The Connected Performance Report

• Clear targets for each KPI, where feasible.
• Actual performance against baselines, prior years, targets and industry or other benchmarks.
• Financial or business performance measures alongside each sustainability KPI to explain the connection to the business's results.
• Commentary on progress towards both targets and intended broader outcomes.

1. Agree on targets for each KPI and supporting performance measures, ensuring that each target:

   • aligns to the organization's financial targets/plans;
   • considers time horizons that are applicable to the issue, the industry or the organization itself;
   • considers levels set by peers, industry and national averages or other benchmarks;
   • includes a baseline against which it will be measured; and considers the sufficiency of the response to address the identified sustainability issue.

   For emerging issues, as a first stage it may be necessary to establish an approach to measuring the impacts before specific targets can be set.

   

   "In order to tackle climate change, the depletion of finite natural resources and other sustainability challenges, projections and targets are essential to assess the sufficiency of an organization's response. The use of safe harbour provisions or similar safeguards to protect companies that make these statements in good faith will help remove legal concerns and facilitate meaningful disclosure."

   Paul Druckman, Chairman Trucost and Fédération des Experts
   Comptables Européens Sustainability Policy Group

2. Ensure appropriate information collection processes are established to provide complete, accurate and consistent information. Where possible, integrate and align sustainability-related data capture systems and processes with financial systems.

3. Report on the actual performance achieved in the reporting period, with reference to:

   • the agreed targets;
   • the reporting baseline;
   • performance in prior years, where possible providing trends over the past five years; and,
   • peers, industry and national averages or other benchmarks.

   Ensure that reported performance includes absolute as well as normalised data where relevant (for example, total energy use rather than just energy efficiency measures), enabling investors to conduct their own analysis of impacts.

4. Report related financial or business performance measures alongside KPIs, providing a clear indication of the relevance of sustainability performance to the business's results. If quantification of financial impact is not possible, report in qualitative terms.
5. Provide disclosure of any restatements to historic data, including the breakdown between changes as a result of acquisitions or disposals and changes due to improvements in data collection or changes in accounting policies adopted.

6. Create a commentary which provides an explanatory narrative of performance and progress against targets and towards intended broader outcomes, reflecting a balanced perspective of:

   • reasons for successes and failures;
   • challenges to progress and how management is responding; and
   • explanation of plans to deliver strategic objectives, including how targets will be achieved.

As indicated in the introduction to the worked examples, while none of the nominations demonstrated full application of the connected reporting guidance, a number of companies have already started applying a connected approach to reporting in accordance with our 2007 report. Click here to be taken to a list of these organizations.

Where companies have identified specific performance measures, many were lacking future targets (particularly with a longer time horizon than the following financial year) and very few comment on their performance in respect of peers, industry / national averages or other benchmarks.

However, the following provide additional examples of where elements of the guidance have been applied in practice: