IR Discussion Paper 2011 Spreads

TOWARDS INTEGRATED REPORTING Communicating Value in the 21st Century
ABOUT THIS DISCUSSION PAPER

Contents
About this Discussion Paper Summary What is Integrated Reporting? Why do We Need Integrated Reporting? An International Framework Future Direction Your Comments Requested The World has Changed Reporting Must Too Towards Integrated Reporting Integrated Reporting Defined Building on Developments to Date An International Integrated Reporting Framework How is Integrated Reporting Different? Business Model and Value Creation The Building Blocks Guiding Principles Content Elements Towards Integrated Reporting Innovation in Action What will Integrated Reporting Mean for Me? Benefits, Challenges and Responses Reporting Organization Perspective Investor Perspective Policy-maker, Regulator and Standard-setter Perspective Other Perspectives Future Direction Summary of Consultation Questions Acknowledgements and Endnotes 4 6 1 2
The International Integrated Reporting Committee (IIRC) has brought together world leaders from the corporate, investment, accounting, securities, regulatory, academic, civil society and standard-setting sectors to develop a new approach to reporting. This approach, Integrated Reporting, will meet the needs of the 21st century. It builds on the foundations of financial, management commentary, governance and remuneration, and sustainability reporting in a way that reflects their interdependence. The IIRC aims to forge a global consensus on the direction in which reporting needs to evolve, creating a framework for reporting that is better able to accommodate complexity, and, in so doing, brings together the different strands of reporting into a coherent, integrated whole. This Discussion Paper considers the rationale behind the move towards Integrated Reporting, offers initial proposals for the development of an International Integrated Reporting Framework and outlines the next steps towards its creation and adoption, including the publication of an Exposure Draft in 2012. Its purpose is to prompt input from all those with a stake in improved reporting, including both producers and users of reports.
Your answers to the Consultation Questions in this Discussion Paper, and any other comments you would like to make, will be important to us in refining these proposals. They should be submitted to dpresponses@theiirc.org or online at www.theiirc.org. Please identify in your response the organization to which you belong and where it is located. All comments received will be considered a matter of public record and will be posted on www.theiirc.org. Comments should be submitted by Wednesday 14th December 2011. You can register at www.theiirc.org to be notified when additional information is published, when regional roundtables or webinars are held or for information about the IIRC Pilot Programme.
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25 26 28
MANAGEMENT COMMENTARY GOVERNANCE AND REMUNERATION REPORTING
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FINANCIAL STATEMENTS SUSTAINABILITY REPORTING
Copyright September 2011 by the International Integrated Reporting Committee. All rights reserved. Permission is granted to make copies of this work to achieve maximum exposure and feedback provided that each copy bears the following credit line: Copyright September 2011 by the International Integrated Reporting Committee. All rights reserved. Used with permission of the International Integrated Reporting Committee. Permission is granted to make copies of this work to achieve maximum exposure and feedback.
Towards Integrated Reporting 1
SUMMARY
The development of Integrated Reporting is designed to enhance and consolidate existing reporting practices...to move towards a reporting framework that provides the information needed to assess organizational value in the 21st century.
What is Integrated Reporting?

Integrated Reporting brings together material information about an organizations strategy, governance, performance and prospects in a way that reflects the commercial, social and environmental context within which it operates. It provides a clear and concise representation of how an organization demonstrates stewardship and how it creates and sustains value. An Integrated Report should be an organizations primary reporting vehicle.
reflecting this growing complexity. Such a framework needs to bring together the diverse but currently disconnected strands of reporting into a coherent, integrated whole, and demonstrate an organizations ability to create value now and in the future.
The initial focus is on reporting by larger companies and on the needs of their investors. The Framework will help to elicit consistent reporting by organizations, provide broad parameters for policy-makers and regulators and provide a focus for harmonizing reporting standards.
Future Direction
The development of Integrated Reporting is designed to enhance and consolidate existing reporting practices and, through collaboration, consultation and experimentation, to move towards a reporting framework that provides the information needed to assess organizational value in the 21st century. The next steps that the IIRC will take in this direction are listedbelow. Undertake a Pilot Programme to encourage experimentation and innovation among companies and investors. Develop an International Integrated Reporting Framework Exposure Draft, reflecting responses received to this Discussion Paper and the experience gained from the first year of the Pilot Programme. Work with others to support the development of emerging measurement and reporting practices relevant to Integrated Reporting. Raise awareness among investors and other stakeholders and encourage organizations to adopt and contribute to the evolution of Integrated Reporting. Explore opportunities for harmonizing reporting requirements within and across jurisdictions. Develop institutional arrangements for the ongoing governance of Integrated Reporting.
International differences in reporting

Reporting requirements have evolved separately, and differently, in various jurisdictions. This has significantly increased the compliance burden for the growing number of organizations that report in more than one jurisdiction and makes it difficult to compare the performance of organizations across jurisdictions.
The building blocks

Five Guiding Principles underpin the preparation of an Integrated Report. Strategic focus Connectivity of information Future orientation Responsiveness and stakeholder inclusiveness Conciseness, reliability and materiality
Why do We Need Integrated Reporting?

Since the current business reporting model was designed, there have been major changes in the way business is conducted, how business creates value and the context in which business operates. These changes are interdependent and reflect trends such as: globalization, growing policy activity around the world in response to financial, governance and other crises, heightened expectations of corporate transparency and accountability, actual and prospective resource scarcity, population growth, and environmental concerns.
The benefits of Integrated Reporting

Research has shown that reporting influences behaviour. Integrated Reporting results in a broader explanation of performance than traditional reporting. It makes visible an organizations use of and dependence on different resources and relationships or capitals (financial, manufactured, human, intellectual, natural and social), and the organizations access to and impact on them. Reporting this information is critical to: a meaningful assessment of the long-term viability of the organizations business model and strategy; meeting the information needs of investors and other stakeholders; and ultimately, the effective allocation of scarce resources.
These Principles should be applied in determining the content of an Integrated Report, based on the key Content Elements summarized below. The presentation of the Elements should make the interconnections between them apparent. Organizational overview and business model Operating context, including risks and opportunities Strategic objectives and strategies to achieve those objectives Governance and remuneration Performance Future outlook
Against this background, the type of information that is needed to assess the past and current performance of organizations and their future resilience is much wider than is provided for by the existing business reporting model. While there has been an increase in the information provided, key disclosure gaps remain. Reports are already long and are getting longer. But, because reporting has evolved in separate, disconnected strands, critical interdependencies between strategy, governance, operations and financial and non-financial performance are not made clear. To provide for the growing demand for a broad information set from markets, regulators and civil society, a framework is needed that can support the future development of reporting,
Your Comments Requested

Please join us in this unique effort to develop an overarching International Integrated Reporting Framework by providing feedback on this Discussion Paper. Your answers to the Consultation Questions in this Discussion Paper, and any other comments you would like to make, should be submitted to dpresponses@theiirc.org or online at www.theiirc.org. For the purpose of analysis, you are asked to identify the organization to which you belong and where it is located. All comments received will be considered a matter of public record and will be posted on www.theiirc.org. Comments should be submitted by Wednesday 14th December 2011.
An International Framework
The IIRC is developing an International Integrated Reporting Framework that will facilitate the development of reporting over the coming decades. The core objective of the Framework is to guide organizations on communicating the broad set of information needed by investors and other stakeholders to assess the organizations long-term prospects in a clear, concise, connected and comparable format. This will enable those organizations, their investors and others to make better shortand long-term decisions.
Who is the IIRC? The International Integrated Reporting Committee (IIRC) is an international cross-section of leaders from the corporate, investment, accounting, securities, regulatory, academic, civil society and standard-setting sectors. See page 28 for a list of members.
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THE WORLD HAS CHANGED REPORTING MUST TOO

While the architecture necessary to support changing information needs is developing, many currently perceive a reporting landscape of confusion, clutter and fragmentation.
Key points in this section

The world has changed. Reporting needs to keep pace. While reporting has expanded and evolved, it has also become increasingly complex. Critical interdependencies are not brought to light and disclosure gaps remain. It is not enough to keep on adding more information. The connections need to be made clear and the clutter needs to be removed. Only the most material information should be included in the Integrated Report. Coordinated, international action is needed now. The IIRC has brought together key organizations in response.
The world has changed due to globalization and resulting interdependencies in economies and supply chains, advances in technology, rapid population growth and increasing global consumption. This has had a significant impact on the quality, availability and price of resources, including water, food and energy. It also puts increasing pressure on ecosystems that are essential to the economy and society. This has political, social and commercial implications. Businesses are being forced to react to these changes in order to remain successful and, in many cases, are developing new business models that recognize the need to innovate and do more with less. The need for a broader information set is clearly demonstrated by the small percentage of market value now explained by physical and financial assets down to only 19% in 2009 from 83% in 1975. The remainder represents intangible factors, some of which are explained within financial statements, but many of which are not.1
Reporting needs to keep pace. The traditional reporting model was developed for an industrial world. Although it continues to play a valuable role with respect to stewardship of financial capital, it nonetheless focuses on a relatively narrow account of historical financial performance and of the valuecreation process. As business has become more complex and gaps in traditional reporting have become prominent, new reporting requirements have been added through a patchwork of laws, regulations, standards, codes, guidance and stock exchange listing requirements. This has led to an increase in the information provided through: longer and more complex financial reports and management commentaries;2 increased reporting on governance and remuneration; and standalone sustainability reporting which has also evolved rapidly over the past decade.
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For many organizations, reporting is seen as a legal compliance process, rather than as a process for communicating what matters. Furthermore, different strands of reporting have tended to evolve separately, with additional requirements and information requests being bolted on to the existing model, rather than being integrated into it. The pressure to keep adding more continues to grow. This has created a complex and overlapping set of disconnected disclosures. As a result, critical interdependencies that exist are not made clear, for example, between: strategy and risk, financial and non-financial performance, governance and performance, and the organizations own performance and that of others in its value chain.
In the context of financial reporting, international convergence has been recognized as important, and progress has been made towards international standards, for example, through the current work on the convergence of International Financial Reporting Standards (IFRS) and U.S. Generally Accepted Accounting Principles (U.S. GAAP). Nevertheless, many other aspects of reporting continue to be governed by national or regional laws, regulations and stock exchange listing requirements, and by a mixture of mandatory and voluntary standards, codes and guidance. The IIRC has brought together key organizations in response. The IIRC was established in 2010 in recognition of the need to move towards an International Integrated Reporting Framework that is fit-for-purpose for the 21st century. The IIRC seeks to build upon, enhance and support the work that has been done to date, and is ongoing, to achieve a reporting framework that: communicates the organizations strategy, business model, performance and plans against the background of the context in which it operates; provides a coherent framework within which market and regulatory driven reporting requirements can be integrated; is internationally agreed, so as to encourage convergence of approach and hence more ready understanding of information presented; reflects the use of and effect on all of the resources and relationships or capitals (human, natural and social as well as financial, manufactured and intellectual) on which the organization and society depend for prosperity; and reflects and communicates the interdependencies between the success of the organization and the value it creates for investors, employees, customers and, more broadly, society.
Components of S&P 500 market value

100 83 68 32 20 19
80 68 60
80
81
These developments, led by policy-makers, companies and other reporting organizations, investors and civil society, are welcome reactions designed to elicit the information needed in a changing world. However, while the architecture necessary to support changing information needs is developing, many currently perceive a reporting landscape of confusion, clutter and fragmentation. Much of the information now provided is disconnected and key disclosure gaps remain. As a result, although there is evidence that investors recognize the materiality of non-financial factors, they do not feel that the information they have available is adequate for decisionmaking.4 For example, while there is management recognition that sustainability issues should be fully integrated into the strategy and operations of a company (with 96% of CEOs from the worlds largest companies expressing this opinion5), only 21% of listed companies report any sustainability information based on Bloomberg research.6
Coordinated, international action is needed now. The information available to management, investors and other stakeholders, and the way in which it is presented, have a fundamental impact on decision-making. The time has come to step back and rethink what information is needed to provide a clear, concise picture of performance, impacts and interdependencies. Such a picture must: drive innovation, be focused on communication and not just compliance, and support resource allocation decisions that are consistent with sustained value creation and with long-term economic stability.
40 32 20
17
In an increasingly global marketplace, comparability is important. Reporting requirements have evolved separately, and differently, in various jurisdictions. This has increased the reporting and administrative burden for the growing number of organizations that report in more than one jurisdiction. It has also resulted in diverging disclosure practices that inhibit investors and others from understanding and comparing the information they need for decision-making.
1975 Physical and nancial assets Other factors
1985
1995
2005
2009
The percentage of market value represented by physical and financial assets versus intangible factors, some of which are explained within financial statements, but many of which are not.1
It is not enough to keep on adding more information the connections need to be made clear and the clutter needs to be removed. Corporate reports are already long and, in many cases, they are getting longer. Length and excessive detail can obscure critical information rather than aid understanding.7 Only the most material information should be included in the Integrated Report.
Q1.
(a) Do you believe that action is needed to help improve how organizations represent their value-creation process? Why/why not? (b) Do you agree that this action should be international in scope? Why/why not?
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TOWARDS INTEGRATED REPORTING

Integrated Reporting brings together the material information about an organizations strategy, governance, performance and prospects in a way that reflects the commercial, social and environmental context within which it operates. It provides a clear and concise representation of how an organization creates value, now and in the future.

Integrated Reporting combines the different strands of reporting (financial, management commentary, governance and remuneration, and sustainability reporting) into a coherent whole that explains an organizations ability to create and sustain value. The main output of Integrated Reporting is an Integrated Report: a single report that the IIRC anticipates will become an organizations primary report. Integrated Reporting can reduce the reporting burden on organizations while improving investors, and other stakeholders, insight and understanding. Integrated Reporting reflects and builds upon existing developments in reporting.
Integrated Reporting Defined

Integrated Reporting brings together the material information about an organizations strategy, governance, performance and prospects in a way that reflects the commercial, social and environmental context within which it operates. It provides a clear and concise representation of how an organization demonstrates stewardship and how it creates value, now and in the future. Integrated Reporting combines the most material elements of information currently reported in separate reporting strands (financial, management commentary, governance and remuneration, and sustainability) in a coherent whole, and importantly: shows the connectivity between them; and explains how they affect the ability of an organization to create and sustain value in the short, medium and long term.
contributes to success over time. It will increasingly be through this process of integrated thinking that organizations are able to create and sustain value. The effective communication of this process can help investors, and other stakeholders, to understand not only an organizations past and current performance, but also its future resilience. The main output of Integrated Reporting is an Integrated Report: a single report that the IIRC anticipates will become an organizations primary report, replacing rather than adding to existing requirements. Such a report enables evolving reporting requirements, both market-driven and regulatory, to be organized into a coherent narrative. An Integrated Report provides a clear reference point for other communications, including any specific compliance information, such as investor presentations, detailed financial information, operational data and sustainability information. Much of this information might move to an online environment, reducing clutter in the primary report, which will focus only on the matters that the organization considers most material to long-term success.
Building on Developments to Date

Integrated Reporting reflects and builds upon existing developments in reporting, including the following. The ongoing international convergence of accounting standards through the collaborative efforts of the International Accounting Standards Board (IASB) and the U.S.-based Financial Accounting Standards Board (FASB) to improve both IFRS and U.S. GAAP, and to eliminate the differences between them. The work of The Princes Accounting for Sustainability Project, the Global Reporting Initiative, the World Business Council for Sustainable Development, the World Resources Institute, the World Intellectual Capital Initiative, the Carbon Disclosure Project, the Climate Disclosure Standards Board, the European Federation of Financial Analysts, the United Nations (UN) Conference on Trade and Development, the UN Global Compact, the International Corporate Governance Network, the Collaborative Venture on Valuing Non-Financial Performance, and many others to develop principles, methodologies, guidelines and standards for the accounting and reporting of non-financial information.
The publication during 2010 and 2011 of: the IFRS Practice Statement, Management Commentary, an international framework for narrative reporting to provide a context for interpreting an organizations financial position, financial performance and cash flows; the Integrated Reporting Committee of South Africas Discussion Paper, Framework for Integrated Reporting and the Integrated Report; the Global Reporting Initiatives G3.1 Sustainability Reporting Guidelines, and its current project to develop a fourth generation of Guidelines over the coming two years; and the International Auditing and Assurance Standards Boards Discussion Paper, The Evolving Nature of Financial Reporting: Disclosure and Its Audit Implications.
Integrated Reporting reflects what can be called integrated thinking application of the collective mind of those charged with governance (the board of directors or equivalent), and the ability of management, to monitor, manage and communicate the full complexity of the value-creation process, and how this
The evolution of corporate reporting

1960
Financial Statements
The IIRC aims to forge a global consensus on the direction in which reporting needs to evolve, creating a framework for reporting that is better able to accommodate complexity and, in so doing, brings together the different strands of reporting into a coherent, integrated whole. All of the organizations referred to above are part of, or collaborating closely with, the IIRC to achieve this aim. 2020
1980
2000
Management Commentary
Integrated Reporting
Sustainability Reporting
Management Commentary
Environmental Reporting Governance and Remuneration
Management Commentary Sustainability Reporting Governance and Remuneration Financial Statements
Governance and Remuneration
Q2.
Do you agree with the above definition of Integrated Reporting? Why/why not?
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AN INTERNATIONAL INTEGRATED REPORTING FRAMEWORK

The Framework will provide high-level guidance to organizations that prepare Integrated Reports, helping to provide consistency of content and approach in a way that demonstrates the extent to which integrated thinking is occurring within the organization.
The IIRC is developing a Framework to support the future development of reporting. The Framework will help ensure consistent reporting by organizations, will provide broad parameters for policy-makers and regulators, and will be a focus for harmonizing reporting standards. The initial focus is on reporting by larger companies and on the needs of their investors. An organizations business model and its ability to create and sustain value in the short, medium and long term are central themes of the Framework, which includes Guiding Principles and Content Elements. Integrated Reporting results in a broader explanation of performance than traditional reporting. It makes visible how the organization uses different capitals (financial, manufactured, human, intellectual, natural and social), its impact on them, and their interdependence. Focus Stewardship
How is Integrated Reporting Different?

Thinking Isolated Integrated
Because traditional reporting occurs in silos, it encourages thinking in silos. Integrated Reporting, on the other hand, reflects, and supports, integrated thinking monitoring, managing and communicating the full complexity of the value creation process and how this contributes to success over time. Integrated Reporting demonstrates the extent to which integrated thinking is occurring within the organization. Financial capital All forms of capital
An Integrated Report displays an organizations stewardship not only of financial capital, but also of the other capitals (manufactured, human, intellectual, natural and social), their interdependence and how they contribute to success. This broader perspective requires consideration of resource usage and risks and opportunities along the organizations full value chain. Past, financial Past and future, connected, strategic
Annual reporting at present is largely focused on past financial performance and financial risks. Other reports and communications may cover other resources and relationships, but they are seldom presented in a connected way, or linked to the organizations strategic objectives and its ability to create and sustain value in the future. The aim of the International Integrated Reporting Framework is to support the development of reporting over the coming decades, centred on how an organization creates and sustains value. This section outlines initial proposals for the development of the Framework, setting out concepts, principles and key elements around which it can be built. These proposals offer a starting point for discussion, rather than a complete Framework. An Exposure Draft of the Framework is planned for release in 2012. During the comment period for this Discussion Paper, interim guidance material will be made available on the IIRC website. This material will be built upon as further experience is obtained through the IIRC Pilot Programme (see page 24). The Framework will provide high-level guidance to organizations that prepare Integrated Reports, helping to provide consistency of content and approach in a way that demonstrates the extent to which integrated thinking is occurring within the organization. It will also provide policy-makers and regulators with broad parameters within which consistent regulatory reporting regimes can be developed across different jurisdictions. The Framework will be a focal point for the harmonization of current standards. The initial focus is on reporting by larger companies. However, the IIRC expects that the concepts underlying Integrated Reporting will be equally applicable to small- and medium-sized enterprises, the public sector and not-for-profit organizations. Integrated Reports will meet the needs of a broad range of stakeholders. Initially, however, the IIRC intends to focus the development of the Framework on the needs of investors (providers of debt and equity), consistent with the current duties of those charged with governance in many jurisdictions. The following pages include: a summary of the key differences between Integrated Reporting and traditional reporting; a discussion of the central importance of an organizations business model and of value creation; guiding principles for developing an Integrated Report; and content elements that describe the core information to be included in an Integrated Report. Adaptive Timeframe Short term Short, medium and long term
Much of the media and regulatory attention in response to the global financial crisis has focused on short-termism as one contributory factor. Although short-term considerations are important in many ways, placing them in context is also essential. Integrated Reporting specifically factors in short-, medium- and long-term considerations. Trust Narrow disclosures Greater transparency
Financial reporting focuses primarily on a narrow series of mandated disclosures. Although an increasing number of organizations are improving their transparency, for example, through voluntary sustainability reporting, in absolute terms that number is still low. By emphasizing transparency, for example, covering a broader range of issues and disclosing the positive with the negative, Integrated Reporting helps to build trust. Rule bound Responsive to individual circumstances
Todays reporting is often said to be too compliance orientated, reducing the scope for organizations to exercise an appropriate amount of judgement. While a certain level of compliance orientation is necessary to ensure consistency and enable comparison, Integrated Reporting offers a principles-based approach that drives greater focus on factors that are material to particular sectors and organizations. It permits an organization to disclose its unique situation in clear and understandable language. Concise Long and complex Concise and material
Q3. Q4.
Do you support the development of an International Integrated Reporting Framework? Why/ why not? (a) Do you agree that the initial focus of Integrated Reporting should be on reporting by larger companies and on the needs of their investors? Why/why not? (b) Do you agree that the concepts underlying Integrated Reporting will be equally applicable to small and medium enterprises, the public sector and not-for-profit organizations?
Technology enabled
Long and complex reports are often impenetrable for many readers. A key objective for Integrated Reporting is to de-clutter the primary report so that it covers, concisely, only the most material information. Paper based Technology enabled
While the internet and XBRL are introducing elements of technological innovation, many corporate reports are still presented as if they were entirely paper based. Integrated Reporting takes advantage of new and emerging technologies to link information within the primary report and to facilitate access to further detail online where that is appropriate.
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An International Integrated Reporting Framework (continued)

Business Model and Value Creation
Central to Integrated Reporting is the organizations business model. There is no single, generally accepted definition of the term business model. However, it is often seen as the process by which an organization seeks to create and sustain value. An organization determines its business model through choices that typically recognize that value is not created by or within the organization alone, but is: influenced by external factors (including economic conditions, societal issues and technological change) that present risks and opportunities, which create the context within which the organization operates, co-created through relationships with others (including employees, partners, networks, suppliers and customers), and dependent on the availability, affordability, quality and management of various resources, or capitals (financial, manufactured, human, intellectual, natural and social). significant external factors that affect an organization, the resources and relationships used and affected by the organization, and how the organizations business model interacts with external factors and resources and relationships to create and sustain value over time. By describing, and measuring where it is practicable, the material components of value creation and, importantly, the relationships between them, Integrated Reporting results in a broader explanation of performance than traditional reporting. In particular, it makes visible all the relevant capitals on which performance (past, present and future) depends, how the organization uses those capitals, and its impact on them, as illustrated by the diagram below. This information is critical to the effective allocation of scarce resources. It will provide a meaningful presentation of the organizations prospects for long term resilience and success, and facilitate the informational needs of, and assessments by, investors and other stakeholders. Importantly, a reporting framework centred around an organizations business model provides a better basis for management to explain what really matters, bringing reporting closer to the way the business is run.
Resources and relationships or capitals

All organizations depend on a variety of resources and relationships for their success. The extent to which organizations are running them down or building them up has an important impact on the availability of the resources and the strength of the relationships that support the longterm viability of those organizations. These resources and relationships can be conceived as different forms of capital. The purpose of the following categorization and descriptions, based on various sources and established models,8 is to help readers understand the concepts underlying this Discussion Paper; it is not intended to be the only way the capitals can be categorized or described. The extent to which different organizations use or impact each of these capitals varies: not all capitals are equally relevant or applicable to all organizations. Financial capital: The pool of funds that is: available to the organization for use in the production of goods or the provision of services, and obtained through financing, such as debt, equity or grants, or generated through operations or investments. ability to understand and implement an organizations strategies, and loyalties and motivations for improving processes, goods and services, including their ability to lead and to collaborate.
Intellectual capital: Intangibles that provide competitive advantage, including: intellectual property, such as patents, copyrights, software and organizational systems, procedures and protocols, and the intangibles that are associated with the brand and reputation that an organization has developed.
Integrated Reporting therefore aims to provide insights about:
Natural capital: Natural capital is an input to the production of goods or the provision of services. An organizations activities also impact, positively or negatively, on natural capital. It includes: water, land, minerals and forests, and biodiversity and eco-system health.
Manufactured capital: Manufactured physical objects (as distinct from natural physical objects) that are available to the organization for use in the production of goods or the provision of services, including: buildings, equipment, and infrastructure (such as roads, ports, bridges and waste and water treatment plants).
Social capital: The institutions and relationships established within and between each community, group of stakeholders and other networks to enhance individual and collective wellbeing. Social capital includes: common values and behaviours, key relationships, and the trust and loyalty that an organization has developed and strives to build and protect with customers, suppliers and business partners, and an organizations social licence to operate.
Financial
Financial
External factors
Manufactured Human Manufactured Human
Human capital: Peoples skills and experience, and their motivations to innovate, including their: alignment with and support of the organizations governance framework and ethical values such as its recognition of human rights,
Business model
How the organization creates and sustains value in the short, medium and long term
Intellectual Natural Social
Intellectual Natural Social
External factors
Q5.
Are: (a) the organizations business model, and (b) its ability to create and sustain value in the short, medium and long term, appropriate as central themes for the future direction of reporting? Why/why not? Do you find the concept of multiple capitals helpful in explaining how an organization creates and sustains value? Why/why not?
Q6.
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The Building Blocks
Guiding Principles Five guiding principles underpin the preparation of an Integrated Report (see page 13). Strategic focus Connectivity of information Future orientation Responsiveness and stakeholder inclusiveness Conciseness, reliability and materiality Content Elements The principles should be applied in determining the content of an Integrated Report, based on the key elements summarized below. The presentation of the elements should make the interconnections between them apparent (see page 14 15). Organizational overview and business model Operating context, including risks and opportunities Strategic objectives and strategies to achieve those objectives Governance and remuneration Performance Future outlook
Guiding Principles
The following guiding principles underpin the preparation of an Integrated Report, informing the content of the report and how information is presented.
Strategic focus: An Integrated Report provides insight into the
organizations strategic objectives, and how those objectives relate to its ability to create and sustain value over time and the resources and relationships on which the organization depends. An Integrated Report communicates what is important to the organization from a strategic perspective. It outlines: the organizations strategic objectives; the strategies it has in place, or plans to implement, in order to achieve them; and how they relate to other components of its business model.
This involves analyzing: how sustainable the organizations business model is; the relationship between past and future performance; and the factors that may change that relationship, for example, whether the organization will be able to access the resources it needs at a price it can afford.
An Integrated Report may include targets, forecasts, projections, estimates and sensitivity analyses.
Responsiveness and stakeholder inclusiveness: An Integrated

Report provides insight into the organizations relationships with its key stakeholders and how and to what extent the organization understands, takes into account and responds to their needs.
This may include, for example, highlighting significant new opportunities, risks and dependencies that flow from the organizations market position, strategies and business model. It also clearly articulates how the organization uses resources and relationships. This includes reporting on financial, manufactured, human, intellectual, natural and social capital to the extent each contributes materially to the organizations ability to create and sustain value.
Integrated Reporting emphasizes the importance of relationships with the organizations stakeholders. Stakeholders provide useful insights about matters that are important to them, including economic, environmental and social issues. This assists the organization to: identify material issues; develop and evaluate strategies; and manage activities, including strategic and accountable responses to material issues.
us foc ic g ate Str

Operating context, including risks and opportunities
Co nn ec tiv ity of inf or ma tio n
Connectivity of information: An Integrated Report shows
the connections between the different components of the organizations business model, external factors that affect the organization, and the various resources and relationships on which the organization and its performance depend. Connectivity is central to ensuring that an Integrated Report: illuminates the changing nature of business decision-making, and the critical linkages in business thinking and activity; and helps to break down established silos in the way information is reported, and the traditional focus primarily on financial matters. information about how changes in the market environment impact strategy; links between the different elements in the organizations market analysis and its assessment and explanation of risk; and how strategies link to key performance indicators (KPIs), key risk indicators (KRIs) and remuneration.
An Integrated Report enhances transparency and accountability, which are essential in building trust and resilience, by disclosing: the nature and quality of the organizations relationships with key stakeholders, such as customers, suppliers, employees and local communities; and how their issues are understood, taken into account and responded to.
Future outlook Organizational overview and business model
Strategic objectives
y rialit mate and bility relia ess, cisen Con
Examples of connectivity include:

Futu re o rient ation
Conciseness, reliability and materiality: An Integrated Report
provides concise, reliable information that is material to assessing the organizations ability to create and sustain value in the short, medium and long term. Senior management and those charged with governance must exercise judgement in: distinguishing between information that is material and should therefore be included in the Integrated Report, and other information that may be relatively static or only relevant to some report users; conciseness is enhanced when the latter is included separately on the organizations website or in other forms of communication; and deciding whether information is sufficiently reliable to be included in an Integrated Report.
Performance
Governance and remuneration
Importantly, an Integrated Report clearly presents the linkage between financial performance and the organizations use of, and impact on, the significant resources and relationships upon which it depends.
Future orientation: An Integrated Report includes

Responsiveness and stakeholder inclusiveness
managements expectations about the future, as well as other information to help report users understand and assess the organizations prospects and the uncertainties it faces. Future orientation includes: how the organization balances short- and long-term interests; where the organization expects it will go over time; how it plans to get there; and what the critical enablers, challenges and barriers may be along the way.
Q7.
Do the Guiding Principles identified in the Discussion Paper provide a sound foundation for preparing an Integrated Report are they collectively appropriate; is each individually appropriate; and are there other Guiding Principles that should be added? Why/why not?
While reliable information needs to be complete, neutral and free from error, it is recognized that this is seldom, if ever, achievable in every respect, so the objective is to maximize these qualities to the extent practicable, for example, by ensuring that any negative issues are as faithfully reported as positive ones. Reliability also encompasses the need for information to be comparable between organizations and consistent for the same organization over time. Reliability is enhanced by mechanisms such as robust stakeholder engagement and independent, external assurance.
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Content Elements
An Integrated Report includes the following Content Elements, answering the respective question posed for each. These elements are fundamentally linked to each other and are presented in the Integrated Report in a way that makes the interconnections between them apparent, rather than as isolated, standalone sections. Explanations of material changes since prior reporting periods are particularly important.
Governance and remuneration: What is the organizations governance structure, and how does
governance support the strategic objectives of the organization and relate to the organizations approach to remuneration? An Integrated Report provides insight about the organizations oversight and tone at the top. It includes: organization, including its culture, ethical values and relationships with key stakeholders; and how the remuneration of executives and those charged with governance is linked to performance in the short, medium and long term, including how it is linked to the organizations use of and impact on the resources and relationships on which it depends.
Organizational overview and business model: What does the organization do and how does it create
and sustain value in the short, medium and long term? The Integrated Report provides essential context by identifying: the organizations mission, principal activities, markets, products and services; its business model, value drivers and critical stakeholder dependencies; and its attitude to risk.
an explanation of the organizations leadership and strategic decision-making processes, including the skill set of those charged with governance; what actions those charged with governance have taken to influence the strategic direction of the
Performance: How has the organization performed against its strategic objectives and related strategies? Operating context, including risks and opportunities: What are the circumstances under which the
organization operates, including the key resources and relationships on which it depends and the key risks and opportunities that it faces? To provide context, an Integrated Report identifies: the commercial, social and environmental context within which the organization operates, including significant laws and regulations that affect the organizations ability to create and sustain value in the short, medium and long term; the resources and relationships that are key to the organizations success, including key stakeholders, their legitimate needs, interests and expectations, and their importance to the organization; and the organizations key risks and opportunities, including those that relate to its relationships and to its impact on, and the continued availability, quality and affordability of, relevant resources. This Content Element builds on the high-level overview of the organization and includes: a more in-depth description of material issues; the organizations process for determining which issues it considers material; and how the material issues affect the organizations ability to create and sustain value over time (e.g., how the organization integrates key emerging or escalating risks and opportunities into its strategies). An Integrated Report includes qualitative and quantitative information, including: KPIs and KRIs regarding the organizations performance against its strategic objectives and related strategies; the organizations impacts (both positive and negative) on the resources and relationships on which it depends; the significant external factors impacting performance; and how the organization fared against its targets. Performance information includes a description of the organizations view of its major external economic, environmental and social impacts and risks up and down the value chain, along with material quantitative information to the extent practicable. While other reports and communications (such as financial statements, a sustainability report or detailed website disclosures) may be referenced or linked for those report users who want additional detail on various aspects of performance, the performance discussion in an Integrated Report is considerably more concise and connected. The linkages between past and current performance and between current performance and future outlook should be made clear.
Information regarding financial performance is integrated with information regarding performance with respect to the other capitals. The discussion also encompasses how innovation affects the ability of the organization to create and sustain value.
Strategic objectives and strategies to achieve those objectives: Where does the organization want to go
and how is it going to get there? An Integrated Report describes the organizations strategic objectives and its strategies to achieve those objectives. It sets out how the organization will measure achievement and target outcomes for the short, medium and long term. This discussion builds on the description of the organizational overview and operating context to provide report users with an understanding of what drives and protects the value of the organization. It identifies: risk management arrangements related to key resources and relationships; the linkage between strategies and other Content Elements; and what makes the organization unique and able to realize value in the future, such as the extent to which sustainability considerations have been embedded into its strategy to give it a competitive advantage.
Future outlook: What opportunities, challenges and uncertainties is the organization likely to encounter
in achieving its strategic objectives and what are the resulting implications for its strategies and future performance? Future outlook builds on other Content Elements to highlight anticipated changes over time. It provides information, built on sound and transparent analysis, about: how the organization is currently equipped to respond to the operating context that it is likely to face in the future, how the organization balances short- and long-term interests,
potential repercussions of where the organization expects it will go in the short, medium and long term, the actions needed to get there, and the associated uncertainties.
The Integrated Report should identify any real risks that could have extreme consequences, even though the probability of their occurrence might be considered quite small.
Q8.
Do the Content Elements identified in the Discussion Paper provide a sound foundation for preparing an Integrated Report are they collectively appropriate; is each individually appropriate; and are there other Content Elements that should be added? Why/why not?
14 www.theiirc.org
Towards Integrated Reporting Innovation in Action

Many organizations are taking innovative approaches to aspects of reporting that are often consistent with the concept of Integrated Reporting. Few organizations, if any, however, could claim to have achieved the ideal of Integrated Reporting. Presented on pages 16 19 is a small selection of examples of current innovation. These might not be perfect illustrations of all aspects of the Framework in this document and are not intended
AkzoNobel Report 2010 pp 52 53
to provide definitive guidance; rather, they are presented here to illustrate reporting innovation in the particular circumstances of an organization that might be regarded as good practice and to exceed targeted rates of return in a sustainable manner. at present.As an integrated energy and chemicals further Sasol aims to meet stakeholders expectations The IIRC Pilot Programme will provide company opportunity for experimentation to inform the development of the As an integrated energy and chemicals company Sasol aims to meet stakeholders expectations Framework, and the IIRC also encourages contributions by other our integrated business model organizations of innovative examples of good practice.
and to exce
arket overview
ess or
s 2010
the elf ts, well as tion
In downstream chemical process technology, we have developed Besides the research and development http://www.sasol.com/sasol_internet/downloads/sasol_review_2010_1288356157307.pdf and new-produc and to exceed targeted rates of return in a sustainable manner. As an integratedFinancialchemicals company Sasol 5 to meet stakeholders expectations energy and Information pp 4 aims several proprietary processes for recovering and processing a range formulation and testing work we do at Sasolburg throug Sasol obtains its raw materials through its coal-mining activities, of solvents, waxes and phenolics for the world market, as well Technologys fuel research group, we conduct further fu These pages provide a concise overview of the business, the period and provide a range of financial and gas exploration, and purchases from the open market.our integrated business model These pages provide an easy to follow description and future value such as innovation and research, asthe Sasolas steps Laboratory (SAFL) oil and as 1-pentene, 1-hexene, 1-heptene, 1-octene and higher alpha research at well Advanced Fuels Some raw materials are sold directly to external markets. olens, the last of which we convert intochanging business environment with some of Cape Town, and the Safol H(C12,13) alcohols. collaboration with the University including how it creates value, key market and business non-financial performance indicators, seeking to demonstrate graphical representation of the companys business model, its coal-mining to respond to the Sasol obtains its raw materials through activities, Innovation Research Application Centre (SFAC). SFAC enables us to conduct We have developed and patented several base-metal catalysts oil and gasoutcomes, drivers from the open market. exploration, and purchases of characteristics, external factors that affect value creation and financial value generated through responses to global linking together key inputs, activities and quantification in financial and non-financial terms.Besides the research and development and new-product In downstream chemical process technology, we have developed and fuel research and tests in line with internatio for our FT synthesis processes. engine Exploration and production Some raw materials are sold directly to external markets. several proprietary processes for recovering and processing a range formulation and testing work we do at Sasolburg through Sa Sasol obtains its raw materials through its coal-mining activities, of solvents, Technologys fuel research group, we conduct further fundam the role of innovation. They describe key developments during market drivers. We have also been innovative in coal explorationwaxes and phenolics for the world market, as well and mining, where oil and gas exploration, and purchases from the open market. as 1-pentene, 1-hexene, 1-heptene, 1-octene and higher alpha research at the Sasol Advanced Fuels Laboratory (SAFL), in Some raw materials are sold directly to external markets. olens, the last of which we convert into collaboration with the University of Cape Town, and the Saso Sasol Mining (sometimes in partnership with technology suppliers) Safol H(C12,13) alcohols. are served through a variety of outlets ranging from big box We have developed and patented several base-metal catalysts Application Centre (SFAC). SFAC enables us to conduct seahas developed high-extraction mining methods, advanced DDC (Dulux Decorator Centers) Paint Can Recycling chains such as The Home Depot, Walmart, B&Q and Leroy for our FT synthesis processes. engine and fuel research and tests in line with international t directional drilling techniques, roof-boltinghave also been continuous-exploration and mining, where systems, innovative in coal We professional paint waste management systems Merlin (serving mainly homeowners) to independent dealers miner systems and a virtual-reality training system for continuous- with technology suppliers) Sasol Mining (sometimes in partnership (serving both homeowners and professionals) and companyhas developed high-extraction mining methods, advanced miner operators, among other cost-saving innovations.
http://www.akzonobel.com/news/reports/2010/annual_report_2010.aspx Exploration and production
our integratedand Summarized Sasol Annual Review business model
Innovation
Research
Exploration and production
owned stores focused on serving professionals. Global market drivers and developments
superior properties for the professional painter. Eco-premium portfolio Recent initiatives: professional paint
directional drilling techniques, roof-bolting systems, continuousminer systems and a virtual-reality training system for continuousminer operators, among other cost-saving innovations.
and home sales interior decoration
Decorative paints market overview

Our Decorative Paints business supplies a full range of interior and exterior decoration and protection products for both the professional and do-it-yourself (DIY) markets, including paints, lacquers and varnishes, as well as products for surface preparation Drivers (pre-deco products). for buying decision
Market business characteristics Retailers sizeandthe global market for decorative paints is around The of 30 billion. Architectural coatings Interior and exterior wall paints and trim paints (lacquers) for consumers and professionals. Woodcare and specialty products and decoration other critical building materials. Trade customers Pre-deco products Fillers, wall treatments, sealants and putties for consumers and professionals. Building adhesives paint with energy-saving properties used in the building and renovation industry Trade customers Drivers for buying decision Retailers are served through a variety of outlets ranging from big box chains such as The Home Depot, Walmart, B&Q and Leroy Merlin (serving mainly homeowners) to independent dealers (serving both homeowners and professionals) and companyowned stores focused on serving professionals. Global market drivers and developments
professional trimpaint
DDC (Dulux Decorator Centers) Paint Can Recycling professional paint waste management systems
e is around s retailers
Key gures in millions

superior properties for the professional painter. Eco-premium portfolio Recent initiatives:
wall paint.
and home sales interior decoration
professional paint professional trimpaint
Signed a landmark agreement with the Forest Stewardship Council
Operating income Moving average ROI (in %)
133 4.7
275 5.2
Germany Sweden UK
2009
1,600 600 2,200 5,400 1,100 21,900
2010
1,300 600 2,200 5,100 1,100 22,000
Our proprietary Fischer-Tropsch technology
Key raw materials
Key raw materials
Price drivers material prices
nwealth
EBITDA
Market leadership positions
Europe 1st
487 10.6 298 6.5 4.7

11%
Latin America
548 11.0 343 6.9

42%
Mature Europe
Latin America China The Netherlands Germany

Asia Pacic
Product: Eco-premium solutions % of revenue
acquers) for
ndon 2012
Through Sasol Petroleum International (SPI) and Sasol Gas, we obtain natural gas through the cross-border pipeline linking Key developments 2010 the Pande and Temane elds in Mozambique to our Secunda complex. We use this gas as our Employees sole hydrocarbon feedstock at by Price driversSasolburg and as a supplementary 2009 2010 feedstock to coal at Secunda.
Signed a deal with Walmart to become the retailers primary paint supplier in the US Dulux Trade won contract to paint the London 2012 Olympic Games site Leading coatings supplier for the Commonwealth Games in India
Revenue EBITDA EBIT
Key gures in millions

2009 4,573 487 298 6.5 10.6 2010 4,968 11.0 343 6.9
Employees by region at year-end

2009 US and Canada Latin America China 5,100 1,700 1,200 2,000 1,000 2010 5,100 1,800 1,500 2,200 1,100
EBITDA margin (in %) EBIT margin (in %)
region at year-end
548 Other Asian countries The Netherlands Other European countries Other regions
Presence in China increased to material prices more than 600 cities
Lets Color campaign continued to gather momentum
Revenue
wall paint.
4,573
4,968
US and Canada
Revenue breakdown by business unit in %
Total
5,100 1,700 1,200

15
2008 2009
5,100
29
Through Sasol Sasol Mining supplies most of the Sasol Mining suppliesPetroleum the most of International (SPI) and Sasol Gas, feedstock coal we need for our Sasol we obtain need for our feedstock coal we natural gas throughSasol petrochemical plants. the cross-border pipeline linking Through Sasol Petroleum petrochemical plants. the Pande and Temane elds in International (SPI) andAs an integrated energy and chemicals company Sasol aims to meet stakeholders expectations Sasol Gas, Mozambique to our Secunda complex. We use this gas as our we obtain natural gas through sole hydrocarbon feedstock at our integrated the cross-border pipeline linking business model Sasolburg and as a supplementary feedstock to coal at Secunda. the Pande and Temane elds in Exploration and production Mozambique to our Secunda complex. We use this gas as our sole hydrocarbon feedstock at Sasolburg and as a supplementary feedstock to coal at Secunda.
Sasol obtains its raw materials through its coal-mining activities, oil and gas exploration, and purchases from the open market. Some raw materials are sold directly to external markets.
Concise overview of external context
Clear description of business model seeking to link inputs and outputs
Our GTL diesel has a higher quality than diesels derived from(70+ versus Markets crude oil. GTL diesel has a high cetane number Sasol markets products directly the conventional 45 55), low sulphur (less crude most of the Sasol Mining suppliesoil. GTL diesel has a high cetane number (70+ versusthan ve parts to the consumer, as well as to per million), low aromatics (less than 1%) and excellent Sasol commercial and industrial cust markets products dir feedstocktocoal the needoffor oursustainable manner. low sulphur (less thanGTLve parts and exceed we conventional 45 55), cold-ow characteristics. Our diesel, therefore, is ideal targeted rates return in a Sasol thereby integrating itswell consumer, as upstream as a low-emissions, and excellent petrochemical per million), low aromatics (less than 1%)premium grade fuel and as a blend stock to theand downstream activities. as plants. for upgrading conventional diesels. commercial and industrial cold-ow characteristics. Our GTL diesel, therefore, is ideal Innovation Research thereby integrating its upst as a low-emissions, premium grade fuel and as a blend stock and downstream activities for upgrading conventional diesels.
In downstream chemical process technology, we have developed several proprietary processes for recovering and processing a range of solvents, waxes and phenolics for the world market, as well as 1-pentene, 1-hexene, 1-heptene, 1-octene and higher alpha olens, the last of which we convert into Safol H(C12,13) alcohols. We have developed and patented several base-metal catalysts for our FT synthesis processes. Besides the research and development and new-product formulation and testing work we do at Sasolburg through Sasol Technologys fuel research group, we conduct further fundamental research at the Sasol Advanced Fuels Laboratory (SAFL), in collaboration with the University of Cape Town, and the Sasol Fuels Application Centre (SFAC). SFAC enables us to conduct sea-level engine and fuel research and tests in line with international trends.
Our GTL diesel has a higher quality than diesels derived from
Markets
We have also been innovative in coal exploration and mining, where Sasol Mining (sometimes in partnership with technology suppliers) has developed high-extraction mining methods, advanced directional drilling techniques, roof-bolting systems, continuousminer systems and a virtual-reality training system for continuousminer operators, among other cost-saving innovations.
1,800 1,500 2,200 1,100 1,300 600 2,200 5,100 1,100

53
2007
2010
Northern and Eastern Europe Operating income 133

2nd United States Latin America
1st
Canada
North America
consumers
momentum
the air to create a safer home environment parquet layers, interior decorators and painters specialized retailers. Customers Our end-users can broadly be segmented into homeowners (either DIY or BIY buy it yourself), professional painters serving homeowners and commercial contractors. They Support professional painters with tailor-made products and services programs for painters
Moving average ROI (in %)

1st South East Asia and Pacic India and South Asia China and North Asia 2nd
Asia
UK, Ireland and South Africa
275 5.2
7%
Emerging Europe
17%
32
2009
1,600 600
4.7
2009
2010
3%
Sweden UK Other European countries Other regions Total
Rest of the world
Total reportable rate of injuries per million hours

5.7
n 600 citiesConsumer market

52 AkzoNobel Decorative Paints
Innovations
Americas 1st 2nd
2,200
4.9
4.0
2010
Canada United States Latin America
2007
5,400
2008
Business performance
AkzoNobel Report 2010
AkzoNobel Report 2010
Business performance
paint with energy-saving properties the air to create a safer home environment
1,100
|
AkzoNobel Decorative Paints
Key developments 2010

