July 26, 2010
As the 2010 reporting season winds down, and the debate over integrated reporting heats up, it is a useful time to take stock of where reporting is today, and where it may be headed.
Integrated reporting is the topic du jour for report wonks. It's an idea whose main selling point is persuasive: requiring environmental, social, and governance (ESG) matters to be included in the single report of record a company issues would be a great step toward the mainstreaming of sustainability into business decision-making.
Maybe.
It’s equally possible that such a step could have the unintended consequence of reducing, or dumbing down, the ESG content on which companies report. There are two primary reasons for this.
First, the regulators--and company lawyers--will begin to take a much greater interest in the assertions made about sustainability performance. I've heard this from multiple senior executives. It is not hard to imagine this having a chilling effect on some of the aspirational language contained in reports. And as most company report managers will tell you, it is precisely such aspirational language that makes a report a tool for advancing company strategies and commitments.
Second, there is only so much space in an integrated report. As a practical matter, it's likely that integrated reporting could result in a decline in the amount of information being presented in a formal report. The obvious fix to this problem is to provide information through other channels, such as social media, or issue-specific reports. But if the answer to this problem is to create new vehicles for ESG information, doesn't it defeat the purpose of an integrated report in the first place?
What’s more, the vision of integrated reporting is also muddied by the ever-changing media landscape. Integrated reporting is rising as a concept just as the information world is disintegrating. With people seeking out their own take on information and news, and with multiple sources ready and able to deliver just that, it may be that the concept of an integrated report is swimming against the tides. This has nothing to do with values or purpose, and everything to do with the realities of 21st century communications. It is possible that an integrated report is to sustainability what the daily newspaper is to journalism: a model that won't survive the digital revolution.
But these may well be issues that can be worked out, and there is considerable energy ready to do just that. The Global Reporting Initiative expressed its support for integrated reporting by 2020, and the International Integrated Reporting Steering Committee is likely to announce new steps forward in the coming weeks. South Africa has taken the lead in realizing that vision, with the 450 companies on the Johannesburg Stock Exchange now required to issue integrated reports, and a committee has been established to create the guidelines. Bob Eccles at Harvard Business School is conducting a working conference to explore the topic further in October (I serve on the steering committee for the event). And rumors are that the G-20 will put this topic on its agenda for 2011 when France holds the Chairmanship.
Integrated reporting is an idea whose time has clearly come. Now the task is to make sure that it's a practice we're ready for.
This post was also published on FastCompany.com's Ethonomics.
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