In recent years sustainability reporting has moved from a niche activity to the mainstream. Pressure to report is now coming from all sides of the corporate parapet, and one approach that’s receiving a lot of attention is something called integrated reporting (IR). But will this relatively new idea withstand the test of time? And what other reporting concepts should future-thinking companies consider?
IR promises to revolutionise corporate reporting as it challenges companies to account for the non-financial wealth and thus, the ‘total value’ they create. These non-financial elements aren’t typically covered in traditional financial reports, yet they can have a big impact on a company’s prospects, especially its ability to deliver long-term returns.
This might explain why there’s been a huge uptick in integrated reporting since the IR Framework was published in 2013. The market has responded with vigour, with more than 1,600 organisations now doing some form of integrated reporting – and we expect this momentum to keep apace.
Backing from regulators and investors
Regulatory support for integrated reporting is also growing. For instance, the EU’s Non-financial Reporting Directive, which from 2018 requires companies to report on their environmental and social impacts, provides the legislative stick to the Framework’s intellectual carrot.
Besides policy makers, support for integrated thinking is brewing among heavy-weight investment circles, too. For example, long-term investors (led by BlackRock) are increasingly calling for companies to communicate how their businesses deliver value beyond profit. The same can be said for accounting and investor bodies such as the International Corporate Governance Network which recommends businesses adopt IR to improve investor dialogue.
Lost in translation
To complicate matters further, a smorgasbord of non-financial reporting standards have emerged alongside the IR Framework. Even in our industry we have plenty of options to choose from, including EPRA, INREV and GRESB – which are all property specific. To paraphrase Apple’s trademark, now more than ever “there is a framework for that!”
The Corporate Reporting Dialogue is attempting to reverse this and provide greater coherence and comparability between the IR Framework and seven related reporting standards. We are beginning to see common principles and key performance indicators emerge but it is wishful thinking to expect these frameworks to be condensed into one.
Reporting for the digital age
Rather, transformation will come in how social and economic value is reported, collected and communicated. And this is especially true in the digital age. With the onset of technologies like smart sensors, artificial intelligence and machine learning, revealing the true and full value of a company’s sustainability endeavours should become significantly easier and accurate.
What’s more, the way we communicate this information will evolve too – in today’s fast paced online world it’s hard to see the relevance of a 200 page sustainability report. Does anyone even use a printer these days? The content will live on that’s for sure, but we will find new ways to communicate it which will blend traditional forms with new digital channels and social networks.
A new lens
Leading property companies such as The Crown Estate are using the lens of IR to understand the ‘true value’ they create. For instance, The Crown Estate’s ‘Total Contribution’ report conveys the net economic value created by its operations across six capitals including natural resources, people, know-how and physical resources.
In future, connected metrics that capture this value, and link decision making at both the c-suite and operational level, will provide the route to smarter decision making, and smarter reporting.
Article written by Tom Branczik and edited by Laura Jockers in JLL’s Upstream Sustainability Services team.