Key takeaways from our 2-part Integrated Reporting webinar series.
By Megan Wallingford and Helle Bank Jorgensen
In response to the growing need for companies to demonstrate the relationship between financial and non-financial information, integrated reporting (IR) is emerging as the future of corporate reporting.
This fall the Global Compact Network Canada hosted leading integrated reporting experts and trailblazing companies for a 2-part webinar series on IR. Our first session The State of Integrated Reporting, featured a discussion with Paul Druckman, CEO of the International Integrated Reporting Council (IIRC), and Bob Eccles, Professor of Management Practice at the Harvard Business School. Beyond the basics (what is IR and what is it not?) Paul and Bob discussed what IR and the IIRC mean for the future of sustainability and corporate reporting, the relationship between the IR Framework and other reporting mechanisms, and the benefits of adopting IR.
In November, we hosted a second webinar The Journey Towards Integrated Reporting, where leaders from three trailblazing IR companies shared their stories about the journey toward IR and integrated thinking: Susanne Stormer, Vice President of Corporate Sustainability at Novo Nordisk; Mary O’Malley, Vice President of Environment and Sustainability at Prudential Financial; and Joanne Westwood, Manager of Accountability Reporting at Vancity. Through storytelling Susanne, Mary and Joanne shared why and how their companies started IR, discussed the relationship between integrated reporting and integrated thinking, and provided advice on how to get started and engage senior management and boards.
We have combined the learnings from these sessions to give you the 8 things to know about integrated reporting from the experts and trailblazing companies.
1. There is growing global momentum for integrated reporting: From Singapore to the European Union and from Brazil to South Africa, Paul shared some of the many examples of recent and diverse initiatives including: the Johannesburg Stock Exchange’s inclusion of integrated reporting in its listing requirements; the World Bank releasing its first integrated report; and companies from around the world implementing IR including Prudential Financial, Potash Crop., and Vancity.
2. It is about strategy and value creation: Integrated reporting is not about creating one report that meets the needs of all stakeholders, nor is it simply a green financial report. Bob explained that it is fundamentally about value creation over three time horizons – the short, medium and long-term. Paul further highlighted IR’s strategic rather than data-driven perspective: “the difference between integrated reporting and the current reporting regime is that when practicing IR you ought to think about entering the company through the doorway of its strategy, rather than the weeds of its data”.
3. Technology is a critical component of integrated reporting: Technology enables both the creation and communication of an integrated report. Bob emphasized that as technology for information collection and internal controls becomes more sophisticated (reaching the same level of quality as financial data), this will facilitate the implementation of integrated reporting and integrated thinking. In terms of communication, websites, for example, have already become just as important (if not more) as physical reports.
4. It is a long-term investment that may require some upfront costs: Paul was candid in explaining that IR will not necessarily result in immediate cost savings. In fact, for many companies costs may initially rise as they invest in the systems and technologies necessary to gather the information and data needed for developing an integrated report. However, in order to maintain a healthy company in the long-term, these investments are necessary.
5. Integrated reporting and integrated thinking go hand-in-hand: In our second session, panelists agreed that there is no rule of thumb as to whether to start with integrated reporting or integrated thinking. Joanne explained that at Vancity integrated thinking came first; however, it was through integrated reporting that the company was able to identify gaps and areas for improvement, as well as opportunities. Susanne added that you can’t have one without the other, no matter where you decided to start.
6. Pursue a short and long-term approach to building the internal case: Integrated reporting is not yet a well-accepted or commonly used reporting framework. As a result, Mary advised that those who are building the internal case for IR must be prepared, in the short and medium term, to spend substantial time and energy persuading colleagues and building senior leadership buy-in. She suggests coupling this with a long-term approach that focuses on building the next generation of sustainability, integrated thinking, and IR leaders. This means sharing knowledge and resources, and engaging new employees in the conversation, in order to build an informed set of internal champions and future company leaders.
7. Be creative with building the business case for boards and senior management: Senior management and board support is critical for implementing IR and integrated thinking; however, many champions continue to struggle to build the business case. Susanne shared her creative approach to building buy-in at Novo Nordisk: she made an efficiency argument. Since her board was required to review both the sustainability and financial reports, and the board is always looking for ways to simplify and reduce work load, the fundamental rationale was simple – combining the reports would result in fewer pages and a more simplified message.
8. It is an opportunity with clear and immediate benefits: The speakers from both of our webinar sessions agreed that integrated reporting and integrated thinking should be understood as an opportunity. Two immediate benefits were highlighted:
First, it aligns internal and external communication and reporting. Adopting integrated reporting results in a single document containing a consistent message that can be used across the business functions and presented to a range of stakeholders. Mary explained that on a day-to-day basis Prudential Financial’s integrated report allows all employees to connect integrated thinking and its value to the company, to their individual lines of work.
Second, it focuses attention on measurement and strategy. By adopting integrated reporting, Joanne explained that Vancity has begun to pay more attention to measurement, particularly measuring the company’s impact (social, environmental, and economic) on its community. Susanne agreed that IR has allowed Novo Nordisk to attain better measurement, and added that improved measurement has led to improved target setting – “by getting us to measure, we have also improved our strategizing”.
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