Blog: World Economic Forum and Big Four propose new sustainability reporting framework

Cooley LLP
Contact

Cooley LLP

Last week, the NYT, reporting from Davos, said that the “business titans” at the annual World Economic Forum seemed to show a “newfound enthusiasm” for the cause of climate change, rallying “around a consensus that accelerating global temperatures pose a significant risk to society—and to business. Missing, though, was a clear answer to the question of what exactly they would do about it and how quickly. ‘It’s an increase in rhetoric, absolutely,’ said one commentator, ‘Will we see a walking of the talking? The jury is out.’” One way that a group of some of the largest businesses at Davos, together  with the Big Four accounting firms, have been trying to “walk the talking” is through an effort “to develop a core set of common metrics to track environmental and social responsibility.”  Is it just virtue-signaling or will the effort toward creation of new metrics make a difference?

Currently, companies that want to provide sustainability disclosure must decide among different reporting frameworks, such as SASB (Sustainability Accounting Standards Board) (see this PubCo post), TCFD (Task Force on Climate-related Financial Disclosures) (see this PubCo post), CDSB (Climate Disclosure Standards Board), GRI (Global Reporting Initiative), IIRC (International Integrated Reporting Council), and others.  These frameworks provide a variety of  standards and approaches, requiring companies to disclose somewhat different information—all of which creates an impediment to consistency and comparability.  In addition, concerns have been raised that non-financial ESG information that may materially affect business performance and business risks “are not reported with the same discipline and rigor as financial information.”

The new initiative (currently in draft form), Toward Common Metrics and Consistent Reporting of Sustainable Value Creation, sponsored by the World Economic Forum International Business Council (comprising approximately 120 large multinational firms) in collaboration with the Big Four accounting firms, is an effort to address this issue.  The initiative takes the opposite approach from that taken by the SASB framework (which provides separate sustainability accounting standards for each of 77 industries), instead seeking “to identify a common, core set of ESG metrics and recommended disclosures for all companies to report on, across sectors and geographies.” Another objective is to develop metrics and recommended disclosures that could be subject to “verification and assurance, further helping to raise the level of transparency and alignment among corporations, investors and all stakeholders with the goal of building a more sustainable and inclusive global economy.” And the report goes a step further in suggesting that companies “report on these metrics in their mainstream disclosures to provide a more accurate representation of a company’s performance, risk management capabilities and ability to generate long‑term value for all stakeholders.” 

According to IBC Chair Brian Moynihan, the preliminary report

“proposes a common, core set of metrics and recommended disclosures that IBC members could use to align their mainstream reporting and, in so doing, reduce fragmentation and encourage faster progress towards a systemic solution, perhaps to include a generally accepted international accounting standard. To the maximum extent practicable, the report incorporates well‑established metrics and disclosures for the express purpose of building upon the extensive and rigorous work that has already been done by those who have developed the existing standards. The objective is to amplify those standards and more fully harness their synergies rather than create a new standard altogether.”

The report organizes the proposed metrics and disclosures into four categories: Principles of Governance, Planet, People and Prosperity.  Within each category, there are two sets of metrics—core metrics, consisting of 22 well-established metrics that require primarily quantitative responses that “can be obtained with reasonable effort,” and expanded metrics, which are less well established and “have a wider value chain scope or convey impact in a more sophisticated or tangible way, such as in monetary terms. They represent a more advanced way of measuring and communicating sustainable value creation, and companies are encouraged to report against them as well, when material and appropriate.” The expanded metrics are designed to “help companies to progress towards greater depth, breadth and precision of reporting on the factors influencing long‑term value.” The report invokes a “comply or explain” approach, and  encourages the use of balanced reporting of positive and negative effects. 

In what might be a controversial aspect of the proposed framework, the report advocates that, instead of discussing the various metrics in a separate sustainability report, as seems to be the more common practice, the discussion should be mainstreamed. (Note, however, that the SEC has proposed to require that public companies provide a discussion of their human capital resources, which could involve discussion of similar metrics, as part of their narrative business discussions. See this PubCo post.) Because sustainability is “increasingly material to business performance,” the report contends, the related disclosures should be

“addressed in the mainstream report and proxy statements and integrated into core business strategy and governance processes. By reporting on these factors on a consistent basis in its mainstream report—including a discussion of their implications for company strategy and governance—a company demonstrates to its shareholders and other stakeholders that it diligently weighs all pertinent risks and opportunities in running its business, conducting its governance processes and contributing to broader economic and social progress, including achievement of the SDGs [sustainable development goals].”

Although the report disclaims any intent to discredit separate ESG reports, the report encourages IBC companies to begin reporting in mainstream corporate disclosures (annual reports to investors and proxy statements), using the core metrics as soon as they are finalized. In addition, the report advises that addressing ESG metrics in MD&A “will ensure that consideration of material ESG factors is on the board’s agenda and is part of the overall corporate governance process.”

The goal of the metrics and disclosures is “to identify universal disclosures that enable companies to demonstrate their long‑term viability and sustainable business practices.” The core metrics for the four categories cover the following topics:

  • Principles of Governance addresses whether the company has a stated purpose linked to societal benefit and its core business, board composition, topics of stakeholder engagement, anti-corruption training and incidents, ethics advice and reporting mechanisms, and risk and opportunity oversight.
  • Planet addresses greenhouse gas emissions (upstream and downstream where material), material climate risk and opportunities, land use and ecological sensitivity and fresh water consumption in water-stressed areas.
  • People includes metrics related to ratio of remuneration of women to men, injury and absentee rates, diversity and inclusion data, wage levels, risks for child or forced labor and training provided.
  • Prosperity includes metrics related to new employee hires and end employee turnover, levels of community investment in funds, in-kind contributions and time, net jobs created, net economic contribution, net investment, innovation in better product and services and country-by-country tax reporting.

