DECEMBER 2024
The future looks bright as we see productive collaboration and engagement such as phase 2 of the Business and Government Partnership2, that was announced in October. This initiative aims to elevate growth to 3% from next year by pursuing key stretch targets in the areas of electricity, freight logistics and crime and corruption3.
South African companies will have to continue to play a key role in unlocking growth for the country through their organisations and the influence they have on the economy and in the communities they operate.
Effectively communicating your value creation story demonstrates your contribution to driving economic progress and social impact.
If you follow us on LinkedIn, you might have noticed our
“Whatever words we articulate ought to be picked with care for individuals will hear them and be affected by them
for good or sick.”
– Buddha
We can help amplify your reach during each stage of the corporate reporting value chain through our comprehensive offering:
“Purposeful storytelling isn’t show business,
it’s good business.”
– Peter Guber
As we approach the festive season, we extend our warmest wishes to you and your loved ones. May this time bring joy, rest, and renewed energy for the year ahead. Thank you for your continued partnership and trust in us. We look forward to working together to create an even brighter 2025.
GMF will be closed from 23 December 2024 to 3 January 2025. We will reopen on 6 January 2025. Should you require urgent assistance during this period, email us.
1 |
https://www.treasury.gov.za/documents/National%20Budget/2024/review/Chapter%202.pdf |
2 |
|
3 |
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NEWSLETTERS
OCTOBER 2024
On 26 July 2024, the President signed into law the First and Second Companies Amendment Acts, which introduced several important changes for businesses operating under South Africa’s Companies Act of 2008. These amendments bring new regulations that will impact your company’s reporting, transparency and governance obligations. As always, GreymatterFinch (GMF) is here to help you navigate these changes.
This newsletter provides an overview of the key amendments and how they may affect your business. However, this summary does not replace legal advice. It is important to speak to your sponsor or seek legal expert guidance.
This act focuses on improving transparency and governance while easing administrative burdens. Here are the main changes:
The second act primarily focuses on director accountability, drawing from the Zondo Commission of Inquiry into State Capture findings, which revealed widespread state capture in South Africa. Key changes include:
As specialists in financial, integrated, sustainability, and other stakeholder reporting, GMF is well-equipped to help you address the reporting implications of the Companies Amendment Acts. We ensure your disclosures and reports are clear, compliant, and aligned with shareholder expectations.
If your company has an SEC, its report must be presented at the AGM. A companies’ SEC report is not a Sustainability or ESG report but its anticipated that there may be ESG elements reviewed under the SEC depending on the company.
While the precise content requirements for the report are not yet defined, following the King IV1 guidelines is advisable. King IV suggests the SEC report should cover social, ethical and environmental responsibilities, including stakeholder relationships and human rights. You are on the right track if your SEC report aligns with King IV.
One of the more contentious changes is the introduction of stricter remuneration disclosure requirements.
The new provisions require public and state-owned companies to disclose their remuneration policies as well as detailed pay gap information. Furthermore, if shareholders do not approve the remuneration report by ordinary shareholder resolution, the company must address the concerns raised, and directors may face dismissal if these issues are not resolved.
Responses to these changes have been mixed. Many political parties, community organisations, and unions have commended the regulations for promoting transparency and tackling income inequality.
However, others have expressed concerns about potential unintended consequences. For instance, companies may seek to outsource lower-level jobs to narrow the pay gap. There are also worries that forcing non-executive directors to step down following a second failed remuneration vote could result in a loss of valuable expertise on the board. Ironically, if shareholders insist that companies’ significantly increase their wage costs, to decrease the pay gap, there might be less capital left to pay dividends.
Companies will need to refine their remuneration strategies and ensure clear communication with shareholders to avoid governance challenges. Given the complexities, GMF can assist you in developing remuneration reports that clearly articulate your policies and implementation outcomes, aligned with regulatory requirements and best practice.
Our research into pay-gap disclosures includes an analysis of methodologies and best practice disclosures from the UK and the USA. In the USA, companies can determine their pay ratios using statistical sampling or other reasonable methods, while the UK mandates detailed disclosures comparing CEO pay to employee compensation across various percentiles.
Ultimately, these new provisions reflect a global shift towards greater transparency in corporate pay structures. Companies that embrace these changes early will ensure compliance and position themselves as leaders in equitable business practices.
The Second Amendment Act aims to enhance mechanisms for holding directors accountable for financial losses or governance failures. King IV clearly states that the board is responsible for the reports issued by the company.
“The governing body should ensure that reports issued by the organisation enable stakeholders to make informed assessments of its performance, as well as its short-, medium and long-term prospects.”
– King IV Principle 5
This means the board must take responsibility for the group’s reporting by approving management’s selection of reporting frameworks while considering legal requirements and the intended purpose of each report.
Consequently, GMF’s clients must produce high-quality, transparent, accurate reports that the board can confidently endorse. This is what we do best.
As mentioned earlier, we recommend seeking expert legal assistance to review your current governance and reporting practices to ensure compliance with the amendments.
With the Companies Amendment Acts now gazetted, updates to the Companies Regulations are expected soon. However, the Department of Trade, Industry and Competition (DTIC) has not yet provided a timeline for these updates or announced commencement dates for the amendments. The DTIC has suggested a delayed or staggered implementation to give companies sufficient time to prepare for the new obligations.
1 |
King IV Report on Corporate GovernanceTM for South Africa, 2016 (King IV). Copyright and trademarks are owned by the Institute of Directors in South Africa NPC and all of its rights are reserved. |
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NEWSLETTERS
AUGUST 2024
German writer Von Goethe’s wisdom reminds us not to let minor issues overshadow what truly matters. In the business world, it’s easy to get sidetracked by trivial problems like a broken printer or desk placement, while more significant concerns – for example, data security – should demand our attention.
This is how the concept of materiality works; it acts as a lens through which to focus on what’s truly essential.
“Materiality is like packing a backpack for a hike: you can only bring the supplies that are
absolutely critical. Otherwise, the weight will slow you down and eventually bring you to your knees.”
