The Holy Grail of Integrated Reporting By John Elkington

The Holy Grail of Integrated Reporting

By John Elkington

A conversation between SustainAbility co-founder John Elkington and Jean-Philippe Renaut, leader SustainAbility’s Engaging Stakeholders Program, on the current state and evolution of ‘integrated reporting’.

Jean-Philippe Renaut: John, you took part in a session on integrated business reporting at Clarence House early in September. What was that about?

John Elkington: Sadly, JP, the session was subject to the Chatham House Rule, which restricts what I can say. But integrated reporting is now the ‘Holy Grail’ in corporate public disclosure. The session was significant – for me at least – because it was the first time that two of the key bodies in the reporting field, Accounting for Sustainability (founded by HRH The Prince of Wales) and the Global Reporting Initiative (where I sit on the Board) had co-hosted leading organisations involved in accountability, accounting, reporting and sustainability to look at ways to drive the future integration of the multiple reports that so many major companies now produce.
JPR: Why was the meeting called? And why now, when people like SustainAbility and Tomorrow’s Company have been calling for integrated reporting for years?

JE: Sometimes you can be uncomfortably ahead of your time. SustainAbility always saw the triple bottom line agenda as a way of opening out the thinking of business leaders – ahead of an eventual re-integration of accounting, reporting and communication at a new level of sophistication. Some companies have experimented with integrated reports, to varying degrees of success. In previous rounds of our Global Reporters benchmarking surveys we have dubbed some of these as Frankenstein’s Monsters. But the underlying trajectory is clear: although the downturn is squeezing reporting activities generally, the trend is towards better information across the triple bottom line agenda, supplied to management in an integrated, user-friendly way. As to the timing, the Clarence House meeting was convened to discuss a draft of a new book by Bob Eccles of Harvard Business School and Mike Krzuz of Grant Thornton, the US accountancy firm, which is due out early next year.

JPR: Sounds like big organisations are involved in the project, but surely one more book isn’t going to make much difference?

JE: Who knows? There are moments when an agenda can take a big lurch forward. And there’s something about this collection of people – and the timing – that makes me think that we may be on the brink of something important here. The authors stress that they see their ‘One Report’ approach as more of a metaphor than as an immediate requirement for all reporting companies.

JPR: I am comfortable with the conceptual idea of ‘One Report’; it still leaves us room to advise clients on the information needs of their stakeholders, and to help them customize their processes and messages to better engage these audiences. But did this discussion bring anything new to the table?

JE: Impatience can be a virtue, JP, but we are talking about tectonic shifts in business thinking here. This stage of the debate is about re-articulating a concept that you and I may understand, but that thousands of businesses around the world still don’t see value in adopting. The ultimate goal here is to create the incentives across economies, supply chains and companies that will help drive systemic change. Fundamentally, it’s about convincing business stakeholders that sustainability issues are important in evaluating a company’s overall health and quality of management.

JPR: Since you can’t talk about specific things that other people said, can you say a little about what you brought to the table?

JE: Drawing on SustainAbility’s experience in the field, I stressed three priority areas. First, I noted that the work to date doesn’t distinguish adequately between corporate social responsibility (CSR) and the much wider sustainability agenda.

JPR: Aren’t we just talking semantics here, John?

JE: No. I see sustainability as a challenge that ultimately operates at the level of a civilisation; it’s about the natural and social limits to the expansion of economies and, in the end, of a species like ours. On semantics, anything with ‘corporate’ in the title, by definition, is addressing a more limited agenda – and, in the case of CSR, we are talking about an agenda and mindset that sees the scale of change as linked to the fraction of a percentage point of profits devoted to citizenship activities. Not an agenda that is about market disruption and radically new mindsets, technologies and business models.

JPR: And the other two themes you raised?

JE: The second big challenge, I suggested, was to pick company case studies that properly reflect the nature and scale of the challenge. Picking a company or companies that do produce brilliantly integrated reports, but which operate in suspect markets and fail to address the most material sustainability issues – even if they aren’t the most material financial issues – invites attack. And, third, since there was little appetite for regulation, I led a counter-attack on that, with fairly strong support, to the effect that we have had a long period of maximum experimentation in reporting. The challenge now is to both increase the number of reporting companies by several orders of magnitude and to create reporting ecosystems, with company-level disclosure integrated with sector, supply chain, national regional and global reporting and analysis. I pointed to Denmark as an excellent example of at least one way forward in this respect – and recalled Gordon Brown’s squashing of the proposed Operating & Financial Review (OFR) requirement in the UK, because of what he saw as business resistance. Just at the point, ironically, where the most important resistance had been overcome.

JPR: So, John, do you see the ‘One Report’ scenario looming like a supertanker? Is it likely to replace the ‘triple bottom line’ agenda?

JE: Yes and no, JP. The integrated reporting agenda is evolving fairly energetically. But, as you told me a few days back, ahead of the Clarence House meeting, a small but growing number of reporting companies are talking about crunching their multiple reports into a single report, largely because of financial pressures. Integrated reporting is a noble objective – but we need to do it for the right reasons and in the right way. As The Economist reported a few weeks ago, the triple bottom line remains a key provocation to those who would boil all of this back down to the business-as-usual bottom line. We’ll see how things go, but I think there was real momentum building among at least this group of 15-20 institutions to push this agenda into the world of the G20 and similar multilateral organisations. If we can finally bring this concept into mainstream management practices, it could represent a major step towards greater corporate accountability.

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http://sustainability.com/our-work/insights/the-holy-grail-of-integrated-reporting/
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John co-founded SustainAbility with Julia Hailes in 1987, served as Chairman from 1995-2005, and was a Board member until 2014.

http://sustainability.com/who-we-are/our-people/john-elkington/