ACCOUNTING BODIES NETWORK

The Prince s Accounting for Sustainability Project s ACCOUNTING BODIES NETWORK Annual Review 2012

THE ABN MEMBERS ARE: American Institute of Certified Public Accountants (AICPA) Association of Accounting Technicians (AAT) Association of Chartered Certified Accountants (ACCA) Canadian Institute of Chartered Accountants (CICA) Chartered Institute of Management Accountants (CIMA) Chartered Institute of Public Finance and Accountancy (CIPFA) CMA Canada Consiglio Nazionale dei Dottori Commercialisti e Degli Esperti Contabili (CNDCEC) Consultative Committee of Accountancy Bodies (CCAB) CPA Australia Global Accounting Alliance (GAA) Hong Kong Institute of Certified Public Accountants (HKICPA) Institut der Wirtschaftsprüfer in Deutschland (IDW) Institute of Chartered Accountants in Australia (ICAA) Institute of Chartered Accountants in England and Wales (ICAEW) Institute of Chartered Accountants in Ireland (ICAI) Institute of Chartered Accountants of Scotland (ICAS) The Institute of Cost and Works Accountants of India (ICWAI) Japanese Institute of Certified Public Accountants (JICPA) New Zealand Institute of Chartered Accountants (NZICA) The South African Institute of Chartered Accountants (SAICA) TABLE OF CONTENTS REVIEW OF INTEGRATED THINKING 3 AND INTEGRATED REPORTING IN 2012 To provide some context to Integrated Thinking and Integrated Reporting, A4S outlines key activities in these areas in 2012. THE WORK OF THE ABN IN 2012 5 The ABN follows five sustainability principles. In this Annual Review, the many activities of the ABN have been categorized and described using these five principles: Influence and inform Lead by example Drive thought leadership Incorporate accounting for sustainability within training and professional education Collaborate through the International Network LOOKING AHEAD: 2013 20 A4S and the ABN have ambitious plans for 2013 to deliver the benefits of Integrated Thinking and Integrated Reporting.

THE ACCOUNTING BODIES NETWORK An international group of accounting bodies that has the ability to influence nearly two million accountants and accounting students worldwide. The Accounting Bodies Network (ABN) is a group of powerful accounting bodies from across the globe, brought together to help minimize the duplication of initiatives undertaken in isolation and achieve a common approach to accounting for sustainability. The Prince s Accounting for Sustainability Project (A4S) established the ABN in 2008 to work with professional accounting bodies as they recognize and incorporate five principles of sustainability in their organizations, drive change and influence their collective membership of almost two million accountants and accounting students in 176 countries around the world. The ABN members sign up to five sustainability principles, thereby acknowledging the crucial role that accounting for sustainability must play in providing today s decision-makers with the information they need, and in educating tomorrow s accountants in order to embed sustainability throughout the profession. The principles are: INFLUENCE AND INFORM LEAD BY EXAMPLE DRIVE THOUGHT LEADERSHIP INCORPORATE ACCOUNTING FOR SUSTAINABILITY WITHIN TRAINING AND PROFESSIONAL EDUCATION COLLABORATE THROUGH THE INTERNATIONAL NETWORK THE ACCOUNTING BODIES NETWORK ANNUAL REVIEW 2012 1

IT IS THE ACCOUNTANTS WHO WILL SAVE THE WORLD * HRH The Prince of Wales established A4S in 2004 because HRH recognized the capacity of the accounting and finance community to change the way organizations operate. Sustainability has to become integrated into the way organizations plan and act, and such an integrated way of operating can only lead to better decision-making. Accountants hold the key both as strategic decision-makers within their organizations and because they are responsible for measuring, valuing and monitoring their organizations activities. They are the professionals tasked with making sense of past performance and providing insight into what the future might hold. The ABN s members work to provide today s and tomorrow s decision-makers with the information and skills they need. This is the second annual review of the work of the ABN, and it demonstrates the wide variety of projects and initiatives that the ABN members have undertaken during 2012, demonstrating their embrace of the five principles of the network. Many of the ABN members projects and initiatives have been undertaken in collaboration with A4S, the International Integrated Reporting Council (IIRC) and each other. Considerable work has been undertaken to engage with the accounting and finance community around the world: providing guidance and training; leading the accounting profession through research and thought leadership; and encouraging Integrated Thinking and Integrated Reporting. In preparing material for this annual review, each ABN member was asked to prioritise their activities and to describe only their key projects and initiatives in 2012. As a result, the annual review provides a snapshot of the variety of work undertaken by the ABN during 2012, but not an exhaustive list. WHAT IS INTEGRATED THINKING? Integrated Thinking helps an organization to make strategic decisions that lead to a more sustainable organization by managing future regulatory, resource and price risks. Integrated Thinking provides a vision of how business may be impacted by short, medium and long term environmental and social changes. It also provides a more holistic view of the organization in terms of its operations, risks and opportunities to enable more sustainable management and value creation into the future. WHAT IS INTEGRATED REPORTING (<IR>)? <IR> is a process that results in communication, most visibly a periodic integrated report, about value creation over time. An integrated report is a concise communication about how an organization s strategy, governance, performance and prospects lead to the creation of value over the short, medium and long term. * Peter Bakker, the President of the World Business Council for Sustainable Development 2 (WBCSD) THE ACCOUNTING BODIES NETWORK ANNUAL REVIEW 2012

