     • level of uncertainty;
     • scope and boundaries.

4. Identify the relationship between selected KPIs and financial or business performance, where possible quantifying the relationship in terms of impact on revenue, expenditure, investment, cash flow or measures of operational performance.

   

   "It is great for me that we can tell people what is happening, and that we can save money. That is one of the biggest benefits of the Connected Reporting Framework. If people ask for a financial figure you can point to one, whereas a figure based on technical data often doesn't have the same impact. You can show that, for a property company, unsustainable practices can cost more."

   Paul Edwards, Head of Sustainability
   Hammerson plc

5. Align management performance appraisal and incentive structures with selected KPIs, based on time-horizons over which outcomes can be measured.

6. Describe clearly in the connected report:

   • the actions taken in response to each material issue;
   • how these will achieve the intended outcomes;
   • the KPIs which demonstrate performance, highlighting the connection with the strategic direction of the business; and
   • the governance arrangements in place to incentivise and reward behaviour contributing to the delivery of intended outcomes.

One of the main areas that is lacking in the reports reviewed is the clear and concise reporting of actions taken in response to each material sustainability issue, and the KPIs identified to measure this performance. However, the following provide examples of where elements of the guidance have been applied in practice: