Making a difference through reporting - understanding your · PwC London School of Mines 2019 –Making a difference through reporting –Understanding your impact Proprietary and

London School of Mines

6 June 2019

Making a difference through reporting -understanding your impact

Introduction

PwC

London School of Mines 2019 – Making a difference through reporting – Understanding your impact

Morning recap: In spite of the strong operating performance, investors seem to be down on the brand of mining

3

Mining requires far more than good financial performance in order to realise value in a sustainable manner.

PwC


Morning recap: Fixing ‘Brand’ mining

4

Action and words

needed on carbon

Miners are performing strongly in

terms of sustainability reporting,

however stakeholders have made it

clear that disclosure is not enough.

Direct, measurable and visible

progress is required for trust to be

regained and maintained.

Accelerate and widen

technology adoption

Mining’s level of technological

maturity is still relatively low.

Miners need to take a broader view

of technology adoption to

encompass sustainability, safety

and changing consumer sentiment.

Consumers need

mining: engage with

them

Miners need to become more

consumer-centric and more brand-

savvy. With no real alternative to

the primary supply of essential

commodities, miners need to

clearly articulate the essential role

that they play – and will play – in

meeting existing and emerging

consumer needs.

PwC


Making a difference through reporting – understanding your impact

5

Agenda

Reporting on performance in Mining Richard Haig – Corporate reporting specialist

Understanding your impact Henry le Fleming – Sustainability

Reporting on performance in Mining

Insights into 2018/19 reporting in the sector

PwC Proprietary and confidential. Do not distribute.London School of Mines 2019 – Making a difference through reporting – Understanding your impact

Reporting on performance in MiningBreaking down performance – what does it mean?

7

Key

performance

indicators

Link to

executive

reward

Alternative

performance

measures

Non-financial

performance


9

5

4


8

Key

performance

indicators

Average number of KPIs

Average number of financial KPIs

Average number of non-financial KPIs

79%Of companies

indicated a link

between KPIs and

strategy

What does the FRC say?

• balanced, fair and comprehensive analysis

• in the context of how it has performed relative to

prior periods

• information relating to environmental and

employee matters

• KPIs should reflect the way that the board

manages the entity’s business21%Of companies

provided targets for

any KPIs


Go-Ahead Group plc 2017

KPIs are grouped against relevant

stakeholder groups, which are

linked to strategic priorities.

There is a good level of detail

explaining performance of the

KPIs but importantly why they are

measured and what the ultimate

objective is for performance.

Reporting on performance in MiningReporting in practice

9


36%Of companies have

changed their financial KPIs

in the past 2 years


10

Alternative

performance

measures

27%Of financial KPIs presented

were statutory/IFRS

measures

Reconciliation

Presentation

Prominence

Consistency

Explanation

ESMA

Guidelines

FRC Commonly raised issues

in 2017/18

#2 Alternative

performance measures

“…there is scope for companies to further improve

their presentation of APMs and strategic reports.”

FRC, November 2018


BHP Group plc 2018

This disclosure appears upfront in the strategic

report.

A clearly presented, reconciliation is used to show

the relevant adjustments between IFRS measures

and the APM used. Further detail on the reconciling

items can be found within the notes to the financial

statements.


11


Anglo American plc 2018

The use of APM’s and their overall purpose is clearly

set out – both for financial and non-financial metrics.

Each adjusted measure is explained and its specific

purpose addressed.


12


Key things to consider

- Do you monitor non-financial outcomes with the same

importance as financial outcomes?

- How much information do you put in the Strategic report?

- Is the information in the Strategic report presented with the

same prominence as financial reporting?


13

Non-

financial

performance

41%Of non-financial KPIs

were linked to people

and communities

22%Of non-financial KPIs

were linked to the

environment

28%Of companies

referenced Climate

Change within their

principal risks


Rio Tinto plc 2018

Non-financial priorities are

clearly aligned with the UN

Sustainable Development

Goals.

Each priority is reported

against similar to strategy,

includes targets, summary

of performance and next

steps in future periods.


14


“…should be clearly linked to business

targets, ideally through the financial and

non-financial KPIs reported.”

