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explain the rationale for organisations managing and reporting…

- - - - • definition of the KPI, its purpose and an explanation of the KPI calculation method;
        • disclosure of the core data source and assumptions for calculating the KPI;
        • ‘quantification or commentary on future targets’;
        • reconciliation, when financial statement data has been adjusted; and
        • the corresponding KPI value for the previous financial year being reported (ASB 2005, p. 21).
    - - Most of DEFRA’s recommended KPIs can be computed from data routinely collected by firms, such as quantity of fuel consumed per annum, business mileage and electricity consumption.
      - DEFRA notes that a KPI for biodiversity is not included, since, in its opinion, there is no single, universally accepted method for measuring the effects of company activity on biodiversity
      - Each firm can report on environmental issues in two contexts:
        
        mandatory reports, such as the business review; and/or
        
        voluntary reports, such as a corporate responsibility report.
      - DEFRA KPIs by indicative industry sector
        
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- - - - The general principles that give assurance to a firm and its stakeholders are transparency, accountability and credibility
        
        Transparency
        
        Transparency and report integrity are achieved through data collection that includes ‘internal processes to manage and report risk’; ‘level of public disclosure’; and a ‘clear definition of [the] boundaries of the company to which the report applies’ (DEFRA 2006, p. 15).
        
        accountability
        
        • ‘the definition, level and nature of stakeholder engagement’;
        • the ‘quality of a third party assurance statement’;
        • ‘integration of environmental reporting within the Annual Report and Accounts, and Business Review’;
        • success level of the communications strategy; and
        • extent that data ‘is specifically identified and tailored to the needs of institutional investors’ (DEFRA 2006, p. 16).
        
        credibility
        
        are: having limited understanding of the notion of sustainable development and how it applies to a firm; ‘a company’s procurement policy and efforts to manage the impacts of its supply chains and products’; and ‘description of an externally certified … environmental management system (EMS), and other related practices’
    - - measurable to facilitate action
        
        ‘[F]or example, targets can be set to reduce a particular emission if it is expressed in a quantitative term’
      - relevant
        
        it should have a general narrative, explaining its aim and impact. Each KPI is to explain the process undertaken, ‘the calculation methods and … relevant assumptions’. Moreover, data linking environmental to financial performance should be discussed.
      - comparability
        
        Firms are ‘to report data in a comparable format, so [that] users of reports can assess the performance of a single company over time and relative to its competitors … [KPIs] should be expressed in absolute terms that cover the entire business for each period of reporting, and related to a normalising factor’. Typical ‘normalising factors are turnover and production output’, but others may be relevant—for instance, ‘companies with offices may normalise to floor space … This allows stakeholders to know how much environmental impact firms have relative to a given amount of goods and/or services produced’