2016 Review INTERNATIONALINTERNATIONALACCOUNTINGACCOUNTINGandandREPORTING ISSUESREPORTING ISSUES

INTERNATIONAL INTERNATIONAL ACCOUNTING

ACCOUNTING and and

REPORTING ISSUES REPORTING ISSUES

2016 Review

INTERNATIONAL ACCOUNTING AND REPORTING ISSUES

2016 REVIEW

Report by the secretariat of the United Nations Conference

on Trade and Development

UNITED NATIONS New York and Geneva, 2017

© Copyright United Nations 2017 All rights reserved

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ACKNOWLEDGEMENTS

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CONTENTS

Noteii

Prefaceiii

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Abbreviationsvii

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CHAPTER I. ENHANCING THE ROLE OF REPORTING IN ATTAINING THE SUSTAINABLE DEVELOPMENT GOALS: DISCUSSION ON THE SELECTION OF CORE COMPANY

SUSTAINABILITY REPORTING INDICATORS ...1

A. Background ... 1

B. Company reporting on the 2030 Agenda for Sustainable Development: Main challenges ... 3

C. Key criteria for the selection of core indicators for the Sustainable Development Goals ... 4

D. Core Sustainable Development Goal indicators in company reporting ... 8

CHAPTER II. MONITORING OF COMPLIANCE AND ENFORCEMENT: CASE STUDY OF SINGAPORE ...17

A. Background ... 17

% 0RQLWRULQJFRPSOLDQFHZLWKWKHƄQDQFLDOUHSRUWLQJIUDPHZRUNVWDQGDUGVDQGDSSOLFDEOH enforcement mechanisms ... 20

C. Monitoring compliance with the audit and assurance reporting framework, standards, and ap- plicable enforcement mechanisms ... 23

D. Monitoring compliance with codes of professional conduct and other applicable membership requirements and related enforcement mechanisms ... 28

E. Conclusion: Lessons learned and future prospects ... 31

CHAPTER III. INTERNATIONAL AUDIT AND ASSURANCE REQUIREMENTS AND GOOD PRACTICES ON THEIR IMPLEMENTATION: A REGIONAL CASE STUDY OF THE EUROPEAN UNION FOCUSING ON IRELAND, PORTUGAL AND SWEDEN ...33

A. Background ... 33

B. Country case: Ireland ... 38

C. Country case: Portugal ... 39

D. Country case: Sweden ... 40

E. Institutional aspects of the implementation of International Standards on Auditing: Statutory institutions that facilitate their implementation, compliance monitoring and enforcement ... 41

F. Conclusion and lessons learned ... 46

Tables and Annex

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Table 2 Process chart: Practice monitoring programme

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ABBREVIATIONS

ASEAN Association of Southeast Asian Nations

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FAR 6ZHGLVK3URIHVVLRQDO$FFRXQWDQF\2UJDQL]DWLRQ GDP gross domestic product

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INTRODUCTION

The past two decades have seen the emergence of international standards and codes on corporate reporting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complex interrelations, harnessing the contribution of corporate reporting to sustainable development has posed FKDOOHQJHVIRU0HPEHU6WDWHVLQWHUPVRIDFKLHYLQJFRQVLVWHQWLPSOHPHQWDWLRQDQGHQIRUFHPHQWDQGIRUJOREDO VWDQGDUGVHWWHUV DV WKH\ VHHN WR HVWDEOLVK VWDQGDUGV DQG FRGHV DOLJQHG ZLWK WKH 6XVWDLQDEOH 'HYHORSPHQW

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ENHANCING THE ROLE OF REPORTING IN ATTAINING THE SUSTAINABLE DEVELOPMENT GOALS: DISCUSSION ON THE SELECTION OF CORE COMPANY SUSTAINABILITY REPORTING INDICATORS

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LQIRUPDWLRQ RQ FRPSDQ\ SHUIRUPDQFH DQG LPSDFW 6HFWLRQ % LQGLFDWHV VRPH RI WKH PDMRU FKDOOHQJHV in company reporting on sustainability and the 6XVWDLQDEOH'HYHORSPHQW*RDOV6HFWLRQ&GLVFXVVHV NH\ FULWHULD DQG SULQFLSOHV IRU WKH VHOHFWLRQ RI FRUH LQGLFDWRUV IRU WKH *RDOV DQG VHFWLRQ ' FRQWDLQV D OLVWRIWHQWDWLYHLQGLFDWRUVSURSRVHGDWWKHWKLUW\WKLUG VHVVLRQRI,6$56HFWLRQ(SUHVHQWVFRQFOXVLRQVDQG WKHZD\IRUZDUGIRUWKHZRUNRI,6$5

A. BACKGROUND

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*RDO ,QGLFDWRUV (&1 0HPEHU 6WDWHV will develop their national indicators in line with its SULQFLSOHV DFFRUGLQJ WR ZKLFK WDUJHWV DUH GHƄQHG as aspirational and global, with each Government

