What does this guidance cover?

This guidance is focused on how environmental and social sustainability factors can be reported using a connected reporting approach. It is primarily intended for use within the Annual Report and Accounts, within investor presentations, or as part of internal reports to management.

Sustainability is considered from two perspectives: firstly, what environmental and social impacts are material to the achievement of the organization's strategic objectives; and secondly, how do those objectives, and actions taken in response to them, contribute to a more sustainable economy and society. There is a strong degree of overlap and interrelation between these two perspectives. It is unlikely, for example, that an organization will be able to pursue a strategy with significant harmful impact on a local community, without there being a risk of reputational damage, a potential for regulatory response and loss of licence to operate.

The aim of this guidance is to provide organizations with a simple approach to making this connection between strategic direction, financial performance and environmental and social considerations, and is broken down into three key steps.

Connecting business strategy and sustainability

The identification of material sustainability issues and description of how each of these impact on the organization's strategic objectives.

Key Performance Indicators (KPIs) and actions taken

The evaluation of action taken to address each material sustainability issue and the identification of KPIs to measure performance.

The Connected Performance Report

A balanced assessment of progress against agreed targets and towards intended outcomes.

Since we applied a connected approach to reporting on 'The Northern Way' in our 2008/9 Annual Report, there has been a definite reduction in the number of questions asked by investors. Not only does the reported information pre-empt many questions, but the fact that the data in the annual report is supported by a consolidation of monthly data adds further credibility.

Paula Widdowson, Corporate Responsibility Director,
Northern Foods plc

The guidance is followed by three worked examples – for a supermarket, a property investment company and a water and wastewater company. These examples highlight different ways that connected reporting can be applied in practice.

Who is this guidance for?

This guidance is primarily aimed at Finance Directors, Company Secretaries, Heads of Investor Relations, Heads of Sustainability and their respective teams within listed companies and other public interest entities. It provides practical guidance to help these teams to integrate environmental and social factors, which are material to the organization's success, into management reporting, investor communications and the Annual Report and Accounts.

In applying the guidance, a multi-disciplinary approach is needed, with finance, sustainability and human resources teams working closely together and drawing on the expertise from a range of individuals within the organization.

Underlying principles

Good corporate reporting derives much of its credibility from strong underlying characteristics. The International Accounting Standards Board's Conceptual Framework Exposure Draft makes reference to the fundamental characteristics of relevance and faithful representation, and the enhancing qualitative characteristics of comparability, verifiability, timeliness and understandability. Such characteristics should underpin the information presented within a connected report.

In addition, reporting should be balanced, concise, focused on the material issues and include indications of future performance which are made in good faith and, like the rest of the information, can be explained.