Creating a clear vision on Integrated Reporting
Connecting both financial and non-financial goals
A growing number of companies are aware of the importance of Integrated Reporting <IR>. Reports that include both financial and non-financial information are more balanced and make a more interesting read for the end-users. Unfortunately, this balance alone is not enough. Non-financial information is not yet connected to value creation in a clear way. Integrated Reporting established this connection.
How do you measure your non-financial performance and set clearly defined goals that reflect your organisation’s strategy? Increasingly, companies want to express their role in and commitment to societal developments. Non-financial performance interacts with financial results and their interdependency is becoming clearer. The necessity to report in such a way that it can be easily understood by all stakeholders is therefore receiving more attention.
Financial aspects are usually measured by clear goals: companies aim for x% growth and y% return. With non-financial data however, these kinds of targets are frequently not disclosed. Companies for example publish their environmental impact and are held accountable for it, but barely mention goals for non-financial aspects or how they will change them. An important problem in this appears to be defining a clear vision for the company. What would we like to change? What are our goals?
It is important for every organisation to understand the role it plays in society, and to develop a clear vision from that understanding. Companies should know what they contribute to the community. What is the essence of their services or products? What part do innovation and intellectual capital play? And how do they see their role in environmental sustainability? Once goals and a vision have been formulated, Integrated Reporting can be fully developed.
Integrated Reporting is closely related to value creation. With <IR> you not only look at the past, but also indicate the kind of value that you want to create in the short- and long term. This provides you with an important insight: financial capital is only one of the capitals you need to create value. The realisation that your clients, suppliers, society and your employees are also capital, and that natural capital is something that shapes and impacts your organisation, is an important one. It shows that your organisation is closely connected to its business environment. This growing awareness stimulates organisations to focus more on Integrated Reporting, and will eventually lead to change.
This change is already happening. We see it in our annual research on Integrated Reporting. Our last publication ‘Integrated Reporting: A driver for integrated thinking’ showed that including employees from all parts of the organisation leads to a more productive reporting process. In addition, many Boards of Directors are aware of the importance of reporting on both financial- and non-financial aspects. However, our report also still shows that most organisations are more focused on financial capitals than the other capitals relevant to their company, leading to relevant insights into the need to change the current dashboards of companies.
Speeding up the process
The integrated thinking that is sparked by Integrated Reporting provides a great way to inspire, once the Board of Directors is aware of the opportunities that it creates. A great example is CEO-led report of ING. ING has published an inspiring report, including the way ING sees itself and its contribution to society and current developments. As with ING, the CEO of Unilever has also played an important role in the shift towards a more sustainable organisation with the creation of the Unilever Sustainable Living Plan. With this plan he has inspired hundreds of managers at Unilever, who in turn get a chance to integrate sustainability in their daily management processes and decisions.
In the market, we notice a growing desire from organisations to start Integrated Reporting processes. Even though this is a positive development, it is important to ask ourselves whether this change is happening fast enough. Do we understand that we are quickly encountering problems that need innovative solutions? Are companies really aware of the role they play in society? We challenge you to find out!
More information on Integrated Reporting? Please contact Annemieke Huibrechtse-Truijens via +31882882071.
Deloitte Integrated Reporting in 2 minutes
for Internal Auditors, Finance en Sustainability managers