More specifically, for example, the category of Principles of Governance includes the following as core metrics:

  • Governing Purpose: Whether the company has a stated purpose linked to societal benefit and its core business
  • Quality of Governing Body: Composition of the highest governance body and its committees by: executive or non-executive; independence; tenure on the governance body; number of each individual’s other significant positions and commitments, and the nature of the commitments; gender; membership of under-represented social groups; competencies relating to economic, environmental and social topics; stakeholder representation
  • Stakeholder Engagement: A list of the material topics identified in the process of defining report content and how they impact stakeholders
  • Ethical Behavior (Anti-corruption):
    • 1. total percentage of governance body members, employees and business partners who have received training on the organization’s anti-corruption policies and procedures, broken down by region
    • 2. total number and nature of incidents of corruption confirmed during the current year but related to previous years
    • 3. total number and nature of incidents of corruption confirmed during the current year, related to this year
  • Ethical Behavior (Protected ethics advice and reporting mechanisms): A description of internal and external mechanisms for:
    • 1. seeking advice about ethical and lawful behavior, and organizational integrity
    • 2. reporting concerns about unethical or unlawful behavior, and organizational integrity
  • Risk and Opportunity Oversight: Company risk factor disclosures clearly identify the principal risks facing the company specifically (as opposed to generic sector risks), the Board appetite in respect of these risks, how these risks have moved over time and the response to those changes. These should include discussion of data security and other emerging principal risks and should disclose the number of data breaches in the reporting period.”

As noted above, the report distinguishes between core metrics and expanded metrics, a kind of “stretch” reporting goals. For example, under the category “Planet,” the report indicates that the group of core metrics “relate corporate activities to the most material and pressing environmental issues for society as a whole—climate change, nature loss and the availability of clean, fresh water. Of these, climate change is perhaps the most universally material theme and is certainly the most advanced from the perspective of current corporate reporting. Nature loss will be particularly relevant for firms with agricultural operations, supply chains or customers, and similarly water consumption will be material for firms with significant operations, supply chains or markets in water-stressed areas,” such as California.

The expanded metrics for “Planet” include additional topics: air pollution, water pollution and solid waste, as well as “a measure of resource circularity to assess progress towards a circular economy business model.” In addition, the expanded metrics request reporting of material environmental impact of these metrics “along the full value chain (or ‘lifecycle’) of products or services. Individual businesses often operate in a small section of the overall value chain—for example, many major businesses focus solely on resource extraction, or on product manufacturing, or retail sales. However, these businesses rely on the continuing commercial viability of all preceding (upstream) and subsequent (downstream) parts of the value chain to sustain their own commercial success.” These environmental impacts can “present a threat to long term value creation.”

The report itself includes excellent tables showing the various core and expanded metrics under each category.

Hat tip to Robert Hirth of Protiviti.

(Note: modifications in quotes from the original to reflect Americanized spelling)

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Cooley LLP | Attorney Advertising

Written by:

Cooley LLP
Contact
more
less

Cooley LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide

JD Supra Privacy Policy

Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at www.jdsupra.com) (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

Registration Information. When you register with JD Supra for our Website and Services, either as an author or as a subscriber, you will be asked to provide identifying information to create your JD Supra account ("Registration Data"), such as your:

  • Email
  • First Name
  • Last Name
  • Company Name
  • Company Industry
  • Title
  • Country

Other Information: We also collect other information you may voluntarily provide. This may include content you provide for publication. We may also receive your communications with others through our Website and Services (such as contacting an author through our Website) or communications directly with us (such as through email, feedback or other forms or social media). If you are a subscribed user, we will also collect your user preferences, such as the types of articles you would like to read.

Information from third parties (such as, from your employer or LinkedIn): We may also receive information about you from third party sources. For example, your employer may provide your information to us, such as in connection with an article submitted by your employer for publication. If you choose to use LinkedIn to subscribe to our Website and Services, we also collect information related to your LinkedIn account and profile.

Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

How do we use this information?

We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

  • Operate our Website and Services and publish content;
  • Distribute content to you in accordance with your preferences as well as to provide other notifications to you (for example, updates about our policies and terms);
  • Measure readership and usage of the Website and Services;
  • Communicate with you regarding your questions and requests;
  • Authenticate users and to provide for the safety and security of our Website and Services;
  • Conduct research and similar activities to improve our Website and Services; and
  • Comply with our legal and regulatory responsibilities and to enforce our rights.

How is your information shared?

  • Content and other public information (such as an author profile) is shared on our Website and Services, including via email digests and social media feeds, and is accessible to the general public.
  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at privacy@jdsupra.com.

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to privacy@jdsupra.com. We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to privacy@jdsupra.com.

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at: privacy@jdsupra.com.

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at www.jdsupra.com) (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit legal.hubspot.com/privacy-policy.
  • New Relic - For more information on New Relic cookies, please visit www.newrelic.com/privacy.
  • Google Analytics - For more information on Google Analytics cookies, visit www.google.com/policies. To opt-out of being tracked by Google Analytics across all websites visit http://tools.google.com/dlpage/gaoptout. This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit http://www.aboutcookies.org which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at: privacy@jdsupra.com.

- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.