Introductory to ESG and Sustainability Reporting - Introduction.pptx

This presentation will provide an introduction to ESG

1. Introductory to ESG and Sustainability Reporting Paul Young Senior Data and AI Thought Leader – ESG Reporting and Policy August 26, 2024

2. Paul Young CPA CGA Bio Subject Matter Expert – Close, Consolidate and Reporting Cycle Subject Matter Expert – Public Governance and Reporting Subject Matter Expert – Environmental, Social, and Governance (ESG) Policy Development and Reporting Subject Matter Expert – Data Integration and Data Management Subject Matter Expert – Financial Planning and Analysis (FPA) Subject Matter Expert – Customer Success Management (Data, AI, Platform, and Security Subject Matter Expert – Risk and Compliance (Emergency, Risk, and Crisis Planning and Reporting) Senior Matter Expert – Integrated Planning and Reporting Subject Matter Expert – Profitability Modelling and Supply Chain Management Work Experience IBM - Various positions (December 2006 to March 2023) Deloitte Inc - Senior Consultant – Data and AI (June 2005 to November 20006) Transforce (formerly Dynamex) – Financial Analyst – August 2002 to June 2005) Linde (formerly Praxair) – Senior Accountant and Financial Analyst (January 1995 to November 2001 Diamant Boart – Junior Accountant / Costing Clerk (July 1991 to December 1994) Skills: Data and AI (Cognos Controller, Planning Analytics (TM1), Cognos Analytics, OpenPages, Cloudpak for Data, Envisi, and WatsonX Modeling: Microsoft Excel Key engagements: Graphic Packaging, KLA, Mark Anthony, Werner, Irving Oil, Algoma Central Marine, Carhartt, AECOM, Dole Fresh Vegetables Ancestry.com, Golden Enterprises, Apria Healthcare, Century Communities, K Hovnanian Homes, Snap on Credit, Jones Lang Lasalle (JLL), A.W. Chesterton, and many others. Strong Partner Relationships: QueBit, eCapital, Revelwood, Intito, Cortell, Breakaway, Cubewise, 1Direction, Aramar , Converge Technology, BMA Group, Cortell Solutiosns, and many others Email: [email protected]

3. Objective This is introductory course to ESG and reporting. The goals of the presentation are as follow: High level view of the ESG Data Challenges Discussion of emissions, biodiversity, water management, land management, waste management, social governance, and corporate governance. Add a footer 3

4. 4 Agenda Housekeeping Introduction What do you know? What is Sustainability Reporting? What is ESG Reporting ESG vs Sustainability Reporting Reporting Standards (IFRS and FASB) What are SASB Standards? Sample – Financial Statement (Scope 1, 2, and 3) What are the initial steps for Sustainability and ESG Reporting Scope 1 (Definition) and Data Flow Scope 2 (Definition and Data Flow Scope 3 (Definition) and Data Flow Key focus areas (Emissions, Biodiversity, Social Governance, Energy Management, Land Management, Water Management, Waste Management, and Corporate Governance Additional links What is next

5. The goals of this presentation Understanding was involved with Scope 1, Scope 2, and Scope 3 Reporting How to manage, stored, secured and ingest data for ESG and Sustainability Reporting? Options on how to integrate the budgeting and forecasting cycle with the regulatory filing cycles How to develop ESG and Sustainability Policies including key metrics as part achieving net zero Add a footer 5

6. What do you know about the following areas? Add a footer 6 Retailing Transportation, Warehousing, and Logistics Utilities Co nstruction Manufacturing Mining Other What is your industry or What sector are your clients? Net Zero Circularity / Business Processes

7. Reporting Add a footer 7 As of 2020, 93% of S&P 500 companies issued a non-financial report using one or more ESG framework or standard. But whether you are moving to ESG reporting voluntarily or due to legal requirements, you’ll face a complex landscape of ESG standards and sustainability frameworks. There are more than 2,200 ESG reporting provisions that can affect how organizations disclose non-financial matters. This can make it difficult to determine which ESG standards and frameworks are right for your organization. To make it easier, this guide will walk you through all you need to know about the most common ESG reporting standards and frameworks and how to get started. Key areas of concerns by Small to Medium-size enterprises lack of knowledge limited time, lack of funds conflicting priorities Target date January 2024 (EMEA)