1st 2nd
Revenue breakdown by business unit Asia in %

South East Asia and Pacic India and South Asia China and North Asia
21,900
22,000
Our global emissions of GHG, which have been independently veried, increased from 71,3 million tons (Mt) in 2009 to 75,8 Mt in 2010, Coal is an important part of the worlds energy mix, and Sasol will continue to mainly due to the inclusion of Oryx GTL emissions data. However, our produce transportation fuels from coal and gas. However, we are committed emissions intensity improved to 3,05 (measured as carbon dioxide to substantially reducing our carbon emissions by, among others, developing equivalent per ton of production) in 2010. This compares with 3,24 in more efcient production processes and investigating carbon capture and 2009 and 3,02 (restated) in 2008. The improved overall GHG intensity storage (CSS) solutions. We have set several targets to reduce our greenhouse is a result of the inclusion of Oryx GTL, and Sasol Polymers and Sasol gas emissions intensity by 15% (on the 2005 baseline) in all our operations by Synfuels signicantly increasing production volumes, which offset Our global emissions of GHG, which have 2020, and we have spent R100 million (US$11,1 million) in Greenhouse gas (GHG) emissions 2009 on energy the emissions increase. The targets 71,3 million tons (Mt)for beento 75,8 operations we have set in 2009 our Mt in 2010, ed, all independently veri increased from Coal is around efciency-related projects, which should achieve a reduction of an important part of the worlds energy mix, and Sasol will continue desire to be a the inclusion of Oryx GTL emissions butHowever, our mainly due to responsible company, data. also reect not only our to produce transportation fuels from coal and gas. However, we are committed emissions intensity improved to 3,05 (measured as carbon dioxide 760 000 tons of GHG emissions a year. our awareness that a to substantially reducing our carbon emissions by, among others, developing strong businessof production) in 2010. This compares with 3,24 in equivalent per ton case exists for sustainable more efcient production processes and investigating carbon capture and 2009 and 3,02 (restated) in 2008. The improved overall GHG intensity development. storage (CSS) solutions. We have set several targets to reduce our greenhouse is a result of the inclusion of Oryx GTL, and Sasol Polymers and Sasol
gas emissions intensity by 15% (on the 2005 baseline) in all our operations by 2020, and we have spent R100 million (US$11,1 million) in 2009 on energy efciency-related projects, which should achieve a reduction of around 760 000 tons of GHG emissions a year. Synfuels signicantly increasing production volumes, which offset the emissions increase. The targets we have set for all our operations reect not only our desire to be a responsible company, but also our awareness that a strong business case exists for sustainable development.
Greenhouse gas (GHG) emissions
orest
EBIT Europe
Americas
Geo-mix revenue by destination
Continental Europe Northern and Eastern Europe UK, Ireland and South Africa
Other Asian countries

C Decorative Paints Asia
A Decorative Paints Europe B Decorative Paints Americas
52 31 17
Innovations Consumer market
EBIT margin (in Continental Europe %) 1st
Key value chains with carbon footprint assessment
2,000 1,000
EBITDA margin (in %) positions Market leadership
A B
15
22
Through Sasol Petroleum International (SPI) and Sasol Gas, we obtain natural gas through the cross-border pipeline linking the Pande and Temane elds in Mozambique to our Secunda complex. We use this gas as our sole hydrocarbon feedstock at Sasolburg and as a supplementary feedstock to coal at Secunda.
Sasol Mining supplies most of the feedstock coal we need for our Sasol petrochemical plants.
Our GTL diesel has a higher quality than diesels derived from crude oil. GTL diesel has a high cetane number (70+ versus the conventional 45 55), low sulphur (less than ve parts per million), low aromatics (less than 1%) and excellent cold-ow characteristics. Our GTL diesel, therefore, is ideal as a low-emissions, premium grade fuel and as a blend stock for upgrading conventional diesels.
Markets
Sasol markets products directly to the consumer, as well as to commercial and industrial customers, thereby integrating its upstream and downstream activities.
20%
108
Water
Various technological advancements in efuent recycling, cooling, pre-treatment of water for steam generation and solids handling are paving the way for signicantly improved zero liquid efuent discharge designs, which are being developed irrespective of water availability or New energy pricing.
Sasol New Energy Holdings (SNE) was created to focus on new technologies that can be integrated with our core technologies to reduce our GHG footprint. As part of our commitment to reduce production of carbon dioxide in our operations and integrate new technology into our FT processes, SNE will look into renewable and lower-carbon energy options such as solar, biofuels and biomass, as well as nuclear, hydro and natural gas.
New energy
Sasol New Energy Holdings (SNE) was created to focus on new technologies that can be integrated with our core technologies to reduce our GHG footprint. As part of our commitment to reduce production of carbon dioxide in our operations and integrate new technology into our FT processes, SNE will look into renewable and lower-carbon energy options such as solar, biofuels and biomass, as well as nuclear, hydro and natural gas.
Water
Various technological advancements in efuent recycling, cooling, pre-treatment of water for steam generation and solids handling are paving the way for signicantly improved zero liquid efuent discharge designs, which are being developed irrespective of water availability or pricing.
annual review 2010 our business our integrated bus

annual review 2010 our business our integrated business model
Support professional painters with tailor-made products and services
homeownional paintctors. They
Signed a deal with Walmart to become the retailers Dulux Trade won contract to paint the London 2012 Olympic Games site Leading coatings supplier for the Commonwealth Games in India Signed a landmark agreement with the Forest Stewardship Council Lets Color campaign continued to gather momentum Presence in China increased to more than 600 cities
primary paint supplier in the US programs for painters
A B
bel Report 2010
4 5 Our global emissions of GHG, which have been independently veried, Water New energy increased from 71,3 Key gures in millions Employees by region at year-end million tons (Mt) in 2009 to 75,8 Mt in 2010, Sasol New Energy Holdings (SNE) was created to focus on new Coal is an important revenueworlds energy mix, and Sasol will continue to Various technological advancements in efuent mainly due to the inclusion of Oryx GTL emissions data. However, our % of part of the Our global emissions of GHG, which have been independently veried,can be integrated with our core technologies Wat Greenhouse gas (GHG) emissions technologies that 2009 2010 2010 produce transportation fuels from coal and gas. However, we are committed recycling, cooling, pre-treatment of water emissions2009 intensity improved to 3,05 (measured as carbon dioxide increased from 71,3 million tons (Mt) in 2009 to 75,8 Mt in 2010, GHG footprint. As part of our commitment to reduce to reduce our to substantially reducing our carbon emissions by, among others, developing equivalent per ton of production) in 2010. This compares with 3,24 in worlds energy mix, and Sasol will continue to for steam generation and solids handling are emissions data. However, our 29 Coal is an important part of the Variou mainly due to the inclusion of Oryx GTL production of carbon dioxide in our operations and integrate new more efcient production processes and investigating 4,968 capture and carbon US and Canada 2009 and 3,02 (restated) in 2008. The produce transportation intensity coal and gas. However, we are committed paving the way for signicantly improved improved overall GHG fuels from Revenue 4,573 5,100 5,100 emissions intensity improved to 3,05 (measured as carbon dioxide our FT processes, SNE will look into renewable recyc technology into 22 storage (CSS) solutions. We have set several targets to reduce our greenhouse is a result of the inclusion 1,800 GTL, and Sasol Polymers andour carbon emissions by, among others, developing zero liquid efuent discharge designs, which of Oryx Sasol to substantially reducing for st EBITDA 487 548 Latin America 1,700 equivalent per ton of production) in 2010. This compareslower-carbon energy options such as solar, biofuels and biomass, and with 3,24 in gas emissions intensity15 15% (on the 2005 baseline) in all our operations by by are being developed irrespective of water Synfuels signicantly increasing production efcient production processes and investigating carbon capture and 15 10.6 more volumes, which offset pavin 2009 and 3,02 (restated) in 2008. The improved overallwell asintensity hydro and natural gas. as GHG nuclear, EBITDA margin (in %) 11.0 1,200 1,500 2020, and we have spent R100 million (US$11,1 million) in 2009China on energy the emissions increase. The targets westorage (CSS)all our operations set several targets to reduce our greenhouse availability or pricing. inclusion of Oryx GTL, and Sasol Polymers and Sasol have set for solutions. We have zero l is a result of the EBIT 298 343 Other 2,000 efciency-related projects, which should achieve a reduction of around Asian countries ect not only our desire2,200 a responsible company, but also 15% (on the 2005 baseline) in all our operations by re to be gas emissions intensity by are be Synfuels signicantly increasing production volumes, which offset 760 000EBIT margin (in %) tons of GHG 2007 emissions a year. The Netherlands our awareness that a strong business case exists we have spent R100 million (US$11,1 million) in 2009 on energy 1,000 1,100 2008 6.5 20096.9 2010 2020, and for sustainable availa the emissions increase. The targets we have set for all our operations development. 1,600 Operating income 133 275 Germany 1,300 efciency-related projects, which should achieve a reduction of around reect not only our desire to be a responsible company, but also
Greenhouse gas (GHG) emissions solutions Product: Eco-premium
Moving average ROI (in %)
4.7
5.2
Sweden UK Other European countries Other regions Total
600 2,200 5,400 1,100 21,900
600 2,200 5,100 1,100 22,000
760 000 tons of GHG emissions a year.
A Decorative Paints Europe B Decorative Paints Americas C Decorative Paints Asia
52
in %
31Revenue breakdown by business unit 17 between revenue generation and Link

C
Key value chains with carbon footprint assessment
our awareness that a strong business case exists for sustainable development.
annual review 2010 our business our integrated
Succinct summary of key developments

7%
Emerging Europe
response to market drivers highlighted

32
2009
108
Discussion of material issues that arise as a result of business activities, including targets and costs
Product: Eco-premium solutions % of revenue
29 22 15 15
Identification of strategic responses to changing business environment
17%
16 www.theiirc.org
B
Asia Pacic
2010
Towards Integrated Reporting Innovation in Action (continued)

BHP Billiton 2010 Annual Report pp 152 153
http://www.bhpbilliton.com/home/investors/reports/Documents/bhpBillitonAnnualReport2010.pdf
Anglo American Annual Report 2010 pp 14 15

14
http://www.angloamerican.com/investors/reports/2011rep
Anglo American plc Annual Report 2010
These pages show the linkage between key financial and non-financial drivers of strategy, remuneration policy and remuneration practice. Thiscontinued 6 Remuneration Report is reinforced through discussion of the linkages between remuneration and both risk and
6.2.2 Strategic alignment
6 Remuneration Report continued
performance, and includes quantification of remuneration practices and the alignment between remuneration and company performance.
They pages give a snapshot of performance. OPERATING AND FINANCIAL REVIEW: Key performance indicators
They are structured so that the reader can easily see the link between key strategic objectives and performance, both financial
and non-financial. They explain how KPIs are calculated and include quantification of past results and targets for the future.
15
the Remuneration Committee recognises that we operate in a global environment and that our performance depends on the quality 6.2.2 Strategic alignment of our people. Remuneration is recognises that we operate in a global environment and that our performancethe committee keeps the remuneration policy the Remuneration Committee used to reinforce the Groups strategic objectives, and depends on the quality of our review to ensure used to reinforce the for the needs of the Group. under regular people. Remuneration isit is appropriateGroups strategic objectives, and the committee keeps the remuneration policy the diagramdiagram below illustrateshowBHP Billitons remuneration policy is linked to the is linked toof our strategy and how theof our strategy and how the the below illustrates how BHP Billitons remuneration policy six key drivers the six key drivers remuneration structures for executives (including the members of the GMC) serve to GMC) serve to these linkages. remuneration structures for executives (including the members of the support and reinforcesupport and reinforce these linkages.
NON-FINANCIAL
PEOPLE
under regular review to ensure it is appropriate for the needs of the Group.
MEASURING OUR PERFORMANCE KEY INDICATORS

STRATEGIC ELEMENTS Investing KPI TARGETS
Anglo American plc Annual Report 2010 15
We measure performance again elements of our strategy throug and improvement measures.
FINANCIAL
WORLD-CLASS ASSETS FINANCIAL STRENGTH AND DISCIPLINE PROJECT PIPELINE
NON-FINANCIAL LICENCE
Drivers of strategy
TO OPERATE
FINANCIALOPTIONS GROWTH
PROJECT Looking beyond the project pipeline to pursue new growth options.
Explanation and quantification of alignment between remuneration and strategic objectives, both 14 financial and OPERATING AND FINANCIAL REVIEW: Key performance indicators non-financial
GROWTH OPTIONS
Explicit link made between strategic aims and KPI targets

Capital projects and investment Optimise the pipeline of projects and ensure that new capital is only committed to projects that deliver the best value to the Group on a risk adjusted net present value basis Page 16
RESULTS AND TARGETS

Drivers of strategy
of our business is our people. Talented and motivated people The foundation are our most precious of our business resource.
PEOPLE The foundation
Supported by remuneration policy
While the Board recognises that market forces necessarily management within organisations, and in particular on influence remuneration practices, it strongly believes that willing to work environment remuneration frameworks that work to ensure executives take the fundamental driver behind our remuneration structure is around the world. and community 6.2.2 Strategic alignment 6.2.3 Risk alignment 6.2.4 Performance alignment development. a long-term approach to decision-making minimising activities forces necessarily performance. Accordingly, while target remuneration business the Remuneration Committee recognises that we operate in a global environment and that our performance depends on the quality the global financial crisis has heightened the focus on risk While the Board recognises that market that focus only onorganisations, and in results at the expense of longer it strongly believes that is structured to attract and retain executives, the amount of our people. Remuneration is used to reinforce the Groups strategic objectives, and the committee keeps the remuneration policy management within short-term particular on influence remuneration practices, under regular review to ensure it is appropriate for the needs of the Group. remuneration frameworks that work to ensure executives take the fundamental driver behind our remuneration structure is STRATEGIC ELEMENTS KPI TARGETS We provide Remuneration Remuneration frameworks reward Consistent with minimising term business growth and success. activities business performance. Accordingly, while target remuneration actually received is dependent on the of remuneration a long-term approach to decision-makingour long-term strategic the diagram below illustrates how BHP Billitons remuneration policy is linked to the six key drivers of our strategy and how the on short-term is remuneration 15% of STI for (including the members of the GMC) serve the GMC are weighted structures for executives reinforce these linkages. achievement of superior business and individual performance GMCrewards base salaries STI outcomes for to support andof demanding financial The LTIP operates over athat focus onlygrowthperformance measures structured to attract and retain executives, the amount long-term horizon. results at the expense of longer competitive frameworks reward achievement focus, Committee has considered are ways in whichis dependent on the term business of remuneration actually received the Remuneration and success. the linked GMC members is are aligned with towards achievement of challenging Performance Shares are the Remunerationa tested over Committee has considered the ways in which achievement of superior business and individual performance and on generating and on generating reward risk management is reflected throughout BHP Billitons sustained shareholder value. Investing sustained shareholder value.
6 Remuneration Report continued
Drivers of strategy
is our people. Talented and motivated people We provide are our most rewards competitive to preciousattract, motivate and retain highly resource. executives skilled
environmental assets and imperatives and managing them in on our ability the most effective Remuneration Remuneration frameworks reward to operate within achievement of demanding financial and efficient way. frameworks reward strong Code of performance targets, driving superior our performance in the areas results across the Group. Business Conduct. of health, safety,
LICENCE We depend on key safety and TO OPERATE environmental imperatives and on our ability We depend on to operate within our safety keyCode of and Business Conduct.
MaintainingWORLD-CLASS Balancing high-quality financial flexibility ASSETS assets and with the cost managing them in of finance in the most effective effective capital Maintaining and efficient way. management programs. high-quality
FINANCIAL Focus on delivering an STRENGTH AND enhanced resource DISCIPLINE endowment to

underpin future
PIPELINE
In world class assets in the most attractive commodities
Total shareholder return (TSR) Share price growth plus dividends reinvested over the performance period. A performance period of three years is used and TSR is calculated annually
Return on capital employed (ROCE) 2010
24.8%
Balancing Focus on generations of growth. financial flexibility delivering an with the cost enhanced resource of finance in endowment to effective capital underpin future Consistent with our long-term strategic management measures are linked generations focus, performance to long-term programs. growth. ThisRisk alignment of 6.2.3 rewards growth.
Looking beyond the project pipeline to pursue new growth options.
executives for delivering sustainable the global financial crisis has heightened the focus on risk returns and avoiding excessive risks.
6.2.4 Performance alignment
MEASURING OUR PERFORMANCE KEY INDICATORS