– Gary Niekerk, former Director of Global Citizenship at Intel
Materiality has long been a cornerstone of financial reporting, referring to information that can significantly influence investor decisions or a company’s financial outcomes. By pinpointing material aspects, companies can ensure stakeholders receive vital, consistent, reliable data. While the term is well-defined in accounting, its application in sustainability reporting is more complex and often sparks debate. Questions frequently arise: What environmental, social, and governance issues are financially material? How are these determined?
This newsletter will illuminate some of the complexities of materiality. For those looking for further clarity, GreymatterFinch has done the heavy lifting and can assist you in navigating these intricacies.
In financial accounting, materiality is determined by the report preparer and auditor. In the realm of non-financial reporting, however, it involves considering the reasonable expectations of all stakeholders. The concept is highly context-specific, varying significantly across companies depending on their industry, business model and stakeholder priorities.
At GMF, we find that it is common for companies to conflate material matters with key risks. While there is some overlap, material matters encompass a broader scope, including opportunities and challenges that impact a company’s value creation. In contrast, key risks specifically focus on potential
Determining what’s material for the different elements of a reporting suite is no easy task, with various standard setters trying to bring clarity. Here are how different frameworks define materiality:
In addition, each framework has its own requirements for materiality determination. Financial accounting often uses quantitative thresholds, whereas sustainability reporting considers broader factors, including stakeholder engagement and risk assessments. The concept of “double materiality” combines financial and non-financial perspectives and is especially prevalent in European frameworks.
Most frameworks also require that reports include a description of the process followed – and these also differ! For instance, the Integrated Reporting Framework suggests summarising the process, while the GRI and European Sustainability Reporting Standards specify more detailed steps.
While not all the frameworks mandate disclosing a specific list of material matters, providing one can enhance understanding and facilitate better decision-making.
With increasing regulatory requirements, particularly in Europe, the assurance of materiality processes is becoming more critical. Companies must ensure their materiality assessments are robust and capable of withstanding external scrutiny.
Materiality is not just about compliance; it’s about understanding and communicating what truly matters. Companies can better align their strategies with stakeholder expectations, enhance transparency, and ultimately create long-term value by focusing on material issues.
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NEWSLETTERS
Why branding and marketing matter
JUNE 2024
Branding and marketing are key components for any organisation. It is how an organisation solidifies its identity and communicates with its target audience. How do these two components support integrated reporting?
Branding speaks to the visual aspects of how an organisation presents itself to the public. Branding consists of elements that organisations use to identify with their target audience. This includes logos, taglines, colours, shapes, typography, sound and imagery that people can associate with a particular brand. Establishing brand identity is not only essential for creating a loyal customer base, but it also impacts how all stakeholders perceive and engage with the organisation.
Building brand trust is instrumental in helping the organisation establish a positive reputation among its customers, competitors, employees, investors and other stakeholders.
Marketing includes all the activities involved in promoting and selling products or services, such as market research, advertising, sales, and distribution. Marketing seeks to understand and influence consumers’ behaviour to effectively position and offer products or services that meet their needs and desires.
Case Study
Global athletic footwear and apparel corporation Nike, has over 56 years, created a brand
personality that is recognisable by its logo, the Swoosh, or its famous tagline “Just Do It”. In
2023, Nike spent approximately $4
billion on advertising and promotion costs. The branding and
marketing of the organisation have contributed to its global success.
Branding and marketing are also key to stakeholder communication as they help organisations communicate their vision, business model, strengths and overall corporate image. Organisations use different marketing channels to communicate with stakeholders, including email, social media, TV, radio, websites, presentations, podcasts, newsletters and external reports.
Branding and marketing can play an important role in ensuring that your external reports are impactful.
A reporting suite is a communication tool that organisations use to reach different stakeholders. External reports such as the integrated annual report (IAR), sustainability report, and impact report, include information that speak to the relevant stakeholders. In this newsletter, we provide five ways that branding and marketing can enhance your IAR.
Understanding your target audience is key to determining the relevant branding and marketing channel.
According to the International Integrated Annual Reporting Framework, “An integrated report benefits anyone who’s interested in an organisation’s ability to create value. This includes but is not limited to providers of financial capital, employees, customers, suppliers, business partners, local communities, legislators, regulators, and policy-makers who may also have an interest in an organisation’s integrated report.” Knowing your audience gives you an understanding of what branding and marketing elements will be applicable.
Brand identity is what gives the organisation its personality. A reader should be able to get a sense of your brand identity throughout the report, starting with the cover. Brand identity is evident through the logo, brand colours, design elements and tone of the report.
An important part of brand identity is communicating the organisation’s values, mission and purpose.
These elements help the organisation to communicate why and how it operates by providing the audience with an overview of the organisation and what it represents. This can be communicated in a narrative form or as a creative graphic or visual.
An integrated report provides an organisation with the opportunity to enhance its brand reputation. By publishing transparent disclosure, external reports provide an opportunity to build brand trust. This can help to strengthen relations with stakeholders. Failure to do so can negatively influence perceptions about the organisation and subsequently affect its financial position.
Storytelling is an important part of branding and marketing. It conveys the organisation’s vision in a passionate and impactful manner that its audience can relate to. It helps to create emotional connections with consumers and build brand loyalty. The brand story communicates the brand’s history, mission, values, and unique selling proposition.
While the <IR> Framework requires organisations to disclose key information, it does not restrict the “how”. This gives organisations the creative freedom to tell a story in a way that is true to their brand and uniqueness. This should be evident through the tone, style and and design choices in the report.
Through the IAR, you can showcase how your organisation creates and preserves value. This includes showing how your marketing efforts support your performance.
Organisations can build brand trust by being transparent with the information disclosed in the IAR.
Providers of financial capital are the main audience of an IAR. If it is prepared
according to the
This can be achieved by demonstrating, for example, their resilience under the operating context, strategic objectives, competitive edge insights, governance processes and future plans.
The organisation’s approach to sustainability can contribute to how the organisation positions itself as a responsible corporate citizen in the sector it operates in.
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NEWSLETTERS
APRIL 2024
Since their release, there has been a lot of uncertainty and sometimes even panic associated with the International Financial Reporting Standards (IFRS), European Sustainability Reporting Standards (ESRS) and Global Reporting Initiative (GRI) sustainability standards. This stress is understandable because of the volume of disclosure requirements introduced and the level of detail called for.
