{"id":699,"date":"2012-01-13T09:06:34","date_gmt":"2012-01-12T23:06:34","guid":{"rendered":"http:\/\/blogs.unsw.edu.au\/knowledgetoday\/?p=699"},"modified":"2012-01-19T10:16:48","modified_gmt":"2012-01-19T00:16:48","slug":"can-companies-communicate-corporate-value","status":"publish","type":"post","link":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/blog\/2012\/01\/can-companies-communicate-corporate-value\/","title":{"rendered":"Can companies communicate corporate value?"},"content":{"rendered":"

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Peter Shergold | CSI blog<\/a><\/strong><\/p>\n

In a previous blog<\/a>\u00a0I talked about the importance of qualitative attempts by nations to measure the good life.\u00a0 It was courageous, I thought, to write about statistics.\u00a0 Today I\u2019m going to address the issue of integrated reporting.\u00a0 Braver still, I suspect.\u00a0 I risk becoming the boring bloke who stands between you and the drinks fridge at a party.<\/p>\n

I do so because the issue is fundamental to how companies measure, and report upon, their ability to create and sustain value \u2013 not just economic and financial but social, environmental and governance factors.\u00a0 It\u2019s an idea whose time has come.\u00a0 Below the radar, the reporting framework for companies is set to change.<\/p>\n

I sit on the board of a publicly-listed company.\u00a0 I know, having to read every page, how long, detailed and complex the Annual Report has become.\u00a0 Much of its arcane nature is driven by regulatory requirements.\u00a0 Presentation of strategy tends to get lost behind dense technical jargon.<\/p>\n

It\u2019s hard to tell our story in an engaging and informative manner to our shareholders, policyholders and stakeholders.\u00a0 The narrative gets buried in the voluminous financial statements and their detailed explanatory notes.\u00a0 Like many companies we end up employing workarounds, providing an alternate measure of \u2018underlying profit\u2019 that we believe is a better measure of our corporate performance over time.\u00a0 The financial reporting predominantly looks backwards:\u00a0 non-executive directors like myself are only too well aware that discussing future prospects gives rise to potential legal liabilities.<\/p>\n

Company reporting, then, tends to be extensive but partial.\u00a0 It is commonplace that documents on corporate citizenship, social responsibility or sustainability are issued separately from the Annual Report.\u00a0 The measures of performance are then selected from a widening array of reporting vehicles \u2013 from the Global Reporting Initiative framework to the London Benchmarking Group.\u00a0 This gives rise to three problems.<\/p>\n

First, it perpetuates the belief that the reporting measures of societal or environmental value may be chosen to present a company\u2019s performance in the best light.<\/p>\n

Second, it suggests that community benefit or sustainability initiatives are simply well-meaning (or self-serving) bolt-ons to the real business of the business presented in the Annual Report.<\/p>\n

Third, as Helen Brand, the President of the Association of Chartered Certified Accountants has blogged<\/a>, \u201cPresenting the information separately, in silos, makes it difficult to build up an overall picture of a business\u2019 long-term value \u2026\u00a0 We need an integrated approach to reporting.\u201d<\/p>\n

Thankfully, a move is underway to do just that:\u00a0 to streamline company reporting, reduce its costs and \u2013 most importantly \u2013 provide a clearer picture of organisational performance.\u00a0 The International Integrated Reporting Committee (IIRC) was set up in 2010 by a large group of distinguished corporate, regulatory, academic and civil society leaders to design a more comprehensive but flexible reporting framework.<\/p>\n

The IIRC\u2019s mission is to find ways to better communicate the total value that companies create.\u00a0 To do so it is necessary to make transparent the six \u2018capitals\u2019 on which a company depends (financial, manufactured, human, intellectual, natural and social) and to explain how they are assessed and deployed in a strategic manner.\u00a0 Among the guiding principles of integrated reporting are the connectivity of information, its future orientation, stakeholder inclusiveness and commitment to conciseness, reliability and materiality.<\/p>\n

According to Goran Tidstrom, President of the International Federation of Accountants (and a member of the IIRC), \u201cFinancial information is not sufficient.\u00a0 We have to provide information on sustainability, on social issues and environment, and it has to be done in an integrated way with a financial report.\u201d\u00a0 Here\u2019s how.<\/p>\n

Social capital reporting is meant to recognise a company\u2019s social licence to operate, including the corporate values and behaviours that prevail;\u00a0 how relationships are conducted with customers, suppliers and business partners;\u00a0 and the extent to which the business enhances individual and collective wellbeing.<\/p>\n

Natural capital reporting is intended to exhibit how a company\u2019s activities impact, positively or negatively, on the ecosystem \u2013 water, land, minerals, forests and biodiversity.\u00a0<\/p>\n

Human capital reporting is designed to capture the alignment of a company\u2019s ethical values and governance framework including, for example, how human rights are recognised.<\/p>\n

The IIRC has now issued a comprehensive Discussion Paper<\/a> on its ambitions.\u00a0 It\u2019s a good read.<\/p>\n

The good news is that some Australian innovators are not waiting.\u00a0 The new cooperative bank, bankmecu, has already announced that it is to work with the Net Balance Foundation to develop an integrated reporting framework<\/a> for its 2011-12 Annual Report.\u00a0 At the bigger end of town NAB\u2019s Annual Report for 2011 already includes a significant section<\/a> on corporate responsibility as an integral part of its business strategy.<\/p>\n

Accounting and applied statistics can seem to be dull disciplines.\u00a0 The truth is that unless we can measure and report upon the value of social and environmental good created by companies effectively, the momentum for them to create \u2018shared\u2019 economic and societal value is likely to slow.\u00a0 That, at least, is my perspective.\u00a0 I\u2019d welcome your views.<\/p>\n

Peter Shergold<\/a> is the Macquarie Group Foundation Professor at the Centre for Social Impact (CSI) at UNSW. This blog post first appeared on the CSI blog<\/a>. <\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

\u00a0 \u00a0 \u00a0 Peter Shergold | CSI blog In a previous blog\u00a0I talked about the importance of qualitative attempts by nations to measure the good life.\u00a0 It was courageous, I thought, to write about statistics.\u00a0 Today I\u2019m going to address the issue of integrated reporting.\u00a0 Braver still, I suspect.\u00a0 I risk becoming the boring bloke […]<\/p>\n","protected":false},"author":336,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12673],"tags":[12766,12808,12779,12800],"class_list":["post-699","post","type-post","status-publish","format-standard","hentry","category-social-impact","tag-corporate-responsibility","tag-integrated-reporting","tag-social-impact-2","tag-social-policy"],"_links":{"self":[{"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/posts\/699","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/users\/336"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/comments?post=699"}],"version-history":[{"count":12,"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/posts\/699\/revisions"}],"predecessor-version":[{"id":796,"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/posts\/699\/revisions\/796"}],"wp:attachment":[{"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/media?parent=699"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/categories?post=699"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/tags?post=699"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}