14
14
Return on capital employed (ROCE) Total operating prot before impairments for the year divided by the average total capital less other OPERATING AND FINANCIAL REVIEW: Key performance indicators investments and adjusted for impairments
Underlying earnings per share We measure performance against the four strategic Underlying earnings are net prot attributable to equity shareholders, plc Annual the effect elements ofAnglo Americanadjusted forReport 2010 of Group-wide targets our strategy through 15 special items and remeasurements and any related tax and non-controlling interests and improvement measures.
15 Anglo American plc Annual Report 2010
14.4%
2009
Organising
OPERATING AND FINANCIAL REVIEW: Key performance indicators
Efciently and effectively
to attract, motivate comparable roles in global and retain highly companies skilled executivesof a similar size willing toand complexity. work Base salaries around the world. for
Enacted through remuneration structures
Basic EPS excluding exceptional items (US cents per share)
Profit attributable excluding exceptional items (US$B)
Average STI reward (as of % of maximum award)
Average STI reward (as % of maximum award)
rewarding Further rewards loyalty. are available to executives for performance against all at risk The Remuneration components of Committee has remuneration. an overriding The at risk discretion to components reduce incentive serve the dual outcomes purpose of: to reflect incentivising below-target and rewarding safety or 152 | BHP BILLItON ANNUAL REPORt 2010 executives for environmental exceptional performance. performance; and promoting retention and rewarding loyalty.
152 | BHP BILLItON ANNUAL REPORt 2010
GMC base salaries Further rewards are aligned with are available comparable to executives roles in for performance global against all at risk companies of of components remuneration. a similar size The at risk and complexity. components serve the dual Base salaries for purpose of: other executives incentivising are market rewarding and executives for competitive within exceptional each geography, performance; and and equitable promoting across the Group. retention and
other executives are market competitive within each geography, and equitable across the Group.
performance targets, driving superior to growth. This risk management is reflected throughout BHP Billitons reward financial KPIs linking remuneration to the five-year performance period. for long-term satisfied that it reinforces rewards structure all is Short-term performance indicators and outcomes FINANCIAL structure for allexecutives, andfor delivering sustainable executives, and through the performance of BHP Billitons assets and the results across the Group. The LTIP links a significant desired behaviours. this is largely achievedis satisfied that it reinforces executives Short-term performance indicators and outcomes componentStI and LtI rewards, An individual scorecard of each executive Groups behaviours. this which comprise the desiredapproach to of remuneration foris largely achieved through themeasures is set fortheseIn world class assets in the Capital projects and investment Page 16 Return on capital employed Underlying earnings per share Capital projects and investment Total shareholder return (TSR) capital management programs: Operating FINANCIAL PROJECT PIPELINE GROWTH OPTIONS STRATEGIC ELEMENTS KPI TARGETS RESULTS AND TARGETS a significant portion and avoiding excessive risks. the GMC. of pay for executives to the delivery returns StI and LtI rewards, at the commencement of each financial year. individual scorecard of measures is An scorecards STRENGTH AND include the key financial Groups approach toStI rewards is deferred for a two-year which believes will drive and non-financial measures At the attractive commodities set for each executive comprise BHP Billitons performance. that the Profit AfterDISCIPLINE Tax (adjusted for foreign the equity component of Optimise the pipeline of projects and ensure that (ROCE) A summary of the Groups capital most Share scorecards Board of superior returns. Investing at the commencement of each financial year. these price growth plus dividends reinvested over period, and portion underremuneration for the conclusion of the financial year, each individuals achievement performance of the LtIP is measured over a The foundation We depend on Maintaining Balancing Focus on Looking exchange, price and exceptional items) beyond a significant GMC. Executives only derivefive-year period. the actual rewards received by members of value from of our business key safety and high-quality financial flexibility delivering an the project 2010 employed Underlying earnings per share Capital projects and investment against their measures is assessed by the Remuneration the key financial and non-financial measures that the Total water use Page 24 Work and investments can Safely, three new onlyWork related fatal injury projects that projects related fatal injurybe found the performance period. A performance period of sustainably capital isworld classcommitted toshareholder return (TSR) Capital projects and investment Page 16 Return on capital In assets in the Total 2010 include is our people. environmental assets and with the cost enhanced and pipeline and Earnings Before Interestresource Tax to the GMC Billiton Groups performance and Committee and Board and their cash StI reward is determined. their LTIP awards where BHPtherefore reflect the of StI rewards share and ensure (ROCE) A summary of the Groups capital most ELEMENTS Talented and imperatives and managing them in of finance in endowment to pursue new STRATEGIC value to the Share price growth plus KPI TARGETS RESULTS AND frequencyto 19 (FIFR) TARGETS price over an extended period. the equity component is deferredmatched with an allocation of Deferred Shares orbelieves will drive BHP Billitons performance. At the and TSR is calculated annually responsibly deliver the bestattractive commodities Group on period.dividends reinvested over three Optimise the pipeline of projectsprojects thatthat water use includes only water used for this is for a two-year Options Boardwill Total and frequency rate (FIFR) on pages 18 rate years is used 25% to effective capital 2010 motivated people on our ability the most effective 50% weighting. underpin future growth options. new capital is only committed to projects and investments can be found the performance a risk A performance period of 2010 performs strongly relative to comparator (or a combination of the two), to which the individual are our most to operate within and efficient way. management generations In and performance under the deliver the best value to the Group on a risk on pages 18 to 19 years is used and TSR is calculated annually period, addition, StI and LtI outcomes are not driven by a LtIP is measured over a (unless they leave the Group of the financial year, each individuals achievement 24.8% Capital management (cost and schedule) $4.13 conclusion not have access for two years precious our Code of programs. of growth. performance Conduct. companies in growing formulaic approach. the Remuneration Committee applies its TSR. adjusted net present value basis primary activities FIFR is calculated as the number of fatal injuries to basis adjusted net present value 2009 20 fatalities, 0.010 FIFR resource. Business under members of Investing a qualitative judgement to actual StI rewards and to five-year period.LtIP, and determiningrewards received byspecific circumstances). the may determine that rewards not Total shareholder return (TSR) 10% to 15% weighting. 2009 against their measures is assessed by the Remuneration in the areas of Full vesting under the LTIP only occurs vesting under the 2009 Total shareholder return (TSR) Please refer to the Remuneration employeesReturncontractors (ROCE)200,000 Underlying earnings per shareattributable to or on capital employed per hours worked 2009 2010 14 fatalities, 0.008 FIFR 14.4% the GMCoutperforms reflect the committee determines the relationship between StI rewards and the performance be therefore of the Group and past five health, safety, where BHP Billitons TSRprovided in circumstances where the Groups performance over theshareyears indicates the success of and Board and their cash StI reward is determined. Committee report on $2.14 it to be inappropriate or would provide unintended outcomes. On target reward We provide Remuneration Remuneration frameworksperformance against our long-term strategic Consistent with the KPIs 2009 Page 16 pages 98 to 109 Return on capital employed the Remuneration Capital projects investment Underlying In world class assets in per Total operating prot before impairments for the year (TSR) earnings are net protthe effectCorporate socialand investment Total shareholder return Underlying our remuneration strategy in aligning executive rewards with equity shareholders, adjusted for of divided by Underlying earnings the sharethe average total capital less other Please refer to fatal incidentsearnings p Return or Options employed (ROCE) on capital price over an extended period. environment reward the index TSR by morethe Remuneration Committee does not apply any discretion to than 30% over competitive rewards frameworks achievement of demanding financial focus, performance measures are linked this is matched with an allocation of Deferred Shares shareholder interests (as shown in the graphs below). Further Target Zero special items and remeasurements and any delivers a cash STI reward of 80% of base to attract, motivate driving superior to long-term This rewards (ROCE) most attractive commodities investments and adjusted forgrowth Share price impairments allow vesting when performance hurdles have not been satisfied. details of the and communityfor five-year period. related tax and retain highly of in the areas results across the Group. executives for delivering sustainable Underlying earnings are net prot attributable to plus dividends reinvested over report on pages 98 to 109 Total operating prot before impairments for the year 15% strong performance performance targets, STI outcomes forgrowth.the GMC areaweighted In addition, The LTIP operates over a driven byoverGroups Attributablecan be found inaEarnings STI StI and LtI outcomes are not long-termthe past five years Profit and Basicsection 3 as dened and ensure Lost time injuryperformance period. A(LTIFR) and non-controlling interests Social investment committed toby the London frequency rate performance period of three Optimise the pipeline of projectsprojects thatthat (or combination of the two), to which the individual will per Share a horizon. salary. The maximum cash award of 160% skilled executives of health, safety, returns and avoiding excessive risks. 2010 new capital is only the 2010 of this willing development to work environment The Minimum formulaic approach. not have equity shareholders, adjusted foryearseffectinjuries (LTIs) per 200,000 the time of TSR is calculated annually divided by the GMC members is is rarely awarded, and is only available of challenging Shareholding Requirement the Remuneration Committee applies descriptions of these terms).access for two years (unless they leave the Group average total capital less other towards achievement Performance Shares are testedAnnual Report (including over a Benchmarking Group includes donations, gifts in The number of lost is used and around the world. and Lost time injury Organising deliver the best value to the Group on a risk impacts STI community development. 24.8% was increased in July 2010 to STI reward for GMC members Average 300% of Average STI reward $4.13 under specific circumstances). a qualitativefive-year to determining StI rewards and to special items andand effectivelyworked.optimisation (AO)an occupationalSupply chainwhich investments and adjusted for impairments measured against where all non-financial KPIs linking remuneration tobase salaryvsfor the judgementperformance period. Earnings perfor GMC members financial and financial outcomes for Efciently remeasurements and any Asset An LTI is Supply chain Profit Attributable to Shareholders (excluding exceptional items) vs Basic Share kind and staff 20 administering injury hours adjusted Page present value optimisation (AO) community net time forAsset basis frequency rate (LTIFR) annual gross the CEO and targets are fully achieved. Sustainable operating prot benet Operating prot and capital spend benets to the 2009 $749 million 2009 $445 million 300 100 16 100 vesting under the LtIP, and may determine that rewards not all executives. STI for 15% of GMC base salaries STI outcomes for the GMC are weighted The LTIP operates over a long-term horizon. the relationship between StI rewards and the performance related tax and non-controlling interests of theto perform his/her duties forprocurement 2009 from optimised performance Group resulting from centralised 200% for other GMC members to ensure health, GMC members is safety, towards achievement ofperformance ofShares are tested over a programmes and volunteering in company timemillion renders the person unable asset 2010 $1,548 million 2010 $713 are aligned with challenging Performance BHP Billitons assets and 2009 0.76 90 Cash STI rewards are matchedperformanceaward by an period. significant component base of the core businesses capital employed (ROCE) from core businesses 14 in circumstances be providedThe LTIP links90awhere the committee determines 2009 measured against comparable financial KPIs linking remuneration to the five-year Target $1 billion by 2011 Underlying earningsTarget $1 billion by 2011 per share Return on of the Group over the past five years indicates the success of The Remuneration executives and shareholders interests 250 health, safety, rolesenvironment in global performance of BHP Billitons assets and management for 80 80 capital Thepay forlinks a significant component as percentage of attributable to one full shift orTotal operating prot before injury was for the year and is shownearnings are net prot prot before tax more the day after the impairments LTIP of BHP Billiton equity, which is deferred programs: 14.4% environment companies of capital management programs: 2010 0.57 12 of pay for would provide the delivery Committee has remain aligned. it to be inappropriate or executives tounintended outcomes. of executives to the delivery Underlying our remuneration strategy in aligning executive rewards with $2.14 70 and community a similar size Profit After Tax (adjusted for foreign 70 Operating two years providing an appropriate(adjusted for foreign of superior returns. focus 200 and incurred, whether a scheduled workday or not other development and complexity. community exchange, price and exceptional items) Profit After Taxderive value from Executives are prohibited from of superior returns. not apply any discretion to an overriding the Remuneration Committee does Executives only 10 equity shareholders, adjusted for the effect ofEnergy consumption divided by the average total capital less 60 shareholder interests (as shown in the graphs below). Further 60 Organising measures. Base salaries for Target Zero incidents and Earnings Before Interest and Tax time frame,awards where BHP Billiton on the longer-term their LTIP even in Page 24 Work related fatal injury Corporate social investment Safely, sustainably Work related fatal injury Total water use otherdiscretion The Groups executives 25% to 50% weighting. allow vesting when performance hurdles have not been satisfied. 50 details of the Groups Attributable Profit and Basic Earnings to performs to development 150 frequency and responsibly frequency rate (FIFR) Total water use includes 8 50 special items and remeasurements and investments and adjusted for impairments only water used forEnterprise developmentrate (FIFR) any 2009 102.1 million GJ total 2009 $82.5 million, 1.9% of are market regard to annual STI rewards. strongly relativeTSR.comparator hedging items) Capital management (cost exchange, price and exceptional any unvested equity and any and schedule) companies in growing its Executives only derive value from FIFR is calculated as the number of fatal injuries to primary activities the ultimate goal of zero reduce performance competitive within incentive of 2009 20 fatalities, 0.010 FIFR prot before tax used 10% to 15% weighting. in the areas Full vesting under the LTIP only occurs 40 40 shares that are as part of the held relatedof companies supported and 2010 energymillion GJ totalchain tax and non-controlling interestsFIFR per Share over the past five years can be found in section 3 6 each measures. safety, geography, employees or contractors Number Asset optimisation (AO) where BHP Billitons TSR outperforms 2010 14 fatalities, 0.008 2010 $111 million, 100.7 and EarningsTSR by more than 30%Interest and Tax Before over 100 Page 20 Supply Efciently and effectively Asset optimisation (AO) Supply chain Energy consumptionper 200,000 hours worked Corporate social investment outcomes health, On target performance against the KPIs and equitable their 30 30 environment the index Minimum Shareholding Requirement. LTIP awards where BHP Billiton 1.3% of prot before tax energy used Target Zero harm remains delivers a cash STI reward of 80% of base across the Group. of this Annual Report (including descriptions of these terms). 4 a Lost time Social investment as the London to reflect and community number of jobs sustained by fatal incidents companies Target A 15% intensity reduction Improvements inofenergy efciency salary. The maximum cash award of 160%to 50% weighting. 