2 7KLVFKDSWHUZDVSUHSDUHGE\WKH81&7$'VHFUHWDULDWEDVHG on research, drawing on inputs made by participants at the WKLUW\WKLUGVHVVLRQRI,6$5

setting its own national targets guided by the global OHYHO RI DPELWLRQ EXW WDNLQJ LQWR DFFRXQW QDWLRQDO FLUFXPVWDQFHV )XOO} GHYHORSPHQW RI WKH LQGLFDWRU IUDPHZRUN LV D SURFHVV WKDW UHTXLUHV WLPH DQG WKH SRVVLELOLW\ RI UHƄQHPHQW DV NQRZOHGJH DQG GDWD DYDLODELOLW\LPSURYH,QDGGLWLRQWKH5HSRUWVWDWHVWKDW

“global monitoring should be based, to the greatest possible extent, on comparable and standardized QDWLRQDO GDWD REWDLQHG WKURXJK ZHOOHVWDEOLVKHG mechanisms from countries to the international VWDWLVWLFDOV\VWHPr(IIRUWVVKRXOGEHPDGHWRƄOOGDWD gaps and improve international comparability through the increased adoption of internationally agreed standards at the national level, strengthening of national statistical capacities and improved reporting PHFKDQLVPV

Such developments have a direct impact on the FRUSRUDWH UHSRUWLQJ DJHQGD 7DUJHW} H[SOLFLWO\

encourages companies, especially large and transnational companies, to adopt sustainable practices and to integrate sustainability information LQWR WKHLU UHSRUWLQJ F\FOH ,QGLFDWRU UHTXLUHV data on the number of companies publishing VXVWDLQDELOLW\ UHSRUWV 7KH ,QWHU$JHQF\ DQG ([SHUW

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Such information is normally provided by companies as part of their sustainability reporting, which is becoming D PDLQVWUHDP EXVLQHVV SUDFWLFH ZRUOGZLGH 0DQ\

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Core indicators for the Goals focus on core universal is VXHV ZKLOH OHDYLQJ URRP IRU DGGLWLRQDO UHSRUWLQJ UHTXLUH PHQWV&RQVXOWDWLRQVVKRZHGWKDWZKLOHKDUPRQL]DWLRQZDV critical for the comparability and usefulness of sustainability UHSRUWLQJ ƅH[LELOLW\ ZDV QHHGHG WR UHƅHFW WKH VSHFLƄFLWLHV and varieties of company activities towards sustainable de velopment, including at an industry level, and for providing scope for innovation, given the evolving nature of sustain DELOLW\UHSRUWLQJ

RI 3DUDJUDSK} GXULQJ WKH WKLUW\WKLUG VHVVLRQ RI ,6$5 DV ZHOO DV RQJRLQJ GLVFXVVLRQV DV SDUW RI WKH LQWHUVHVVLRQDO ZRUN RI ,6$5 5HSUHVHQWDWLYHV RI 0HPEHU6WDWHVUHJLRQDORUJDQL]DWLRQVDFDGHPLDWKH private sector and a large number of entities involved LQVXVWDLQDELOLW\VWDQGDUGVHWWLQJHIIRUWVZHUHLQYROYHG LQ IUXLWIXO GLVFXVVLRQV RQ DJHQGD LWHP (QKDQFLQJ the role of reporting in attaining the Sustainable 'HYHORSPHQW *RDOV ,QWHJUDWLRQ RI HQYLURQPHQWDO social and governance information into company UHSRUWLQJ 7'%&,,,6$5 ,Q SDUWLFXODU WKH following issues were suggested for discussion:

• :RXOG WKH KDUPRQL]DWLRQ RI VXVWDLQDELOLW\ UHSRUW LQJLQOLQHZLWKUHTXLUHPHQWVWRPRQLWRUWKH*RDOV HQKDQFH WKH UROH RI UHSRUWLQJ XQGHU WKH Agenda?

• Are selected indicators in the economic, environ mental, social and institutional areas correctly ad dressing the issue of harmonization of sustainabil ity reporting?

• ,VFRQVLVWHQF\UHTXLUHGEHWZHHQƄQDQFLDODQGQRQ ƄQDQFLDO UHSRUWLQJ IRU WKH LQWHJUDWLRQ RI HQYLURQ mental, social and governance factors into com SDQ\UHSRUWLQJ":KDWDUHWKHPDLQFKDOOHQJHV"

• Should corporate indicators in line with the Goals be reported at a large entity level or at a consoli dated level? How should this challenge be ad dressed?

• :KDWDUHWKHPDLQFKDOOHQJHVLQDOLJQLQJWKH*RDOV PRQLWRULQJ IUDPHZRUN DQG WKH GDWD UHSRUWHG by companies? Are there good practices to be shared?

• +RZFDQJOREDOIRUXPVVXFKDV,6$5IXUWKHUFRQ WULEXWHWRFRQVHQVXVEXLOGLQJLQVXVWDLQDELOLW\DQG Goals reporting?

B. COMPANY REPORTING ON THE 2030 AGENDA FOR SUSTAINABLE DEVELOPMENT: MAIN CHALLENGES

&RPSDQ\ UHSRUWLQJ ZLWK UHJDUG WR WKH $JHQGD is a complex issue involving challenges in harmonizing sustainability reporting in general and more recently,

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• /DFNRIFRRUGLQDWLRQFRPSDUDELOLW\DQGKDUPRQL ]DWLRQLQVXVWDLQDELOLW\UHSRUWLQJ

• Need for consistent integration of sustainability information into a reporting cycle and consistency RI VXVWDLQDELOLW\ DQG *RDOVUHODWHG UHSRUWLQJ ZLWK H[LVWLQJƄQDQFLDOUHSRUWLQJIUDPHZRUNV

• Need to address a new dimension of the mate riality principle by considering common needs of DEURDGHUUDQJHRIXVHUVRIVXVWDLQDELOLW\UHSRUWV

• 0DQGDWRU\YHUVXVYROXQWDU\UHTXLUHPHQWV

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reporting related to the Goals should be carried out DWWKHFRUSRUDWHFRQVROLGDWHGOHYHOUHƅHFWLQJDJURXS LPSDFW RQ WKH } $JHQGD RU DW WKH QDWLRQDO OHYHO UHƅHFWLQJWKHLPSDFWRIDƄUPRQWKHQDWLRQDOHFRQRP\

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reporting was critical as a means to change corporate EHKDYLRXU DQG EXVLQHVV PRGHOV LQ OLQH ZLWK WKH

$JHQGD&RQVROLGDWHGUHSRUWLQJZDVDOVRDQLPSRUWDQW tool for assessing the corporate contribution to sustainable development and for raising awareness

RI JRRG FRUSRUDWH SUDFWLFHV ,W ZDV DOVR FULWLFDO WR address issues of alignment between enterprise reporting and data provided by enterprises to statistics DJHQFLHVRQSHUIRUPDQFHVUHODWHGWRWKH*RDOV,QWKLV regard, past efforts on the integration of international public sector accounting standards and government ƄQDQFH VWDWLVWLFV FRXOG SURYLGH D IUDPHZRUN IRU DQ DJJUHJDWLRQPHWKRGRORJ\¹⁰7KH,QWHUQDWLRQDO0RQHWDU\

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This chapter does not discuss whether sustainability UHSRUWLQJ VKRXOG EH PDQGDWRU\ RU YROXQWDU\ :KLOH there is a need to determine how the sustainability RI FRPSDQ\ DQG *RDOVUHODWHG UHSRUWLQJ FDQ EH encouraged and provided in a comparable and FRQVLVWHQW PDQQHU LW LV XS WR FRXQWULHV WR ƄQG WKH PRVWHIIHFWLYHPHDQVRIFDUU\LQJWKLVRXW

C. KEY CRITERIA FOR THE SELECTION OF CORE INDICATORS FOR THE SUSTAINABLE DEVELOPMENT GOALS

Consultations indicated that the harmonization of sustainability reporting based on core indicators for

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accounting could be a valuable information source for statistics that should be aligned with the monitoring of progress in implementing the Goals at WKH QDWLRQDO OHYHO ,W ZDV WKXV LPSRUWDQW WR GHYHORS partnerships that would facilitate dialogue among all PDMRU VWDNHKROGHUV LQFOXGLQJ QDWLRQDO VWDWLVWLFLDQV FRUSRUDWH VRFLDO UHVSRQVLELOLW\ H[SHUWV DQG PDMRU FRUSRUDWHVXVWDLQDELOLW\LQLWLDWLYHV

The panellist from Accounting for Sustainability, a SURJUDPPH ZLWKLQ WKH 3ULQFH RI :DOHVpV &KDULWDEOH )RXQGDWLRQVWUHVVHGWKHLPSRUWDQFHRIVWUHQJWKHQLQJ WKH UROH RI QDWLRQDO VWDWLVWLFDO RIƄFHV WR IRVWHU WKH sharing of data across the private sector, government DQG FLYLO VRFLHW\ )XUWKHU GLDORJXH UHJDUGLQJ GDWD FRPSDUDELOLW\ ZDV QHHGHG EHWZHHQ RIƄFLDOV IURP QDWLRQDO VWDWLVWLFDO RIƄFHV DQG UHSUHVHQWDWLYHV RI VWDQGDUGVHWWLQJERGLHV

Clarity of reporting boundaries

&RQVLVWHQF\ZLWK,)56UDLVHVIXUWKHULVVXHVUHODWHGWR UHSRUWLQJERXQGDULHV)RUH[DPSOH81&7$'UHVHDUFK shows that companies that disclose sustainability information often do not provide information related to QRQRSHUDWHGRZQHGOHJDOHQWLWLHVRUDVVHWV+RZHYHU in some instances, the entity that legally owns such QRQRSHUDWHG HQWLWLHV RU OHDVHG DVVHWV PLJKW EH WKH DFWXDO XVHU RI WKHLU SURGXFWLRQ $ VLPLODU VLWXDWLRQ DULVHVLQWKHFDVHRIMRLQWRSHUDWLRQVZKLFKDUHRIWHQ RSHUDWHGE\RQO\RQHSDUWQHU,IFRQVLVWHQF\ZLWK,)56 LV UHTXLUHG LW LV LPSRUWDQW WR HQVXUH WKDW JXLGDQFH related to such standards is followed and that all GDWD DUH GLYLGHG E\ RZQHUVKLS VKDUH 7KLV PDNHV it important to disclose the basis for determining the boundaries of the reporting entity and other assumptions and methods that underpin sustainability UHSRUWLQJ ,Q VRPH MXULVGLFWLRQV ,)56 PD\ QRW EH UHTXLUHG IRU WKH SUHSDUDWLRQ RI OHJDO HQWLW\ ƄQDQFLDO VWDWHPHQWV EXW RQO\ IRU FRQVROLGDWHG UHSRUWV 7KLV PD\SRVHDGLIƄFXOW\LQFRPSLOLQJQRQƄQDQFLDOGDWD

as companies may use different accounting rules in UHSRUWLQJVWDWXWRU\ƄQDQFLDOGDWD&RQVROLGDWLRQUXOHV play an important role in the process of aggregating data from the company to the corporate level, thus KDYLQJ DQ LPSDFW RQ WKH OLQN EHWZHHQ FRUSRUDWH UHSRUWLQJDQGPRQLWRULQJDFKLHYHPHQWRIWKH*RDOV

$WWKHWKLUW\WKLUGVHVVLRQRI,6$5H[SHUWVVWUHVVHGWKDW WKHUHSRUWLQJERXQGDULHVIRU6XVWDLQDEOH'HYHORSPHQW Goal indicators should be consistent with the boundaries XVHGLQWKH,)56FRQFHSWXDOIUDPHZRUN)RULQVWDQFH WKH SDQHOOLVW IURP WKH &OLPDWH 'LVFORVXUH 6WDQGDUGV

%RDUG VDLG WKDW WKH 6XVWDLQDEOH 'HYHORSPHQW *RDOV and corporate reporting had different audiences, REMHFWLYHV DQG OHYHOV RI DJJUHJDWLRQ 7KXV RQH of the main challenges in aligning the Sustainable 'HYHORSPHQW *RDOV PRQLWRULQJ LQGLFDWRUV ZLWK GDWD reported by companies lay in misalignments and asymmetries between Governments and the private VHFWRU&RUSRUDWHUHSRUWLQJKDGPXFKSRWHQWLDOWRƄW into national statistics, but the existence of different DSSURDFKHVWRDJJUHJDWLRQPLJKWSRVHDFKDOOHQJH

Incremental approach

The selection of core indicators for the Goals should WDNH LQWR DFFRXQW H[LVWLQJ GDWDJDWKHULQJ FDSDFLWLHV RU DFFHVVWRLQIRUPDWLRQ FKDQQHOV RI FRPSDQLHV Placing an excessive burden on companies may be detrimental to engaging the private sector under the } $JHQGD $Q LQFUHPHQWDO DSSURDFK LV WKHUHIRUH UHFRPPHQGHG ZKHUHE\ VHOHFWHG LQGLFDWRUV ƄUVW address issues over which a company has control and for which it already gathers data, or situations in which a company has access to relevant sources of LQIRUPDWLRQ

5HJDUGLQJ WKH LPSRUWDQFH RI DQ LQFUHPHQWDO DSSURDFKSDQHOOLVWVIURPWKH(XURSHDQ&RPPLVVLRQ DQG WKH (XURSHDQ )LQDQFLDO 5HSRUWLQJ $GYLVRU\

*URXSVWUHVVHGWKHLPSRUWDQFHRIVWULNLQJDEDODQFH between effective disclosures, on one hand, and the need to avoid excessive administrative burdens RQ UHSRUWLQJ HQWLWLHV RQ WKH RWKHU $Q LQFUHPHQWDO DSSURDFKWR6XVWDLQDEOH'HYHORSPHQW*RDOUHSRUWLQJ VKRXOG QRW KLQGHU ƄQDQFLDO VWDELOLW\ RU HFRQRPLF JURZWKE\LPSRVLQJUHTXLUHPHQWVRQHQWLWLHVWKDWODFN WKH FDSDFLW\ DQG UHVRXUFHV IRU DGHTXDWH UHSRUWLQJ 6LPLODUO\WKHSDQHOOLVWIURPWKH$VVRFLDWLRQRI'DQLVK Auditors said that it was important to that new UHTXLUHPHQWVVKRXOGEHVLPSOHDQGVKRXOGEHEDVHG RQH[LVWLQJIUDPHZRUNV

$ UHSUHVHQWDWLYH RI 'HORLWWH VWUHVVHG WKH LPSRUWDQFH of raising awareness in the private sector on how the 6XVWDLQDEOH'HYHORSPHQW*RDOVUHODWHGWRDFRPSDQ\pV PLVVLRQ DQG YLVLRQ +HOSLQJ EXVLQHVVHV XQGHUVWDQG how their core activity could contribute towards the DWWDLQPHQWRIWKH*RDOVLQLWLDOO\ZLWKRXWUHTXLULQJWKHP WR WDNH DGGLWLRQDO DFWLRQ FRXOG SDYH WKH ZD\ IRU WKH HQWUHQFKPHQWRIDVXVWDLQDEOHPLQGVHWLQFRPSDQLHV

