The primary goal of financial reporting has always been to provide financial capital providers with insights in the company’s present and future performance, whereas the integrated report benefits all stakeholders interested in the company’s capability to create value over time. However, since non-financial issues are increasingly impacting potential risks and thereby future financial results, more and more companies are including these material issues in their reports to respond to the rising demands of the financial world.
Diverse groups of stakeholders, varying from employees, customers, suppliers to legislators, have different perspectives on the value creation the integrated report brings them. Balancing these interests and producing a comprehensible report is an art in itself. The rising demands of the different groups put a strain on the connectivity and conciseness of a strong report. The guiding principles of the International Framework present a clear list of do’s and don’ts that in practice are more easily said than done.
GRI has become the worldwide standard which is referred to by 82% of the G250 companies that report on Corporate Responsibility. When glancing at the 259 pages counting GRI G4 implementation manual, meeting the principles is not an easy job. To be able to take care of all the (sector specific) details while safeguarding reliability and completeness on the one hand and delivering on crispness on the other is a real challenge. But it is really only the tip of the iceberg. Being able to report along the new guidelines asks for a structured measuring system which begins with a set of relevant KPIs and targets, based on the top materialities and preferably defined on outcomes rather than input. From the research and best practices we’ve come across, companies struggle to align their sustainability program with the business and to set targets and KPIs that are integrated as well.
NGOs are most trusted by experts to judge corporate sustainability performance, but ratings are catching up. 63% of experts believe benchmarks will be more important three years from now in driving improved corporate sustainability performance. Governments and journalists remain least trusted. The top five benchmarks in 2013 were the Dow Jones Sustainability Index (DJSI), Carbon Disclosure Project (CDP), Access to Medicines Index (AMI), the FTSE4Good Index Series and oekom corporate ratings.
Since performing well in these benchmarks make companies eligible funds for a growing group of sustainable investors, the stakes are rising. Here is where often the attention shifts from the CSR- department towards finance and investor relations. Benchmarking can be approached as a quick win battle: “How can we use reporting to optimize our results?”. But since the bar is continuously raised by the competition, the longer term question “What should we change in our business processes in order to increase CR-performance and results at the same time?” has to be faced. Using benchmarks as carrot on a stick can help you create short term urgency as well as long term value from sustainability.
Finch & Beak has been successfully helping companies such as Telenet, Heinz and KBC with their reporting and benchmarking approach. If you need help with benchmarking or reporting challenges, contact Josée van der Hoek, partner and senior consultant, at firstname.lastname@example.org or +31 6 28 02 18 80, to discuss a fitting solution.
Sources: www.theiirc.org, KPMG Survey of CR Reporting 2013, the 2013 Ratings Survey, by GlobeScan/SustainAbility
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