The term ‘integrated reporting’ may not be familiar to all, but with companies such as Coca-Cola, Microsoft and Sainsbury’s jumping on board with the concept, expect to hear more about it.
In a nutshell, it describes a movement in corporate reporting to intertwine the financial information in annual reports and the non-financial content usually found in separate CSR reports.
While not entirely new, there is an emerging consensus about the standards integrated reporting should meet to satisfy the investment community’s need for robust and comparable information. This was brought about by a committee set up in 2010 by Prince Charles’ Accounting for Sustainability project and the Global Reporting Initiative, the UN’s body for disseminating sustainability reporting guidelines.
The consensus has encouraged businesses in more than 20 countries, including PepsiCo, HSBC, Tata Steel and even PR agency Edelman, to participate in a pilot.
There is a "massive opportunity" for corporate communicators in adopting integrated reporting, says professor Anne Gregory, chair of the Global Alliance for Public Relations and Communications Management.
The organisation has been a partner of the International Integrated Reporting Council (IIRC), the body into which the 2010 committee evolved, since the IIRC’s early days in Prince Charles’ offices at Clarence House.
"It will be corporate communicators writing these reports, and we all know that the way a company’s narrative is framed is crucial," says Gregory. "The IIRC absolutely welcomed us into this process."
Another reason why integrated reporting could benefit PR practitioners is that it focuses attention on linking concepts such as brand and reputation to the underlying value of a company, adds Gregory.
"The fact that we can be seen to be on a par with finance directors in the way reporting is undertaken, as we will have to be involved in collecting information on social and relationship capital, is fantastic," she says.
Gregory’s thinking is backed by the IIRC’s chief executive, Paul Druckman, who was a panellist at an integrated reporting event held by Weber Shandwick in February.
He says comms professionals have a central role to play in the development of a holistic reporting approach that he hopes will supersede traditional annual reports.
"Integrated reporting is about communication and transparency, not just reporting numbers," he says.
"Annual reporting has been about KPIs, facts and figures. They need to be there, but integrated reporting is bringing context to the performance, and the people who traditionally do reporting are going to need comms professionals more than ever.
"It brings comms directors to the forefront of business strategy because you have to link performance to future outlook. It needs a business to look at reputation management in a less siloed way, which comms directors can do, and it needs them to articulate the link between risk management and strategy."
Sainsbury’s director of corporate affairs Alex Cole, who is involved with the pilot project, says the company has been on the integrated reporting journey for two years.
"We fundamentally believe this is just good business – our values are a point of long-term strategic difference for Sainsbury’s and part of our 2020 Strategy For Growth. All our stakeholders, including shareholders, expect to understand the part CR and sustainability play in our business performance and plans."
Cole says integrated reporting has demanded that she is closer to the corporate responsibility agenda and ensures the business is embedding CR into its thinking.
"We are spending more time on demonstrating the value of sustainability – from the costs saved to the revenue generated and the benefits to customer and supplier relations."
Tim Haywood, group finance director and head of sustainability at another pilot member, FTSE 250-listed support services and construction company Interserve, agrees that integrated reporting has helped articulate how sustainability and employee relations have created value to shareholders.
He does not subscribe to the view suggested by comms consultancy StockWell’s recent survey of corporate affairs directors that the City does not yet care about a company’s relationship with society.
"It takes two to communicate and corporate UK plc needs to hold its hand up and say if the investor community hasn’t got it, it is because we haven’t delivered it well enough. It is up to us to make the case," he says.
However, we may be a long way from the widespread appearance of recognised integrated reports.
The IIRC’s guidelines are non-binding and many companies have said that they do not plan to label their annual report as integrated.
Home Retail Group corporate affairs director Chris Wermann says his company is already releasing the information recommended by the IIRC and has no need to change its set-up. The company has, however, presented its strategy more clearly at the front of its annual report than in previous years.
Corporate responsibility reporting specialist Ian Buckland praises the IIRC’s work for producing "a bow wave of peer pressure" on companies to help the financial community get a better understanding of the value created by non-financial factors, but doubts that the formalisation of integrated reporting will obviate the need for companies to keep producing CR reports.
"Mandatory integrated reporting was introduced in South Africa ten years ago, but they are still producing CR reports because stakeholder groups weren’t looking at integrated reports," says Buckland, who is an associate director at Chime Communications-owned consultancy Corporate Citizenship.
"Why should an integrated report answer the needs of stakeholder groups who are not financially literate, even including employees, who are by many counts a close second to the investor community in terms of their interest in CR reports?"
Buckland continues: "In a survey two years ago, more than 60 per cent of the audiences for whom CR professionals were producing CR reports were non-financial, although the biggest single audience was the investor community."
IIRC guidelines state the primary purpose of an integrated report is to explain to providers of financial capital how an organisation creates value over time, but that it should benefit all stakeholders interested in an organisation’s ability to create value over time, including staff, customers, suppliers, business partners, local communities, legislators, regulators and policy-makers.
Druckman predicts integrated reports will eventually replace sustainability reports, but stresses the approach does not mean reducing the data an organisation puts out.
"How you put it together is very different. It is all about portals. There is a good example of a first attempt at an integrated report by software company SAP. It has put all of its rep-orting online and connected it."
Ultimately it is a CEO’s decision whether a company subscribes to integrated reporting, Buckland contends: "Most companies will probably start with an internal-only integrated report alongside their annual report. There will be some comms directors biting their nails if their CEO just decides that they want to do this without a dry run."
Druckman wants corporate comms directors to get involved in planning: "If they sit back, it will take longer to become central in the annual reporting process. They need to understand what this is and why they are important to it. Then they need to articulate that."