Integrated reports have to provide the links
Novo Nordisk, a world leading integrated reporter of social, environmental and financial performance tweeted recently about The Economist’s white paper discussing “how executives’ approach to sustainability is evolving, how companies are managing and measuring sustainability, and how sustainability dovetails with financial performance.”
The report is jam-packed with interesting insights into the perspectives of the 280 senior executives surveyed and the nine who participated in depth interviews. But there was one particular fact that jumped out at us because of the implications it surely has for integrated reporting.
Companies were asked: Which of the following stakeholders have consistently had the strongest influence on your company’s environmental, social, and governance objectives? (Respondents could select up to three.) In first place came customers at 53%. Wow, really? That must be a major change on even two years ago. But wait for it, in fifth place (fifth!) came investors/shareholders at 32%. What a measly percentage that is.
But it explains why only 18% of companies in this survey produce integrated reports. The core audience for annual reports – investors – is providing minimal pressure for them to do so. Is that because they, like the companies surveyed, question the link between sustainability and short-term profit, when short-term profit is of foremost importance? Only 14% of companies could see the link.
Communicating integrated performance is undoubtedly tricky because you have to make it easy for your audiences to understand the links between sustainability issues and financial performance, where the immediate gains are and what the value is for long term-viability (to use The Economist’s phrase).
Easy to say, but you’ve got to keep it simple. That’s how we approach reporting at Zephyr because for all the information you may have, clarity is what’s needed to make any of it stick:
http://wearezephyr.com/our-thinking.html
But you shouldn’t even consider integrated reporting if sustainability isn’t integral to your business philosophy and framework. The links between social, environmental and financial performance won’t be there to communicate. You’ll get confused trying to report them and your audiences even more so.
In their 2010 annual report, Novo Nordisk provide some interesting background on why they’ve pursued integrated reporting and how they’re seeking to further improve what they do:
Through their commitment to managing and reporting integrated performance (since 2004), Novo Nordisk has made an incredibly strong statement on what financial investment in their company stands for.
Surely investors must be more interested in the many aspects of what makes a business work effectively – or not – than the companies surveyed by The Economist believe.