Despite constant discussion at nearly every plenary and breakout session during the 2013 Global GRI Conference, integrated reporting -- combining financial and non-financial/sustainability reporting into one integrated report -- seems to be mired in a state of profound confusion.
Integrated reporting seems to be the Holy Grail of corporate reporting: Both the current president of GRI and the former chairman of its board emphasized its importance and noted that G4 was designed to provide the underlying support for integrated reporting. The overarching message is that we are moving toward a new reporting regime -- yet the practical aspects of when, how, what that will look like remain very nebulous.
For example, panelists in one session reported that about 25 percent of GRI registered reports are self-described as "integrated." In practice, these reports are all very different from each other: some are traditional sustainability reports with no link to financial performance, others draw a connection between sustainability and financial performance. The vast majority are "one-cover" reports, where the annual report and sustainability report are sandwiched together, under one cover, with no real integration -- more like a combination or compilation.
Why create an integrated report?
The question that must first be answered is "what is the objective of integrated reporting?" At its core, an integrated report should be a concise communication aimed at providers of financial capital, and one that demonstrates how an organization creates and sustains value both in the short and long term. We heard many times that financial analysts increasingly want to be able to consider a company's sustainability performance in their analyses, but that they are also facing information overload.
The many information streams that companies currently provide do not allow analysts to efficiently extract the information they want. Therefore, an integrated report should seamlessly describe a company's most material issues in terms of their likely positive or negative impacts on value creation and financial performance.
That said, it seems that integrated reporting will not replace sustainability reporting, but that the two will support each other. The integrated report will provide concise information for analysts, while the sustainability report will be the vehicle through which the company conducts the underlying analysis that feeds the integrated report.
Next page: The 3 key elements of a truly integrated report
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