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Traditional business reports such as annual reports are being disrupted by evolving business models, improvements in technology and increasing expectations from stakeholders, and they are at risk of becoming irrelevant if they don’t move with the times. The new imperative for organisations is to communicate their performance and their ‘story’ more effectively and more transparently.
Simultaneously, the information that management needs to oversee the business in an increasingly complex environment is also evolving and this affects what businesses report internally and externally.
To the rescue comes the concept of integrated thinking, a central tenet of the International Integrated Reporting Framework. Integrated thinking aims to improve the quality of information provided to shareholders and other stakeholders by encouraging the organisation to actively consider how their business model is both dependent on and impacts economic, environmental, social and other values.
Integrated thinking helps to break down silos within an organisation and fosters a common understanding of the business strategy to help organisation’s unpack their value creation story. There is no specific formula or template to interpreting value; every business will have its own unique theory of value creation and will need to consider key stakeholders and their interests. Equally, every organisation will need to consider the influence of the external environment and material interdependencies or trade-offs across value drivers. How do activities in one part of the business combine with activities from another part to create value? What are the trade-offs we make in the short-term to maximise long-term value creation (between the environment and profit, for example) and limit unintentional impacts?
In working with clients who are on the Integrated Reporting journey, we have seen them start to develop a better shared understanding of integrated strategic priorities and business outcomes. As we conduct integrated thinking workshops we ensure that there is strong cross-function and divisional representation to reduce silos and build tailor made performance measures unique to the overall business. The focus is on measuring outcomes to shift the way organisations are interpreting data traditionally stored in siloed environments. Organisations are also starting to utilise advanced analytic capabilities and working differently with data to identify new ways to unlock hidden value and manage risks.
Stakeholders are also calling out for new communication mediums that leverages technology to streamline information, for example management videos, use of data centres, continuous reporting to meet their specific information requirements. In current formats, annual reporting suites fail to engage readers and can lead to information overload. There is an increasing awareness amongst mature reporters that leveraging technology and integrated thinking are complementary elements to achieving better quality reporting.
Improving the level of connectivity with relevant people and information across the organisation demonstrates leadership and drives innovation regarding business outcomes. Integrated thinking requires a deep understanding of the company strategy, business model and value creation process and assists organisations’ with a strong foundation for better business reporting and accelerate the effectiveness of their communication to a broad set of stakeholders.
Is your company and management maximising integrated thinking to unlock value and drive its future reporting initiatives?
Paul has 20 years of experience and leads Climate Risk services in the Risk Advisory Sustainability practice. He has extensive experience working with complex sectors including energy, mining, manufacturing and property with a particular focuses on carbon, energy and sustainability services.