Other discussions

,Q DGGLWLRQ WR WKH SULQFLSOHV KLJKOLJKWHG LQ 7'%&,, ,6$5 H[SHUWV DW WKH WKLUW\WKLUG VHVVLRQ RI ,6$5 raised other relevant issues and challenges related to UHSRUWLQJRQWKH6XVWDLQDEOH'HYHORSPHQW*RDOV Some experts explored the means of applying sustainability reporting in the context of public sector HQWLWLHV QRQSURƄW HQWLWLHV DQG 60(V 2QH GHOHJDWH highlighted the gap between the experience of developed and developing countries and possible unfairness in WKH FRPSDULVRQ RI WKHLU HIIRUWV LQ WKLV UHJDUG $QRWKHU delegate said that that all countries would be able to LPSOHPHQWFRUH6XVWDLQDEOH'HYHORSPHQW*RDOUHSRUWLQJ indicators at a basic level and could be given the choice RIJRLQJEH\RQGVXFKUHTXLUHPHQWVWRLQFOXGHDGGLWLRQDO GLVFORVXUHV 6XFK GLVFXVVLRQV KLJKOLJKWHG WKH VSHFLƄF challenges of harmonizing sustainability reporting in the FRQWH[WRI60(VSXEOLFVHFWRUHQWLWLHVDQGFRPSDQLHV from developing countries or countries with economies LQWUDQVLWLRQ

,Q WKH GLVFXVVLRQ RQ LQWHJUDWHG UHSRUWLQJ SDQHOOLVWV QRWHG WKDW VXFK UHSRUWLQJ VRXJKW WR EULGJH ƄQDQFLDO DQGQRQƄQDQFLDOLQIRUPDWLRQDVSDUWRIDQLQWHJUDWHG FRUSRUDWHUHSRUW

A few experts highlighted the need for fair and effective JRYHUQDQFH RI LQWHUQDWLRQDO VWDQGDUGVHWWLQJ ERGLHV DQG FRPPHQGHG ,6$5 IRU LWV UROH LQ SURYLGLQJ DQ open and inclusive forum for discussions to support SURJUHVVWRZDUGDKLJKTXDOLW\UHSRUWLQJHQYLURQPHQW

D. CORE SUSTAINABLE DEVELOPMENT GOAL INDICATORS IN COMPANY REPORTING

%DVHG RQ WKH NH\ FULWHULD DQG SULQFLSOHV GHVFULEHG LQ VHFWLRQ&81&7$'SURSRVHGDVHWRIFRUHLQGLFDWRUV IRU WKH *RDOV GXULQJ WKH WKLUW\WKLUG VHVVLRQ RI ,6$5 These suggestions were based on an indicator IUDPHZRUNWRDFFRPSDQ\WKH*RDOVRQJRLQJ81&7$' ZRUNRQWKHKDUPRQL]DWLRQRIDFFRXQWLQJDQGUHSRUWLQJ DQG8QLWHG1DWLRQV(QYLURQPHQW3URJUDPPHDFWLYLWLHV related to environmental reporting, as well as other PDMRUVXVWDLQDELOLW\UHSRUWLQJLQLWLDWLYHVDQGDVXUYH\RI SUHYDLOLQJFRPSDQ\UHSRUWLQJSUDFWLFHVVHHDQQH[, ,Q WKLV UHJDUG 81&7$' KDG FRQYHQHG D FRQVXOWDWLYH group meeting in 2017 to further analyse the proposed indicators, with a view to preparing guidance materials DV D ZD\ IRUZDUG 7KLV FKDSWHU SUHVHQWV WKH FXUUHQW ZRUNLQJOLVWRIWKHFRUHUHSRUWLQJLQGLFDWRUVIRU6XVWDLQDEOH 'HYHORSPHQW*RDOVGHYHORSHGE\81&7$'

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The listed corporate reporting indicators are a proxy for the indicators on which local companies may report in their stat XWRU\UHSRUWV

20 2WKHU NH\ VWDNHKROGHUV PD\ LQFOXGH H[LVWLQJ DQG SRWHQWLDO business partners, consumers, employees and the surround LQJFRPPXQLW\

Key users of information related to the Sustainable Development Goals

Capital providers

Government agencies Society at large

Other key stakeholders Core indicators

for Sustainable Development Goals-related reporting

7KH FXUUHQW SURSRVDO FRYHUV NH\ DUHDV RI WKH

$JHQGD ZLWK D EUHDNGRZQ RI WKH PDLQ LVVXHV VXJJHVWHG E\ VXVWDLQDELOLW\ UHSRUWLQJ LQLWLDWLYHV DQG RUEHLQJUHSRUWHGE\FRPSDQLHVVHHWDEOH7KH\DUH also related to six types of capital suggested by the ,QWHUQDWLRQDO ,QWHJUDWHG 5HSRUWLQJ &RXQFLO ƄQDQFLDO capital, manufactured capital, intellectual capital,

human, social and relationship capital, and natural FDSLWDO

Table 1 presents some of the areas of corporate reporting WKDWDUHUHOHYDQWWRWKH6XVWDLQDEOH'HYHORSPHQW*RDOV DQG WKDW 81&7$' WRRN LQWR FRQVLGHUDWLRQ LQ GHYLVLQJ WKHSURSRVDORQFRUHLQGLFDWRUV

Table 1 Main areas covered by the suggested indicator

Economic indicators Environmental indicators Social indicators Institutional indicators

