Source: CSR Asia
May 18, 2011
May 18, 2011
By: Rikke Netterstrom rnetterstrom@csr-asia.com
We are back to reporting season. All over Asia, companies are finishing their annual reports and turning to their sustainability reports in order to meet the ACCA sustainability reporting awards deadline.
Yes, this intro is a bit tongue-in-cheek, as it reveals much about the drivers and priorities of companies. Many observers are disappointed with the fact that sustainability reporting takes a back seat to annual reporting. But c’mon folks – that isn’t really fair! An annual report is a regulatory instrument, and companies who fail to produce these in time can be slapped on the wrist or even delisted by stock exchanges and securities commissions. So they are mandated to focus on this first.
But does this mean that we should all look beyond sustainability reporting as yesterday’s fad, and begin producing an integrated report?
I am hearing more and more voices in support of this view. Listening to some of the opinion leaders, it would seem that sustainability reporting is indeed on its way out. The GRI is making noises in support of integrated reporting, and is part of the International Integrated Reporting Committee set up last year, who argues:
“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.”
What worries me greatly about this trend is that it is largely driven by organisations with significant sustainability reporting experience. In other words, they have spent years mastering the methodologies and principles necessary to produce robust sustainability content, such as materiality, responsiveness, completeness and boundary-setting. For most companies, this is a learning curve that takes years, and is to some extend aided by the relative obscurity of the exercise. I used to work with a company called Novozymes http://www.novozymes.com/, which is now considered a leader in integrated reporting. What is often forgotten is that Novozymes had almost a decade of sustainability reporting experience, and took three years to move to 100% integrated reporting.
Looking at the Asian landscape, there is only a handful of companies who are truly ready to embark on the journey. Siam Cement http://www.siamcement.com/, one of the few true A+ reporters and a sector leader in the Dow Jones Sustainability Index could feasibly move towards integrated reporting. They have demonstrated a strong link between business governance and strategy and sustainability, and might be able to combine the two.
Likewise, the latest annual report from New Britain Palm Oil http://www.nbpol.com.pg/?page_id=497 has an integrated report flavour. In this case the company takes the view that the Sustainability Report (and other issue-based reports) is an important addition and opportunity to rethink material issues and reporting every two years is sufficient, whereas the Annual Report is where ongoing performance improvements are disclosed. I like this pragmatic view, which highlights the transformational nature of good sustainability reporting.
There are certainly examples of good integrated reports, but my great concern is that companies think that integrated reporting is about sticking some sustainability data in annual report. One of the culprits here is the ACCA. Now let me be clear: I am a great fan of the ACCA sustainability reporting awards – In my opinion it is one of the very few awards which I feel is making a real difference in driving disclosure quality. In fact, I have served on the shortlisting panel of the Malaysian awards for a couple of years. But I do not like their integrated reporting award category, and would probably prefer to see it dropped. If an integrated report is worthy of an award, it should be in direct competition with “pure” sustainability reports. Either it meets the expectations or it doesn’t.
So for now, let us live with the fact that sustainability reporting does take second priority to annual reports. We can even celebrate the more leisurely pace we can work at and use it to experiment and create innovation which would not be possible in a mandatory report setting.
To the great thinkers out in the sustainability space promoting integrated reporting I would like to shout out: “We are not ready yet!” Until the majority of leading companies in Asia produce robust and material sustainability reports, the continued push for integrated reporting could halt the drive for better disclosure and understanding of non-financial risk and opportunity.
I could probably go on with more arguments, but I don’t want to repeat what has been said more eloquently elsewhere. So if you want more thoughts on this issue there is an excellent debate here:
We are back to reporting season. All over Asia, companies are finishing their annual reports and turning to their sustainability reports in order to meet the ACCA sustainability reporting awards deadline.
Yes, this intro is a bit tongue-in-cheek, as it reveals much about the drivers and priorities of companies. Many observers are disappointed with the fact that sustainability reporting takes a back seat to annual reporting. But c’mon folks – that isn’t really fair! An annual report is a regulatory instrument, and companies who fail to produce these in time can be slapped on the wrist or even delisted by stock exchanges and securities commissions. So they are mandated to focus on this first.
But does this mean that we should all look beyond sustainability reporting as yesterday’s fad, and begin producing an integrated report?
I am hearing more and more voices in support of this view. Listening to some of the opinion leaders, it would seem that sustainability reporting is indeed on its way out. The GRI is making noises in support of integrated reporting, and is part of the International Integrated Reporting Committee set up last year, who argues:
“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.”
What worries me greatly about this trend is that it is largely driven by organisations with significant sustainability reporting experience. In other words, they have spent years mastering the methodologies and principles necessary to produce robust sustainability content, such as materiality, responsiveness, completeness and boundary-setting. For most companies, this is a learning curve that takes years, and is to some extend aided by the relative obscurity of the exercise. I used to work with a company called Novozymes http://www.novozymes.com/, which is now considered a leader in integrated reporting. What is often forgotten is that Novozymes had almost a decade of sustainability reporting experience, and took three years to move to 100% integrated reporting.
Looking at the Asian landscape, there is only a handful of companies who are truly ready to embark on the journey. Siam Cement http://www.siamcement.com/, one of the few true A+ reporters and a sector leader in the Dow Jones Sustainability Index could feasibly move towards integrated reporting. They have demonstrated a strong link between business governance and strategy and sustainability, and might be able to combine the two.
Likewise, the latest annual report from New Britain Palm Oil http://www.nbpol.com.pg/?page_id=497 has an integrated report flavour. In this case the company takes the view that the Sustainability Report (and other issue-based reports) is an important addition and opportunity to rethink material issues and reporting every two years is sufficient, whereas the Annual Report is where ongoing performance improvements are disclosed. I like this pragmatic view, which highlights the transformational nature of good sustainability reporting.
There are certainly examples of good integrated reports, but my great concern is that companies think that integrated reporting is about sticking some sustainability data in annual report. One of the culprits here is the ACCA. Now let me be clear: I am a great fan of the ACCA sustainability reporting awards – In my opinion it is one of the very few awards which I feel is making a real difference in driving disclosure quality. In fact, I have served on the shortlisting panel of the Malaysian awards for a couple of years. But I do not like their integrated reporting award category, and would probably prefer to see it dropped. If an integrated report is worthy of an award, it should be in direct competition with “pure” sustainability reports. Either it meets the expectations or it doesn’t.
So for now, let us live with the fact that sustainability reporting does take second priority to annual reports. We can even celebrate the more leisurely pace we can work at and use it to experiment and create innovation which would not be possible in a mandatory report setting.
To the great thinkers out in the sustainability space promoting integrated reporting I would like to shout out: “We are not ready yet!” Until the majority of leading companies in Asia produce robust and material sustainability reports, the continued push for integrated reporting could halt the drive for better disclosure and understanding of non-financial risk and opportunity.
I could probably go on with more arguments, but I don’t want to repeat what has been said more eloquently elsewhere. So if you want more thoughts on this issue there is an excellent debate here:
