Performance information provides accountability to investors and stakeholders on how the company performed against its strategic goals and objectives and discloses the metrics (key performance indicators) and targets used to assess and manage relevant sustainability and climate-related risks and opportunities.
The annual report includes an overall assessment of management’s performance, both financial and sustainability, and how performance achieved or departed from forecasts and long-term trends. It also includes detailed statements on the company’s financial and sustainability results, with data that are comparable with previous years and peers. To ensure the reliability and credibility of performance information, the financial data are audited, and sustainability information can be assured.
Learn more about the disclosure of Performance Metrics and Targets elements:
The European Sustainability Reporting Standards: ESRS 1 General Requirements, in section 8 introduces the content and structure of sustainability statements. Find below an excerpt from the standard for your reference.
The Performance Metrics and Targets section is aligned with the main recommendations of the IFRS Standard S1 on General Requirements for Disclosure of Sustainability-Related Financial Information, which includes disclosure on metrics and targets as one of the four pillars for sustainability disclosure (1. governance, 2. strategy, 3. risk management, and 4. metrics and targets). Find below an excerpt from the standard for your reference.
ISSB IFRS S1 General Requirements for Disclosure of Sustainability-Related Financial Information (Excerpt)
Metrics and Targets
45 The objective of sustainability-related financial disclosures on metrics and targets is to enable users of general purpose financial reports to understand an entity’s performance in relation to its sustainability-related risks and opportunities, including progress towards any targets the entity has set, and any targets it is required to meet by law or regulation.
46 An entity shall disclose, for each sustainability-related risk and opportunity that could reasonably be expected to affect the entity’s prospects:
(a) metrics required by an applicable IFRS Sustainability Disclosure Standard; and
(b) metrics the entity uses to measure and monitor:
(i) that sustainability-related risk or opportunity; and
(ii) its performance in relation to that sustainability-related risk or opportunity, including progress towards any targets the entity has set, and any targets it is required to meet by law or regulation.
47 In the absence of an IFRS Sustainability Disclosure Standard that specifically applies to a sustainability-related risk or opportunity, an entity shall apply paragraphs 57–58 to identify applicable metrics.
48 Metrics disclosed by an entity applying paragraphs 45–46 shall include metrics associated with particular business models, activities or other common features that characterise participation in an industry.
49 If an entity discloses a metric taken from a source other than IFRS Sustainability Disclosure Standards, the entity shall identify the source and the metric taken.
50 If a metric has been developed by an entity, the entity shall disclose information about:
(a) how the metric is defined, including whether it is derived by adjusting a metric taken from a source other than IFRS Sustainability Disclosure Standards and, if so, which source and how the metric disclosed by the entity differs from the metric specified in that source;
(b)whether the metric is an absolute measure, a measure expressed in relation to another metric or a qualitative measure (such as a red, amber, green—or RAG—status);
(c)whether the metric is validated by a third party and, if so, which party; and
(d)the method used to calculate the metric and the inputs to the calculation, including the limitations of the method used and the significant assumptions made.
51 An entity shall disclose information about the targets it has set to monitor progress towards achieving its strategic goals, and any targets it is required to meet by law or regulation. For each target, the entity shall disclose:
(a) the metric used to set the target and to monitor progress towards reaching the target;
(b) the specific quantitative or qualitative target the entity has set or is required to meet;
(c) the period over which the target applies;
(d) the base period from which progress is measured;
(e) any milestones and interim targets;
(f) performance against each target and an analysis of trends or changes in the entity’s performance; and
(g)any revisions to the target and an explanation for those revisions.
52 The definition and calculation of metrics, including metrics used to set the entity’s targets and monitor progress towards reaching them, shall be consistent over time. If a metric is redefined or replaced, an entity shall apply paragraph B52.
53 An entity shall label and define metrics and targets using meaningful, clear and precise names and descriptions.
The Performance Metrics and Targets section is aligned with the main recommendations of the European Sustainability Reporting Standards: ESRS 2 General Disclosures (p. 38 – 68), which includes disclosure on metrics and targets as one of the four pillars for sustainability disclosure (1. governance, 2. strategy, 3. impact, risk and opportunity management, and 4. metrics and targets). Find below an excerpt from the standard for your reference.
European Sustainability Reporting Standards ESRS 2 – General Disclosures (Excerpt)
5. Metrics and targets
70. This chapter sets out Minimum Disclosure Requirements that shall be included when the undertaking discloses information on its metrics and targets related to each material
sustainability matter. They shall be applied together with the Disclosure Requirements, including Application Requirements, provided in the relevant topical ESRS. They shall also be applied when the undertaking prepares entity-specific disclosures.