REVIEW OF INTEGRATED THINKING AND INTEGRATED REPORTING IN 2012 WHAT HAS A4S DONE IN 2012? A4S has had a very busy and successful year. Achievements include: Engaging with the accounting and finance community, including: Audit Regulators HRH The Prince of Wales addressed the meeting of the International Forum of Independent Audit Regulators by video message, highlighting the importance of Integrated Thinking and Integrated Reporting. Speaking at events, including the ACCA s Virtual Conference Accounting for the Future and A4S-Wales Taking Responsibility about Integrated Reporting and Integrated Thinking. The A4S Community website, established in collaboration with the International Federation of Accountants (IFAC) to encourage organizations, institutions and individuals to share ideas online. The Community website also includes a library with many contributions from ABN members. Sustainable Economy, which included: Hosting an official side event at the United Nations Conference on Sustainable Development (Rio+20) in June that sought to drive collaboration between the key actors involved in developing performance measurement systems and metrics at a global, national and corporate level. HRH The Prince of Wales addressed the delegates at this event via a video message. Convening a meeting in London in May, hosted by HRH The Prince of Wales, at which there was support for a working group that will link the processes to develop performance measurement systems and metrics at a global, national and corporate level. A4S will work to convene this working group over the coming months, and, initially, act as its Secretariat. Integrated Thinking activities, such as: Commissioning decision-making research to understand if and how organizations take environmental and social factors into account in their decision-making. A report based on this research was launched at the A4S Forum in December 2012. Becoming a founding member of the TEEB (The Economics of Ecosystems and Biodiversity) for Business Coalition to help drive the development of globally accepted methodologies that value the impact businesses have on the natural environment, in order to provide organizations with the tools and guidance to successfully incorporate natural capital into strategy and decision-making processes. Co-founding the Finance for the Future Awards, with ICAEW and Natwest, and in particular, developing The journey towards Integrated Thinking at the Award event, which included exhibits, tools and networks that guests could use to help embed sustainability within their organizations and make Integrated Thinking become business as usual. The guests at the Award ceremony were addressed by video message by HRH The Prince of Wales. Supporting Integrated Reporting, including: Working closely with the IIRC on the journey to Integrated Reporting, including at Rio+20. These close ties allow the IIRC to continue to benefit from the excellent input and enthusiastic support of the members of the ABN. With the Global Reporting Initiative (GRI), commissioning Radley Yeldar (a communications agency) to undertake research into how investors and analysts source, use and are influenced by non-financial information. The report was launched in June, and among the findings, highlighted that, reassuringly, 80% of investors and analysts believe that <IR> will deliver benefits to their analysis or company assessments. THE ACCOUNTING BODIES NETWORK ANNUAL REVIEW 2012 3

DEVELOPMENT OF INTEGRATED REPORTING THE <IR> FRAMEWORK The development of an <IR> Framework has continued throughout 2012, with a draft due for public consultation in mid-april, and version 1 to be issued late in 2013. TOPIC-SPECIFIC PROJECTS A number of topic-specific papers are also well advanced. These have been undertaken in collaboration with several partners, including a number of ABN members. Their purpose is to obtain input into the Framework and to inform understanding of <IR>. Publication of the outputs from each of the projects, with the exception of Assurance, which will be later, is expected in January 2013. Materiality: AICPA is serving as the lead partner organization for the materiality work stream, in conjunction with global representatives in Australia, Brazil, Canada, Germany, Japan, the Netherlands, South Africa, the UK and the USA. The paper explores the various issues and matters considered in drafting the materiality section of <IR> Framework. Capitals: The lead partners are ACCA and the Dutch accounting institute Nederlandse Beroepsorganisatie van Accountants (NBA). The paper explores the current categorization of the capitals with suggestions about how to describe each category. Connectivity: The lead partner is the World Intellectual Capital Initiative (WICI), with input from others, including SAICA and AICPA. The paper covers the connectivity of information in depth. Value: The lead partner is Ernst & Young. The paper will contribute to the value work stream, and includes relevant points from a literature review on value. Business model: The lead partner organizations are CIMA, the International Federation of Accountants (IFAC) and PricewaterhouseCoopers. The work analyses how companies report their business model in practice as the basis for the guidance in the draft Framework. Assurance: The lead partner organization is the Independent Regulatory Board for Auditors (IRBA) in South Africa, with additional representation from organizations around the world, including IDW and ICAS. The publication of any paper on assurance will occur subsequent to the publication of the Consultation Draft. PILOT PROGRAMME The Pilot Programme, testing the concepts of <IR>, comprises 82 businesses, including Coca Cola, Microsoft and Unilever, and 25 investor organisations well ahead of the original target of 50 participants. A Pilot Programme conference was held in Amsterdam during September, focussing on the experiences of the companies to date. The conference included discussions about the business case for <IR> and the perspectives of investors, as well as providing valuable feedback to the Technical Team working on the <IR> Framework. TOOLS A Pilot Programme Year 1 Yearbook capturing the experiences of global businesses and investors and showcasing the progress of the Pilot Programme in its first year. The Yearbook includes 35 case studies. An online Emerging <IR> Database, developed in collaboration with Black Sun. It highlights examples of company reporting based on the <IR> guiding principles and content elements from the September 2011 Discussion Paper. 4 THE ACCOUNTING BODIES NETWORK ANNUAL REVIEW 2012

THE WORK OF THE ABN IN 2012 This section of the Annual Review highlights the work of the ABN. The ABN s activities have been described using five sustainability principles to which the ABN members have signed up.