25% Thefive-year period. Requirement 20 Sustainable operating prot benet Operating prot and capital spend injury frequencyto the 200,000 are measureddened bydonations, gifts in benets rate (LTIFR) development Further rewards 2009 $749 million 2009 $445 million 50 Minimum Shareholding The Groups performs strongly relative to comparator 20 is rarely awarded, and is only available The number lost time injuries (LTIs) per Benchmarking Group includes Lost time injury Enterprise development impacts are available by 2014 2 below-target STI was increased in July 2010 to 300% of where all non-financial and financial 10 10 hours worked. An LTI time for administering community frequency rate enterprise outcomes for to executives Organising from a 2004 baselineis an 2009 Businesses annual gross base salary for the CEO and from optimised performance of the asset Group resulting from centralised the person unableoccupational injury duties for kind and staffand volunteering in company supported by Anglo American(LTIFR) procurement his/her which targets are fully achieved. Capital management (cost and schedule) 2010 $1,548 0.76 million 2010 $713 million supported: for performance or all executives. programmes time renders to perform safety performance companies in growing its TSR.2006 2007 2008 2009 2010 0 Average STI reward for GMC members 2009 GHG emissions 3,720 0 200% for other GMC members to ensure Average STI reward for GMC members 0 0 Cash STI rewards are matched by an award against all at risk tax the day after the injury was The Remuneration executives and shareholders interests 2006 2007 2008 2010 CO equivalent of BHP Billiton equity, which10%for is deferred to 15% weighting. components of base of the core businesses fromEfciently and effectively one full shift or morescheduled workday or not(AO) and is shown as percentage of prot beforedevelopment initiatives 0.57 incidents (1) 2009 19 MtTarget Page 20 Jobs sustained: (2) core businesses environmental of vs Profit Attributable to 2009 2010 under the LTIP only occurs Shareholders (excluding exceptional items) vs Basic Earnings per Share Committee remain aligned. incurred, whether a optimisation Target in the areas has Full vesting two years providing an appropriate focus 12,982 Supply chain Asset Supply chain $1 billion by 2011 remuneration. Target Zero 2010 20 Mt CO equivalent $1 billion by 2011 Asset optimisation (AO) Basic Earnings per Share Profit attributable to shareholders (excluding exceptional items) an overriding Executives are prohibited from on the longer-term time frame, even in performance. to The at risk Average STI reward for GMC members Average STI reward for GMC members Greenhouse gas (GHG) emissions Enterprise development 2010 Businesses supported: discretion the ultimate goal of zero Target A 10% intensity reduction
Operating and nancial review PEOPLE LICENCE TO OPERATE WORLD-CLASS ASSETS
strong performance measured against NON-FINANCIAL inhealth, safety, the areas ofenvironment health, safety, and community environment development measures. and community The Groups development.
MEASURING OUR PERFORMANCE MEASURING OUR PERFORMANCE KEY INDICATORS KEY INDICATORS
Asset optimisation (AO) Sustainable operating prot benet from optimised performance of the asset base of the core businesses
Page 20 Asset optimisation the Supply chain We measure performance against (AO) four st OperatingWe measure performancebenetsthethe strategic prot and capital spend against to four 2009 $749 million elements of our strategy through Group-wide RESULTSof our strategy through Group-wide targets elements AND TARGETS Group resulting from centralised procurement 2010 $1,548 million from coreand improvement measures. businesses Target $1 and improvement measures.billion by 2011(1)
Overview
24.8%
$4.13
14.4%
$2.14
(2)
Governance
Basic EPS excluding exceptional items (US cents per share)
Profit attributable excluding exceptional items (US$B)
Average STI reward (as of % of maximum award)
Average STI reward (as % of maximum award)
(1)
Financial statements
(3)(4)
(4)
Ore Reserves and Mineral Resources
components serve the dual purpose of: incentivising and rewarding executives for exceptional performance; and promoting retention and rewarding loyalty.
health, safety, environment and community development impacts STI outcomes for all executives.
reduce incentive outcomes to reflect below-target safety or environmental performance.
regard to annual STI rewards.
On target performance against the KPIs delivers a cash STI reward of 80% of base 14 salary. The maximum cash award of 160% 12 is rarely awarded, and is only available 10 where all non-financial and financial targets are fully achieved.
hedging any unvested equity and any shares that are held as part of the Minimum Shareholding Requirement.
16
measured from a 2004 baseline Total water use Page 24 Work related fatal injury Energy consumption Corporate social investment Work related fatal injury TotalOperating includes only water used for water use frequency rate (FIFR) frequency rate (FIFR) 2009(3)(4) 102.1 million GJ total 2009 $82.5 million, 1.9% of Employing 60 primary activitiespeople FIFR is calculated as the number of fatal injuries to Employing Total water32 Page 24used Work related fatal injury Energy Safely, sustainably Work turnover 2009use 20 fatalities, 0.010 FIFR prot before tax consumption energy diversity Voluntary HIV counselling The best Voluntary labour related fatal injury Page Voluntary labour turnover Voluntary HIV counselling Gender and testing (VCT) Number of permanent employee resignations as 2009 6.8% 2009 12% females, Total water use includes only water0.008 FIFR 82% 2010 used for and testing (VCT) frequency rate (FIFR) $111 million, (3)(4) 102.1 million GJ and responsibly frequency rate (FIFR) 150 50 employees or contractors per 200,000 hours worked 2009 8 Percentage of employees in southern Africa a percentage of total permanent employees 2010 14 fatalities, 2010 100.7 million managers 2009 19% female GJ total 2010 5.3% undertaking voluntary annual to primary activities 2010 14 females, 32 2009 2010 94% 20 fatalities, 0.010 FIFR of prot before tax energy Page Voluntary labour turnover used The best people Corporate social investment FIFR is calculated as the number of fatal injuries HIV tests withVoluntary HIV counselling VoluntaryGender diversityturnover labour Cash STI rewards are matched by an award compulsory counselling support 1.3% energy used managers 40 21% female Target Zero fatal incidents Target 95% VCT in high disease employees or contractors per 200,000 as worked and testing (VCT) hours 6 Percentage of women and female managers 2010 14 fatalities, 0.008 FIFR 2010 100.7 million G burden countries (100% is permanent Social investment Number ofemployed by the Group employee resignations as dened by the London Lost time injury frequency rate (LTIFR) of BHP Billiton equity, which is deferred for 2009 100 the long term goal) Target A 15% intensity reduction Zero fatal incidents6.8% Corporate social investment 30 energy used Target Percentage oftime injury in southern Africa employees by the London a percentage of total permanent Benchmarking Group includes donations, gifts in employees(LTIFR) The number of lost time injuries (LTIs) per 200,000 two years providing an appropriate focus 4 Lost Enterprise development A 15% intensity 2010 5.3% Target Social investment as dened Lost time injury frequency rate by 2014 20 hours worked. An LTI is an occupational injury which 20 Executives are prohibited from undertaking voluntary annual HIV tests with kind and staff time for administering community time injuries (LTIs) per 200,000 Benchmarking Grouprate (LTIFR) The number of lost on the longer-term time frame, even in frequency includes donations, gifts in Lost time injury 50 2009 Businesses supported: by 2014 2 kind and staff time0.76 for administering hedging any unvested equity and any frequency rate (LTIFR) 3,720 programmes and volunteering in hours worked. An LTI is an occupational injury which compulsory counselling support community company time renders the person unable to perform his/her duties for Gender diversity 10 regard to annual STI rewards. 10 2009 GHG emissions 2009 0.76 GHG emissions 6.2.3 Risk alignment are held as0part of the 6.2.4 Performance 0alignment or more the day after the injury was and is shown as percentage of of renders the person unable to perform his/her duties for programmes and volunteering in company time one full shift shares that Percentage prot before tax women and female managers 2010 0.57 2009(4) 19 Mt CO2 equivalent Jobs sustained:(4) 0 0 and is shown as percentage of prot before tax one full shift or more the day after the injury was 2010 0.57 2009 19 Mt CO2 equiv incurred, market forces necessarily 2006 2007 employed by the Group 2006 Minimum Shareholding Requirement. 2007 2008 2009 2010 12,982 2010 20 Mt CO equ the global financial crisis has heightened the focus on risk While 2008 Board2010 the 2009 recognises thatwhether a scheduled workday or not incurred, whether a scheduled workday or not Target Zero incidents 2010 20 Mt CO2 equivalent Target Zero incidents 2 Enterprise development Enterprise development Basic Earnings per Share Profit attributable to shareholders (excluding exceptional items) management within organisations, and in particular on influence remuneration practices, it strongly believes that 2010 the ultimate goal of zero Target A 10% intensity reduction the ultimate goal Businesses supported: intensity of zero Target A 10% Average STI reward for GMC members Number of companies supportedEnergy consumption and Energy consumption Average STI reward for GMC members Number of companies supported and remuneration frameworks that work to ensure executives take the fundamental driver Improvements in energy efciency are measured behind our remuneration structure is harm remains 9,392 by 2014 harm remains by 2014 number of jobs sustained by companies Improvements in energy efciency are measured number of jobs sustained by companies Jobs sustained: a long-term approach to decision-making minimising activities business performance. Accordingly,baseline supported by Anglo American enterprise from a 2004 supported by Anglo American enterprise baseline from a 2004 while target remuneration Total water use Total water use development initiatives 17,200 2009(4) 125.3 million m3 that focus only on short-term results at the expenseQuantified demonstration of alignment executives, the amount of longer is structured to attract and retain development initiatives of sustainableGreenhousebenet(GHG) emissions the end of 2011. $1 bn operating prot gas from core businesses by The 2009 gure was revised since the publication of the 2009(4) 125.3 million m3 Target Businesseshave since115.2 million m term business growth and success. of remuneration company between remuneration and actually received is dependent on the 2010 It includes operations that supported: independ become $1 bn of operating prot and capital spendemissions per unit of production is of 2011. Greenhouse gas (GHG) emissions Reduction in CO2 benets from core businesses by the end 3 Includes businesses since divested. Under revision 2010 115.2 million m 3,500 Target business and 2 emissions per unit of production is measured from a 2004 baseline performance achievement of superiorReduction in COindividual performance the Remuneration Committee has considered the ways in which Target Under revision Jobs sustained: and on generating sustained shareholder value. measured from a 2004 baseline risk management is reflected throughout BHP Billitons reward 18,000
100 where BHP Billitons TSR outperforms the index TSR by more than 30% over 90 a five-year period. 80
300
100 90 80 70
250
Operating Safely, sustainably and responsibly
number jobs sustained Improvements in energy Reduction from CO2baseline efciency performance of the of by Anglo American enterprise in a 2004 emissionsare measured of production isby companies from optimised per unit asset supported base of the core businesses development initiatives measured from a 2004 baseline Greenhouse gas (GHG) emissions Reduction in CO2 emissions per unit of production is
Energy consumption
Number Sustainable operating prot benet of companies supported and
Operating prot and capital spend benets to the by 2014 harm remains Group resulting from centralised procurement water use Total from core businesses 2009 125.3 million m
(4)
3 3
The Minimum Shareholding Requirement 70 was increased in July 2010 to 300% of 60 annual gross base salary for the CEO and 50 200% for other GMC members to ensure 40 executives and shareholders interests remain aligned. 30
2010 Target
115.2 million m Under revision
Target
9,392 Jobs sustained: 17,200 Businesses supported: 3,500 Jobs sustained: 18,000
2009 2010 Target
$749 million $1,548 million $1 billion by 2011(1)
2009 2010 Target
$445 million $713 million $1 billion by 20
200
Other information
(1)
BHP BILLItON ANNUAL REPORt 2010 | 153
(2)
$1 bn of sustainable operating prot benet from core businesses by the end of 2011. $1 bn of operating prot and capital spend benets from core businesses by the end of 2011.
(3)
(4)
The 2009 gure was revised since the publication of the 2009 Annual Report after amendments in accounting methodologies. It includes operations that have since become independently managed. Includes businesses since divested.
(1)
(3)
(2)
(4)
18 www.theiirc.org
152 | BHP BILLItON ANNUAL REPORt 2010
structure for all executives, and is satisfied that it reinforces Short-term performance indicators and outcomes Employing the desired behaviours. this is largely achieved through the An Voluntary HIV counselling Page 32 Voluntary labour turnover Voluntary HIV counsel The best people Voluntary labour turnover Employingindividual scorecard of measures is set for each executive Groups approach to StI and LtI rewards, which comprise and testing (VCT) and testing (VCT) Number of permanent employee resignations as at the commencement of each financial year. these scorecards 2009 6.8% a significant portion of remuneration for the GMC. Percentage of employees in southern Africa 82% 2010 5.3% Gender diversity 2009 Voluntary HIV counselling a percentage of total permanent employees 32 Page Voluntary labour turnover Voluntary HIV counselling The best people the key financial and non-financial measures that the Voluntary labour turnover include undertaking voluntary annual HIV tests with the equity component of StI rewards is deferred for a two-year Quantification of past and12% females, 94% present2010 and testing (VCT) and testing (VCT) Number of permanent employee resignations as 2009 6.8% 2009 Board believes will drive BHP Billitons performance. At the compulsory counselling support Gender diversity Target 95% VCT in hig Percentage of employees in southern Africa women and female managers a percentage ofindividuals achievement total permanent employees period, and performance under the LtIP is measured over a 2009 82% performance data and future targets 19% female managers countrie 2010 5.3% conclusion of the financial year, each Percentage of burden undertaking voluntary annual HIV tests with the Group employed by five-year period. the actual rewards received by members of 2010 14 females, 2010 94% against their measures is assessed by the Remuneration the long term g compulsory counselling support Gender cash StI the GMC therefore reflect the Groups performance and share 21% female managers Target 95% VCT in high disease Committee and Board and their diversity reward is determined. Explanation isan extended period. discussion price over reinforced through burden countries (100% is this is matched with anPercentage of women and femaleor Options allocation of Deferred Shares managers employed by the Group the long term goal) of link with risk StI and LtI outcomes are not driven by a (or a combination of the two), to which the individual will In addition, and performance Includes an array of non-financial $1 bn of sustainable operating prot benet from core businesses by the end of 2011. The 2009 gure was revised since the publication of the 2009 Annual Report after amendment not have access for two years (unless they leave the Group $1 bn of operating prot and capital spend benets from core businesses by the end of 2011. It includes operations that have since become independently managed. formulaic approach. the Remuneration Committee applies Includes businesses since divested. as well as financial KPIs under specific circumstances). a qualitative judgement to determining StI rewards and to BHP BILLItON ANNUAL REPORt 2010 | 153 vesting under the LtIP, and may determine that rewards not the relationship between StI rewards and the performance $1 bn of sustainable operating prot benet from core businesses by the of The 2009 gure was revised since the publication of the 2009 Annual Report after amendments in accounting methodologies. be provided in circumstances where the committee determines of the Group over the past bn of operating prot and capital spend benets from core businessesendthe2011.of 2011. five years indicates the success of It includes operations that have since become independently managed. $1 by end it to be inappropriate or would provide unintended outcomes. Includes businesses since divested. our remuneration strategy in aligning executive rewards with the Remuneration Committee does not apply any discretion to Towards Integrated Reporting 19 shareholder interests (as shown in the graphs below). Further allow vesting when performance hurdles have not been satisfied. details of the Groups Attributable Profit and Basic Earnings per Share over the past five years can be found in section 3 of this Annual Report (including descriptions of these terms).
(1) (3) (2) (4)
(1)
(3)
(2)
(4)
WHAT WILL INTEGRATED REPORTING MEAN FOR ME?

