Integrated Reporting: Don’t aim for perfection. Just get in the mood and go.
19 Feb 2019 by Mike Tisdall
I see too many clients hesitating to get on the integrated reporting bus. Often because they perceive that there’s a lot of internal change needing to happen before this is possible. Sometimes it’s because they’re waiting for leadership and board to make such a far-reaching decision. But equally often it’s because they don’t know quite where to start. This article is designed to help you conquer all of the above and get started on the journey anyway.
Certainly, if the aim is for a fully-fledged, assurance-quality Integrated Report, then a lot of ducks need to be lined up, and the board needs to make an active and mindful decision.
But here’s the thing: the <IR> report is not an absolute. So you don’t need to tick all their boxes to get started. Even if you use the framework as it is intended – as a framework – to guide your approach, you’ll be on the bus. Personally, I spent too long thinking of the <IR> principles as ‘must haves’ in total. I’ve since learnt that while this comprehensiveness is an end-game goal, it’s the ‘notion’ that has the most power. And the IIRC (International Integrated Reporting Council) themselves will applaud you for just starting on the journey, because they know you’ll only get better from there, over time.
I have <IR> clients that don’t call their report an Integrated Report but are starting to apply some of the core principles to their approach. They know that when they grow up they want to be a ‘real’ Integrated Report. But they also know that this is a game that you can’t master overnight.
So think about starting the integrated reporting journey as <IR> on trainer wheels. Perhaps you can’t yet join all the dots between the various action streams to cross-credit cause and effect. Perhaps you haven’t quite got the board across the line yet. But those things aren’t a barrier to applying the integrated reporting lens to your report.
So, where to start
The following are very subjective views on what principles you should include in order to start on the journey. A purist may well disagree – after all there are a whole 19 requirements in the <IR> framework, and some are more onerous than others. But what’s important here is the spirit - and in the spirit of ‘Extended External Reporting’ and using some the framework ideas in <IR>, here’s where I’d be thinking:
- Tell the story of how you create value over time. This shows you understand your business drivers, how your business model makes money and has the right impacts on people and planet. If you do that right, the story should be unique, separating your company from others you’re competing with – for capital, for talent, for distribution, for consumers.
- Purpose beyond profit. As soon as you start thinking about the impacts you’re having beyond money-making, somehow the ground shifts and you start thinking differently about business. The really strange thing is that the research shows that companies that think more broadly and apply systems thinking to their entire operation, end up making more money and lowering their cost of capital. Go figure, but the facts speak for themselves.
- Risk. Being aware of future, potential, latent risk is the first step towards resilience to it. That’s making your business sustainable. And that’s my definition of ‘sustainability’. Whether that’s competition risk, supply chain risk, talent risk, climate change risk – if you’ve got a plan to mitigate it, you’re more likely to survive. Your capital providers, talent pool, suppliers and consumers tend to like survival.
- Future focus. Closely linked with risk, but also looping in opportunities, looking ahead and having clear strategies to optimise on both provides comfort and trust.
- Strategy. Lay out your core plan. What activations are you planning to achieve your purpose, mitigate risk, minimise harm, assure future sustainability, meet your stakeholders most important needs, and make the desired profit. Belief equals trust.
- Materiality. I have a far too simplistic view of materiality, I acknowledge. But where possible, I like to keep things simple. The big benefit of knowing what your stakeholders hold as most important means that you can focus your strategic plan around those – and here’s the free set of steak knives: you only need to report on those, keeping your report concise.
- Connectivity. Now we start to get a bit more woolly, and some things you do over there may be hard to prove affect what happens over here. But others are much easier to connect. If Sanford don’t look after the ocean environment and fish stocks, for example, they may have trouble with their product volumes in a few years with kick-on risks in talent acquisition and regulatory controls among other fatal problems. So where you can show multiple impacts on your business strategy from a particular stance, initiative or policy, join the dots in your report.
- Frank and balanced. Openness and transparency is what’s expected now, whether it’s an integrated report or not. The whole notion of ‘extended external reporting’ is to build trust in the organisation through disclosure and transparency.
If you believe you can tell a story around most of the above eight points, then you’re well on your way to being able produce a report that’s in the right spirit. Over the years, your company’s thinking will mature, the performance data will become available, your thinking and reporting will become more sophisticated, and one day you may feel comfortable to label your report an Integrated Report.
Don’t wait until you can tick all 19 boxes before you start. Use the <IR> framework as a principles touchstone and to shift your mindset, and get going at whatever level is right for your company.