In Case Studies: Best Practices in Sustainability Reporting – Part 1 , we looked at sustainability reports which demonstrated strengths in sustainability governance and materiality. In Part 2 of this case studies series, we will examine sustainability reports according to two further aspects:
- Measuring Key Performance Indicators (KPIs) and Setting Targets
- Balanced Reporting
Measuring KPIs and Setting Targets
KPIs are specific, measurable and comparable progress markers which allow an organisation to track its progress in managing sustainability. Measuring KPIs is important to help the organisation measure the effectiveness of its policies/initiatives in managing its material matters.
Targets set improvements in performance (the change in a KPI) over a specified time period. Setting targets is important to ensure the organisation is striving to improve its performance year-on-year. It also displays an organisation’s commitment to sustainability and its ambition to do better.
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Best Practices:
KPIs:
- Organisations should identify KPIs for each material matter, set a target to drive performance improvement, then collect data to periodically track performance against these targets. Organisations may customise their own KPIs based on their own strategic objectives, or select relevant ones from lists such as Appendix A in Bursa Malaysia's Sustainability Reporting Guide.
- Data collected to track performance should be comparable, consistent, normalised and if possible, measured against a baseline.
Targets:
- Targets should be specific, measurable, achievable and time-bound.
- Organisations should communicate targets clearly to their stakeholders. Explicit disclosure of targets demonstrates the company’s commitment to transparency as they report on their progress against their pre-determined targets.
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Case Study 1: F&N Holdings
In its 2019 Annual Report, F&N Holdings clearly articulated 10 key performance targets in line with their material matters, which they had established for the entire F&N Group (including Singapore, Malaysia and Thailand).
As an example, here is their target for water stewardship:
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Their 2020 target to reduce water intensity is clearly presented as a time-bound, measurable target which includes a baseline.
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The target was presented together with their performance for the past 3 years, allowing readers to clearly identify F&N’s progress towards their 2020 target.
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Pages 34-35, AR2019, F&N Holdings
Similar KPIs and targets were reported for 8 topics (sustainable sourcing of palm oil, occupational health and safety, consumer health and safety, talent management, effluents and waste and energy and climate change), while the company reported qualitative KPIs and targets for the remaining 2 topics (innovation, creating value for society).
This approach helps both the company and external stakeholders to clearly understand the company’s ambition and how it is performing in relation to its targets.
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Case Study 2: Singtel
Singtel, a Singaporean multinational telecommunications company, has set and reported on clear KPIs and targets in its 2020 Sustainability Report. They reported on both their annual and five-year targets as well as their current progress against these targets. They also indicated their progress on two levels – if the target was achieved or exceeded, or partially or not achieved. The targets set are time-bound and measurable, which is in line with best practice.
Pages 6-7, SR2019, Singtel
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Balanced Reporting
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Best Practices:
The principle of balance, as per the Bursa Malaysia Sustainability Reporting Guide and the GRI Standards, states that the sustainability report should reflect both the positive and negative aspects of the organisation’s sustainability performance. The report should be unbiased and avoids selective reporting.
This ensures that the organisation demonstrates transparency and builds trust among stakeholders, while allowing stakeholders to make an objective and reasonable assessment of the organisation’s sustainability performance.
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Case Study 1: Sunway Construction Group Berhad (SunCon)
In its 2019 Annual Report, SunCon – a leading contractor in turnkey building and infrastructure projects – disclosed the challenges it faced when managing its material matters, as well as the measures taken to mitigate the negative impacts.
Here are some examples:
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In the chapter on responsible governance, SunCon reported on unethical cases recorded in the company and provided details on the nature of these cases (page 134).
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When reporting on their environmental impacts, they also mentioned instances where samples collected exceeded compliance limits for silt discharge. Importantly, they also explained the reasons for the occurrence and described the follow up actions taken (page 141).
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In addition, they also noted cases where they received notices from authorities regarding dengue eradication and health and public safety (page 160).
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Case Study 2: PETRONAS Chemicals Group Berhad (PCGB)
PCGB – a leading chemical producer in Southeast Asia – has elaborated on its commitment to protect human rights in its supply chain, in line with its belief that the Group should lead other companies in their supply chain to strive for better performance.
In its 2019 Annual Report, CGB went one step further to disclose the social performance of its contractors against the nine principles in the PETRONAS Contractors Code of Conduct on Human Rights (COCHR). After conducting a survey of 873 contractors in its supply chain, PCGB stated that 143 contractors were identified to have potentially high human rights risks, while a further 29 contractors were selected for on-site assessments. From the survey and on-site assessments, PCGB reported that one of the areas for improvement identified was the establishment of contractor grievance mechanisms.
Pages 106-107, AR2019, PETRONAS Chemicals Group Berhad
By reporting on the performance of contractors on its internal policy, PCGB has demonstrated transparency with stakeholders and a recognition that it is aware of and committed to improve on the gaps identified.
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