8. Integrated Reporting Add a footer 8 Stakeholders Government (Regulatory) SEC (Pensions , Stocks, Bonds Private Investors Internal stakeholders (Lines of Business) Reporting Cycle Regulatory filings Budgeting and Forecasting Cycle Integration between reporting cycle and the budgeting & forecasting Cycle

9. Data Quality Add a footer 9 Data Management Data Governance Data Ingestion

10. ESG / Sustainability Add a footer 10

11. Introduction Add a footer 11 Discussion on ESG and Sustainability Reporting Discussion on Scope 1, Scope 2, and Scope 3

12. What is Sustainability Reporting Add a footer 12

13. What is ESG Reporting Add a footer 13

14. What is ESG Reporting Add a footer 14

15. Difference between ESG and Sustainability Reporting Add a footer 15

16. ESG and Sustainability Reporting Standards Add a footer 16 Country Standards Target Date IFRS The ISSB also voted to include a reference to the GRI standards and the European Sustainability Reporting Standards (ESRS) as sources of guidance for companies to be allowed to consider in the application of the IFRS’ general sustainability reporting standard (“S1”), in the absence of a specific ISSB standard. January 2024 FASB Continues to be evolving No Official target date. However, IFRS changes will impact US via their EMEA subsidiaries

17. W hat are SASB Standards Add a footer 17

18. Sample of F/S Add a footer 18 Source - https://www2.deloitte.com/uk/en/focus/climate-change/zero-in-on-scope-1-2-and-3-emissions.html

19. Focus Areas Annual, monthly, and forecasting cycles for Sustainability Targets Scope 1, Scope 2, and Scope 3 will require plans Data and AI can play a key role – Introduction to Sustainability Add a footer 19 Regulatory compliance Pulling the data for Sustainability reporting Structure, semi-structure, and structure data

20. Introduction to Scope 1, Scope 2, and Scope 3 Familiarization with Scope 1, Scope 2, and Scope 3 Develop a project plan for Sustainability and ESG reporting Identified data sources Establishing of net zero policies and framework Breakdown the process into the following areas Budgeting and forecasting cycle (Annually, Quarterly, and Monthly) Regulatory compliance Investor presentation Internal and external monthly reporting Integration of budgeting and forecasting with the close, consolidate, and reporting cycle Add a footer 20

21. Scope 1 Categories Add a footer 21

22. Scope 2 Add a footer 22 Key focus areas is source of raw materials and energy as part of the production, selling, distribution, and the end consumer

23. Scope 2 – Categories Add a footer 23

24. Scope 3 Add a footer 24

25. Scope 3 Categories Add a footer 25

26. Emissions Add a footer 26 This is a short video on tracking emissions

27. What is Carbon Accounting? Source - https://www.investopedia.com/carbon-accounting-7562229 Add a footer 27

28. Challenges with Carbon Accounting Add a footer 28

29. Biggest Carbon Accounting Software Source - https://www.persefoni.com/learn/best-carbon-accounting-software Add a footer 29 Persefoni Microsoft Sustainability Cloud Net Zero Cloud by Salesforce IBM Environmental Intelligence Suite Sphera Sinai Technologies Emitwise Greenly Diligent Sweep

30. Emissions Accounting bodies continue to work with regulatory bodies on auditing and accounting standards for carbon accounting - Blog – Carbon Accounting and Software Options - https://www.linkedin.com/posts/paul-young-055632b_8-best-carbon-accounting-software-of-2023-activity-7096810653172060160-yXKp?utm_source=share&utm_medium=member_desktop Small to medium size public and private sector organizations have cash flow and resources constraints when it comes to capturing emissions for their operations. Standardized rules and regulations around carbon tax and credit programs across the globe - https://www.environmental-finance.com/content/news/net-zero-targets-can-oblige-progress-reporting-in-financial-accounts-says-iasb-committee.html Add a footer 30

31. Biodiversity / ESG Add a footer 31 Harvesting aquatic life, natural resources, and food from the environment while protecting the environment: Protecting habitat Protecting species and wildlife Protecting watershed

