Integrated Reporting for Corporates by Terence Jeyaretnam & Amanda Nuttall
I have spent a significant part of my life focusing on how corporate reporting could be expanded from traditional financial accounts to non-financial (environmental, social and economic metrics). I have not been alone on this path. Happily, a number of us recently convened at the Harvard Business School (HBS) in Boston to talk about the future of corporate reporting; that is to pave a vision forward for a framework for Integrated Reporting.
“Integrated reporting” is a term that is generating excitement in sustainability circles.
The idea that sustainability issues should be fully integrated into business strategy and reporting seems like a no-brainer.
Environmental, social and governance issues do have a very real impact on the bottom line of a company – just look at the impact of the Deepwater oil spill in the Gulf of Mexico on BP’s bottom line – and as such should be integrated into a business’ risk management, target setting and reporting processes.
However, there is still some way to go. Companies that integrate sustainability strategies into business strategies are the exception rather than the norm. There is also confusion about what integrated reporting actually means, what format it should take and who the target audiences for the reports are.
An integrated report provides readers with a complete picture of how an organisation is performing by including environmental, social and governance information along with financial performance.
In 2009, HRH The Prince of Wales said a framework was needed “to help ensure that we are not battling to meet 21st century challenges with, at best, 20th century decision making and reporting systems.” As a result the Prince established the Accounting for Sustainability initiative which developed a Connected Reporting Framework to provide guidance for companies to link social and environmental strategies with business and financial strategies.
Following this, in August 2010, Accounting for Sustainability and the Global Reporting Initiative (GRI) announced the establishment of an International Integrated Reporting Committee (IIRC). The Committee aims to develop a framework for reporting financial, environmental, social and governance information in an integrated format.
Our contribution (or should I say conversation between multi-stakeholders) at HBS literally starts that ball rolling on this movement. Net Balance will be engaging and tapping into the international network built through the Harvard session and our representation on the GRI Stakeholder Council. We also have recently contributed to an Ebook that is a collection of articles submitted by the participants to the Harvard Business School’s 2010 “Workshop on Integrated Reporting: Frameworks and Action Plan.” The purpose of this EBook is to help broaden the awareness of integrated reporting, to help give it greater definition and clarity, and to help spread its broad adoption around the world.
The Net Balance position is that:
- The development of an integrated reporting framework needs to recognise that integrated reporting will only be possible if it reflects the reporting organisation’s strategy.
- The involvement of key stakeholder groups such as business, government, civil society and experts in both non-financial and financial accounting will be critical if integrated reporting is going to be worthwhile to companies and their stakeholders.
- The GRI G3 guidelines require further development and we support current planning by GRI for G4, the next generation of the Guidelines, to shape and enhance an integrated reporting framework.
- Net Balance will be working with some of our clients on the integrated reporting journey and undertaking some local research through Net Balance Foundation.
Net Balance Foundation, with Swinburne University’s National Centre for Sustainability, is an accredited training organisation by the Global Reporting Initiative (GRI). We are currently delivering two-day GRI training sessions, which may be of interest to you (see http://www.netbalance.com/gri_training.html). Net Balance is also pleased to have contributed a prize available on this site for one spot at an upcoming training session.
For more information please contact Terence Jeyaretnam is a Director of Net Balance (terence@netbalance.com) and Amanda Nuttall is a Senior Associate (amanda@netbalance.com), both based in Melbourne.
Amanda Nuttall