We advise viewing the disclosure requirements as the outcome of a process to make internal improvements in your business. For example, by integrating oversight of sustainability matters into governance and risk management processes, companies are better placed to identify, prepare for, and respond to impacts that result from emerging trends.
Take for instance the consumer trend towards e-commerce and sustainable preferences. With this shift comes several opportunities and risks. Delivering a seamless e-commerce offering can increase market share and presence in the market. However, customer data also needs to be used responsibly and protected. Companies must consider how they can reduce the environmental impact of the increased need for packaging and the emissions associated with deliveries.
There is a lot your company can already do internally to prepare to report on the sustainability disclosure standards. Below, we detail a 5-step process that we developed to guide your company’s internal preparation. The order of these steps is based on our experience working with South African-based listed companies. It can be tailored to suit your company’s needs.
Improving a company’s sustainability performance must occur concurrently with improved disclosure. Both processes require involvement from individuals in different teams throughout the company.
Internal stakeholders
Identify and begin to engage with internal experts within your company. These experts have
in-depth knowledge of your company’s business model, which is essential to understand
the material sustainability topics in your context. Functions like risk management, finance,
and sustainability teams should collaborate to determine the issues relevant to the
business and the materiality thereof.
With assurance also being an objective of the standards, audit expertise should be involved early on, such as the internal audit function. In addition, the people responsible for different data sources and procedures related to capturing and signing off data must be included.
External stakeholders
Meaningful engagements with external stakeholders must occur regularly to ensure the
robustness of the sustainability disclosure process. The most important period for getting
external stakeholder opinions is during the materiality assessment process.
According to all the standards, a robust materiality assessment is fundamental to a company’s sustainability work and disclosure. This is because the materiality assessment informs a company’s sustainability focus areas and disclosures. It will be a relief for companies to know that they do not need to report on topics that are not material to their business. That said, evidence from the materiality process showing whether topics are material and why, needs to be documented and disclosed.
Financial, Impact and Double Materiality
Financial Materiality
The IFRS standards require companies to focus on financial materiality. Financial materiality refers to the external financial impacts that might affect a company, including the economy, planet and society. This information is predominantly for investors.
For example, human rights violations can result in negative reputational impacts or halt operations, reducing sales or slowing supply.
Impact Materiality
The GRI defines impact materiality as topics that “represent the organization’s most significant impacts on the economy, environment, and people”1. This information is useful for all stakeholders, including investors, employees, customers, suppliers and local communities.
For example, companies conducting thorough due diligence processes that ensure human rights are protected across the value chain, create positive societal impacts.
GRI 3: Material Topics 2021 provides a clear process to determine material topics.
Double Materiality
In contrast, the ESRS require companies to take a double materiality approach. Double materiality refers to financial materiality, impact materiality, and the interactions between them.
To learn more about materiality, read this overview from the GRI.
1 GRI 3: Material Topics 2021, page 16
Compare your company’s current disclosure to the standards it reports on. This comparison can be done at different levels. For example, companies can start with a gap analysis that compares a company’s narrative disclosures to the standards. After that, an in-depth gap analysis that considers the technical details within the standards can be completed.
Note that the timelines for implementation differ based on region and company size. Make sure you understand which timelines apply to your company before deciding on a sustainability disclosure strategy.
The Sustainable Stock Exchanges (SSE) Initiative’s disclosure toolkit contains a valuable checklist that can be used to compare your company’s disclosure to IFRS S12 and S23.
2 General Requirements for Disclosure of Sustainability-related
Financial Information
3 Climate-related Disclosures
“Global alignment is crucial to provide a comprehensive and clear
view of a company’s
sustainability performance and to allow for the comparability of disclosures on a global
level.”
– Jean-François van Boxmeer, Chair, European Round Table for
Industry and Chair, Vodafone Group”
The outcomes of the materiality process and gap analysis should assist companies in identifying the sustainability topics that are most relevant to them. Once defined, these should be shared broadly within the company as they might need to be integrated into:
“[the standards] will help companies to communicate and manage
their sustainability
performance more efficiently and therefore to have better access to sustainable
finance.”
– European Commission”
The reporting process can be stressful for writers, reviewers, and data providers, with hard publication deadlines for external reports. Companies typically cannot make all the changes they would like to within the available time. Having a reporting plan outlining what your internal team aims to achieve in the current and future reporting years can remove some of the pressure from the reporting process. Your objective should be to make incremental improvements to your report and reporting process every year.
Reporting plans should include preparing for assurance, digital tagging, and additional changes to the standards.
Assurance
In Europe, limited assurance is mandatory as soon as companies fall “within scope” of the
Corporate Sustainability Reporting Directive (CSRD).The European
Commission
continues
to assess the feasibility of making reasonable assurance a requirement. IFRS does not yet
require assurance, but as financial regulators adopt the standards in their regions, they may
introduce assurance requirements.
For companies, this means working with your internal and external audit teams to understand and prepare for potential future audits.
Digital tagging
Digital tagging enables machines and artificial intelligence to read reports easily. In Europe,
tagged information will be fed into a central database, allowing information to be easily
compared. Both the IFRS standards and the ESRS will likely need to be tagged to enable
ease of access to the data contained in reports, but timelines by which this will become
mandatory have not been released yet. Watch this EFRAG
presentation
delivered in
February 2024 to get some insight into what the tagging process looks like in practice.
Changes to the standards
It can be tempting to dive deep into the detail when reporting on the standards. However, it
is equally important for companies to have strong and adaptable internal systems in place,
especially related to data recording and management. These systems can help future-proof
your company’s disclosure by allowing it to easily report on new standards, and if changes
are made to existing standards.
Companies should engage with their reporting partners, like GreymatterFinch (GMF), to understand the process, which technology can support them, and how best to prepare.
While there are no mandatory requirements yet, South African companies have an opportunity to begin improving their sustainability disclosure. Though the path is daunting, the overall goal can be achieved by breaking the task down into small, manageable steps. During this reporting journey, don’t let perfection get in the way of progress – continually improve over time.
If your company has subsidiaries in Europe or supplies European companies, it is important to confirm whether your company has any reporting obligations. For example, if your company is a supplier to a company that trades in Europe and needs to report on the ESRS, they might require information from your company, that forms part of its value chain. This could mean an increased disclosure requirement on your company.