32. Challenges with ESG / Biodiversity Establishing programs with indigenous and environmentally friendly groups as part of harvesting from nature Investing in monitoring technology including robots and other tools to mitigate the impact on projects on the overall habitat and wildlife. All levels of government working with the private sector on sustainable practices related to harvesting from nature. Complete visibility as part of scope 3 adoption. Source - https://www.environmentenergyleader.com/2023/11/increased-nature-related-impact-reporting-tnfd-to-address-measurement-challenges/ Add a footer 32

33. Water Management Add a footer 33 Water management including conservation: Recycling wastewater Conserving water as part of operations. Mitigating chemicals and wastewater going into waterways, lakes, oceans

34. Water Management Key challenges: Government wastewater sectors able to recycle water as part of managing wastewater and storm water Facilities management revamping building technology as part of better conservation and wastewater management. The cost upgrade water systems with old building can be expensive. Revising building codes to enforce better water management practices. Integrated water data into integrated planning and forecasting cycle as part of operational, management, and regulatory reporting cycles for ESG. Eliminating and/or reducing hazardous chemicals entering waterways through producing of goods and services. Source - https://www.knowesg.com/featured-article/is-water-sustainable-understanding-the-reality-and-solutions-for-future Add a footer 34

35. Land Management Add a footer 35 Endorsing expert and intelligent farming to better utilized land Developing urban, rural, and remote planning that builds sustainable communities that embrace biodiversity as part of the planning and building process. Mitigating the impact of climate change through best practices of forestry, land, water, and wildlife Building commercial , residential, commercial, industrial sites that embrace green space. Working with local groups on environmental initiatives like tree planting, garbage cleanup, etc.

36. Challenges with Land Management Monitoring and tracking land protection initiatives Measuring the effectiveness of best practices related to forestry, farming, water, habitat, and land managent Add a footer 36

37. Energy Management Add a footer 37 https://medium.com/@anandv_62921/renewable-energy-and-esg-a-path-to-a-sustainable-future-19a75d11440f

38. Key Challenges facing Energy Management Viable and cost-effective solutions like solar power Viable solutions that will transform the grid to net zero, i.e., nuclear, wind, solar, natural gas, hydrogen, etc. Viable energy storage solutions Ability to capture energy data scope 1, scope 2, and scope 3 tracking. Facilities ability to transform through LED lighting, green building, and other technologies that can drive down energy usage. Add a footer 38

39. Waste Management Add a footer 39

40. Key Challenges / Waste Coordinating waste programs including recycling by all levels of government Establishing programs that allow waste to recycle as part of an organization operations Viable technology that can reduce methane, food waster, and other waste products Capturing waste recovery rates and validated these recovery rates as part of ESG reporting cycle. Capturing the partnership related to transforming the packaging sector as part of scope 3 reporting Add a footer 40

41. Social Governance / ESG Add a footer 41

42. Key Challenges with Social Governance Source - https://www.techtarget.com/sustainability/feature/5-ways-organizations-can-address-the-social-factors-of-ESG Add a footer 42

43. Corporate Governance Add a footer 43

44. Challenges with Corporate Governance Finding the right people with the right skill set as part of creating inclusive corporate environment. Measuring corporate governance initiative including metrics. Integrating surveys by employees and others as part of the overall corporate metrics. Add a footer 44

45. USA SEC and Climate Disclosure Add a footer 45 Source - https://www.fenwick.com/insights/publications/sec-files-brief-in-support-of-climate-disclosure-rules

46. Europe ESG Reporting Add a footer 46 Source - https://www.arbor.eco/blog/what-is-the-eu-csrd-the-ultimate-guide-for-carbon-accounting

47. Europe ESG Reporting Add a footer 47 Source - https://www.arbor.eco/blog/what-is-the-eu-csrd-the-ultimate-guide-for-carbon-accounting

48. Europe ESG Reporting Add a footer 48 Source - https://www.arbor.eco/blog/what-is-the-eu-csrd-the-ultimate-guide-for-carbon-accounting