71. The corresponding disclosures shall be located alongside disclosures prescribed by the topical ESRS.
72. If the undertaking cannot disclose the information on targets required under the relevant topical ESRS, because it has not set targets with reference to the specific sustainability matter concerned, it shall disclose this to be the case, and provide reasons for not having adopted targets. The undertaking may disclose a timeframe in which it aims to adopt them. Minimum disclosure requirement – Metrics MDR-M – Metrics in relation to material sustainability matters
73. The undertaking shall apply the requirements for the content of disclosures in this provision when it discloses on the metrics it has in place with regard to each material sustainability matter.
74. The objective of this Minimum Disclosure Requirement is to provide an understanding of the metrics the undertaking uses to track the effectiveness of its actions to manage material sustainability matters.
75. The undertaking shall disclose any metrics that it uses to evaluate performance and
effectiveness, in relation to a material impact, risk or opportunity.
76. Metrics shall include those defined in ESRS, as well as metrics identified on an entity-specific basis, whether taken from other sources or developed by the undertaking itself.
77. For each metric, the undertaking shall:
(a) disclose the methodologies and significant assumptions behind the metric, including the limitations of the methodologies used;
(b) disclose whether the measurement of the metric is validated by an external body other
than the assurance provider and, if so, which body;
(c) label and define the metric using meaningful, clear and precise names and descriptions;
(d) when currency is specified as the unit of measure, use the presentation currency of its
financial statements. Minimum Disclosure Requirement – Targets MDR-T – Tracking effectiveness of policies and actions through targets
78. The undertaking shall apply the requirements for the content of disclosures in this provision when it discloses information about the targets it has set with regard to each material sustainability matter.
79. The objective of this Minimum Disclosure Requirement is to provide for each material
sustainability matter an understanding of:
(a) whether and how the undertaking tracks the effectiveness of its actions to address
material impacts, risks and opportunities, including the metrics it uses to do so;
(b) measurable time-bound outcome-oriented targets set by the undertaking to meet the
policy’s objectives, defined in terms of expected results for people, the environment or the
undertaking regarding material impacts, risks and opportunities;
(c) the overall progress towards the adopted targets over time;
(d) in the case that the undertaking has not set measurable time-bound outcome-oriented
targets, whether and how it nevertheless tracks the effectiveness of its actions to address
material impacts, risks and opportunities and measures the progress in achieving its
policy objectives; and
(e) whether and how stakeholders have been involved in target setting for each material
80. The undertaking shall disclose the measurable, outcome-oriented and time-bound targets on material sustainability matters it has set to assess progress. For each target, the disclosure shall include the following information:
(a) a description of the relationship of the target to the policy objectives;
(b) the defined target level to be achieved, including, where applicable, whether the target is absolute or relative and in which unit it is measured;
(c) the scope of the target, including the undertaking’s activities and/or its upstream and/or downstream value chain where applicable and geographical boundaries;
(d) the baseline value and base year from which progress is measured;
(e) the period to which the target applies and if applicable, any milestones or interim targets;
(f) the methodologies and significant assumptions used to define targets, including where
applicable, the selected scenario, data sources, alignment with national, EU or
international policy goals and how the targets consider the wider context of sustainable
development and/or local situation in which impacts take place;
(g) whether the undertaking’s targets related to environmental matters are based on
conclusive scientific evidence;
(h) whether and how stakeholders have been involved in target setting for each material
(i) any changes in targets and corresponding metrics or underlying measurement
methodologies, significant assumptions, limitations, sources and processes to collect
data adopted within the defined time horizon. This includes an explanation of the
rationale for those changes and their effect on comparability (see Disclosure
Requirement BP-2 Disclosures in relation to specific circumstances of this Standard); and
(j) the performance against its disclosed targets, including information on how the target is
monitored and reviewed and the metrics used, whether the progress is in line with what
had been initially planned, and an analysis of trends or significant changes in the
performance of the undertaking towards achieving the target.
81. If the undertaking has not set any measurable outcome-oriented targets:
(a) it may disclose whether such targets will be set and the timeframe for setting them, or the reasons why the undertaking does not plan to set such targets;
(b) it shall disclose whether it nevertheless tracks the effectiveness of its policies and
actions in relation to the material sustainability-related impact, risk and opportunity,
and if so:
i. any processes through which it does so;
ii. the defined level of ambition to be achieved and any qualitative or quantitative
indicators it uses to evaluate progress, including the base period from which
progress is measured.