If your company requires assistance with any of the above steps, GMF has a team of experts ready to help you. Contact our Head of Value Added Services, Lelanie Hohls, if you would like to set up an appointment.
USEFUL
RESOURCES
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NEWSLETTERS
FEBRUARY 2024
In 2024, the world is still recovering from the aftermath of the COVID-19 pandemic, ongoing conflict in Russia-Ukraine and Israel-Gaza, and other political strife and economic constraints. These global challenges, coupled with climate change, rapid technological advances and disruption caused by AI, are causing wariness and division among many. We are in a state of flux on all fronts, and governance systems are stretched beyond their limits. But are our prospects as grim as it sounds?
According to the World Economic Forum’s1 (WEF) Global Risk Report 20242, misinformation and disinformation are the biggest risks we will face over the next two years. The Global Risks Report 2024 presents the findings of the Global Risks Perception Survey (GRPS), which captures insights from nearly 1 500 global experts.
As the short-term risks spread, they affect societal polarisation, the most extensively connected risk in the global network. Given the widespread mistrust in governments and news media, manipulated or synthetic content threatens to worsen existing conflicts significantly.
When asked which five risks are most likely to present a material crisis on a global scale in 2024, the GPRS voted as follows:
Close to three billion people in seven countries, including the United States, the
United Kingdom, Russia and South Africa, are expected to head to electoral polls over the next two
years. According to WEF, these risks could destabilise the legitimacy of newly elected governments,
potentially leading to political unrest, violence and even terrorism. Technological advances, including
generative AI, will enable the accessibility of information that could lead to the development of new
tools of disruption and conflict, from malware to biological weapons. But they also warn that
As we advance as a species, our risks will increase. But so too is our capacity to respond. Extreme weather, AI-generated mis- and disinformation, a cost-of-living crisis, cyberattacks and socio-political polarisation are already upon us and are affecting billions of lives. The impact and timeline of each risk area are different, and so are our opportunities for mitigating or preparing for them. When combined, risks are heightened. But their worst outcomes are not inevitable. The solutions are already available. Today’s crisis is an opportunity for a better future.
“We must recognise the full scale of the risk but maintain the
optimism that we can and will respond in a way to avoid and mitigate the worst risks
from occurring.”
– Gill Einhorn, Head, Innovation and Transformation, Centre
for Nature and Climate, WEF”
Some challenges we face are risks familiar to human history, while others are new and fast-evolving. WEF reports that many global risks are interconnected and may have far-reaching consequences for human development.
But the future is not set in stone, says Saadia Zahidi, Managing Director of WEF. “A multiplicity of different futures is conceivable over the next decade. Although this drives uncertainty in the short term, it also allows room for hope.”
Collaboration is essential for addressing global risks, but not all risks necessitate extensive global cooperation as the sole solution. In today’s fragmented world, exploring different approaches that involve varying levels of cooperation can offer a more comprehensive framework for planning and preparation. The complexity and speed of global risks require adaptable and agile approaches that utilise all the tools at our disposal. We must take individual or collective actions to implement preparedness measures for unavoidable risks and collaborate to prevent or reduce the likelihood of avoidable ones.
According to WEF, there are four categories for approaching global risk reduction, based on the level of cooperation required:
PRIORITISING
IT
GOVERNANCE
The Global Network of Director Institutes3 2022-2023 Survey Report claimed that digital governance was an issue for boards of the future – not now. Digital transformation ranked fifth (only 21%) of priorities critical for organisational success, despite cyber-risk and digital innovation being identified by 55% and 54% of directors, respectively, as the two key areas that their boards have insufficient expertise/skills to govern over the next three to five years.
A well-known case study of continuous failure of IT governance that spans more than two decades is the case of the Post Office Limited (POL) Horizon IT scandal4 in the United Kingdom. More than 700 sub-postmasters and postmistresses were prosecuted and convicted after faulty software made it look like money was missing from their branches. Some went to prison. Many were financially ruined. Some have died.
Records show that POL had more than 80 directors between 2000 and 2003. None of them probed or challenged the institution’s narrative during this time. British Prime Minister Rishi Sunak has called it “one of the greatest miscarriages of justice in UK history” and has announced emergency laws5 to exonerate and compensate victims.
Emerging technology governance faces a challenge known as the Collingridge dilemma6, where early interventions are inexpensive, but the technology’s full consequences are not clear, while later interventions are costly and complex once the need for change becomes evident.
What governance lessons can be learned from this scandal?
In this context, the importance of effective IT governance has never been more pronounced. Effective IT governance plays an essential role in combatting the spread of misinformation and disinformation, which ranks as the foremost short-term risk in our increasingly digital world. The Collingridge dilemma, exemplified by past failures like the POL Horizon IT scandal, underscores the urgency of clear accountability, vigilant oversight, robust risk management, and regular audits in IT operations.
As technology’s role in companies expands, IT governance is not a future concern but an imperative necessity for navigating the complexities of today and tomorrow, safeguarding against catastrophic failures, ensuring cybersecurity, and embracing the benefits of emerging technologies.
Sources:1.https://www.weforum.org/; 2.https://www.weforum.org/publications/global-risks-report-2024/; 3.http://www.gndi.org/; 4.https://www.iod.com/; 5.https://www.bbc.com/; 6.https://www.sciencedirect.com/science/article/pii/S0048733317301622
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NEWSLETTERS
The biggest reporting milestones of 2023
DECEMBER 2023
2023 IS ALMOST OVER
We wish all our clients, colleagues, suppliers and partners a peaceful and relaxing festive season. We hope that 2024 will be a prosperous and joyful year for you and your family.
As 2023 is drawing to a close, we reflect on some of the highlights and reporting milestones of the year.
Despite worldwide and local economic and political upheavals, GreymatterFinch had a fruitful year and celebrated a few milestones to boot. This would not have been possible without our loyal clients, partners and employees.
The question isn’t who’s going to let me;
it’s who is going to stop me.
