By CPA Aboge Priscillah Nyaguthii
Every man for himself, God for us all” is the sort of world we are living in today. The brains behind
sustainability were forward thinking intellectuals who had foreseen the current challenges facing our planet and humanity and they put their minds together to draft the Millennium Development Goals (MDGs) that have since transitioned to the Vision 2030 Sustainability Goals (SDGs) necessitated
by a need to incorporate both the Global North (developed) countries and Global South (developing) countries. In as much as we are struggling and aspire to better our lives today we should not negate the future generations’ ability to enjoy theirs – what sustainability is all about. Environmental, Social and Governance (ESG) issues seek to address the impact that the environment has on an entity while sustainability issues address the impact that an entity has on the environment even though used
Traditional financial reporting was keen on financials only – numbers in terms of net profit after tax. Vision
2030 sustainability development goals are holding entities accountable by requiring them to include in their financial reporting a sustainability report as part of their financial reporting in what is now an Integrated Report: the financials and non-financials – a holistic approach. Essentially, an entity should
not only exist for the sake of itself. The environment should not be degraded by its existence, socially the communities surrounding the entity should benefit through job creations, infrastructure and opportunities for growth, improved standards of living, decent earning, and social welfare. The government should get returns in the form of taxes to be able to maintain infrastructure, provide
public goods and initiate and support development projects.
Economically the entity should be able to demonstrate through a value added statement how
the value created was shared out among the various contributors of capital. Strong governance structure should be instituted that provide oversight an entity’s operations and business practices and ensure they are ethical in all forms and manner. “In light of the foregoing, since 2015 UNCTAD has been working
to enable further advancements on SDG / Sustainability reporting by companies specifically focusing efforts to support governments in measuring the contribution of the Private sector to the implementation of the Sustainability Development Goals. It has thus development its guidance on core indicators (GCI) for entity reporting on contribution towards implementation of the SDGS guidance on core indicators which was launched at the 35th session of International Standards of Accounting and Reporting (ISAR) in October 2018 in Geneva.
The guidance on core indicators (GCI) is based on elaborations on the SDG reporting issues during the annual sessions of the intergovernmental working group of experts on the International Standards of Accounting and Reporting (ISAR) and the intersessional forums including consultative group meetings since 2016.” Further, the SDG indicators cover the economic, environmental, social and institutional areas and were identified based on: key reporting principles, main reporting frameworks, companies
reporting practices and the macroindicators included in the SDG monitoring framework of the of the inter-agency and expert group on SDG indicators (IAEG – SDGs) which are also applicable at company level” UNITAR / UNCTAD.
These mark the genesis of the journey towards sustainability and SDG reporting by entities and thus
represent the minimum disclosures that companies would need to provide so that governments are in a position to evaluate their contribution to the Sustainability development goals. Worth noting is that those minimum disclosure requirements do not attempt to preclude the companies from providing additional
information whether qualitative or quantitative. Let us examine in a nutshell the core indicators defining each of the aforementioned four indicators.
It is critical to be able to define and calculate the following core indicators:
Revenues – found as the first line of the income statement.
Value added– the wealth that the entity has been able to create and that can be distributed among
different stakeholders (employees, lenders, authorities, shareholders),
Net value added – value added net of depreciation also refers to the sum of the value added to employees, to providers of capital, to government and to owners.
Taxes and other payments to the government – income taxes, property taxes, exercise duties, value added tax (VAT), royalties, license fees & other payments to government, local rates, other levies and taxes that are industry / country specific.
Green investments – direct / indirect positive investment for the environment.
Community investment – charitable / voluntary, donations and investments of funds in the broader community where the target beneficiaries are external to the entity.
Total expenditure on research and development and The percentage on local procurement.
The core indicators are:
Water recycling and re-use – total volume of water that a reporting entity re-uses and or recycles during
a reporting period.
Water use efficiency – water use per net value added during the reporting period.
Water stress – total water withdrawn with a break down by sources. Can also refer to the availability, quality or accessibility of water.
Reduction of waste generation – measures the change in the entity waste generation per net value
Waste re-used, re-manufactured and recycled
Hazardous waste – Basel convention on the control of transboundary movements of hazardous wastes and their disposal.
Greenhouse gas emissions (Scope 1) – Greenhouse gas (GHG) emissions per unit of net value added. Scope 1 covers emissions that occur inside an entity’s organizational boundary and are also known as direct GHG. They are emissions from sources that are directly controlled by the organization.
Greenhouse gas emissions (Scope – Indirect GHG emissions (from purchased electricity, heat or steam)
per unit of net value added.
Ozone depleting substances and chemicals – aims at quantifying an entity’s dependency on ozone
depleting substances (ODS) and chemicals per net value added.
Renewable energy – the ratio of entity’s consumption of renewable energy to its total energy
consumption during the reporting period.
Energy efficiency – entity’s energy consumption divided by net value added.
The core indicators in this area as follows:
Proportion of women in managerial positions – expressed as the number of women in managerial positions divided by the total number of employees in a given reporting period.
Average hours of training per year per employee – suggests the scale of an entity’s investment in employee training (i.e. in human capital) and the degree to which this investment is made across the entire employee base in terms of hours of training.
Expenditure on employee training per year per employee – suggests the scale of an entity’s investment
in employee training (i.e. in human capital) and the degree to which this investment is made across the entire employee base in terms of hours of expenditures.
Employee wages and benefits, by employment type and gender – reflects the total costs of the
employee workforce for the entity in the reporting period, segmented by employee type and gender as a
proportion of the total revenue.
Expenditures on employee health and safety – Total expenses incurred by an entity to guarantee employee health and safety as a proportion of total revenue.
Frequency / incident rates of occupational injuries- related to the number of work days lost due to
occupational accidents, injuries and diseases during a reporting period.
Percentage of employees covered by collective agreements – is the ratio of employees covered by collective agreements to the total number of employees of the reporting period.
Number of board meetings and attendance rate.
Number and percentage of female of female board members.
Board members by age range.
Number of meetings of Audit committee and attendance rate – provides a quantitative
measure of whether the entity has developed, effective, accountable and transparent governance
Compensation: Total compensation per board member (encompassing both executive and non-executive
Amount of fines paid or payable due to settlement – refers to the total monetary value of paid and payable corruption related fines imposed by regulators and courts during the reporting period.
Average hours of training on anticorruption issues per year per employee.
In some companies few indicators were found difficult to report as a result of inadequate technical expertise, legislative restrictions, lack of data or a system of data collection or simply due to lack of activities relating to a particular indicator e.g. water recycling, training on anticorruption issues among others. Case studies highlighted environmental indicators presented more challenges during reporting. In particular challenges revolved around data collection of environmental indicators such as measuring waste, water recycling, ozone depleting substances or chemical and renewable energy. A lack of knowledge of sources of information to calculate greenhouse emissions or water stress was also highlighted. More also, an urgent need for building technical capacity on the SDG reporting by companies was highlighted.
The Covid 19 Pandemic has taught us that hornbills problems are not hornbills problems alone, they are and should actually be everyone’s problems, that “national solutions to global problems do not work” Mia Motley, Prime Minister of Barbados at the opening of #Cop 26. She further added that Collective capacity
is needed to address the challenges of our time with regard to climate change. Addressing climate change in isolation is short sighted as there is need to address other factors which directly and indirectly impact on the environment leading to climate change, a threat to humanity and existence. With sustainable business practices the world will be a better place for all living things. You and me taking the mantle and resolving to make a definable difference towards sustainable business practices where we stand.