What makes information authentic/fit-for-purpose for both management and investors? How do we navigate standards and stakeholder needs to provide integrated information for decision making?
This blog sets out some evolving thought leadership in this field from around the world, as presented at a recent international event in London.
The panel chair, Richard Barker, Professor of Accounting at the Saïd Business School at the University of Oxford, introduced the session’s central theme of “thinking and communicating in an integrated way.” The session, he said, would focus on the “realistic and challenging” aspects of Integrated Reporting and provide a range of insights and perspectives.
A reporting first for India at Tata Steel
First up was Parvatheeam Kanchinadham, Company Secretary of Tata Steel, India. In 2016, Tata Steel produced its first Integrated Report, which was also the first-ever integrated report from an Indian-based company. Having previously published a compliance-driven annual report every May, and a GRI sustainability report every September, in late 2015 the company realised there was a missing link between its financial and sustainability data. “We saw that investors could not actually assimilate, harmonise or align the two”, said Kanchinadham, explaining how he and his colleagues took the decision to move “to a more strategic communication model”.
The switch to <IR> enabled Tata Steel to “clearly articulate [their] strategy, priorities and business operations”. It also helped them “strengthen [their] narrative on risks, opportunities and governance mechanisms,” while materiality testing sharpened their focus on clear and tangible material issues.
But there were, said Kanchinadham, “many, many challenges”. For a start, the transition to <IR> was a truly radical shift – particularly in India, where it had never been done before. “Internally, we had a great challenge in pushing the concept through,” he explained. “Many people did not know what we were trying to do.” What’s more, they only had Western companies to emulate, and the different reporting structures meant it was difficult to “adopt and synchronise that practice to the Indian condition.”
Ultimately, though, the report was a success, and <IR> is now gaining traction in India, where the regulator, the Securities and Exchange Board of India, has called on the top 500 companies to implement Integrated Reporting.
Breaking down silos, improving connectivity at Indra in Spain
The next speaker was Marco Leyes Bastida, Sustainability Specialist at Indra, a global IT company with 36,000 employees. Having been involved in the <IR> Business Network, Indra’s journey with Integrated Reporting started in 2011. But it wasn’t until 2015 that a step-change took place within the company, and Bastida and his team began to analyse the materiality of their non-financial information.
The first major challenge they faced was to “break down…the siloed data management” that had prevailed within the company until that point. “We wanted to know if there was any connectivity between information from different areas and different capitals,” said Bastida.
The process, he explained, has helped to highlight the connectivity gaps and enabled the company to align its financial and non-financial data. It has also helped to improve the links between operational and consolidation systems, while the inclusion of broader KPIs within the company’s balancing scorecard “has been very positive”, proving to be “a key tool for embedding Integrated Reporting and integrated thinking in the company culture.”
The role of technology at Sasol
At Sasol Group Services, South Africa, the company’s Integrated Report, while being its “primary report”, is supported “by various other reports”. The reason for this, explained Dr Stiaan Wandrag, Sasol’s Head of Sustainability Advisory, is that “you cannot disclose everything to every single stakeholder.” Therefore, said Wandrag, “we supplement it with different types of information, often on our website, aimed at specific stakeholder groups.”
For a company with such a “huge social and environmental footprint”, technology has come to “play a very important role in managing” data and meeting stakeholders’ expectations. It is certainly vital in “making sure what we put out in the public domain is credible and trustworthy,” observed Wandrag. Indeed, the team at Sasol has used various online channels to engage with their stakeholders, most recently producing “a short video clip on the six capitals and the interrelationship between these capitals.”
Sasol also uses an electronically generated Executive Dashboard to keep its senior management up-to-date on all strategically important activities. Each month, the company’s CEO and senior executives receive fresh data on performance against KPIs (financial and others such as safety), with sophisticated technology ensuring that the integrated information required for effective decision-making is readily accessible. Wandrag explained: “At different levels the executives can drill down into more and more detail, whether by operating model or region…The navigation is easy; it’s all on iPads and it’s updated on a monthly or even weekly basis.”
This approach has led to strong governance control over information, and has transformed Directors’ questions and knowledge about the broader information set that the company reports on.
In the US it will be a ‘slam dunk’!
Last up was Bob Laux, former Treasury Controller at Microsoft, who gave his perspective on Integrated Reporting in the US. Microsoft, he explained has not yet produced an integrated report. The reason for this, he said, was that there isn’t yet the sense of “Integrated Reporting being the norm, of people talking about it.” If there was, “it would be – to use a basketball term – a slam dunk!”
But interest in <IR> is growing in the US. In November 2016, Laux attended an IIRC event in Silicon Valley, where companies like Apple, SAP and Oracle heard about the “the power of integrated thinking and how that can help you think more holistically about your business and the six capitals.” According to Laux, “you could just tell by people’s body language…that they really got it.”
This article was kindly contributed by Stratton Craig: www.strattoncraig.co.uk. In December 2016, the IIRC’s official conference, in partnership with the International Corporate Governance Network (ICGN), brought together 400 people from over 30 countries around the world. This blog reports on the key messages, issues and debates arising from Plenary 3, which considered How companies are meeting the information challenge with Integrated Reporting.