– Ayn Rand”
2023 saw significant developments reflecting the growing need for transparency, comparability and reliability when it comes to ESG reporting. Companies are overwhelmed by the myriad of ESG guidelines and standards they must adopt to be compliant. At COP26, the IFRS Foundation announced it will work with global jurisdictions to deliver a comprehensive global baseline for sustainability disclosures for capital markets through the International Sustainability Standards Board (ISSB).
GMF will be closed from 23 December 2023 to 4 January 2024 to allow our teams to spend this joyous time with their family and friends. However, we are available if you need us. Please contact giselle@greymatterfinch.com. should you need any support during this time.
OCTOBER 2023
“We cannot give away our strategy.” Or “we don’t want to put our policies on the website”. These are words we often hear in discussions with company leaders.
In the past, transparency in business was a taboo concept. The better you were at keeping secrets, the better your chances to succeed as a corporate. In today’s interconnected world, things have changed1.
While some companies still fight to protect their information, their stakeholders, including governments, investors, customers and suppliers are clamouring for more. Impatient with the level, quality and reliability of the information provided, regulators step in and make new rules for more transparency.
A solid disclosure strategy can help corporates be intentional about the information they share. It will also help them package information in a way that is appropriate to the audience. If stakeholders cannot find the information they need, they will fill the gaps with pieces from other sources, including social media and competitors.
Focus group research done on business behaviour by the largest public corporations in America, shows that disclosures written in accessible language and formats are considered the most transparent2.
1 https://slack.com/blog/collaboration/transparency-in-business-company-evolution
2 https://www.cutter.com/article/case-increased-corporate-disclosure-examination-transparency-trust-taxonomy
Companies that disclose more than just the minimum are in control of their public information, and reduce the risk of stakeholders using the wrong information to assess a company’s performance. They make it easy for stakeholders to find information. This includes using disclosure tools or well-structured websites, where a user can filter or search for quick access.
Strategic disclosure examples include:
Integrated and sustainability reports are important sub-elements of a disclosure strategy. They should connect the dots for stakeholders, with tips on where to find more information. For example: a sustainability report might mention a diversity policy, but the details of what the policy entails, should be available via an interactive link to where the policy is listed online. Reports should be concise, and not include all the disclosure details available or required.
THE RIGHT PARTNER FOR
YOUR REPORTING
NEEDS
Companies that know their stakeholders have targeted and efficient disclosure strategies. Knowing who needs what information when, and on which channel, can save costs and avoid duplication. It will also improve the quality of a company’s relationship with their stakeholders and increase levels of trust.
GreymatterFinch helps companies develop stakeholder engagement processes that can feed into disclosure strategies. Working with a client in Namibia, we developed a fastread summary based on stakeholder feedback that said their integrated report was too long and complex to read.
Summary reports can be an effective tool to make sure your stakeholders still receive information, but in a format and language that they find easy to absorb. Using diagrams or visual elements to explain concepts, is key to the success of these elements.
Simple can be harder than complex: you have to work
hard to get your thinking clean to make it simple. But it’s worth it in the end because once you get there, you can move mountains.
– Steve Jobs”
An internal policy is often not immediately suitable to publish online. It should reflect the company’s corporate identity, and more often than not, the language will need a polish or simplification for external audiences. You want your online policies to be of the same quality as your reports.
Planning to convert internal to external documents is part of developing a disclosure strategy. It also means ensuring that the right approval process was followed, and that naming conventions are correct.
GreymatterFinch helps companies polish their internal documents for external use. We also assist with language adaptation, which means that we can convert highly technical documents into simple language, depending on your target audience and what they need to know.
At GreymatterFinch, we want your disclosure strategy to be effective and strategic. We want to help stakeholders find information about you without hassle or frustration. Your integrated and sustainability reports should be core elements of the disclosure strategy.
By allowing us to help you plan your disclosures, you can be more concise and have less duplication – putting out more quality information with less effort, and less cost.
GreymatterFinch has deep experience in dealing with companies and stakeholders, to make information accessible and fit for purpose. Try us!
NEWS
IN FOCUS
Nature takes the spotlight: The rising corporate focus on
biodiversity in ESG – FinTech Global
Position Green recently took the opportunity to dig deeper into ESG and how the sector is growing in presence and popularity in the corporate world. Recent developments underscore a paradigmatic shift, emphasising the vital relationship between nature and global economic health.
Launching the Gold Standard for Transition Plans – TPT
The Transition Plan Taskforce (TPT) best practice Disclosure Framework for climate transition plans was launched in October.
OUR MOST READ ARTICLES
ON
LINKEDIN
Incorporating ESG metrics into executives’ remuneration
How do we increase youth employment in South Africa?
The role of the Chief Information Officer and access to data
SEPTEMBER 2023
Lines, texture, shape, imagery, colour and typography are the fundamentals of any design concept. How these fundamentals are integrated and strategically applied will ultimately determine how captivating your report can be.
Compiling a report goes beyond placing words on a page – the report must be compelling. Keeping an audience engaged in the digital age, in which humans consume large amounts of information daily, requires creative thinking. Netflix says if viewers do not find something to watch in the first 60-90 seconds, they typically lose interest and leave the platform.
Design enables us to think about how we can deliver quality content that will instantly captivate the reader, inspire them, make them want to read the copy and then, make it easy to understand.
Understand your client, understand their corporate personality, understand their appetite for change, understand how they see themselves; and then
believe in the same things that they do.
Understand your client.”
Content and design must speak to each other. Therefore, the designer must understand the report’s contents before conceptualising how this will be presented. The designer needs to think logically and creatively about how text-heavy content can be displayed impactfully, or how design can make complicated information easier to understand.Understanding the content will guide the designer in selecting the most suitable layout, graphics and imagery.
The composition and layout of a report can easily captivate or distract the reader. Layout must be seamless, it must flow, it must make sense and sometimes less is more – over-designing a page can detract from your message. Consider a simple yet effective design concept. Embrace the white spaces, as this gives the reader’s eyes a break and keeps them engaged.
For example, infographics are practical for displaying information. They are visually appealing and easily grab the reader, enabling them to digest information at a glance. Infographics can be used to display processes such as business models (organograms, timelines, and distribution footprint). It can also be used to create interest around statistics and performance measurements.