Integrated Reporting and transparency is not only the right thing to do, but it has brought with it a broad range of business benefits, ranging from richer access to capital markets and identification of cost savings to an increase in employee engagement.
Lord Sharman of Redlynch, Chairman, Aviva

The main benefits and challenges of Integrated Reporting are presented here from the following perspectives: reporting organizations; investors; policy-makers, regulators and standard-setters; and other stakeholders.
Benefits and Challenges

The implications of Integrated Reporting will vary for different participants in the reporting supply chain depicted in the diagram below. This section of the Discussion Paper outlines the main benefits and challenges with respect to Integrated Reporting for reporting organizations, investors, policy-makers, regulators and standard-setters, and other stakeholders. The benefits of Integrated Reporting set out in this section are equally relevant to other key stakeholders such as customers, suppliers and governments who are increasingly demanding demonstration of a more integrated picture of performance as a prerequisite for doing business.
Policy-makers, Regulators and Standard-setters Assurance Providers
Reporting Organization Perspective

Benefits
Although Integrated Reporting is an emerging practice, a number of benefits have been identified in research to date, as summarized below:9 reported information better aligned with investor needs; more accurate non-financial information available for data vendors; higher levels of trust with key stakeholders; better resource allocation decisions, including cost reductions; enhanced risk management; better identification of opportunities; greater engagement with investors and other stakeholders, including current and prospective employees which improves attraction and retention of skills; lower reputational risk; lower cost of, and better access to, capital because of improved disclosure; and development of a common language and greater collaboration across different functions within the organization. Directors duties The fiduciary and other duties of those charged with governance are not consistent across all jurisdictions. Consequently, the focus of an Integrated Report may differ, in particular in relation to the users to whom the Integrated Report is addressed. Directors liability Because the scope of Integrated Reporting will cover new and evolving subjects, with a greater focus on the future, concerns about the liability of those charged with governance will need to be addressed. This might be through the adoption of globally accepted and harmonized safe harbours or a broad business judgement rule. Commercial confidentiality Organizations will need to provide a more strategic focus and, in some cases, information not currently subject to mandatory disclosure requirements in their Integrated Reports. They will, therefore, need to balance the benefits mentioned above with the desire to avoid disclosing competitive information. Capacity building Building knowledge and experience across the reporting system will be essential to long-term success. The IIRC Pilot Programme (see page 24 for more details) will help to build this capacity, with the learning captured and disseminated by the IIRC for all to access. An online forum will also be created to encourage knowledge sharing. Information systems Organizations will need to establish or strengthen information systems for capturing and aggregating information. Organizations that are interested in experimenting with Integrated Reporting over the next two years are invited to join the IIRC Pilot Programme see page 24 for more details.
Reporting Organizations
Reporting

Investors
Other Users
Alternative pathways to Integrated Reporting

While the IIRC anticipates that an Integrated Report will ultimately become the primary report for all organizations, individual organizations will follow different routes over different timeframes towards that end. All organizations will be bound by existing regulatory reporting requirements until these are changed, but this will affect them in different ways depending on the jurisdiction(s) and industry(ies) in which they operate. Alternative routes that organizations may follow include the following. Combining the sustainability report with the management commentary or the full annual report. While a combined report is not an Integrated Report, it can be a logical first step for some organizations as they explore opportunities to integrate the content of the two reports into a more concise form and build understanding of how performance in one area drives value in another. Publishing a concise, standalone, Integrated Report as the only addition to a statutorily required annual report or regulatory filing. This may be particularly attractive for organizations not currently producing a separate sustainability report that their stakeholders have come to expect. Modifying the sustainability report or, to the extent permitted given the organizations regulatory environment, the management commentary by tailoring it in accordance with the Guiding Principles and Content Elements of Integrated Reporting. Adopting Integrated Reporting internally to underpin management information. This will provide business benefits while liaising with regulators either to introduce Integrated Reporting for all organizations or to introduce safe harbours for those who choose to innovate and experiment.
Challenges
Regulation Many components of Integrated Reporting are the subject of existing local regulations which vary between jurisdictions. Progress towards Integrated Reporting is, therefore, likely to evolve at different speeds in different countries. International consensus on the direction taken will be important, in particular for organizations operating across jurisdictions.
Q9.
From your perspective as a reporting organization: (a) Do you agree with the main benefits as presented in the Discussion Paper? Why/why not? (b) Do you agree with the main challenges as presented in the Discussion Paper? Why/why not?
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What Will Integrated Reporting Mean for Me? (continued)

Investor Perspective
Benefits
Fiduciary duty The provision of a more integrated information set will help those who invest on behalf of others, such as pension funds, to discharge their fiduciary duty by taking into account the full range of issues that affect organizational, and therefore financial, success and investment returns. Future orientation and outlook Integrated Reporting puts greater emphasis on information about the future. This will assist investors in assessing the organizations ability to generate future cash flows. Risks and opportunities Integrated Reports disclose key risks and opportunities as management views them. This will enable investors to assess the short-, medium- and long-term impact of these risks and opportunities across their investment portfolio. Comparability Integrated Reporting provides a platform to help enhance sector-specific reporting models and to bring together information from different forms of reporting. This assists improved sectoral and geographical analysis and comparison of issues such as business ethics, management of conflicts of interests, and bribery and corruption where they are relevant and material to the organization. Connected information Integrated Reporting makes clearer the linkages between the organizations strategy, governance and financial performance and the social, environmental and economic context within which it operates. It also better aligns externally reported information with information that management uses for decision making. This enables investors to assess more effectively the combined impact of the diverse factors that materially affect an organizations long-term value. Improved analysis Analysts, both sell-side and buyside, will have access to an organizations most significant information in one concise and integrated form, with the opportunity to drill down to more detailed information where necessary. This can streamline the analytical process and help analysts to incorporate a wider set of KPIs and other factors into their analysis. More effective decisions, better investment returns and more effective capital allocation Collectively, the above benefits will result in more effective investment decisions, better long-term investment returns and more effective capital allocation. Revised analytical techniques Analytical tools that incorporate a wide range of financial and non-financial factors are evolving. The IIRC Pilot Programme will work with investors to develop disclosures relevant for investment analysis. Investment supply chain Many of the current compensation and incentive structures along the investment supply chain drive a focus on the short term. A wide range of steps are being taken by regulatory and non-regulatory actors to rebalance this focus. Integrated Reporting can support these efforts by taking into account the whole spectrum of factors that impact an organizations success and, therefore, its long-term investment returns.
Policy-maker, Regulator and Standard-setter Perspective

Benefits
More effective capital allocation The more meaningful communication brought about through Integrated Reporting will support more effective capital allocation across the economy generally and, to the extent that Integrated Reporting supports capital flowing to those organizations that are responding most effectively to future challenges, can encourage the investment necessary to respond to issues such as energy security, food scarcity and climate change. Harmonization of approaches and reduced red tape Reporting is shaped by a patchwork of laws, regulations, standards, codes, guidance and stock exchange listing requirements, described in a recent report as a jigsaw in pieces.10 Integrated Reporting offers a platform for policy-makers, regulators and standard-setters, working together, to: integrate reporting requirements within a jurisdiction; harmonize advances in reporting that have been achieved in different jurisdictions; and approach new reporting issues on a consistent basis as they emerge across jurisdictions. Stewardship of common resources Because of the broader perspective required by Integrated Reporting, both in terms of the resources and relationships that it takes into account and the longer timeframe over which value creation is considered, it leaves organizations better placed to act, and be more accountable, as stewards of the communitys common resources, in particular human, natural and social capital. Access to information Integrated Reporting, by providing decision-relevant information, can support effective action by policy-makers and regulators as users of that information. Revising legislation, regulation and standards Mechanisms for revising legislation, regulation and standards require leadership, political will, coordination, time, resources, consultation and due process. This is particularly so where proposed changes involve more than one subject area (e.g., environmental law and securities law), and more than one jurisdiction. Liability and business confidentiality The scope of Integrated Reporting will cover new and evolving subjects and will have a more strategic focus. The resulting concerns of management, those charged with governance and assurance providers about liability, fiduciary duties and business confidentiality will need to be addressed.
Challenges

Challenges

Investors interested in developing integrated disclosures relevant for investment analysis are invited to join the IIRC Pilot Programme see page 24 for more details.
Economic and market stability The recent global financial crisis has made it clear that risks can develop, be harboured and be transmitted through market participants and practices that fall outside the traditionally prudentially regulated institutions. One important tool in addressing these risks is greater transparency of market participants, which Integrated Reporting can facilitate. This, linked with the better internal decision making and behaviours that Integrated Reporting encourages, as well as the longerterm perspectives that it enables, may well deliver lower volatility in markets. Moreover, it permits policy-makers and regulators to identify such risks as they emerge so that they can be dealt with in a timely way, thus adding to greater economic and market stability.
Q9.
From your perspective as an investor: (a) Do you agree with the main benefits as presented in the Discussion Paper? Why/why not? (b) Do you agree with the main challenges as presented in the Discussion Paper? Why/why not? (c) Do you agree that Integrated Reporting will drive the disclosure of information that is useful for integrated analysis? Why/why not? Q9. From your perspective as a policy-maker, regulator or standard-setter: (a) Do you agree with the main benefits as presented in the Discussion Paper? Why/why not? (b) Do you agree with the main challenges as presented in the Discussion Paper? Why/why not?
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What Will Integrated Reporting Mean for Me? (continued)

Other Perspectives
Civil Society Alignment of sustainable issues Organizations that adopt Integrated Reporting will display their stewardship not only of financial capital, but also of human, natural, social and other capitals, which is likely to align with the interests of many civil society interest groups. Stakeholder engagement Integrated Reportings emphasis on stakeholder engagement is likely to result in greater consultation with civil society interest groups. Supply chain Integrated Reporting will provide greater visibility of how an organization impacts on the stakeholder groups across its supply chain. Focus on specific issues The integration of environmental and social issues with financial issues could result in a reduction in focus on some issues of concern to particular civil society interest groups. The IIRC is engaging with key civil society interest groups and will utilize existing guidelines, codes, etc. throughout the development of the Framework. Future prospects Current and prospective employees will be able to gain an integrated perspective on the future prospects of their employer. They will also be better able to discern whether their employers values are consistent with their own. Connecting the organization Integrated reporting facilitates the breaking down of reporting silos and the introduction of integrated thinking. This allows employees to gain a better understanding of how their performance links to the objectives of the organization and to identify how they contribute to the ability of the organization to create and sustain value over time. Assurance providers Independent assurance The independent audit of financial statements currently plays a critical role in the worlds capital markets, and independent assurance of sustainability reports is recognized as best practice. It is therefore reasonable to expect that when an Integrated Report is an organizations primary report, investors and other stakeholders will want that report to be subject to independent assurance. New techniques Some information in an Integrated Report may be more difficult to assure than information disclosed under traditional reporting frameworks. This will require the development of new techniques, standards and reporting mechanisms to support assurance on Integrated Reports. Research As researchers, academics will have a strong role to play in the development of the initial Framework and in researching emerging topics as Integrated Reporting evolves over time. Education As educators, academics will have a strong role to play in education and capacity building across the reporting system, which will be essential to Integrated Reportings long-term success.
FUTURE DIRECTION
The development of Integrated Reporting will require a change in established thinking about decision making and reporting. Actions that the IIRC is planning include: developing an Exposure Draft of the Framework; working with others on emerging measurement and reporting practices; outreach, encouraging organizations to adopt and contribute to the evolution of Integrated Reporting; exploring opportunities for harmonizing reporting requirements within and across jurisdictions; and consultation regarding the ongoing governance of Integrated Reporting.
The development of Integrated Reporting is designed to enhance and consolidate existing reporting practices. Through collaboration, consultation and experimentation, the IIRC plans to move towards a reporting framework that provides the information needed to assess organizational value in the 21st century. There will be a period of transition. Some jurisdictions will introduce Integrated Reporting requirements ahead of others. This is the case in South Africa for example, where the Johannesburg Stock Exchange has introduced a listing requirement for companies to prepare, or publicly explain why they have not prepared, an Integrated Report. In other jurisdictions, organizations will experiment with Integrated Reporting within the existing reporting requirements. A number of organizations have already released Integrated Reports in this context. The IIRC Pilot Programme will facilitate further experimentation.
additional research conducted by the IIRC and others; and ongoing engagement with investors and other key stakeholders.
Employees
Academics
It is anticipated that an Exposure Draft of an International Integrated Reporting Framework will be published for comment in 2012. The intention is to ensure that the Framework has the scope and flexibility to support the future development of reporting for several decades, recognizing that it will need to be revised periodically to continue to meet the evolving needs of the market and society. Measurement and reporting practices Monitor and, where appropriate, contribute to or potentially lead development of emerging measurement and reporting practices relevant to Integrated Reporting. This may include the development of techniques to enable those areas of business impact and interdependence that are currently treated as externalities to be better quantified and integrated into decisions and reporting whether as risks and opportunities or as part of performance statements. Outreach Conduct regional roundtables and other engagement and communication activities to raise awareness of Integrated Reporting among investors and other key stakeholders, and to encourage organizations to adopt and contribute to the evolution of Integrated Reporting. Harmonization Explore with national, regional and global policy-makers, regulators and standard-setters, opportunities for harmonizing reporting requirements within and across jurisdictions, and help to develop a compatible regulatory landscape. Governance Develop, through public consultation, institutional arrangements for the ongoing governance of Integrated Reporting.
The IIRC Pilot Programme

The IIRC is conducting a two-year Pilot Programme, commencing in October 2011, to test and further develop the International Integrated Reporting Framework. Working as a network of peer-group organizations and investors with whom knowledge can be exchanged and experiences shared, the IIRC Pilot Programme aims to: encourage organizations to innovate in their reporting practices; inform the future evolution of reporting and investor practices; and drive convergence in international reporting guidance.
Developing an effective Framework and supporting mechanisms will require a collaborative effort from all those involved in the reporting system. The IIRC is seeking to encourage and facilitate that collaboration. Actions that the IIRC is currently planning relate to the following. Pilot Programme Run a two-year Pilot Programme, commencing in October 2011 to test the proposals set out in this Discussion Paper and provide practical examples of Integrated Reporting. Companies, investors and others participating in the IIRC Pilot Programme will provide a key contribution to the Frameworks development over the next two years (see page 24 for more details). Framework Develop the International Integrated Reporting Framework on the basis of: responses received to this Discussion Paper; the insights emerging from the IIRC Pilot Programme;
For more details and to express interest in participating, see www.theiirc.org/pilot
Q9.
From your perspective as a key stakeholder: (a) Do you agree with the main benefits as presented in the Discussion Paper? Why/why not? (b) Do you agree with the main challenges as presented in the Discussion Paper? Why/why not?
Q10. (a) Do you agree that the actions listed in the Discussion Paper should be the next steps undertaken by the IIRC? Why/why not? Are there other significant actions that should be added? (b) What priority should be afforded to each action? Why? Q11. Do you have any other comments that you would like the IIRC to consider?
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SUMMARY OF CONSULTATION QUESTIONS
ABOVE ALL, INTEGRATED REPORTING IS ABOUT GOOD BUSINESS
The IIRC welcomes comments on all aspects of the Discussion Paper from all stakeholders, whether to express agreement or to recommend changes. Your answers to the Consultation Questions, and any other comments you would like to make, should be submitted to dpresponses@theiirc.org or online at www.theiirc.org. For the purpose of analysis, you are asked to identify the organization to which you belong and where it is located. All comments received will be considered a matter of public record and will be posted on www.theiirc.org. Comments should be submitted by Wednesday 14th December 2011.
Guiding Principles (page 13)

Q7. Do the Guiding Principles identified in the Discussion Paper provide a sound foundation for preparing an Integrated Report are they collectively appropriate; is each individually appropriate; and are there other Guiding Principles that should be added? Why/why not?
In Tata Group the core belief is what we do must benefit society and this is why we support the development of Integrated Reporting. Sustainability must be in your DNA.
Ishaat Hussain, Finance Director, Tata Sons Limited

Managing pension assets means that we have a responsibility towards millions of people to ensure they receive decent pensions; we therefore need to generate decent returns in a responsible manner over the long term. Integrated Reporting helps us get the full picture of a companys performance and make sound investment decisions.
Content Elements (page 14)

Q8. Do the Content Elements identified in the Discussion Paper provide a sound foundation for preparing an Integrated Report are they collectively appropriate; is each individually appropriate; and are there other Content Elements that should be added? Why/why not?
The World has Changed Reporting Must Too (page 4)

Q1. (a) Do you believe that action is needed to help improve how organizations represent their value-creation process? Why/why not? (b) Do you agree that this action should be international in scope? Why/why not?
Professor Angelien Kemna, Chief Investment Officer, APG and Chief Executive Officer, APG Asset Management
The case for globally consistent financial reporting standards is well understood and accepted. It is appropriate to apply the same global approach to other aspects of corporate reporting. This initiative represents an important step on that journey.
Towards Integrated Reporting (page 6)

