Why CEOs, boards and communicators should pay attention to a global movement
Businesses tell stories every day. Stories influence decisions by shareholders, customers, suppliers, employees and all other stakeholders. And thanks to a growing international movement and an emerging new model for corporate reporting, the way those stories are told is about to change for the better.
In Paris last week, a working group of the International Integrated Reporting Council, a global coalition of regulators, investors, companies, standard-setters, the accounting profession and NGOs, put the finishing touches on a new reporting framework that will soon be released for public consultation. Building on today’s financial and sustainability reports, integrated reporting presents an organization’s strategy, governance, performance and prospects within its full commercial, social and environmental context. The goal: to give shareholders and stakeholders alike a truer picture of how the organization creates value over time.
In the spirit of transparent disclosure, I’m a member of this working group, representing the Global Alliance for Public Relations and Communication Management. As last week’s meeting concluded, there was great enthusiasm coupled with a little bit of anxiety about how the framework would be received. There will no doubt be many suggestions for improvement from those who lead corporations, prepare reports for them, or use corporate reports to make business, investment or stakeholder decisions. In the end, however, I am convinced that most will see integrated reporting as an idea whose time has come.
Here are five reasons why every CEO, corporate director and business communicator needs to pay attention to integrated reporting:
- Integrated reporting leads to integrated thinking. Smart CEOs fight ‘silo thinking’ by encouraging executives and employees to consider their connectivity to the business strategy and the interdependence of the various departments and divisions. You know the aphorism, ‘what’s measured is treasured’? It comes from the reality that the way managers report often shapes the way they think.
- Investors want better information, particularly in uncertain times. CEOs have a lot of reporting to do. The global financial crisis and high-profile lapses in corporate ethics have brought changes to corporate governance, and to financial, environmental, health, safety, sustainability and other reports. Yet for the investor, there are still two big problems: first, these reporting streams are not integrated; and second, they tend to look backwards rather than forwards. With a sharper picture of both risk and opportunity, investors are more likely to provide capital with confidence.
- Few businesses have silent stakeholders. While economic power has become more concentrated in corporations, communication power has shifted to stakeholders. Strategic CEOs know that with their operations being more transparent and scrutinized than ever before, they must acknowledge both problems and solutions within a clear context. Integrated reporting makes that possible – and potentially powerful in mitigating risk.
- The company represents the brand. A Swiss branding consultant, Christoph Eschmann, puts it succinctly: ‘The brand used to represent the company; now the company represents the brand.’ Countless CEOs see research tracking their customers’ growing desire for authentic consumption – i.e., buying products that reflect their values. The risk is high for brands whose owners are found wanting. We do pay attention to the wizard behind the curtain, and this influences our decisions — to buy or try products, to invest in companies, and to believe their claims on both counts.
- Integrated reporting requires integrated communication. For CEOs, few risks are greater than losing touch with their customers and stakeholders; that’s when even a successful business finds itself vulnerable to disruptive innovation, reputational damage and lost value. The very nature of an integrated report – which requires a company to consider how it uses financial, manufactured, human, intellectual, natural and social capital – requires robust, ongoing dialogue both inside and outside the organization.