Integrated Reporting: What integrates What

Recently, the Sustainability debate has been involved particularly into issues of transparency, since The International Integrated Reporting Committee (IIRC) has brought together world leaders from several disciplines and sectors to launch a new approach to business reporting, the.Integrated Reporting, which is supposed to display in a solo report financial and non financial relevant information about a company. In addition, since Marc 2010 Integrated Reporting became a requirement for Johannesburg Securities Exchange (JSE)-listed entities, suggesting that it could be the case also among the mandatory requirements of far more influent capital markets, as the ones of US and Europe.

What “an integrated report” means.

As a system which thrives on its variables and their interconnections to generate a unique outcome, Integrated reporting is more than the sum of its components: to be effective it requires the company to tell the reader the story of how strategy is embedded to environmental, social, and financial governance to deliver a unique performance. It presents an opportunity to demonstrate the linkage between sustainability performance and business value, to show somehow the values of intangibles. Consequently it should illustrate how the six capitals (being financial, manufactured, natural, social, human, and intellectual) interact together to deliver a distinctive value for the business and for society, responding also to the expectations and concerns of stakeholders which are rooted into this unavoidable interdependence between the two. It should also tell the reader how the reporting company faces this interconnection in the present, how it did in the past, and how it will do in the future.

What integrates What

Another fundamental requirement of an Integrated Report is to be concise, since the content of a report has often been characterized by too long considerations and irrelevant information, which led the report to be unclear and made it hard for stakeholders to have a picture about the overall performance. In a Integrated report, being relevant is a must. Yet I wanted to recall that another fundamental principle in a report should be completeness, meaning that coverage of topics and indicators should be sufficient to reflect impacts and enable others to assess performance, according to the Global Reporting Initiative guidelines.

When I refer to “ what integrates what”, I fear particularly that sustainability information and the previous actions that support it may risk to be reduced, leaving space just to those matters that are most relevant for the business financial performance. The fact that the business needs to be material doesn´t mean that it has to report just what affects the bottom line, nor that it has to report just what interests simply investors. Materiality means finding the interconnections between business and society where they can have an impact each other. Disclosing information and the underlying processes which lead to it, aim to make sure that negative impact is reduced and positive is enhanced so that business can be a further solution for societal problems, while assuring its own long term prosperity. Consequently a focused report has not a defensive approach, but an innovative one: it doesn´t mean reporting the risks for the bottom line deriving from external pressures, but reporting the issues related to business activities and bringing evidences that those are addressed and eventually translated into opportunities. And here it come the involvement of the bottom line. And strategically. Since a company addresses societal problems for the communities in which it operates, it enhances social, human and environmental capital, on which also the business itself depends for its prosperity. With richer capitals available, more opportunities to enrich the bottom line the business has. Finally, this approach is the evidence that the practice of reporting is integrated: the business understands that the only viable condition for it to succeed along time is that the systems in which it is part, being society and the biosphere, are healthy and prosperous, so that it aligns its strategy toward its integration in such systems.

Comments Off on Integrated Reporting: What integrates What / 27 May 2012 por Francesco Mazzeo
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