Selecting the right imagery for a report helps the reader relate to the message and can create a visual relationship with them. One high-quality image can be more impactful than a collage of images that do not correlate or tell a story. The key to finding the best images for a report is to select images that align with the content and the company’s brand.
“Less is more” applies to design concepts.
The minimal design is characterised by a clean layout, simple design, visual hierarchy, and a limited colour palette. The minimalist design aims to be impactful using fewer elements.
Minimal design does not mean cheap design. Minimalist can still equate to elegance.
In recent years, neutral and muted palettes were used in many design concepts in reporting, advertising and digital content marketing.
Design concepts are gradually moving away from muted or natural tones, and companies are more open to using simple and bold colours with a minimal design layout.
Data visualisation has transformed the way companies compile their reports.
Visualising key information allows the report to tell a story, helping the reader to connect the dots. This can vary from basic pie charts, infographics and graphs to heat maps, tree maps, area charts, dot distribution maps and wedge stack graphs.
Artificial intelligence (AI) is taking every industry by storm, and the design world is no different.
Designers can access AI platforms that allow them to customise logos, generate AI imagery or manipulate existing imagery to meet their design needs by simply inserting descriptive prompts. The rise of such platforms has enabled designers to unlock creativity and improve efficiency.
THE RIGHT PARTNER FOR
YOUR REPORTING
NEEDS
Reporting on company performance is important for mitigating reputational risk and being a responsible corporate citizen. It is also a regulatory requirement for many companies. However, reporting on performance is not just about ticking off the right boxes. Every company, listed or unlisted, has a broad impact on society beyond its investors. Authentic reporting allows companies to build a culture of transparency and accountability for internal and external stakeholders.
Once you have identified your reporting needs, it is time to find a partner that will help you meet those needs.
When looking for the right partner to execute your reporting needs, you want a partnership that equates to 1+1=7, i.e., brings synergy. You need a company that will be more than just a supplier. You want to collaborate with a company that understands your goals and is committed to helping you achieve them.
This is a partner that values excellence and respect, no matter the size of the project or the client. A collaborator that treasures building long-lasting relationships with all its clients. You need a partner with extensive experience in local and international stakeholder communication and a reputable clientele.
You want to partner with a company that embraces creativity and innovation. A partner that dares to take on the challenge of creating a reporting experience that exceeds expectations. A partner that can help you realise anything that you can imagine. A partner like GreymatterFinch.
At GreymatterFinch, we want your reporting journey to be seamless. This includes catering for all aspects of end-to-end reporting. We will work with you from planning the project right through to the completion of your report. GreymatterFinch is by your side, from determining what and how to report to ensuring that the report, in its printed and digital forms, reaches stakeholders.
GreymatterFinch will help your company build a solid reporting suite, including financial, integrated and sustainability reporting, and supplementary products and services that maximise your investment in interim and annual reporting.
NEWS
IN FOCUS
How companies will have to report on ESG globally explained –
Bloomberg
Countries and regions are creating their own reporting rules on environmental,
social
and corporate governance reporting. The European Union recently announced its new reporting standards
that
companies will adhere to from 2024. This article provides insight into the different regulatory paths
that
are emerging.
Corporate social responsibility is more than just charity – here’s
why
it’s good for business – Entrepreneur
Executives who do not consider integrating CSR into
their
decision-making fabric risk alienating stakeholders, damaging their brands, and eroding their
competitive
positions. This article explores the CSR elements that executives need to factor in.
OUR MOST READ ARTICLES
ON
LINKEDIN
The future of board governance
The evolving role of the company secretary
DEAR READER
I am pleased to share our latest newsletter with insights from the world of corporate reporting. In this letter, we share the four characteristics of an impactful and award-winning report.
News in focus
A new report from several accounting bodies reveals that global momentum is building for corporate reporting and assurance involving environmental, social and governance (ESG) issues. However, the inconsistencies in disclosure remain a significant challenge. In 2021, 95% of large companies reported on ESG matters, up from 91% in 2019. The study underscores the need for globally consistent, high-quality sustainability assurance and the role of professional accountants in providing that assurance.
World Economic Forum: How to make non-financial reporting your company’s north star
In an increasingly fragmented and volatile world, it is important for companies to have a clear compass. Having a “true north” is a prerequisite for sustainable management and creating value for all stakeholders. Here, having clearly communicated ESG goals can be this north star..
Five steps to strong sustainability reporting for the biggest business impact
While sustainability reporting is likely to become a regulatory requirement in many countries, it has also grown in popularity. In 2011, only 20% of S&P 500 companies published sustainability reports compared to 90% in 2019. When done well, sustainability reporting drives two compelling outcomes for companies: informed decision-making by stakeholders and improved sustainability performance by companies.
Warren Buffet is considered by some to be the world’s most successful investor. He is also an advocate for reading annual reports. Here are his most famous quotes about annual reports. It’s hard to overstate the emphasis Buffet places on honest, transparent and shareholder-focused reporting.
“I’d like to have a report that describes what had happened if I owned a company but went away for a year. When I came back, my business partner would tell me what had taken place during the past year and what he foresaw coming up. If we read a bunch of public relations gobbledlygook, and we see lots of pictures and no facts, it has some effect on our attitude toward the business. We want to understand the business better when we get through the annual report than when we picked it up.”
“Almost every business has problems… A lot of companies, for example, have investor relations people, and they’re dying to pump out what they think is good news all the time… we try to stay away from businesses like that.”
“If we owned stock in a company, in an industry, and there are eight other companies in the same industry… I want to be on the mailing list for the reports of the other eight because I can’t understand how my company is doing unless I understand what the other eight are doing.”
Our most-read articles on LinkedIn
Consultation to enhance the international applicability of the SASB standards now open
The state of play in sustainability assurance
Less than 1% of companies have presented credible climate transition plans: CDP
As the year winds down and summer holidays beckon, we would all do well to heed this warning contained in an obscure spoken-word song that was a hit in 1997: “Trust me on the sunscreen”.
Back then, “global warming” was a little-known concept. A quarter century later, climate action failure has been ranked the number one long-term threat to the world by respondents in the 2021–2022 Global Risks Perception Survey.
From the first King Report on corporate governance in 1994 and the Integrated Reporting Framework in 2013, reporting has been a river sensing the sea. And now all the various actors – standard setters, regulators, governments, companies and investors – are coming together to start a new act.