INFLUENCE AND INFORM. The Principle: The ABN works to promote accounting for sustainability and the benefits of integrated reporting. Some of the ABN s activities that influence and inform in 2012 included: SUSTAINABILITY GROUPS AICPA s new Sustainability Task Force was launched in December 2012. It will focus on communications and education related to needs and opportunities for sustainability reporting and assurance services, and will develop application guidance for assurance and/or advisory services related to sustainability reporting. NZICA re-launched their Sustainability Special Interest Group in January 2012. The group webcasts its bi-monthly meetings on sustainability-focused topics, featuring influential and knowledgeable speakers from areas including business, accounting practice, government policy and academia. This group provides a great mechanism for networking opportunities and sharing ideas about a range of interesting, challenging and topical sustainability issues. The IDW Sustainability Group have developed a strategy and work plan for future IDW activities in Sustainability. During 2012, this group s activities included developing IDW s comment letters for GRI s G4 Exposure Draft, the IIRC s Working Draft of the Prototype Framework and the European Commission s Corporate Social Responsibility (CSR) Strategy. MAKING A DIFFERENCE AT RIO +20 ACCA s policy paper Making a Difference at Rio +20 called on Rio+20 to require public and large global private corporations to integrate material environmental, social and governance issues in their Annual Report and Accounts, or to explain why they could not report the information. ACCA also wanted Rio+20 to lead to a commitment by UN Member States to develop mechanisms for sustainability reporting at a national level. ACCA therefore welcomes Paragraph 47 in the final announcement from Rio+20, which, among other calls to business, governments and other relevant stakeholders, acknowledged the importance of corporate sustainability reporting and encouraged companies to consider integrating sustainability information into their reporting cycle. PROMOTING AND FOLLOWING ETHICAL BUSINESS PRACTICES CIMA and Tomorrow s Company held a parliamentary reception at the House of Lords in London in November 2012, at which the Chairman of Marks and Spencer delivered an impassioned speech about how businesses must act with integrity to ensure success in the long-term. RESPONSES TO CONSULTATIONS ABN members have contributed to new guidance and standards by responding to key local and international consultations, including: IDW, ACCA and CNDCEC responded to the European Commission CSR Strategy. CNDCEC believes that the <IR> Pilot Programme will provide useful experience to contribute to the current debate on the revision of the Fourth Directive, as far as Environmental, Social and Governance (ESG) reporting is concerned. IDW, ACCA, AICPA, CICA and HKICPA each submitted a comment letter on the GRI s G4 Exposure Draft. HKICPA and ACCA responded to the Hong Kong Stock Exchange s proposals for ESG reporting. CNDCEC is a key supporter of GBS (a national ESG reporting principles setter in Italy) that includes the accounting profession, industry and academia. CICA contributed to new draft technical guidance for greenhouse gas (GHG) verification in the province of Alberta, where Chartered Accountants are designated by regulation as eligible verifiers of companies GHG emissions filings with the government. ACCA responded to the UK Department for Environment, Food and Rural Affairs (Defra) GHG reporting papers and to the UK Department for Business, Innovation and Skill s (BIS) narrative reporting paper. 6

ESSAY COMPETITION ICAS launched their first ICAS Sustainability Essay Competition. The competition was sponsored by Grant Thornton and asked the question: How will company sustainability be measured and what role might accountants play? Almost 90 entries in total were received from around the world, including submissions from the UK, America, Australia, South Africa and Singapore. The competition was won by ICAS member Dave Marshall from Herefordshire for his essay The Tale of the Accountant with Three Eyes. Following the success of the 2012 competition, ICAS aims to make this an annual event. FINANCE FOR THE FUTURE The inaugural Finance for the Future Awards (co-founded by A4S, ICAEW and Natwest) were presented in June at an event attended by almost 300 CFOs, CEOs, Sustainability Heads and others. The Finance for the Future Awards reward organizations that embed sustainability within their operations, led or actively supported by their finance teams. The winners of the 2012 Awards, as well as those that were Highly Commended, have shared their good practice through case studies, which are available on the Finance for the Future website. Entries for the 2013 Awards close on 11 January 2013, and the 2013 Awards will be presented in May 2013. WORKING WITH OTHER ORGANIZATIONS CIMA continues to participate in and influence global initiatives such as the United Nations Global Compact. CIMA also works with influential think tanks such as Tomorrow s Company to promote sustainable business through high profile lectures and publications such as Tomorrow s Value and Tomorrow s Company Good Governance Forum. CPA Australia has, since 2007, been an Organizational Stakeholder member of the Global Reporting Initiative (GRI) and is a major provider of support to the GRI s Focal Point Australia. In 2012, CPA Australia provided a part-time resource on secondment to the GRI G4 Technical Editing Taskforce. ACCA is also an Organizational Stakeholder member of GRI and this year ACCA s Head of Sustainability was elected onto the GRI Stakeholder Council. CICA was an invited member of the National Round Table on the Environment and the Economy s Business Resilience in a Changing Climate Advisory Committee, and is an invited member of the Climate Change Adaptation Plenary, a coordinating group that identifies shared priorities and resources regarding climate change adaptation in Canada. THE ACCOUNTING BODIES NETWORK ANNUAL REVIEW 2012 7

SPOTLIGHT ON INTEGRATED REPORTING ABN members are represented on the IIRC Council, the Working Group and the Technical Task Force. These representatives include CIMA, TOWARDS SAICA, JICPA, CPA Australia, ACCAINTEGRATED and the GAA. REPORTING Communicating Value in the 21st Century

