Integration Aspects in Sustainability Reporting for Economic KPI under GRI Framework Part E1.
Aspect: Economic Performance
EC1 Direct economic value generated and distributed, including revenues, operating costs, employee compensation, donations and other community investments, retained earnings, and payments to capital providers and governments.
A majority of the KPIs mentioned here, namely, revenues, operating costs, retained earnings, and payments to capital providers (repayments of debt, loans, interest for the same, etc.) and governments (taxes etc.) are already part of the financial statements like, Profit and loss statement, Balance sheet statement, which are submitted by the companies on a yearly basis, even before Sustainability initiatives gained momentum. So this KPI can easily be captured from the stated financial statements. Having SAP will facilitate smooth and timely reporting of the financial statements.
Employee compensation data can be taken from the SAP HCM sub-module, “Enterprise Compensation Management”. There is a standard report “Total Compensation Statement” for each employee with a selection criterion for a specific time period (start date and end date). This report needs to be iteratively run for all the employees for the duration of the reporting period to get the total amount paid in compensation. Or perhaps identifying the tables and developing a “ZREPORT” for the same will also be a better approach, if the number of employees is very high.
Donations and community investments can be booked as an expense to a separate General Ledger (GL) with detailed line items, so that they can be filtered out easily for reporting purpose. This is similar to SO6 KPI.
EC2 Financial implications and other risks and opportunities for the organization’s activities due to climate change.
This is a qualitative disclosure. Agro based industries, like juice, tea, coffee, sugar etc. and the other secondary industries that depend on it, like paper mill, match box industry, hotel etc. are the one, which will suffer major impact by climate change. Fish or Prawn culture will also be effected by climate change.
But this also brings opportunities for organizations working in the clean technology and energy efficient devices and equipments. The risks, opportunities and the financial implications existing for the organizations due to climate change needs to be disclosed.
EC3 Coverage of the organization’s defined benefit plan obligations.
This is both a quantitative and qualitative component. The benefit plan in India can include,
- 1. Provident fund,
- 2. Gratuity
- 3. Pension plan,
- 4. Medical Insurance for self, spouse and dependent, and such.
The list of such benefit plans needs to be disclosed and the data on the number of employees covered under such schemes, companies contribution, individual contribution, whether it is mandatory or voluntary, needs to be reported on.
Most of the details here can be captured from the components of the employee salary, which is stored in the Enterprise Compensation Management. If total PF contribution needs to be reported on then we need to pick the PF contribution of one employee from the “Total compensation statement” for that reporting period and run it iteratively for all the employees.
Alternatively, we can leverage the SAP HCM sub-module Benefits Administration to report the percentage coverage of the employee benefit plan obligations.
EC4 Significant financial assistance received from government.
First, we need to define the significant financial assistance as, say, greater then Rs, 10,00,000 or 1 Crore. All the financial assistance received from the government or any other NGO or any other source can be posted to a separate General Ledger – GL created for the specific purpose. A report run on the specific GL with appropriate selection criterion will give the information required.
Aspect: Market Presence
EC5 Range of ratios of standard entry level wage compared to local minimum wage at significant locations of operation.
The significant location of operation, based on the turnover or employee headcount, needs to be defined and then the local minimum wage, as defined in law, at a significant location needs to be identified and benchmarked with. After this we need to disclose the range of ratios, benchmarked against the minimum wage. For example:
- 1. 10% Employee at 90% of local minimum wage.
- 2. 30% Employee at 100% of local minimum wage.
- 3. 40% Employee at 120% of local minimum wage.
- 4. 20% Employee at 140% of local minimum wage.
Again this data can also be derived from the “Total compensation Statement” for an employee against his grade, location and the minimum wage defined for that grade in that particular location. Developing a “ZREPORT” from the relevant infotypes will also be a good idea.
There are some other interesting reports which can be utilized for reporting this KPI. Let’s see that in part 2.
Disclaimer: The opinions expressed in this blog are purely my personal opinions and has no legal liability on my employer or affiliates or parent organization.