Celebrating that momentum is the theme of this newsletter, our final one for the year. Because good reporting is not only good for business, it’s good for all of humanity.
Now, it’s true that corporate reports don’t make bestseller lists, but they do matter.
“Get the reporting right and sustainability will follow,” the World Economic Forum said earlier this year.
According to the International Trade Centre, more than 2 500 standards and related initiatives in corporate sustainability and responsible business conduct are in use globally. Thankfully, though, convergence is now happening fast.
In 2020, two statements of intent to develop unified sustainability standards stood out – one by the European Union (EU) and one by the International Financial Reporting Standards (IFRS) Foundation.
Last year and throughout 2022, the two groupings forged ahead with developing their own sets of standards, which are now nearing completion.
In November, the European Financial Reporting Advisory Group (EFRAG) reached an agreement on the first set of draft European Sustainability Reporting Standards (ESRS), which the European Commission aims to adopt by June 2023.
And the IFRS Foundation’s International Sustainability Board (ISSB) said it was making good progress towards a global baseline of sustainability-related financial disclosures, and would be supporting preparers, investors and other capital market stakeholders as they get ready to use the IFRS Sustainability Disclosure Standards, also due to kick in next year.
At COP27 in Egypt last month, it was announced that EFRAG and the ISSB are “working together towards a shared objective to agree as soon as practicable on a framework for maximising interoperability of their standards and aligning on key climate disclosures.”
Importantly, both initiatives feature alignment with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), which reflects universal agreement on the threat posed by global warming.
For us in South Africa, there is a third initiative to take note of, and that is the pair of disclosure guidance documents issued by the JSE in June – one on sustainability, the other on climate change. These are not intended to replace global initiatives but are aligned with the most influential ones, including the TCFD recommendations.
And the momentum is being provided by the urgent need to address the climate emergency. So, Baz Luhrmann was right after all when he said, “Trust me on the sunscreen.”
The same song also contained the warning, “Be careful whose advice you buy.” At GreymatterFinch we fiercely guard our reputation as trusted experts in the services that we provide to our clients.
We invest time to build robust knowledge of the latest requirements and our clients’ industries. Clients leverage this expertise to ensure they meet their stakeholders’ information needs – whether with integrated, sustainability, social value or any other kind of report or communication.
We believe each company has a unique story to be told in a way that stakeholders can understand, using a medium that is accessible. We use our in-house skills, such as research insights, content crafting, creative design, accurate typesetting and coding, and meticulous project management to deliver impactful communication in an effective manner.
A big thank you to all our clients for your ongoing support over the past year. We believe that stakeholder trust is earned through consistent, quality service and good communication. Thanks for trusting us to tell your story.
Enjoy the holidays, be safe and may you return full of energy for the challenges and opportunities that no doubt lie in store for all of us next year.
Three ways business can take action in the fight against climate change – WEF
The climate crisis requires urgent global action on mitigation and adaptation. A shared agenda to rally action on 30 adaptation goals was launched at COP27. Here are three key actions business can take to help tackle climate change.
Corporate climate pledges rife with greenwashing, says UN – Reuters
Promises by companies, banks and cities to achieve net-zero emissions often amount to little more than greenwashing, experts said in a report released at COP27 in Egypt as they set out proposed new standards to harden net-zero claims.
Companies on the emissions radar – Reuters
Corporations are coming under the glare of climate activists and policymakers after speeches at the COP27 climate summit called on companies to pay a global carbon tax.
‘Fossil fuels are a dead end’, says climate adviser – UN News Service
To prevent the worst impacts of the climate crisis, the world must abandon fossil fuels as quickly as possible, says Selwin Hart, Special Adviser to the UN Secretary-General on Climate Action.
TNFD launches latest framework for nature-related financial disclosure – edie
The Taskforce on Nature-related Financial Disclosures (TNFD) has issued the latest amendments to its beta framework to enhance corporate approaches to disclosing nature-related data for investors, ahead of an official launch next year. The TNFD complements the TCFD, which is gaining popularity amongst corporates and financial markets in outlining the economic risks associated with the climate crisis.
Global Compact Network calls on private sector to join new Business & Human Rights Accelerator
South African financial sector faces litigation risks if ESG matters are ignored
Steps companies can take to optimise their ESG reporting
2022 TCFD status report finds a steady increase in climate-related financial disclosures
Do you always trust what you read? We don’t…
Welcome to the Spring edition of GreymatterFinch’s newsletter, sharing our perspectives from the world of reporting. Building on our previous newsletter’s theme of ‘change’, this edition focuses on ‘trust’.
We live in a world with increasing lines of defence (it started with three, then five and now moving beyond seven it seems) aimed at checking, rechecking and assuring against error and misstatement.
How does a stakeholder know that a company is spending money wisely? That they are making sound investments and share their values? Unfortunately, trust is not always the first word people think of when it comes to corporate reporting. Stakeholders are wary of empty commitments and obligatory, compliance-driven disclosures.
Greenwashing is defined as unsubstantiated or misleading claims about an entity’s environmental performance or selective disclosure or non-disclosure about the environmental or social impacts of a company’s business practices.
dailyinvestor.com‘Whoever is careless with the truth in
small matters cannot be trusted
with important matters’
The consequences of untrustworthy reporting can be dire. When a business publishes a report to influence the decision-making of stakeholders – be it an integrated annual report, a sustainability report or a governance report – and does so not providing evidence, but made-up or exaggerated claims, it is misleading its audience. And when this happens in corporate reports, it can be considered fraud.
Investors have been questioning the trust they can place in companies’ reporting when it comes to environmental, social and governance (ESG) matters. Greenwashing is being called out, and whistleblowing is becoming more prevalent.
We are likely to see more greenwashing claims as public attention on climate change continues to grow and sustainability becomes increasingly important in consumer and investor decision-making.
Against this backdrop, the corporate world will need to ensure that ESG-related claims are unambiguous, accurate and supported by objective evidence, and that public statements on decarbonisation commitments are backed up by action.Radical transparency in the challenges and opportunities related to ESG commitments is key to build trust, forge fruitful stakeholder connections and develop business models that work. Clear, transparent communication can help create certainty and trust for investors, employees, customers, and local communities.
