AS THE PENDULUM SWINGS Returning to a more

AS THE PENDULUM SWINGS Returning to a more asset-based approach to sustainability reporting Kurt Ramin June 25, 2009 TRUEVUE 19 th International XBRL Conference - Paris, France Copyright © 2009 True. Vue All Rights Reserved

True. Vue Team l Kurt Ramin – IASCF and IUCN l l John O’Connor – IMF and World Bank l l Sustainability Indicators Erik Thomsen – DSS Lab l l XBRL & IFRS Reporting Standards World Bank Information systems Gary Gannon – UNGCCP l XBRL Consortium, UBmatrix co-founder

Summary True. Vue’s focus l Role of XBRL for sustainability reporting l Conceptual challenges l Technical challenges l The road ahead l

True. Vue Focus l We help forward-looking government bodies and corporations To identify critical assets/flows l To integrate CSR/sustainability reporting with management information systems l To develop integrated socio-economicenvironmental management information systems l

XBRL and Sustainability l Sustainability reporting and XBRL need one another l l No going back on electronic dissemination Information services for sustainability are relatively under mobilized l Significant business opportunity

Conceptual challenges: Metrics l Most approaches to sustainability metrics fall into 2 traps (1) as with standard accounting – relying too heavily on flows l (2) Focus on physical quantities that can’t be compared with other business indicators (need pricing) l

The Benefits of Sustainability* • Report based on several studies • Interviews of 135 executives (CSR professionals, human resources, environment, strategy finance and investor relations) in 20 companies in 11 industries Survey of 238 CEOs and investment professionals (Mc. Kinsey) • Survey of 127 CSR professionals and socially responsible institutional investors (Boston College • • • Addresses issue of terminology regarding CSR/Sustainability and settles on ESG as preferred term “ESG programs can create significant quantifiable financial value. ” • • Maintain a good corporate reputation and/or brand equity (77%) Attract, motivate and retain talented employees (55%) Meeting society’s expectations for good corporate behavior (35%) Improve operational efficient and/or decrease costs (34%) Strengthen competitive position (33%) Open new growth opportunities (23%) Improve risk management (23%) Greater benefits in the long-term than the short term • Measuring value of ESG activities is a major challenge but can be done • Very few companies effectively communicate this value to investors, many of whom have a short-term orientation • “If very few companies quantify fully the financial value of their ESG activities, even fewer effectively communicate that value to the market. ” *”How Virtue Creates Value for Business and Society” Mc. Kinsey/Boston College •

Conceptual challenges: Early Research l Work that began 20 yrs ago with one of our partners at the World Bank John took an asset-based approach to sustainability l Approach now ratified by the UN statistical commission l Will eventually be adopted by all countries l

Conceptual challenges: Wealth Accounting l Focus: long term financial profitability Wealth accounting works as well for corporations as government bodies l Uncovers hidden financial assets and liabilities l Environmental/social quantities need to be combined with prices to create financial values l

Conceptual challenges Assets and Flows l Starting with key assets and assetimpacting flows puts a relevancy filter over GRI-style indicators This “balance sheet” approach works well for private companies and governments l Provides a more useful basis for l l Benchmarking l Planning l capital budgeting l investment decisions

Technical Challenges l Significant information system challenges Interpreting text, spreadsheets, images l Dealing with uncertainty l Dealing with local variability l

The Roadmap to One Report: Integrating Financial and Nonfinancial Reporting From Data Chaos to Information for Decision-Making Leverage the Internet • XBRL • Web 2. 0 • Multimedia Use a process of Integrated design • Annual report • Environmental • Social • KPIs Engage in a Dialogue with Stakeholders • Identify usage patterns • Establish criteria for validation • Use social media One Report

Novo Nordisk l l l Health care, pharmaceuticals, biotech 22, 000 employees HQ in Denmark l l l Revenues are over 2% of Danish GDP Exports almost 5% of DK Super sector leader in “Great places to work” Quoted on pan European DJSI SR integrated at all levels of the company including its annual report

Novo Nordisk l “ Our formal commitment to sustainable development has been built into the corporate governance structure, management tools and individual performance assessments”

Novo Nordisk l l “ Our formal commitment to sustainable development has been built into the corporate governance structure, management tools and individual performance assessments” “Pro-actively preparing for a carbonconstrained future is a matter of costeffective environmental management and risk mitigation”

Novo Nordisk l “ Our formal commitment to sustainable development has been built into the corporate governance structure, management tools and individual performance assessments” l “Pro-actively preparing for a carbon-constrained future is a matter of cost-effective environmental management and risk mitigation” l Following strong operational, financial and nonfinancial performance, we saw an appreciation of Novo Nordisk share price” 2006 Annual Report

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Tagging of Financial Data (Objects) valued at Location and Time RFID - NFC - Oyster Radio Frequency Communication Identification Near Field <Current. Assets>5329000000</Current. Assets> <Current. Assets context. Ref="End_2004" unit. Ref="EUR"> </Current. Assets> 5329000000 Time 18 Value Files Unit

“Einstein’s Formula" of Financial Reporting OBJECTS @ Location 19 X VALUE @ Time

Modular Format (period = time and location) operating, financial, other (objects x value) l Sort objects definition): (entry/exit People l Fixed Assets l Products l Financial l Communication -Intangibles (time sensitive) l Statement of Financial Position l Cash Flows l l Recognized Income and Expense for Period Statement of Changes in Equity (including to owners Add Related Disclosure: (People, Fixed Assets, Product, Financial, Communication l Parallel (dual) Reporting FV, historical and Mirror accounting, renders the current/non-current and one equity model outdated

Sustainability Accounting and Reporting Historical cost Fair value l l Cash flow l l People (and Entities) Tangible assets Communication (Intangible Assets and Liabilities) Financial Assets and Liabilities Products Disclosure Disclosure 21 SUSTAINABILITY l

The Road Ahead l l XBRL incorporates emerging asset-based indicator frameworks New generation of information systems makes it possible to manage the irregularity l l l Merging socio-environmental with traditional management information systems Creating a global sustainability-oriented information network Wealth management becomes the framework at a macro and micro level l Total wealth is maximized for all

Contact Information Kurt Ramin kurtramin@yahoo. de +971 050 153 9785 TRUEVUE www. truevuesolutions. com