Why the Future of Corporate Reporting May be 4D: Increasing Business Value through a Custom New Approach to Integrated Valuation and Reporting

1. Why the Future of Corporate Reporting May be 4D: Increasing
Business Value through a Custom New Approach to Integrated
Valuation and Reporting
Caterina Camerani, AKZONOBEL @CateinaCam

2. Measuring Our Impact in 4D
Caterina Camerani
Sustainability Manager, Pulp & Performance Chemicals

3. 3
Overview of AkzoNobel
All figures relate to 2014

4. 4
• Economic growth cannot be sustained if the environmental
and social capital are negatively impacted
• We wanted to gain better insights into how our profit and loss are generated
• Examining our entire value chain and how we impact:
– Environment
– People
– Society
– Financial capital
• These insights enable us to make better business decisions
by building on the positives and reducing the negatives
Why 4D reporting?

5. 5
Investigate total effect of our business
• Environment, people, society and
financial capital
• Profits and Losses (P&L)
• Full value chain
Business and Location
• AkzoNobel PPC: Bleaching Chemicals
business in Brazil
Stage
• Pilot study
Timeline
• Q3 2014 - Q1 2015
4D P&L accounting pilot

6. 6
Go beyond environmental profit and loss
Test a P&L for all four pillars of sustainability
• Environment, people, society and financial capital
Explore social methods with collaborations
4D P&L pilot goals

7. Environmental Capital
7
Quantifies negative externalities
• Based on Environmental Priority Strategy methodology
• Main drivers are fossil fuel use, CO2 emissions and forestry
Learnings
• Significant negative impact on natural capital
• Low for PPC Brazil, high upstream and downstream
• Confirms existing focus (Resource efficiency and value chain CO2 targets)
4D P&L environment

8. 8
4D P&L people
Quantifies positive externalities
• Future payments to employees as a measure of their human capital value
• Benefit derived by employee and society at large when trained employees leave
Learnings
• Training and development delivers significant (future) value for employee
People Capital

9. Societal Capital
9
Quantifies negative externalities
• Health and safety
• Land right issues
• Living wages
• Gender equality
Quantifies positive externalities
• Community programs
Learnings
• Social projects deliver a significant social ROI per euro invested for the society
• The total profit and loss social impact is relatively small compared to other capital
4D P&L society

10. Financial Capital
10
Quantifies positive externalities
• Gross value added approach: e.g. profit, taxes and salaries
• Aims for a wide benefit accounting, regardless the receiver
Learnings
• Much larger value added than just the profit metric
• Includes most direct and indirect stakeholders
4D P&L financial

11. 11
Distribution between the “4 Capital Accounts”
• Main profit: Financial capital
• Main loss: Environmental capital
• Societal and people capital are small compared to environmental and financial capital
(compared to agriculture, food, textile industry, etc.)
These indicative results are based on work carried out in cooperation with TruePrice and Pavan Sukhdev (GIST)
4D P&L Pilot – monetized impact across
the whole value chain

12. 12
Distribution between the “4 Capital Accounts”
• Main profit: Financial capital
• Main loss: Environmental capital
• Societal and people capital are small compared to environmental and financial capital
(compared to agriculture, food, textile industry, etc.)
These indicative results are based on work carried out in cooperation with TruePrice and Pavan Sukhdev (GIST)
4D P&L Pilot – monetized impact across
the whole value chain

13. 13
Distribution between the “4 Capital Accounts”
• Main profit: Financial capital
• Main loss: Environmental capital
• Societal and people capital are small compared to environmental and financial capital
(compared to agriculture, food, textile industry, etc.)
These indicative results are based on work carried out in cooperation with TruePrice and Pavan Sukhdev (GIST)
4D P&L Pilot – monetized impact across
the whole value chain

14. 14
Distribution between the “4 Capital Accounts”
• Main profit: Financial capital
• Main loss: Environmental capital
• Societal and people capital are small compared to environmental and financial capital
(compared to agriculture, food, textile industry, etc.)
These indicative results are based on work carried out in cooperation with TruePrice and Pavan Sukhdev (GIST)
4D P&L Pilot – monetized impact across
the whole value chain

15. 15
Distribution between the “4 Capital Accounts”
• Main profit: Financial capital
• Main loss: Environmental capital
• Societal and people capital are small compared to environmental and financial capital
(compared to agriculture, food, textile industry, etc.)
These indicative results are based on work carried out in cooperation with TruePrice and Pavan Sukhdev (GIST)
4D P&L Pilot – monetized impact across
the whole value chain

16. 16
Environmental Capital
• Engage with suppliers and customers to
reduce their fossil resource use
• Efficiency in energy / resource use
People Capital
• Staff retention and training
Social Capital
• Health and safety
• Rights at work
• Work with local communities
Financial capital
• Grow business to increase financial capital
• Part of business focus, no additional activities
4D P&L pilot improvement opportunities

17. 4D P&L pilot outcomes
17
• Robust Methodology
• Improving internal transparency and quality of strategic
decision-making by taking all impacts into account
• Defined Improvements across the value chain
• Stimulate Innovation along the value chain
• Shape our business strategy around shared value creation

18. Final Thoughts
Future reporting is about reporting of other monetary values
Sustainability is not about reporting…
reporting is the basis for real actions leading to change
We want to push the boundaries
4D Reporting @ heart of our Planet Possible strategy