ABN CONTRIBUTION TO THE DEVELOPMENT OF INTEGRATED REPORTING Integrated reporting is one of the most pressing issues for the accounting and finance profession at present, and CIMA is proud to be at the forefront of developments in this area. CIMA has taken a place on the pilot programme initiated by IIRC and has committed to produce its own integrated report in 2013. Our research, together with IFAC and PwC, on business models will be an essential element that will inform IIRC s integrated reporting framework. Sustainable business success is built upon integrated thinking throughout the company with the effective decision support of management accountants. I am confident that those companies adopting this approach will be able to produce integrated reports of quality and I am delighted that CIMA has the opportunity to contribute to this important innovation in corporate reporting. Charles Tilley, CEO, CIMA. CNDCEC and ACCA are also part of the IIRC s Pilot Programme, which is being used to take forward the practical adoption of <IR>. In August 2012, ACCA produced its first annual report based on <IR> principles, which taken together with ACCA s CSR statement and full financial statements achieved GRI Level C accreditation. Extracts from the report are featured on the IIRC s Emerging <IR> examples database. The South African Institute of Chartered Accountants is a strong supporter of integrated reporting in South Africa. We contribute to the development of the guidance, and actively promote integrated reporting among our members and the broader business community. Graham Terry, Senior Executive, SAICA. SAICA promotes <IR> by working closely with the Integrated Reporting Committee of South Africa, and, in 2012, they commissioned research, established a network group for companies preparing integrated reports, hosted panel discussions on <IR> and contributed to the development of the international <IR> guidance. SAICA also contributed to a television series on <IR> run on a local business channel, developed an elearning module on <IR>, offered podcasts with subject experts and published articles on <IR> in various business publications. ACCA has also commissioned research on <IR> in South Africa, to ascertain the effect on corporate reporting of the recently introduced King III code, the first, globally, to require <IR>. AICPA sponsored and participated in the Regional <IR> Americas Meeting held in New York, and CICA s Financial Reporting and Accounting Conference featured a session on <IR>. ICAS hosted a CCAB roundtable event on <IR> in Edinburgh in November, which was attended by representatives from the Financial Services, Public and Commercial sectors. HKICPA engaged with companies in a workshop aimed at introducing the Draft Prototype of the <IR> Framework. A unique aspect of this workshop was that each company brought a representative from both the finance and sustainability departments, meaning that the preparers of both the financial and the sustainability reports were present to discuss <IR>. <IR> AND THE PUBLIC SECTOR CIPFA has been engaged in considering the implications of <IR> for the public sector and has, in collaboration with others engaged in the sector, been developing a discussion paper on Integrated Reporting and Public Sector Organisations. The aim of the paper is to contribute to the discourse on <IR> and to highlight public sector differences and consider their implications for <IR>. CIPFA also hosted a roundtable looking at <IR> in the context of public sector organizations. JICPA places great importance on its role in organizing active interaction on <IR> between Japanese stakeholders, including business, investors, accountants and government. The focus is on how corporate reporting should evolve to achieve a long-term value creating economy and society. JICPA has hosted several roundtables and meetings on <IR>, looking at issues such as current challenges in the securities market, sustainable business and the evolving nature of corporate reporting. Another key role is to drive active dialogue between the IIRC and Japanese stakeholders. JICPA and the Tokyo Stock Exchange jointly hosted an <IR> Tokyo Forum with the IIRC in November 2012. It was officially supported by the Japanese government. More than 350 delegates attended these events. THE ACCOUNTING BODIES NETWORK ANNUAL REVIEW 2012 9

LEAD BY EXAMPLE The Principle: The ABN works to embed accounting for sustainability within their own organizations strategy and operations. Some examples of the ABN members embedding sustainability within their own organizations include: REALIGNED ORGANIZATIONAL STRUCTURE CICA has confirmed sustainability as one of its key areas of focus. The incoming Chair of CICA s Board, in her remarks at the Annual General Meeting, noted that CICA has always been a leader in the area of sustainability, and stated that over the course of the next year we intend to build internal capacity, enhance our profile, and focus on what directors need to know. In order to lead by example and drive thought leadership, CICA s Guidance and Support Group has implemented a newly realigned organizational structure that will support and enhance the achievement of sustainability goals and related research. This includes establishing a multi-disciplinary and diverse strategic Sustainability Advisory Board. The Board will provide critical insight to CICA on priority sustainability issues; help them develop valuable thought leadership; and provide practical input on projects and relationships important to fulfilling CICA s sustainability goals, including the ABN s five principles. The Sustainability Advisory Board has: Identified accounting, measurement and reporting as a priority project stream for 2013 and onward. Recommended that CICA consider a project next year to examine the demand for assurance and supply of assurance services related to sustainability reporting in Canada. CARBON FOOTPRINT ICAS are using a firm of external consultants to measure and quantify their carbon footprint and to introduce initiatives that help reduce recycling and waste.

CPA Australia Annual Report 2011 125 years of relationships SUSTAINABILITY REPORTING In 2011, CPA Australia celebrated its 125th anniversary having been founded in 1886. As a flagship publication, CPA Australia s 2011 Combined Annual and Sustainability Report represents a significant achievement and maturing in practice; CPA Australia having first produced a GRI based (Application Level C+) sustainability report for 2008. The report for the calendar year to 31 December 2011 represents a journey towards producing an integrated report. The 2011 report reflects developments in CPA Australia s own practices and, it is hoped, will inspire others to embark on the <IR> journey. CNDCEC has published its own Social Reports since 2006 and promotes and shares best practice on sustainability reporting and assurance. MOVE FROM PAPER ACCA removed the use of paper from five of its key processes (initial registration, exam entry, exam dockets, exam results and certificates) for students in 18 markets in 2012. In other markets, while paper processes are still available, there has been a concerted effort to incentivise students to use electronic processes, for example, reduced fees for earlier, online-only exam entry. As a result, to date this year: 64% of student registrations have been completed online, with a further 30% completed partially online. 87% of students have registered online to sit exams in the year to date. 74% of students received their exam results online for the examination sitting in August 2012. While the primary driver behind this move online is speed and convenience of service to ACCA s customers, there are clear sustainability benefits to removing this volume of paper from ACCA s processes. CIMA also works to reduce waste and consumption. Online exam entry and student registration has reduced paper consumption and carbon footprint, and due to new technology, paper consumption in the head office was reduced by 30% in 2012. THE ACCOUNTING BODIES NETWORK ANNUAL REVIEW 2012 11

