Revealed: The Nine Secrets of Integrated Reporting Success
Integrated reporting is becoming mainstream, with adopters across 64 countries (IIRC). But the process can be confusing, even overwhelming. So we’ve identified nine simple steps to help you get started:
The growing evidence of a link between sustainability and stronger financial returns isn’t really surprising. It’s common sense that a company that adheres to high governance standards, delivers environmentally sustainable products and services, takes care of its staff, and treats customers well, is simply more likely to outperform over the long term.
The graph below, which was inspired by the Future-Fit Business Benchmark, visualises what we at BWD are convinced is inevitable – a future where business finds new ways of delivering financial, social and environmental value at the same time.
The evolution of business
Merging ESG considerations in your core business strategy is known as integrated thinking. An integrated report is the outcome of integrated thinking. The report shows how your company’s strategy, governance, performance and prospects create value over the short, medium and long term.
The rise of integrated reporting
There is compelling evidence that a holistic view of value creation is needed to achieve business success in the 2020s and beyond. This idea is also known as integrated thinking – the process of understanding of how your activities and relationships work together to create value for your business over time.
An integrated report is the outcome of integrated thinking. Relevant to both internal and external audiences, it outlines how your company’s strategy, governance, performance and prospects create value over the short, medium and long term.
As the International Integrated Reporting <IR> Framework explains, the process of producing an integrated report will help to break down internal silos (e.g. the finance, risk and sustainability teams might cooperate closely for the first time), reduce duplication in your reporting efforts, and help you respond to the expectations of investors.
There’s no obligation to structure your integrated report against the six capitals outlined by the IIRC (financial, manufactured, intellectual, human, social and relationship, and natural). While the capitals are useful in guiding internal thinking about value creation, their academic nature means they don’t necessarily resonate with stakeholders. Our advice is to employ the structure most likely to appeal to your readers.
You can produce a basic integrated report as soon as you commit to integrated thinking, with the aim of improving and enhancing your disclosure over time.
Integrated reporting adopters are now spread across 64 countries, according to the International Integrated Reporting Council’s (IIRC) 2019 annual report. Japan, Singapore, Malaysia, New Zealand and Hong Kong have all witnessed growing rates of adoption, while in Australia, over 70 percent of ASX200 companies embraced at least some of the principles of integrated reporting in 2019 (up from 48 percent in 2018).
How business value is changing
Most large companies are incorporating – with varying levels of success – environmental, social and governance (ESG) issues into their core business strategies. From BlackRock to Shell – Nike to Microsoft – companies with once patchy records on sustainability are committing to carbon neutrality, sustainable financing, diverse workplaces and accountable governance.
As a business decision-maker, what does this mean for you? It means you’ll be challenged by your investors, customers and employees to rethink how you measure and communicate the value your company creates. This trend is accelerating through the COVID pandemic, as millions of people reconsider how they interact with their employer, community, and the products and services they use.
Global finance flows are also quickening the transition towards a more sustainable form of capitalism. The finance sector is slowly moving from platitudes to genuine action – divesting from ESG laggards and rewarding early movers with increased investment. The UN Principles for Responsible Investment have now attracted over 3,000 signatories with more than US$103 trillion in assets under management.
Leaders are more mindful of the ‘why’ behind what they do. Jeff Bezos, Elon Musk, Jack Ma and Ariana Huffington, among many others, now spend much time explaining the purpose, vision and values that guide their operations. They do so because they recognise that an inspiring narrative – backed by measurable action on ESG – is becoming fundamental to their ability to grow profits over time.