Stakeholder value Energy Health and safety Governance

Economic performance Water Human rights and fair trade Accountability

Financial performance Greenhouse gases Employment creation and labour

practices Anti-corruption

Local purchasing and supplier

development Emissions Human resource development

Investment related to the

Sustainable Development Goals Waste Gender equality

Research and development Donations

7KH SURSRVHG 81&7$' FRPSDQ\ LQGLFDWRUV ZLWK an indication of their relations with the Sustainable 'HYHORSPHQW*RDOVWDUJHWVDQGJOREDOLQGLFDWRUVDUH SURYLGHGLQDQQH[,,

The following sections of this chapter provide analyses of these indicators in light of existing JXLGDQFHIURPWKH8QLWHG1DWLRQV81&7$'DQGWKH 8QLWHG 1DWLRQV (QYLURQPHQW 3URJUDPPH LQ UHODWHG DUHDV 81&7$' UHVHDUFK RQ WKH FXUUHQW UHSRUWLQJ SUDFWLFHVRIODUJHFRPSDQLHVSUHYDLOLQJVXVWDLQDELOLW\

UHSRUWLQJ IUDPHZRUNV ZLWK D IRFXV RQ WKH *OREDO 5HSRUWLQJ ,QLWLDWLYH JXLGHOLQHV DV WKH PDLQ UHIHUHQFH RQVXVWDLQDELOLW\UHSRUWLQJDQGRWKHULVVXHVUDLVHGE\

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:LWKLQ WKH FRQWH[W RI WKH KDUPRQL]DWLRQ RI VXVWDLQDELOLW\UHSRUWLQJWKH81&7$'UHVRXUFHSHUVRQ further discussed the rationale for the selection of VXFK LQGLFDWRUV GXULQJ WKH WKLUW\WKLUG VHVVLRQ RI ,6$5 6KH SUHVHQWHG DQ DQDO\VLV RI WKH ODUJHVW listed corporates and their environmental, social DQG JRYHUQDQFH UHSRUWLQJ SUDFWLFHV21 2I WKHVH FDUULHG RXW VRPH NLQG RI UHSRUWLQJ RQ VXVWDLQDELOLW\

21 5HVHDUFK ƄQGLQJV ZLOO EH SXEOLVKHG LQ D IRUWKFRPLQJ 81&

7$'GLVFXVVLRQSDSHU

:KLOHWKHUHZHUHGLIIHUHQFHVEDVHGRQJHRJUDSK\DQG industry in the reporting practices of companies, the analysis revealed a number of indicators that were IUHTXHQWO\XVHGLQUHSRUWV

Concerning the selection of companies for the analysis of sustainability reporting practices, participants discussed whether the sample selected ZDVUHSUHVHQWDWLYHRIPRVWFRPSDQLHV6RPHVWDWHG that large companies had best practices to start with, ZKLOH 60(V ZHUH RIWHQ VWLOO LPSURYLQJ WKHLU H[SHUWLVH LQWKLVDUHD2QHSDQHOOLVWVDLGWKDWDOWKRXJKLWPLJKW EHQHFHVVDU\WRWDLORUVSHFLƄFGLVFORVXUHVIRUGLIIHUHQW types of entities, guidance on reporting for both big FRUSRUDWHVDQG60(VVKRXOGEHEDVHGRQWKHVDPH SULQFLSOHV :KLOH WKH OHYHO RI HQWLW\ PDWXULW\ VKRXOG EH WDNHQ LQWR FRQVLGHUDWLRQ LQ WKH HVWDEOLVKPHQW RI standards and codes for sustainability reporting, other experts noted that, with the current state of technological development, the cost of collecting data ZDVFRQVWDQWO\GHFUHDVLQJ

([SHUWV IURP WKH SULYDWH VHFWRU VKDUHG WKHLU experiences regarding sustainability reporting and WKH 6XVWDLQDEOH 'HYHORSPHQW *RDOV )RU LQVWDQFH D UHSUHVHQWDWLYH RI &DULOOLRQ LOOXVWUDWHG WKH HIƄFLHQF\ RI

the proposed approach to reporting on the Sustainable 'HYHORSPHQW *RDOV WKURXJK D SUDFWLFDO EXVLQHVV case of his company, which had delivered additional SURƄWV E\ LQFRUSRUDWLQJ VXVWDLQDEOH GHYHORSPHQW VWUDWHJ\ DQG EHKDYLRXU LQWR LWV DFWLYLWLHV +RZHYHU D UHSUHVHQWDWLYHRI%7*URXSLQGLFDWHGWKDWWRJHWIURP LQGLYLGXDO FRPSDQ\ UHSRUWLQJ WR D GDWDGULYHQ JOREDO GDVKERDUG RQ WKH 6XVWDLQDEOH 'HYHORSPHQW *RDOV it was necessary to generate a more precise set of XQLYHUVDOPHWULFVDFURVVDOOWKH*RDOV

Some experts said that the initiative to select core LQGLFDWRUV IRU WKH 6XVWDLQDEOH 'HYHORSPHQW *RDOV VKRXOG WDNH LQWR DFFRXQW H[LVWLQJ IUDPHZRUNV $V DQ H[DPSOH WKH SDQHOOLVW IURP 81, *OREDO 8QLRQ VWDWHG WKDW WKH &RPPLWWHH RQ :RUNHUVp &DSLWDO KDG developed a set of reporting indicators in the area of ZRUNHUVpULJKWVLQFOXGLQJZRUNIRUFHFRPSRVLWLRQDQG VRFLDOGLDORJXH