DRIVE THOUGHT LEADERSHIP The Principle: The ABN is committed to increase understanding of good sustainability practices by commissioning and/or participating in work related to accounting for sustainability.

CONFERENCES / ROUNDTABLES ACCA Virtual conference More than 10,000 finance professionals signed up to the worldwide Accounting for the Future event organised by ACCA. The online event explored the role that finance professionals will play in building a stronger and sustainable global economy. The week-long event, held in October, explored five key areas: 1. Emerging issues related to risk management. 2. Valuation and how trends and developments in social and environmental accounting may lead to changes in the methods used by accountants to evaluate assets and liabilities. 3. Global trends and developments in corporate disclosure. 4. Importance of investor engagement and the influence which investors can have on corporations and organisations. 5. The green economy. A4S participated on a panel that discussed the key outcomes from the Rio+20 conference and what this means for the future of accounting and reporting. The ABN members hosted and participated in many conferences and roundtables, including: CICA was a sponsor of and speaker at Globe 2012, one of Canada s highestprofile sustainable business summits and a nexus for global networking and thought leadership on the business of the environment. ICAS attended and presented at the International Innovation Network (IIN) Conference in Dublin in July of this year. For the first time, sustainability was included as a topic for discussion. CIMA ran a number of sustainability events and conferences in 2012, including the Corporate Sustainability conference in Canada in October which attracted 350 business and finance leaders and extensive local media coverage, and a breakfast forum in Singapore which focused on the need for a Sustainability Index in Singapore. CICA s National Conference for Audit Committees included a session entitled Sustainability: Why Audit Committees Can t Ignore This Emerging Topic. CMA Canada s Provincial conferences across Canada had sessions on Sustainability. CICA and CMA Canada contributed to the GRI s Toronto conference on sustainability in October. ACCA held four roundtables on the Green Economy in Asia and Canada throughout 2012, to discuss the concept and its potential progress from the investor, policy-maker, corporation and accountant point of view. Embedding sustainability into flagship conferences HKICPA made sustainability one of the two themes of the Institute s flagship conference in October. Keynote speakers were Christine Loh, the recently appointed Under Secretary for the Environment and Paul Druckman, CEO of the IIRC. Two panel sessions discussed the business case for sustainability and communication and reporting. ICAA successfully held their first sustainability stream at their flagship Business Forum conferences in Sydney and Melbourne. This is the first time sustainability has been seen as a separate stream competing with traditional accounting areas such as taxation, reporting and assurance. THE ACCOUNTING BODIES NETWORK ANNUAL REVIEW 2012 13

PUBLICATIONS The ABN contributed to an increasing library of resources: CPA Australia published (with the University of Sydney) a report titled The collection, integration and reporting of sustainability information within an organization. The case study based research presents insight into the challenges and strides being made by leading businesses in sustainability reporting and performance. The Collection, Integration and Reporting of Sustainability Information within an Organisation: State of Practice Associate Professor Geoff Frost Professor Stewart Jones Associate Professor Philip Lee Discipline of Accounting The University of Sydney IDW published a book Opportunities and Boundaries of an Integrated Financial and Sustainability Reporting. Is natural capital a material issue? An evaluation of the relevance of biodiversity and ecosystem services to accountancy professionals and the private sector was launched in November and written by the ACCA, KPMG and Flora & Fauna International. This report investigates the concept of materiality and how it is used to identify issues for management and disclosure, and explores the extent to which materiality definitions currently reflect the increasing significance of natural capital as a business issue. The second issue of SAICA s sustainability book Green has recently been published. CIPFA produced an online information resource on the Carbon Reduction Commitment Energy Efficiency Scheme as well as holding a number of Carbon Finance Network events looking at energy efficiency and local energy production schemes. JICPA has prepared a report, Identification of Sustainability Issues and Assessment of Their Materiality in Investor-Oriented Reporting Examinations of the Approach and Methodology for Identifying Disclosure Issues. CMA Canada in partnership with the Consortium for Advanced Management International (CAM-I) published an emerging issues paper on the topic of how to use Activity Based Costing / Management to support environmental initiatives. ICAA produced guidance for business on the introduction of the carbon price mechanism in Australia. ACCA commissioned Civic Exchange to write the report The Green Economy: pushes and pulls on corporate China to identify how an increased focus on environmental and social performance at both the international and national levels is affecting the private sector in China and Hong Kong. This report explores the efforts that are being made to transition to a more sustainable path, a greener economy, and the impacts these efforts are having on businesses operating in China. CNDCEC prepared and published technical documents on sustainability issues, featuring sustainability reporting, sustainability assurance, control on environmental and sustainability issues, GHG accounting, and financial instruments on environmental investments. CIPFA Sustainability Working Group commenced work on developing resources on energy efficiency and management for public sector organisations. CIMA s report Acting under pressure: how management accountants manage ethical issues highlights areas where management accountants might experience pressure in the workplace, set against the wider ethical environment. CMA Canada s CMA magazine in July/August was dedicated to Corporate Responsibility, including an article about the IIRC. CIMA s September issue of their member and student magazine, Financial Management, focused on sustainability. IDW has published a variety of articles related to Sustainability and <IR> in the IDW journal Die Wirtschaftsprüfung. NZICA featured Sustainability related articles in the NZICA Journal. ICAS and CICA set up web pages to provide a resource for members on sustainability. ICAS is developing a discussion paper on the development of a framework detailing a proposed methodology to allow auditors to provide positive assurance on management commentary. 14

