Robert Eccles has spent more than a quarter century working to develop a set of global standards for reporting non-material financial data so investors can better gauge corporate performance and make better choices as a result. [Full disclosure: Dr. Eccles, a Professor of Management Practice at Harvard Business School, is the Senior Academic Advisor to Cornerstone Capital Inc.]
“The Integrated Reporting Movement — Meaning, Momentum, Motives and Materiality,” by Robert G. Eccles, Michael P. Krzus, Sydney Ribot, Wiley, November 2014) follows the publication in 2000 of the first book on this topic by Eccles and Krzus, “One Report: Integrated Reporting for a Sustainable Strategy.” In just four years, integrated reporting has been transformed from an idea to a growing best practice for companies all over the world. These four years have also seen the creation of the Sustainability Accounting Standards Board (SASB), the International Integrated Reporting Council (IIRC) – both with steering by Eccles – and the mainstream adoption of sustainability reporting by large corporations. For Eccles et al., integrated reporting is the next step.
The increase in integrated reporting – and the underlying “integrated thinking” on sustainability and corporate performance – illustrates the convergence between annual reporting practices, including financial information for investors, and sustainability reports, or “extra-financial” data and analysis. “The Integrated Reporting Movement” aims to explain the history, rationale, and drivers of this trend not only to sustainability specialists, but to all those interested in the process of corporate performance reporting.
The book opens with a quite unique example of how corporate governance and integrated reporting were used to transform the economy of a whole country: South Africa. Since the 1990s, regulations on corporate governance disclosure, and in 2011 on integrated reporting have transformed the business environment and helped the takeoff of the economy in the post-apartheid years. This case offers a fascinating insight into a nation-wide experiment on allying financial, environmental, social and governance-related performance analysis in business reporting practices.
The next chapters discuss why integrated reporting – and the process of integrated thinking behind it – came as a natural solution to both companies and supporting organizations. The authors analyze in detail the meaning of integrated reporting and how it has evolved over the past ten years from an experiment to the current attempts of codification. The take-off of integrated reporting has been boosted by a virtuous cycle where the work of “accelerators” is spurring adoption and creating awareness of its added value for market participants. The authors present the main players in this emerging space, and other organizations converging on this trend with their motives, relationships and the present “co-opetition” taking shape among them. They also discuss materiality, which is a core topic both for traditional financial and sustainability reporting, and the integrated report.
Throughout the book, the reader is provided with key references on the subjects of sustainability and integrated reports. It offers a comprehensive knowledge that is not only essential for those wishing to discover the world of integrated reporting, but that may also fill some important gaps for sustainability professionals who will benefit from a consolidation of their reporting expertise.
The second half of the book is dedicated to solutions, data analysis and concrete examples related to integrated reporting. The authors explain how their “Sustainable Value Matrix” can substitute effectively for what is currently deployed as the “materiality matrix” by companies. The following chapters examine cases of companies attempting to define and apply different types of materiality analysis, and delve into the structure and quality when communicating such analyses to internal and external audiences. They present their methodology, and then focus on a core issue arising in parallel to integrated reporting: the use of information technology to reach out effectively to corporate stockowners and stakeholders. The authors conclude with four recommendations and a possible scenario on the adoption of integrated reporting.
This book is an invaluable tool for all market players wishing to enhance their understanding of how corporate performance is analyzed and communicated to the market. It also delves into the premises of this performance, by addressing core issues such as sustainability strategy and stakeholder engagement. We are witnessing a tremendous transformation of how capital markets understand and support corporate performance. The insight provided by “The Integrated Reporting Movement” is right on time to help investors and corporate managers better understand and respond to the challenges of allying and strengthening financial performance with broader, positive societal impact.Margarita Pirovska, PhD is the Policy & Sustainability Analyst at Cornerstone Capital Inc.