Investment Association – Principles

of Remuneration


15

Link to

executive

reward

43%Of companies indicate

a link between KPIs

and remuneration

3Average number

of financial KPIs

linked to

remuneration

2Average number

of non-financial

KPIs linked to

remuneration

But the Mining

sector is ahead of

the FTSE 350…

31%Of FTSE 350

companies indicate a

link between KPIs and

remuneration


Centamin plc 2018

The disclosure captures the KPI trend and outlook,

including the link to strategy and an icon where

reward is linked.

The remuneration report disclosure indicates relevant

thresholds and the outcome for the year against each

measure


16


Explain your KPIs and why

they are the most important

measures for monitoring

strategic success, including

how they enable this

success to be monitored.

Ensure APM’s are

reconciled, adjustments

explained and presented

with equal prominence to

statutory measures.

Reflect your non-

financial impacts in the

way you measure

success and present with

the same significance as

financial reporting.

Be transparent about the

link between KPIs and

executive reward.

Explain why not all

measures link to variable

pay.

Reporting on performance in MiningKey points to take away

17

Understanding your impact

Using impact analysis to build stakeholder relationships

PwC Proprietary and confidential. Do not distribute.London School of Mines 2019 – Making a difference through reporting – Understanding your impact 19


Struggling for support from local communities impacted by mining operations

20

PwC Proprietary and confidential. Do not distribute.London School of Mines 2019 – Making a difference through reporting – Understanding your impact 21

“On the face of it,

shareholder value is the

dumbest idea in the

world. Shareholder

value is a result, not a

strategy . . . Your main

constituencies are your

employees, your

customers and your

products.”

Jack Welch, 2009


What is TIMM?

22


What is TIMM?

23


What is TIMM?

24


What is TIMM?

25


What is TIMM?

26


What is TIMM?

27


Measuring value – building on the current model

28

Traditional reporting

Impact measurement

Input

Output

Outcome

Impact

Value of impacts

$10m invested in micro-finance for remote villages in Africa

5000 borrowers receive funding to start or expand their business venture

Recipients generate income of $25m per annum

4,000 of the 5,000 borrowers had no access to finance prior to the initiative

$20m new income created per annum


Measuring value – building on the current model

29

Impact valuation takes these....

tCO2e

Liters of Water

PPM of

PM2.5Tonnes of

Waste

tNOx

Kg of Pb €and converts them into...

A measure of the change in well-

being#fatalities

#incidents


Upgrading the “Beauly-Denny” transmission line

30

Going from this: To this: Along here:

132 kV lines 400 kV lines

What are Scottish Hydro Electric (SHE) Transmission doing?

• 220 km of existing line being upgraded

• 2,640 km of conductor and earthwire (6,000 tonnes)

• 600 new towers replacing over 1,000 old ones

• £500+ million being spent by SSE on the project


SSE: Economic value of environmental, social and economic impacts of constructionTotal impact if line was built without consent conditions

31


SSE: Economic value of environmental, social and economic impacts of constructionTotal impact if line was built with consent conditions

32


SSE: Economic value of environmental, social and economic impacts of constructionTotal impact of consent conditions

33


SSE: What was TIMM able to tell them?Total impact of consent conditions

34

<£1Financial

costs

£2.90 - £3.70

Value of social,

environmental

and economic

benefits

pwc.com

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the

information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or

completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do

not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information

contained in this publication or for any decision based on it.

© 2018 PricewaterhouseCoopers LLP. All rights reserved. In this document, "PwC" refers to the UK member firm, and may sometimes refer to the PwC network. Each

member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

Thank you

http://www.pwc.com/structure

PwC Proprietary and confidential. Do not distribute.London School of Mines 2019 – Making a difference through reporting – Understanding your impact36

Contact details

Peter AcloqueLeader in Mid-cap

Natural resources

[email protected]

Richard HaigCorporate reporting

specialist

[email protected]

<insert

photo>

Henry le FlemingSustainability & Climate

change

[email protected]

<insert

photo>

Documents

Making a difference through reporting - understanding your · PwC London School of Mines 2019 –Making a difference through reporting –Understanding your impact Proprietary and