Innovation in Finance The ICAEW and the WWF-UK jointly lead the Finance Innovation Lab, an open space where people can come together to explore, innovate and evolve the financial system so that it sustains people and planet. It was named one of the NESTA/The Observer 50 New Radicals, making Britain a better place in February 2012. The Lab has attracted a community of over 3,000 participants from a broad spectrum of backgrounds. The Finance Innovation Lab, with ICAEW s Audit and Assurance Faculty, is convening an enquiry around the future of audit, to ask questions about the role of audit and building trust. Other Finance Innovation Lab projects include: The Disruptive Finance Policy, supported by the Calouste Gulbenkian Foundation, which aims to identify the most promising policy ideas that could disrupt the existing finance system in a way to overcome some of the biggest barriers to a sustainable economy. The ICAEW RESPONDER project, which is an EU-funded project that explores potential political, social and economic contradictions between sustainable consumption and economic growth. It focuses on consumption decisions made by private household finance and how those decisions impact on sustainability and economic growth. The programme is hosted in partnership with Tim Jackson at the University of Surrey. THE ACCOUNTING BODIES NETWORK ANNUAL REVIEW 2012 15

INCORPORATE ACCOUNTING FOR SUSTAINABILITY WITHIN TRAINING AND PROFESSIONAL EDUCATION

The Principle: The ABN is committed to incorporate accounting for sustainability in training programmes for employees, suppliers, students, members and others, in professional and academic qualifications and in professional development requirements. TRAINING EVENTS AND CURRICULUM CICA continued its outreach and education efforts at a number of national conferences, including those for directors, audit committee members, corporate secretaries, investors, senior financial executives and property developers. CIMA continues to provide training on sustainable business to students, members and others. The 2010 syllabus of the CIMA professional qualification incorporates accounting for sustainability in its Financial Management module. This year CIMA began the process of updating the 2015 CIMA professional qualification. This involves global research, including in-depth interviews and over twenty roundtables with employers, about the skills and competencies of management accountants, including their role in sustainable business development. AAT continues to consider, and, where appropriate, to include relevant sustainability matters in the revision to its syllabus which is due for completion in September 2013. CPA Australia has piloted training for accountants in energy efficiency in collaboration with the University of New South Wales and Macquarie University. The projects, funded by the New South Wales Office of Environment and Heritage, focus on skilling accounting professionals in such applied areas as integrating accounting for energy with financial accounting and evaluating project proposals for energy efficiency. The projects develop both undergraduate and postgraduate education and are currently being assessed for adaptation to continuing professional development programmes in 2013. NZICA will provide scholarly support in the form of two PhD scholarships to upcoming researchers. These scholarships are open to all accounting PhD candidates, a number of which have sustainability focused topics. ICAEW have developed a whole day workshop looking to answer the question Can accountants save the world?. The event brought together the growing community of accountants who are interested in, passionate about and/or working in sustainability. This event is one part of a wider engagement strategy with the membership. CIMA ran an international business management competition aimed at undergraduates, and various skills projects for school children. THE ACCOUNTING BODIES NETWORK ANNUAL REVIEW 2012 17

COLLABORATE THROUGH THE INTERNATIONAL NETWORK The Principle: The ABN shares learning and experience with the International Network and works together to advance better accounting for sustainability.

In 2012 the Chartered Global Management Accountant (CGMA), the new global designation for management accountants was launched. CGMA is powered by the resources and expertise of AICPA and CIMA to elevate the profession of management accounting. CGMAs help guide business decisions that drive sustainable business performance. Some 2012 CGMA resources include: Thirsty planet: Business responses to water scarcity (report) How to access the impact of climate change on your organization (tool) Sustainable business: Shared value in practice (report) How to develop non-financial KPIs (tool) How to drive value from sustainability performance management (tool) Ethical conduct is never out of vogue (animation) Managing responsible business: A global survey on business ethics (report) Navigating ethical issues (case study) Rebooting business: Valuing the human dimension based on interviews with 300 CEOs (report) Talent pipeline draining growth: Connecting human capital to the growth agenda (report) The ICAA and CPA Australia completed a 3 year research project on water accounting. This was a joint project with Monash University. The output of the project was a book on international water accounting developments. AAT, ACCA, CIMA, CIPFA and ICAEW participate in A4S-Wales, which hosted a number of events aimed at both the public and private sectors, and commented on the proposed Welsh Government Sustainable Development Bill. ICAEW has developed an online resource centre to support SMEs to engage in sustainability on a strategic level, called Just Good Business. The website features short video clips from a range of SMEs in the UK and has obtained funding from AAT. CPA Australia is leading the development of a guide for assurance on SME sustainability reports. This project has been undertaken in conjunction with a project group consisting of members from the ABN, including AAT, and CPA Australia s ESG Centre of Excellence. A beta version of the product was published in December 2012. CAPITAL INVESTMENT Extending a 2011 collaborative project within the ABN s work programme, CPA Australia commissioned a team of three academics to undertake an online survey that will obtain data insights into the contemporary influences on capital investment appraisal. The survey targets ASX300 companies and entities reporting under Australia s carbon disclosure scheme, and will explore adaptation of existing methodologies and emerging drivers of change in this key area of management practice. TEEB FOR BUSINESS COALITION ICAEW and A4S support the TEEB for Business Coalition, which was formally launched in Singapore in November 2012. Other Board members include the World Business Council for Sustainable Development (WBCSD) and WWF. The Coalition was present in Rio+20 where it participated in roundtables, and organized a workshop on valuing natural capital. Its aim is to drive the development of globally accepted methodologies that value the impact businesses have on the natural environment, in order to provide organizations with the tools and guidance to successfully incorporate natural capital into strategy and decision-making processes. The Coalition is seeking to bring together those working on projects to value natural capital, so that a single set of methodologies is produced, thereby allowing comparisons to be made between organizations. ABN members are invited to join the TEEB for Business Coalition, and may find out more by contacting the Coalition s Director, Dr. Dorothy Maxwell. THE ACCOUNTING BODIES NETWORK ANNUAL REVIEW 2012 19

