By Verity Hambrook, Industry RE Sustainability, Dec 2011 Tweet
Integrated reporting will help businesses to take more sustainable decisions.

Next year will mark the twentieth anniversary of the UN Earth Summit, first held in Rio de Janeiro in 1992. Back then corporate reporting was only just coming onto the corporate agenda. With the anniversary in mind now is a good time to review how far the world of corporate reporting has come.

Since the early nineties an increasing number of companies have started reporting on their performance in relation to environmental, social and governance issues. Now, in a step further, some businesses are starting to understand how corporate reporting, particularly around sustainability, can actually drive innovation in their enterprises rather than simply creating value.

Put simply, this new type of integrated reporting, means discovering how better data and information can be a tool to help businesses spark new initiatives, drive change for the good, develop new insights and, more importantly, new solutions.

The idea is that these new types of integrated reporting frameworks can help inform top management, investors and other stakeholders to mould their thinking and decision-making in timely and more effective ways, according to John Elkington, executive chairman of Volans and co-founder of SustainAbility, who wrote a Guardian blog on the subject recently.
In the words of the International Integrated Reporting Committee (IIRC): “Integrated reporting demonstrates the linkages between an organisation’s strategy, governance and financial performance and the social, environmental and economic context within which it operates. By reinforcing these connections, integrated reporting can help business to take more sustainable decisions and enable investors and other stakeholders to understand how an organisation is really performing.”

The IIRC also hopes that integrated reporting will help reduce the burden of reporting on companies and actually improve the understanding of investors and stakeholders. Surely recent corporate disasters prove that both of these aims are crucial for long terms business resiliency and sustainability.

So what’s been driving these changes? The IIRC says that the main drivers include globalisations, growing concern about recent financial and governance crises, heightened expectations around corporate transparency and accountability, and the prospects for population growth, resource scarcity and environmental challenges.

In the two decades since corporate reporting first emerged, the challenge has moved onto how to make better use of the information that’s being gathered. Advocates hope that integrated reporting will unite previously isolated streams of data and bring them together to help them make more and better sustainable decisions.

So far only a handful of the world’s leading organisations have made much progress with integrated reporting. According to the IIRC current initiatives are underway with the likes of AkzoNobel, AngloAmerican, BHP Billiton and Sasol.

Meanwhile, Alain McGill, a partner in sustainability and climate chance with PricewaterhouseCoopers described the final environmental profit and loss account (EP&L) that was recently released by the sportswear company PUMA as “a great example of the sort of information that will help to present truly integrated reporting”.

PUMA published the economic valuation of the environmental impacts caused by their greenhouse gas emissions and water consumption throughout its global supply chain. Ultimately, PUMA says its reporting will include further environmental key performance indicators as well as social and economic impacts.

PUMA hopes that by identifying the significant environmental impacts it will be able to develop solutions to address these issues that minimise the business risks and environmental effects. In its own words: “PUMA’s EP&L statement provides an unprecedented and detailed level of understanding, sets a new benchmark in corporate environmental reporting and will hopefully serve as a catalyst for others to join an industry-wide engagement.”

McGill continued: “[PUMA] haven’t waited for regulations to drive this; instead they’ve developed the first – ever EP&L to by examining business risk and efficiencies, future resources and markets, and material environmental impacts. Reports like this lift the lid for consumers and business, on the chain reaction of decisions we make day to day, and give businesses the information to prioritise and act. The report represents just one company’s share of a much wider business issue – our demand for natural resources in the consumer supply chain – which slips below the radar of financial reporting currently.”

Another organisation that has taken a lead on integrated reporting is Nike. In her acceptance speech at the North American Awards for Sustainability Reporting, Hannah Jones of Nike, said: “We believe we have entered the era of climate adaptation, where we are no longer contemplating the potential, but beginning to grapple with the consequences.”

Now is the time for companies to heed these words and to start thinking about how a better appreciation of environmental data can help them to become even more innovative and competitive.