49. Europe ESG Reporting Add a footer 49 Source - https://www.arbor.eco/blog/what-is-the-eu-csrd-the-ultimate-guide-for-carbon-accounting

50. Australia Climate Change Rules Add a footer 50 Source - https://www.minterellison.co.nz/insights/australia-s-new-mandatory-climate-disclosures-regi

51. Canada Climate Change Rules Add a footer 51 Source - https://www.arbor.eco/blog/what-is-canadas-osfi-climate-risk-management-guideline-b-15 or https://www.cpaontario.ca/sustainability/sustainability-simplified/keeping-pace-in-the-global-race-for-sustainability-standards

52. Canada Climate Change Rules Add a footer 52 Source - https://www.arbor.eco/blog/what-is-canadas-osfi-climate-risk-management-guideline-b-15 or https://www.cpaontario.ca/sustainability/sustainability-simplified/keeping-pace-in-the-global-race-for-sustainability-standards

53. USA SEC and Climate Disclosure Add a footer 53 Source - https://www.fenwick.com/insights/publications/sec-files-brief-in-support-of-climate-disclosure-rules

54. Overall Challenges Aligning all aspects of your operations as part of getting to net zero (Procurement, Distribution, Transportation, Property Management, Manufacturing, Extraction, refinement, etc. ) Establishing stringent data governance rules Data capturing will depend on your sector and operational model You will need to look at different tools to capture, stored, secured, and ingest data as part of your ESG and sustainability reporting requirements Working with procurement including vendors on how to capture the data from the invoice into different systems (ERP, Accounting, Databases, etc ) Working with your vendors on breaking information out related to sustainability reporting Establishing key programs around water, waste, emissions, electricity usage, etc. Establishing targets and measuring those targets (Data Management, Data Privacy, Data Security, and Data ingestion) Metric Reporting / Performance Measurements Establishing the right tools that can extract, translate, and load (ETL) data into database that can be ingested by a business analytical tool Add a footer 54

55. Tips and Tricks Understand the Industry Review reporting / models Biodiversity calculation Websheet / PAW Moving excel sheets into Planning Analytics as part of performing the calculations Establishing datamart / centralized database that can house the data Costing models should include social governance, emissions, and other ESG factors as part of calculating the product cost Supply chain Tracking of scope 3 Partnering with supply Tracking of supplier information (RFID HR planning Including training, health and safety, diversity breakdown Add a footer 55

56. What is next? Developing a data strategy that will capture data related to scope 1, scope 2, and scope 3 Development of forecasting models as part of achieving net zero ESG - https://www.linkedin.com/pulse/iasb-proposes-illustrative-examples-climate-related-other-paul-young-qim9c/ Canada is doing catchup - https://www.corporateknights.com/category-finance/canada-falling-behind-other-countries-on-esg-investing-rules-report/ Standardization of Rules and Regulations for ESG and Sustainability Reporting- https://www.ifrs.org/projects/completed-projects/2021/sustainability-reporting/ or https://www.sasb.org/ or https://www.fasb.org/ Tracking sustainability and ESG outcomes on regular basis as part of getting to net zero Integrated financial planning with the close, consolidate, and reporting cycle - https://ibm.box.com/s/a663mwfo08hp9oo06onaps5tcy9enyl7 Looking at the best way to address net zero as part of managing both costs and capital. https://www.youtube.com/watch?v=DouWzaom_jo (Capital Planning) https://www.youtube.com/watch?v=yiD2YmL8sKs&t=189s (Supply Chain) Add a footer 56

57. Contact Any additional questions and concerns, then email: [email protected] Add a footer 57

58. Key areas of focus Net zero – https://netzeroclimate.org/what-is-net-zero/ Close, consolidate, and reporting cycle – https://www.slideshare.net/paulyoungcga/close-consolidate-and-reporting-cyclepptx-256864692 Circularity - https://hbr.org/2021/07/the-circular-business-model Compliance and reporting cycle - https://hbr.org/2012/06/managing-risks-a-new-framework Data strategy and data management - https://www.linkedin.com/posts/paul-young-055632b_unlock-the-full-value-of-your-data-activity-7023960172133838848-6AyT?utm_source=share&utm_medium=member_desktop Add a footer 58