Economic indicators

Participants proposed the following indicators:

• $UHYHQXHDQGRUYDOXHDGGHG

• $WD[HVDQGRWKHUSD\PHQWVWRWKH*RYHUQPHQW

• $WRWDOQHZLQYHVWPHQW

• $ORFDOSXUFKDVLQJDQGVXSSOLHUGHYHORSPHQW

Indicator A.1:

Revenue and/or value added

7KLV LQGLFDWRU LV UHOHYDQW WR LQGLFDWRU RQ WKH annual growth rate of real gross domestic product

*'3 SHU HPSOR\HG SHUVRQ DV OLVWHG LQ WKH 5HSRUW RIWKH,QWHU$JHQF\DQG([SHUW*URXSRQ6XVWDLQDEOH 'HYHORSPHQW*RDO,QGLFDWRUV(&1DQQH[

,,,81&7$'UHVHDUFKLQGLFDWHVWKDWRQO\SHUFHQW of large companies worldwide reported on cash ƅRZV SDLG WR *RYHUQPHQWV HPSOR\HHV VXSSOLHUV shareholders or other investors or spent through GRQDWLRQV 8QGHU WKH * VXVWDLQDELOLW\ UHSRUWLQJ JXLGHOLQHV WKH (& SHUIRUPDQFH LQGLFDWRU IRFXVHV on direct economic value generated and distributed, and states that companies should report value JHQHUDWHGRQDQDFFUXDOEDVLVUHYHQXHVHFRQRPLF YDOXH GLVWULEXWHG RSHUDWLQJ FRVWV HPSOR\HH ZDJHV DQG EHQHƄWV SD\PHQWV WR SURYLGHUV RI FDSLWDO payments to Governments by country and community LQYHVWPHQWV DQG WKH GLIIHUHQFH EHWZHHQ WKHVH WZR PHDVXUHV HFRQRPLF YDOXH UHWDLQHG 7KH JXLGHOLQHV

state that economic value generated and distributed should be reported at country or regional levels, ZKHUHVLJQLƄFDQWDQGWKDWFRPSDQLHVVKRXOGH[SODLQ VLJQLƄFDQFHFULWHULD

Suggestions by the consultative group included LQGLFDWRUV VXFK DV DYHUDJH HPSOR\HH VDODULHV 7KH number of employees earning below a certain threshold ZDVFRQVLGHUHGFUXFLDOLQIRUPDWLRQLWVSURYLVLRQPLJKW EHXVHIXOQRWMXVWIRUDFRPSDQ\EXWIRUDOOHPSOR\HHV LQUHOHYDQWVXSSO\FKDLQV3DUWLFLSDQWVDOVRGLVFXVVHG PRYLQJ VDODU\UHODWHG LQGLFDWRUV XQGHU WKH UHOHYDQW VRFLDODUHDDQGSURSRUWLRQVRIVDOHVLQQDWLRQDO*'3 ,W ZRXOG EH ZRUWKZKLOH WDNLQJ LQWR FRQVLGHUDWLRQ WKH issue of transfer pricing, and the guidelines issued E\ WKH 2UJDQL]DWLRQ IRU (FRQRPLF &RRSHUDWLRQ DQG 'HYHORSPHQWRQFRXQWU\E\FRXQWU\UHSRUWLQJDVSDUW RIWKH%DVH(URVLRQDQG3URƄW6KLIWLQJ$FWLRQ3ODQ

Indicator A.2:

Taxes and other payments to the Government

7KLV LQGLFDWRU LV UHOHYDQW WR ,QWHU$JHQF\ DQG ([SHUW

*URXS RQ 6XVWDLQDEOH 'HYHORSPHQW *RDO LQGLFDWRU RQWKHSURSRUWLRQRIGRPHVWLFEXGJHWIXQGHG by domestic taxes, which is pending review by the

*URXS 81&7$' UHVHDUFK LQGLFDWHV WKDW SHU cent of large companies worldwide report on tax SD\PHQWV0RUHWKDQKDOIRIWKHVHFRPSDQLHVDOUHDG\

report on the proposed indicator, which is included in the Guidance on Corporate Responsibility Indicators in Annual Reports²²6XFK}GLVFORVXUHLVUHTXLUHGXQGHU WKH(&SHUIRUPDQFHLQGLFDWRURIWKH*VXVWDLQDELOLW\

UHSRUWLQJ JXLGHOLQHV 'LVFXVVLRQV E\ WKH FRQVXOWDWLYH group included consideration of whether total tax contribution should be reported or contributions under VSHFLƄF WD[HV 7KH %DVH (URVLRQ DQG 3URƄW 6KLIWLQJ Action Plan provides guidelines on the taxation of multinational enterprises and highlights the need for international coordination to enhance transparency for QDWLRQDOWD[DGPLQLVWUDWLRQV

Indicator A.3:

Total new investment

7KLV LQGLFDWRU LV UHOHYDQW WR ,QWHU$JHQF\ DQG ([SHUW

*URXS RQ 6XVWDLQDEOH 'HYHORSPHQW *RDO LQGLFDWRU

22 81&7$'Guidance on Corporate Responsibility Indi- cators in Annual Reports (Sales No. 08.II.D.8, United Nations SXEOLFDWLRQ1HZ<RUNDQG*HQHYD