LOOKING AHEAD: 2013 Building on the successes of 2012.

A4S A4S will work in collaboration with the ABN and others in a number of areas, for example: Sustainable economy Help to drive a sustainable, resilient economy by embedding sustainability into international and national policy. Integrated Thinking Help organizations to embed environmental and social factors into decision-making and strategy by highlighting the business case for sustainability and behaviour change and by developing practical guidelines and tools that help them to address the practical challenges. Integrated Reporting Drive improved corporate reporting. International Network Further develop A4S s international network. Engagement and communication Convene, influence, educate and engage the accounting, finance and investor community around the business case for accounting for sustainability. Projects to be undertaken, and detailed plans, will be developed with the advice of the A4S Advisory Council, which includes members of the ABN, as well as in collaboration with ABN members at the annual ABN meeting. Potential projects for 2013 and 2014 include: SUSTAINABLE ECONOMY: Convene and provide the Secretariat for a high level working group of governments and other organizations to improve performance measurement systems at a global, national and corporate level, building on A4S s work at Rio+20. Consider how the taxation system can be used as a fiscal policy tool to promote more sustainable behaviours and therefore drive a more sustainable economy. INTEGRATED THINKING: Develop case studies to engage the CFO community around the commercial benefits of sustainable business models. Develop a simulation / wargame for Boards and CFOs that demonstrates the risks of unsustainable business models. Identify and address the practical challenges that businesses are facing to integrate environmental and social impacts into decision-making and accounting systems and how these can be overcome. Explore the business case for the economic valuation of resources such as natural capital that underpin our global macroeconomic model. Develop a training programme to highlight the benefits of embedding sustainability into business models and the role of the CFO, to be delivered by the Cambridge Programme for Sustainability Leadership. INTEGRATED REPORTING: Continue to highlight the need for <IR> and support the work of the IIRC, and encourage Integrated Thinking as a precursor to effective <IR>. INTERNATIONAL NETWORK: Set up an international CFO Leadership Network to allow CFOs to share experiences and work together to develop the tools required. ENGAGEMENT AND COMMUNICATION: Expand the reach of the A4S community website by sharing resources and holding discussion forums. Set up an Ambassador Network of senior individuals in the accounting and financial community to be ambassadors for A4S. THE ACCOUNTING BODIES NETWORK ANNUAL REVIEW 2012 21

THE <IR> FRAMEWORK TIMELINE Development of the Framework is as follows: December 2012 / January 2013: Publication of the Prototype Framework and publication of topic-specific papers. Mid-April 2013: Publication of Consultation Draft. The consultation period will be 90 days. May to July 2013: Engagement to raise awareness of the Consultation Draft and solicit responses. Mid-July to December 2013: Analysis of responses to the Consultation Draft and revision of the <IR> Framework. December 2013: Publication of Version 1.0 of the <IR> Framework. Framework Outline <IR> Frame-work prototype Examples database Topic specific reports World Economic Forum OECD conference GRI release of G4 PP conference Rio+20 Summit PP Conference 2012 World Bank meetings <IR> Draft Framework released for consultation <IR> Frame-work v1.0 G20 Russia Summit World Economic Forum OECD conference PP conference G20 Australia 2012 1st half 2013 2nd half 2013 1st half 2014 22