Q2. Do you agree with the definition of Integrated Reporting on page 6? Why/why not?
What Will Integrated Reporting Mean for Me? (Reporting organizations page 21, Investors page 22, Policymakers, regulators and standard-setters page 23, Other perspectives page 24)
Q9. From your perspective: (a) Do you agree with the main benefits as presented in the Discussion Paper? Why/why not? (b) Do you agree with the main challenges as presented in the Discussion Paper? Why/why not? (c) Do you agree that Integrated Reporting will drive the disclosure of information that is useful for integrated analysis (from the perspective of investors)? Why/why not?
Hans Hoogervorst, Chairman, International Accounting Standards Board

It is about time that we stopped printing together financial and sustainability reports without any visible and concrete links between them.
Professor Nelson Carvalho, Universidade de So Paolo

If you are a company committed to the long term, and one of your ambitions is to be trusted, you have no choice Integrated Reporting is the way to communicate.
An International Integrated Reporting Framework (page 8)

Q3. Q4. Do you support the development of an International Integrated Reporting Framework? Why/why not? (a) Do you agree that the initial focus of Integrated Reporting should be on reporting by larger companies and on the needs of their investors? Why/why not? (b) Do you agree that the concepts underlying Integrated Reporting will be equally applicable to small and medium enterprises, the public sector and not-for-profit organizations?
Jim Singh, Chief Financial Officer, Nestl

The goal of the IIRC is not to increase the reporting burden on companies and other entities. Rather, it is to help them and all their stakeholders make better resource allocation decisions. All of us have a stake in a sustainable society.
Future Direction (page 25)

Q10. (a) Do you agree that the actions listed in the Discussion Paper should be the next steps undertaken by the IIRC? Why/why not? Are there other significant actions that should be added? (b) What priority should be afforded to each action? Why? Q11. Do you have any other comments that you would like the IIRC to consider?
Gran Tidstrm, President, International Federation of Accountants

Integrated Reporting builds on the practice of financial reporting, and environmental, social and governance reporting. It equips companies to manage their operations, brand and reputation strategically and to manage better any risks that may compromise the long-term sustainability of the business.
Business Model and Value Creation (page 10)

Q5. Are: (a) the organizations business model; and (b) its ability to create and sustain value in the short, medium and long term, appropriate as central themes for the future direction of reporting? Why/why not? Do you find the concept of multiple capitals helpful in explaining how an organization creates and sustains value? Why/why not?
Professor Mervyn King, Deputy Chairman, IIRC and Chairman, GRI
Q6.
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ACKNOWLEDGEMENTS AND ENDNOTES
IIRC members
Sir Michael Peat, Principal Private Secretary to TRH The Prince of Wales and The Duchess of Cornwall (Chairman) Professor Mervyn King, Chairman, King Committee on Corporate Governance and Chairman, Global Reporting Initiative (Deputy Chairman) Helen Brand, Chief Executive, ACCA Professor Nelson Carvalho, Universidade de So Paulo, Brazil and Chairman, 25th Session of UNCTADs ISAR Paul Clements-Hunt, Head of Unit, UNEP Finance Initiative Aron Cramer, President and CEO, Business for Social Responsibility Robert Eccles, Professor of Management Practice, Harvard Business School Gerald Edwards, Senior Advisor on Accounting and Auditing Policy, Financial Stability Board (Observer) John Elkington, Founding Partner & Executive Chairman, Volans Dr Wolfgang Engshuber, President, Corporate Centers, Munich Re America and UNPRI Tim Flynn, Chairman, KPMG International Hans Hoogervorst, Chairman of the International Accounting Standards Board (from July 2011) Ishaat Hussain, Chief Financial Officer, Tata Michael Izza, ICAEW Chief Executive and Global Accounting Alliance Professor Angelien Kemna, Chief Investment Officer, APG and Chief Executive Officer, APG Asset Management Thomas Kusterer, Chief Financial Officer, EnBW Energie Baden-Wrttemberg AG Huguette Labelle, Chair, Transparency International Mindy Lubber, President of Ceres and Director of INCR Charles A. McDonough, Vice President and Controller, The World Bank Sir Mark Moody-Stuart, Chairman of the Foundation for the Global Compact Dennis Nally, Chairman, PricewaterhouseCoopers International Limited Jeremy Newman, Chief Executive Officer, BDO International Edward Nusbaum, Chief Executive Officer, Grant Thornton International David Nussbaum, WWF-UK Chief Executive, WWF International
Roberto Pedote, Senior Vice President of Financial and Legal Affairs, Natura Russell Picot, Group Chief Accounting Officer, HSBC James H. Quigley, Senior Partner, Deloitte LLP Ren Ricol, General Commissioner for Public Investment (France) Atsushi Saito, President & CEO, Tokyo Stock Exchange Group, Inc Rick Samans, Managing Director, WEF and Chairman, Climate Disclosure Standards Board Maria Helena Santana, Chairman of the Executive Committee of the International Organization of Securities Commissions Leslie Seidman, Chairman, Financial Accounting Standards Board Jim Singh, Chief Financial Officer, Nestl Bjrn Stigson, President, World Business Council for Sustainable Development Gran Tidstrm, President, International Federation of Accountants Charles Tilley, Chief Executive, CIMA Jim Turley, Chairman and Chief Executive Officer, Ernst & Young Doug Webb, 100 Group of Finance Directors Christy Wood, Chair, International Corporate Governance Network (ICGN) Li Yong, Vice Minister of the Ministry of Finance, P.R. China and President of CICPA (from July 2011)
Claudia Kruse, Head of Sustainability and Governance, APG and Chair, ICGN Integrated Business Reporting Committee Bob Laux, Director, Accounting and Reporting, Microsoft Jerome Lavigne-Delville, Special Advisor, UN Global Compact Office Ernst Ligteringen, Chief Executive, Global Reporting Initiative Steve Maslin, Partner, Grant Thornton Dr. Robert Kinloch Massie, Senior Fellow, Initiative for Responsible Investment, Kennedy School of Government, Harvard University David Matthews, Partner, KPMG Dr Anthony Miller, Accounting and Corporate Governance Programme, UNCTAD Dr Jeanne Ng, Director, Group Environmental Affairs, CLP Holdings Limited David Phillips, Partner, PricewaterhouseCoopers Janet Ranganathan, Vice President for Science and Research, WRI Professor Roger Simnett, Associate Dean, Research, University of New South Wales Susanne Stormer, Vice President, Global Triple Bottom Line Management, Novo Nordisk Alan Teixeira, Director of Technical Activities, International Accounting Standards Board Graham Terry, Strategy & Thought Leadership, SAICA Senior Executive, South African Institute of Chartered Accountants Dr Steve Waygood, Head of Sustainability Research and Engagement, Aviva Investors Yuki Yasui, Deputy Head, UNEP Finance Initiative
John Paluszek, Chair, Global Alliance for Public Relations and Communication Management Sallie Pilot, Director of Research & Strategy, Black Sun Peter Proestakes, Assistant Director, Financial Accounting Standards Board Nick Ridehalgh, Senior Director, KPMG Sydney Tom Rotherham, Associate Director, Hermes Equity Ownership Services (EOS) Neil Stevenson, Brand Executive Director, ACCA Alan Willis, Independent Standards Advisor
Robert H. Herz, Former Chairman, Financial Accounting Standards Board (former member of the IIRC) Donald Hill, Design Director, Black Sun Britt Keay, Account Manager, Black Sun Mitsuru Komiyama, Former Executive Board Member, The Japanese Institute of Certified Public Accountants (former member of the Working Group) Richard Reid, London Chairman, KPMG (former member of the Working Group) Victoria Scott, Research Analyst, Black Sun Takayuki Sumita, Chairperson, World Intellectual Capital Initiative (WICI) Sir David Tweedie, Former Chairman of the International Accounting Standards Board (former member of the IIRC) In addition, the IIRC would like to thank the many hundreds of people around the world who have contributed to the development of Integrated Reporting and this Discussion Paper through participation in meetings, roundtables, seminars, online discussion and other events
Endnotes
1 Ocean Tomo (2010), Ocean Tomos Intangible Asset Market Value Study 2 Management commentary is also known as management discussion and analysis, business review and narrative reporting 3 Sustainability reporting is also known as triple bottom line reporting, environmental, social and governance (ESG) reporting, corporate responsibility reporting and corporate social responsibility reporting 4 See, for example, Boston College Carroll School of Management (2008), The Use of Non-Financial Information: What Do Investors Want?, Arnold, V., Bedard, C., Phillips, J. and Sutton, S. (2009), Understanding Professional and NonProfessional Investors Information Requirements, Financial Services Council and The Australian Council of Superannuation Investors (2011), ESG Reporting Guide for Australian Companies Building The Foundation For Meaningful Reporting, Haigh, M. and Shapiro, M.A. (2011), Financial Institutions: taking greenhouse gases into account produced by the Climate Disclosure Standards Board for the Department for Environment, Food and Rural Affairs, UK 5 UN Global Compact-Accenture (2010), A New Era of Sustainability, UN Global Compact-Accenture CEO Study 2010 6 Bloomberg (2010), The Sustainability Edge, Sustainability Report 2010 7 See, for example, Financial Reporting Review Panel and Accounting Standards Board (2011), Cutting the Clutter. Combating clutter in an annual report 8 These sources include White, A.L (2010), The Five Capitals of Integrated Reporting Toward a Holistic Architecture for Corporate Disclosure and Forum for the Future (2009), The Five Capitals Model a framework for sustainability 9 See, for example, Eccles, R.G. and Krzus, M.P. (2010), One Report: Integrated Reporting for a Sustainable Strategy and Hopwood, A.H., Unerman, J. and Fries, J. (2010), Accounting for Sustainability: Practical Insights 10 CIMA, PwC and Tomorrows Company (2011), Tomorrows Corporate Reporting A critical system at risk
Secretariat
Jessica Fries, Director, The Princes Accounting for Sustainability Project (A4S) and Director, PricewaterhouseCoopers Lisa French, Director Reporting Framework, Global Reporting Initiative Superna Khosla, Head of Communications and Engagement, A4S and Senior Manager PricewaterhouseCoopers Mike Krzus, President, Mike Krzus Consulting Mariko Mishiro, Research Fellow, World Intellectual Capital Initiative (WICI) Charlotte Masiello-Riome, Communications Strategy Advisor, A4S Michael Nugent, Senior Technical Manager, International Federation of Accountants Dr. Jeremy Osborn, Project Manager, CIMA Mike Reid, Project Manager, A4S and Manager, Grant Thornton Beth A. Schneider, Director, Deloitte & Touche LLP Bethan Walker, Communications Officer, A4S Joris Wiemer, Senior Coordinator External Relations, Global Reporting Initiative Victoria Windmill, Project Manager, A4S and Manager, Deloitte
Working Group members

Paul Druckman, Executive Board Chairman, The Princes Accounting for Sustainability Project (Co-Chairman) Ian Ball, Chief Executive Officer, International Federation of Accountants (Co-Chairman) Dr Nelmara Arbex, Deputy Chief Executive, Global Reporting Initiative Frank Curtiss, Head of Corporate Governance, Railpen and Board member ICGN Peter Dart, Director, WPP Jessica Fries, Director, The Princes Accounting for Sustainability Project (Secretary) James Gifford, Executive Director, United Nations Principles for Responsible Investment Eric J. Hespenheide, Partner, Deloitte & Touche LLP Kiyoshi Ichimura, Executive Board Member, The Japanese Institute of Certified Public Accountants Alan Knight, Independent Standards Advisor
Additional Task Force and Advisory Group members

Marjolein Baghuis, Communications and Network Relations Director, Global Reporting Initiative Bastian Buck, Manager Technical Development, Global Reporting Initiative Ralf Frank, Managing Director, DVFA Robert Giglietti, Deputy Controller-Financial Reporting, GE Gavin Grant, Chairman, Burson-Marsteller UK Lois Guthrie, Secretary, Climate Disclosure Standards Board Jonathon Hanks, Founding Director, Incite Sustainability Yoichi Mori, Technical Director, The Japanese Institute of Certified Public Accountants
Other acknowledgements
Members of the Accounting Bodies Network of The Princes Accounting for Sustainability Project Robert Bruce, Journalist Robert Bunting, Past President, International Federation of Accountants (former member of the IIRC) Lauren Dalley, Group Account Director, Black Sun Jane Diplock, Former Chairman of the Executive Committee of IOSCO (former member of the IIRC) Alan Fisk, Technical Editor, International Accounting Standards Board
28 www.theiirc.org
Your comments requested

Please join us in this unique effort to develop an overarching framework for Integrated Reporting by providing feedback on this Discussion Paper. Your answers to the Consultation Questions in this Discussion Paper, and any other comments you would like to make, should be submitted to dpresponses@theiirc.org or online at www.theiirc.org. For the purpose of analysis, you are asked to identify the organization to which you belong and where it is located. All comments received will be considered a matter of public record and will be posted on www.theiirc.org. Comments should be submitted by Wednesday 14th December 2011.
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TOWARDS INTEGRATED REPORTING Communicating Value in the 21st Century

ABOUT THIS DISCUSSION PAPER

MANAGEMENT COMMENTARY GOVERNANCE AND REMUNERATION REPORTING

FINANCIAL STATEMENTS SUSTAINABILITY REPORTING

Towards Integrated Reporting 1

What is Integrated Reporting?

International differences in reporting

The building blocks

Why do We Need Integrated Reporting?

The benefits of Integrated Reporting

Your Comments Requested

Towards Integrated Reporting 3

THE WORLD HAS CHANGED REPORTING MUST TOO

Key points in this section

Components of S&P 500 market value

1975 Physical and nancial assets Other factors

Towards Integrated Reporting 5

TOWARDS INTEGRATED REPORTING

Key points in this section

Integrated Reporting Defined

Building on Developments to Date

The evolution of corporate reporting

Environmental Reporting Governance and Remuneration

Management Commentary Sustainability Reporting Governance and Remuneration Financial Statements

Governance and Remuneration

Towards Integrated Reporting 7

AN INTERNATIONAL INTEGRATED REPORTING FRAMEWORK

How is Integrated Reporting Different?

Towards Integrated Reporting 9

An International Integrated Reporting Framework (continued)

Resources and relationships or capitals

Integrated Reporting therefore aims to provide insights about:

Intellectual Natural Social

Intellectual Natural Social

Towards Integrated Reporting 11

An International Integrated Reporting Framework (continued)

Strategic focus: An Integrated Report provides insight into the

Responsiveness and stakeholder inclusiveness: An Integrated

us foc ic g ate Str

Co nn ec tiv ity of inf or ma tio n

Connectivity of information: An Integrated Report shows

Future outlook Organizational overview and business model

y rialit mate and bility relia ess, cisen Con

Examples of connectivity include:

Conciseness, reliability and materiality: An Integrated Report

Governance and remuneration

Future orientation: An Integrated Report includes

An International Integrated Reporting Framework (continued)

Towards Integrated Reporting 15

Towards Integrated Reporting Innovation in Action

the elf ts, well as tion

http://www.akzonobel.com/news/reports/2010/annual_report_2010.aspx Exploration and production

our integratedand Summarized Sasol Annual Review business model

Exploration and production

and home sales interior decoration

Decorative paints market overview

Key gures in millions

and home sales interior decoration

professional paint professional trimpaint

Signed a landmark agreement with the Forest Stewardship Council

Operating income Moving average ROI (in %)

1,600 600 2,200 5,400 1,100 21,900

Our proprietary Fischer-Tropsch technology

Key raw materials