ERQWKHQXPEHURIQDWLRQDODFWLRQSODQVUHODWHG to multilateral environmental agreements that support accelerated investment in actions that eradicate poverty and sustainably use natural resources, which LV SHQGLQJ UHYLHZ E\ WKH *URXS 81&7$'} UHVHDUFK LQGLFDWHV WKDW SHU FHQW RI ODUJH FRPSDQLHV worldwide report on investments in sustainable HQHUJ\VXSSO\SHUFHQWRQLQYHVWPHQWVRUORDQVLQ environmental improvements, including green bonds, and only 1 per cent on community investments per SUHWD[LQFRPH

Total new investment is an indicator in the Guidance on Corporate Responsibility Indicators in Annual Reports 8QGHU WKH * VXVWDLQDELOLW\ UHSRUWLQJ JXLGHOLQHV WKH (& SHUIRUPDQFH LQGLFDWRU UHTXLUHV DPRQJRWKHUVGLVFORVXUHVRIFRPPXQLW\LQYHVWPHQWV New investments can have a positive economic and social impact, as they may lead to the development RI SURGXFWLYH FDSDFLW\ DQG SRYHUW\ UHGXFWLRQ 6XFK LQYHVWPHQWV PD\ WDNH LQWR DFFRXQW IRUHLJQ GLUHFW investment and investments made by a reporting company in other entities directly, as well as in its own operations, such as by purchasing new facilities RU SURGXFWLRQ WHFKQRORJ\ 6XJJHVWLRQV E\ WKH consultative group included data on green investment DQG JUHHQ WXUQRYHU ([SHUWV DJUHHG WKDW IXUWKHU HODERUDWLRQ RI WKH GHƄQLWLRQV DQG PHDVXUHPHQW RI VXFKLQGLFDWRUVZDVQHHGHG

Indicator A.4:

Local purchasing and supplier development

7KLV LQGLFDWRU LV UHOHYDQW WR ,QWHU$JHQF\ DQG ([SHUW

*URXS RQ 6XVWDLQDEOH 'HYHORSPHQW *RDO LQGLFDWRU RQWKHSHUFHQWDJHVKDUHRIVPDOOVFDOHLQGXVWULHV LQ WRWDO LQGXVWU\ YDOXH DGGHG 81&7$' UHVHDUFK LQGLFDWHVWKDWSHUFHQWRIODUJHFRPSDQLHVZRUOGZLGH report on either the geographic division of suppliers or WKHVKDUHRIORFDOVXSSOLHUV8QGHUWKH*VXVWDLQDELOLW\

UHSRUWLQJ JXLGHOLQHV WKH (& SHUIRUPDQFH LQGLFDWRU focuses on procurement practices and mandates the disclosure of the proportion of spending at local VXSSOLHUV DQG VLJQLƄFDQW ORFDWLRQV RI RSHUDWLRQ /RFDO SXUFKDVLQJ LV DQ LQGLFDWRU LQ WKHGuidance on Corporate Responsibility Indicators in Annual Reports Suggestions by the consultative group included ORQJWHUP FRQWUDFWXDO DUUDQJHPHQWV LQ SODFH ZLWK VXSSOLHUVH[LVWHQFHRITXDOLW\PDQXDODQGLQVSHFWLRQ SURFHGXUHVDQGUHVSRQVLEOHVRXUFLQJ

Environmental indicators

%DVHGRQUHVHDUFKFRQGXFWHGE\WKH8QLWHG1DWLRQV (QYLURQPHQW 3URJUDPPH and comprehensive reporting of environmental information, experts proposed the following indicators:

• %ZDWHUFRQVXPSWLRQSHUQHWYDOXHDGGHG

• %ZDVWHJHQHUDWHGSHUQHWYDOXHDGGHG

• %JUHHQKRXVHJDVHPLVVLRQVVFRSHVDQG SHUQHWYDOXHDGGHG

• % FKHPLFDOV LQFOXGLQJ SHVWLFLGHV DQG R]RQH GHSOHWLQJVXEVWDQFHV

• %HQHUJ\FRQVXPSWLRQSHUQHWYDOXHDGGHG The consultative group noted that, in addition to providing related data, it was important to encourage companies to report on the metrics of how they mitigated negative effects and on positive actions WDNHQWRUHGXFHWKHP

Indicator B.1:

Water consumption

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&RXQFLO IRU 6XVWDLQDEOH 'HYHORSPHQW *OREDO :DWHU Tool,²⁵&'3:DWHU3URJUDPPH²⁷ and United Nations

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Indicator B.2:

Waste generated

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Indicator B.3:

Greenhouse gas emissions

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Indicator B.4:

Chemicals

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Indicator B.5:

Energy consumption

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Social indicators

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Indicator C.1:

Total workforce

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Indicator C.2:

Expenditure on research and development

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Indicator C.3:

Average hours of training per year per employee

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Indicator C.4:

Percentage of employees covered by collective agreements

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Indicator C.5:

Cost of employee health and safety

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Indicator C.6:

Work days lost

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Indicator C.7:

Human rights

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Institutional indicators

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