THE ABN IN 2013 Asked about their key plans for 2013, ABN members highlighted a number of interesting and varied activities to engage their members in accounting for sustainability. Here is a selection of ABN members plans for 2013: INFLUENCE AND INFORM Sustainability Roadmap CICA will develop a sustainability roadmap for the accounting profession in Canada that will outline the important roles and responsibilities that professional accountants have to play in the area. Essay competition The second ICAS essay competition will launch in the first quarter of 2013. Assurance Standards IDW plan to transform ISAE 3000 (IFAC s standard on Assurance) into an Assurance Standard setting out the Generally Accepted Assurance Principles for the Audit or Review of Reports on Sustainability Issues. ESG reporting guidelines HKICPA plan to work with the Hong Kong Stock Exchange, the business community and HKICPA members to facilitate the take up of the Stock Exchange s ESG reporting guidelines. These guidelines are initially only recommended practice but aim to become comply or explain by 2015. Natural capital case studies CMA Canada will continue work to develop case studies on natural capital decision-making, including engaging the International Institute of Sustainable Development (IISD) and CICA in defining the project scope and reach. Greenhouse Gas Emissions AICPA, under the US Auditing Standards Board Sustainability Task Force, is developing review level guidance for GHG emissions. Sustainability reporting CIPFA plan to develop a step by step guide for public sector organisations on producing a concise sustainability report; to develop online information resources on sustainability and environmental information including relevant policy initiatives; and to continue engagement on the application of <IR> in public sector organisations. ESG Reporting in the EU CNDCEC will continue to contribute to the debate on revision of the EU Accounting Directives Fourth Directive regarding ESG reporting. INTEGRATED REPORTING The Draft <IR> Framework will be issued in 2013, and ABN members will engage with their members to raise awareness of the Draft Framework and to prepare their responses to the Draft Framework. As momentum towards the issue of Version 1.0 of the <IR> Framework gathers pace, some specific examples of activities ABN members plan to undertake include: NZICA plans to incorporate <IR> updates in the national Technical Roadshow and, where Technical Team members are present, at regional conferences. SAICA will contribute to the future local guidance on <IR> in line with the international guidance offered by the IIRC, and continue to promote learning and sharing among companies preparing integrated reports. JICPA is creating a case study report on <IR>, which is scheduled to be issued in January 2013. NZICA intends to partner with an <IR> pilot participant to showcase their experience. JICPA has plans for roundtables, seminars and other activities in collaboration with government, companies and investors. The IDW Sustainability Working Group will author an article on <IR> as part of the forthcoming edition of the IDW Handbook for Wirtschaftsprüfer (the German Public Auditors). For those ABN members that are also members of the Pilot Programme, 2013 will see the next steps on their journeys towards <IR>. For example, ACCA will be producing their second integrated report for the 2012-13 performance year and CNDCEC plan to evaluate the feasibility of preparing a CNDCEC Integrated Report. THE ACCOUNTING BODIES NETWORK ANNUAL REVIEW 2012 23

THOUGHT LEADERSHIP AND RESEARCH Research due to be published during 2013 includes: CICA and the Toronto Stock Exchange will complete a primer for reporting issues on environmental and social disclosure. CIMA will publish further research on the key characteristics of resilient and sustainable business models. CPA Australia has currently commissioned research titled Sustainability Reporting - Practice, Performance and Potential due for release early in 2013. The research examines financial and non-financial disclosures and securities behaviour (price and volume) by ASX, FTSE and Hang Seng top 50 companies. The research will draw out evidence in such areas as the relationships between non-financial disclosures and balance sheet characteristics, and the extent to which the securities market rewards non-financial disclosure. A major CPA Australia and government co-funded project Transforming the Australian accounting profession for the carbon challenge will be completed during 2013. The project, undertaken by the University of Sydney, will deliver essential research-based knowledge to transform accounting frameworks, systems and processes as companies seek to manage issues created by developments in carbon disclosure and related regulatory reforms. JICPA will be issuing the results of their research Corporate management, actions and disclosure on water in early 2013. Who ultimately can change the listing rules and how effective are current disclosure requirements? ACCA will investigate the role of Stock Exchanges, focussing on the extent to which stock exchanges can drive corporate reporting and improve performance throughout 2013. CMA Canada plans to complete an additional emerging issue papers with CAM-I regarding Target Costing and environmental initiatives. ICAEW plans to build on existing work in areas such as natural capital and qualitative growth, and expand into new areas such as tools for incorporating environmental and social impacts into decision-making and measuring progress towards sustainability. ICAEW intend to bring together the differing perspectives of accountants, economists and sustainability professionals, to identify common ground and to explore areas of disagreement, with the aim of generating new insights and a more holistic understanding of the issues. The choice of topics and activities will be guided by their relevance to accountants and finance professionals, the public interest remit, and a desire to raise members awareness and understanding of sustainability issues. COLLABORATION Collaborations between ABN members in 2013 include: The UK ABN members AAT, ACCA, CIMA, CIPFA, ICAEW and ICAS, with input from A4S, are developing a workshop in partnership with the Business Council for Sustainable Development (BCSD) - UK and A4S. Senior directors will be asked to participate in an emergency boardroom meeting for a fictitious corporate group, where they will be asked to deal with environmental issues and how they impact the company. CPA Australia and ICAA plan to initiate a funded Australian Research Council Linkage Project with University of New South Wales (UNSW) to examine assurance for integrated reports. This project will provide outputs that can inform the development of the <IR> Framework and associated assurance. Key researchers include Prof. Roger Simnett and Prof. Wendy Green of UNSW. EDUCATION ABN members continue to provide the current and future generation of accountants with the skillset they need to embed accounting for sustainability into their organizations. Examples of plans to achieve this in 2013 include: Various whitepapers and continuing professional education courses covering sustainability and its interrelationship with other key areas, such as strategic planning, performance measurement and management, and enterprise risk management such as those planned by AICPA. ICAEW plans to continue to reach out to ICAEW members through various channels. This includes a whole day event in April which will feature a mix of inspirational speakers, interactive and participatory sessions, as well as practical guidance on how to move forward with issues related to carbon. HKICPA plan to undertake work on assessing the extent of inclusion of sustainability topics in the university curriculum and how such matters might be introduced to the professional examination syllabus. SAICA will continue their <IR> and sustainability reporting training seminars and courses. SAICA also proposes to continue promoting and encouraging integrated thinking within companies by stimulating discussion, commissioning articles, and including the topic in their training courses. ICAS will host webinars on mandatory carbon reporting and online CSR courses. 24 THE ACCOUNTING BODIES NETWORK ANNUAL REVIEW 2012