It goes without saying that providing investors and shareholders with financial performance data is a key responsibility of big companies. Companies also announce goals for the next quarter and this practice is as usual as it can get. Sales and profits are data that the public deserves to know. Nobody doubts that this information is best given through concrete figures. Imagine a CEO telling the shareholders “We have had a successful term and are happy to announce that we gained more profit…” That statement sounds exceptionally incomplete and calls for a number. “More profit” is what we expect; how much more profit is what we want to know!
In a well-defined context, a number is more precise. It is simply a fact. How come, though, a majority of Corporate Responsibility Reports (CSR) completely lack data? I swear that you’d have difficulties finding one single CSR report on this planet that fails to mention their “successfully reduced emissions” and “impressively improved energy efficiency”. In a survey KPMG conducts every three years, it is reported that by 2011 almost all of the world’s 250 biggest companies (G 250) had published some kind of CSR – a fairly-close-to-one-hundred 95%. When it comes to effectively measuring and comparably reporting environmental performance, however, there are only a few early birds left. The practice of companies separating precise financial reports from vague CSR reports is euphemistically called “combined reporting”. In contrast, integrated reporting follows sophisticated financial accounting logic that is a well-established principle, and applies it to the company’s environmental performance. Figures for water consumption, energy use and carbon emissions are included in the financial statements. Through integrated reporting, not only financial, but also environmental data can be compared across companies, sectors and countries. Apart from comparability, the second key advantage of integrated reporting is the option of setting concrete goals for emissions reductions and the possibility of effectively controlling their achievement. PUMA, for instance, wants to reduce one quarter of its water consumption and carbon emissions by 2015. As Tobias Viere wrote on knowtheflow, they are among the pioneers who reveal the costs of their environmental effects precisely.
Hidden Advantage: Better Understanding of Company Interests
Robert Eccles and Michael Krzus are the editors of a 235-page plea for integrated reporting. Concerning its comprehensiveness, the title is hard to top: “One Report“. Of all the arguments they supply, one is particularly surprising. They say that not only will society benefit from the company’s reporting activity, but also vice versa:
To achieve a truly sustainable society, all stakeholders need a mechanism for engaging in the collective conversation necessary for its creation. One Report’s integration of information and clarification on trade-offs will force groups with previously competitive viewpoints to understand that choices have to be made about the most efficient allocation of limited resources – financial, environmental, and social. The sooner a critical mass of companies starts doing this, and the sooner they improve with experience, the faster our progress will be in shaping a sustainable society.
What does that mean? Well, that integrated reporting equips “groups with previously competitive viewpoints,” e.g., G250 companies on the one hand and critical NGOs on the other, with an instrument to better understand each other’s choices (there are probably more companies that complain about NGOs understanding them than the other way around…). So in the context of a shrinking resource base and an increasingly critical, well-connected public, what else could a big company long for other than a better understanding of its own business?
Gerd Michelsen and Jasmin Godemann, the editors of “Sustainability Communication: Interdisciplinary Perspectives and Theoretical Foundations”, make clear that integrated reporting not only improves public relations, but also brings internal benefits:
Companies that are perceived as being simultaneously high performers both in the market and for society may face less friction and problems in their business relationships with suppliers, traders, public authorities and other stakeholders. […] Besides external benchmarking with competitors or reporting leaders, companies may use company-internal benchmarking processes and systems to compare business units, production sites, etc.
Many things are truly beneficial in theory, but nobody actually translates them into practice. What about integrated reporting? We’ve heard about PUMA, but the sports brand from Germany is not the only one, of course. Who else is there?
Seven Big Companies with Integrated Sustainability Reporting
Where [the social and environmental] outcomes [of many organizations’ activities] were often previously treated as externalities, without considering their longer-term impact on the organization itself, they are now progressively being brought into decision-making processes. […] In the context of the widespread and growing recognition that both environmental and social sustainability, are among the major challenges facing society today, sustainability accounting and reporting practices have developed considerably in recent years.
So wrote Anthony Hopwood, Jeffrey Unerman and Jessica Fries (editors) in the introduction to their book “Accounting for Sustainability: Practical Insights”. It showcases seven private companies and two institutions from the public sector that successfully introduced integrated reporting methods. Among them are big UK players from all kinds of sectors: one grocery store chain (Sainsbury’s), one energy company (the UK branch of France’s biggest energy supplier, EDF), one bank (HSBC), British Telecom, Danish environmental accounting pioneer and chemical industry company Novo Nordisk, and the Aviva insurance company. The public sector is represented by West Sussex County and the Environment Agency (UK), which both account for their environmental and social effects. Exactly how the individual companies manage sustainability data can be found in chapters 3-10 and the book is partly available online at Google Books.
- Eccles, R., Krzus, M., (2010): One Report: Integrated Reporting for a Sustainable Strategy, John Wiley & Sons, Hoboken. http://books.google.com/books?id=BioeE4lidCgC
- Hopwood, A., Unerman, J., Fries, J. (2010): Accounting for Sustainability: Practical Insights, Earthscan, Abingdon and New York. http://books.google.com/books?id=c5gHeK_XfgIC
- Michelsen, G., Godemann, J. (2011): Sustainability Communication: Interdisciplinary Perspectives and Theoretical Foundations, Springer, Berlin http://books.google.com/books?id=_FQBVkCI1agC
Article image edited by Moritz Buehner, using the RRZE icon set available at Wikimedia Commons