Who wants integrated reporting?
The principle of integrated reporting is absolutely right – that is if you’re motivated by understanding the combination of factors that determine the long term sustainability of a company. But not everyone is interested, most notably a lot of [short term] investors.
It’s worth watching the Sir Mark Moody-Stuart interview on The IIRC’s website to hear one of the rare (if slightly short and high level) depictions of who exactly is motivated by integrated reporting:
http://www.theiirc.org/2011/03/21/sir-mark-moody-stuart-shares-insight-on-integrated-reporting/
I like his three categories which I have given some further definition to:
1. Thoughtful companies – those that understand the interdependencies between financial, governance, social and environmental performance and actively seek to manage them
2. Long term investors – those who want to build long term financial value and therefore have an inherent interest in understanding how the factors affecting the sustainability of a company are being managed
3. Regulators – national and supranational governing bodies who aim to manage the influence and impacts of companies for the positive long term benefit of populations
Who else, really, is interested in integrated reporting and will ‘get’ what they’re presented with? This is particularly so when integrated reporting is more often than not a combined report – lots of elements bunged together under the title of integration – than a truly integrated report.
But we’re on a journey and a good one. Integrated reporting will get better and better as companies get better at measuring their impacts and attaching financial value to them. Not all benefits are financial but when a lot of people see sustainability as an immediate term cost, converting governance, social and environmental performance into measurable gain will help to convert sceptics.
In the meantime, I refer back to an earlier Zephyr blog: ‘Integrated reports have to provide the links’:
http://www.wearezephyr.com/blog/2011/03/04/integrated-reports-have-to-provide-the-links/
Companies should only consider starting out on integrated reporting if they have a clue what the links between financial, governance, social and environmental performance are for their company. In The Economist’s survey of executives in top companies, it seems less than 20% do.