GreymatterFinch’s advisory team works with clients to develop content for their reports.
We invest time to build robust local and international research, knowledge and expertise in the latest corporate reporting requirements. Clients leverage this experience to ensure their reports transparently meet stakeholders’ information needs.
We are objective and independent. By anticipating the tough questions, we draw out material information.
Our multi-disciplinary teams – from project management to design and digital – then work with the advisory team to package information in ways that external stakeholders can easily understand.
In June, after a period of public comment, the JSE released its final Sustainability Disclosure Guidance and Climate Change Disclosure Guidance, which aligns to global best practice while acknowledging the importance of our South African context.
At the International Cooperation Forum and Meeting of African Ministers of Finance Economy and the Environment in Egypt in September, African Ministers and other representatives of international bodies expressed support for the work of the IFRS Foundation’s International Sustainability Standards Board (ISSB).
Daily Investor: South African financial sector faces litigation risks if ESG matters are ignored
Role players are proactively engaging with institutional investors and asset managers on integrating ESG factors into their decision-making and are facing increasing scrutiny of their investment activities. Webber Wentzel warned participants in the South African financial sector to ensure that disclosures on ESG matters are accurate, well-founded and backed up with data to avoid greenwashing litigation.
EY and Oxford Analytica: The emerging sustainability information ecosystem
A recent report from EY and Oxford Analytica outlines steps companies can take to optimise their ESG reporting. The report highlights five areas of improvement to bring ESG reporting up to speed with financial reporting, as they warn that growing allegations of greenwashing risk eroding credibility.
BCG.com: From compliance to courage in ESG
Companies that use ESG initiatives as an exercise in compliance, rather than a source of competitive advantage, are leaving substantial value on the table. To truly unlock the competitive advantage that comes from being a leader on ESG topics, it’s not enough to track KPIs and publish reports. It’s about creating congruence between the commitments that the company is making to the world and the decisions being made inside its walls.
EY.com: 7 ways CFOs can drive the sustainability agenda
Increasingly, CFOs find themselves at the centre of the sustainability agenda. CFOs have always been responsible for managing financial value and reporting to key stakeholders. But today, those key stakeholders are demanding more than short-term profitability from organisations. They’re questioning how much of a company’s value is reflected in its financial reports alone, and are looking at the triple bottom line, which recognises value generation in terms of people, planet and profit.
I am pleased to present the first edition of GreymatterFinch’s newsletter, sharing our perspectives from the corporate reporting world. The theme for this edition is ‘change’, which is apt for a world where the pace of change continues to pick up. As I write, the headlines are dominated by the Ukraine Russia conflict, resulting in rising global tensions, volatile stock markets and a rocketing oil price. While the outlook for the conflict is unknown, persistent inflation, continued COVID-19 impacts and a weakening global economic recovery are certainties.
While news coverage on climate change has been eclipsed recently, it remains a major global threat. Investors want investee companies to recognise this threat and its potential risks to their earnings. In his annual letter, Larry Fink, CEO of the world’s largest investment firm BlackRock, earlier this year urged companies to disclose how they are transitioning to a net-zero economy by 2050. According to the United Nations Principles for Responsible Investment Annual Report 2021, investor signatories identify climate change as their number one environmental, social and governance (ESG) concern.
Climate change is certainly not the only ESG concern. There are early discussions on corporate disclosure of bio-diversity-related financial information, among other topics. Companies faceincreasing pressure from investors for greater transparency and reporting across the breadth of ESG matters.
Research from the PwC Global Investor Survey 2021, indicates that most investors prefer that investee companies select an established framework to report their ESG disclosures against. This can prove challenging, with a plethora of sustainability reporting frameworks, what should companies select?
The answer will depend on the industry, the audience for the report and investor preferences for that sector. We can help clients make the right choice.
At GreymatterFinch we work with clients to assist them to select the appropriate reporting framework and embed these in their reporting suite.
We also orientate boards and executive teams to better understand the various frameworks and investor expectations.
In 2021, we completed an exciting research project where we analysed a local listed firm’s sustainability reporting against a global and international industry peer group. This analysis resulted in a three-year reporting road map for the company.
Fortunately, there is momentum toward a simplified global corporate reporting system covering non-financial performance. In November 2021, The IFRS Foundation announced the establishment of the International Sustainability Standards Board (ISSB), a sister board to sit alongside the International Accounting Standards Board. The intention is for the ISSB to deliver a comprehensive global baseline of sustainability-related disclosure standards that provide investors and other capital market participants with information about companies’ sustainability-related risks and opportunities to help them make informed decisions.
Closer to home, in December 2021, the JSE released its Sustainability Disclosure Guidance and Climate Change Disclosure Guidance. The JSE has aligned its recommendations with global best practice while acknowledging the importance of our South African context. These documents were welcomed by investors, listed companies and the local reporting community. We strongly recommend you give these documents a read.
GreymatterFinch
Follow our LinkedIn company page to stay up to date with our news and the latest industry trends.
South African listed companies compare favourably with developed nations in our adoption and application of ESG metrics. This article examines year-on-year trends in companies using ESG metrics in executive incentive plans, particularly changes in connection with the COVID-19 pandemic and increasing market pressure for companies to increase their focus on ESG.
Harvard Business Review: We need universal ESG accounting standardsMost companies understand that sustainability must be made core to strategy and capital allocation decision-making, but are often confused by how best to report on ESG progress in a way that will be credible to shareholders and other stakeholders. What is needed is a uniform set of standards for measurement and reporting, just as we have for financial performance.
Wharton Education: How financial reporting affects consumersThe next uptick in your firm’s sales could be in the days after its earnings announcement. In the 10 days after an earnings announcement, publicly held firms see an average increase of 1.1% in consumer footfalls at their brick-and-mortar stores and in online sales, according to a recent research paper.
The world’s 250 largest companies are not doing well in recognising and measuring financial risks related to climate change, according to a new report. The report Towards Net Zero shows that just 56%, acknowledge climate change is a financial risk. About 1 in 5 are reporting the impacts of climate-related risks using scenario analysis. Only 12% are reporting risk analysis in line with global warming scenarios while only 17% use a clear timeline.
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