Integrated Reporting Making Progress, Needs to Catch Up

Companies have a long way to go before the reality of integrated reporting catches up with the ambition, according to a PricewaterhouseCoopers (PwC) survey of the current reporting by large companies involved in the International Integrated Reporting Council (IIRC) pilot program.

One hundred companies across the globe are part of the IIRC pilot program, including Coca-Cola, Microsoft, Unilever, Deutsche Bank, SAP, Jones Lang LaSalle and others. The program aims to test and help develop the reporting framework that will give a better view of their businesses. The PwC survey examined the reporting by 50 of those companies that had already published their reports at the end of April.

It found that companies can now better judge the risks and opportunities for their businesses, since integrated reporting facilitates a holistic way of managing. While 84 percent of companies already identify one or more non-financial capitals material to their business operations, only 15 percent comprehensively report on all material capitals. The IIRC Framework asks companies to report on on human, intellectual, social and relationship capital as well as natural capital, if material to a company’s value creation.

Other key findings from the survey:

• 83 percent discuss future market trends but only half of those link it to strategic decisions.
• 71 percent explicitly identify their key performance indicators (KPIs), and about 47 percent had some targets for these indicators but only 17 percent clearly align KPIs and strategic priorities.
• 96 percent report their principal risks but only 23 percent integrate their risks into other areas of their reporting – linking to strategy, business models and KPIs. Improvements here would help develop more faith in how businesses are managing their risks and making appropriate operational decisions, PwC says.
• 50 percent talk about what resources and relationships their business models rely on. The majority of those discuss constraints and availability expectations, but very few companies cover all their material capitals in this way, and even fewer support this with data.
• 25 percent have already succeeded in communicating how they create value.

PwC says that, as expected, the majority do not yet integrate their financial and non-financial performance in their reporting, which suggests that they are a long way from building understanding within their business about how organizations create and destroy value — not just creating returns for their shareholders, and furthermore, how this affects their future prospects.

Last November, the IIRC and corporate communications agency Black Sun reported that almost 93 percent of businesses say integrated reporting breaks down barriers between teams and leads to better connected departments and 95 percent said they have a clearer view of their business.

In April, the IIRC published the draft of a corporate reporting model and asked businesses to comment on it.

Also in April, a survey from the IRRC Institute and Sustainability Investments Institute reported that only 1.4 percent of S&P 500 companies have fully integrated reporting – the companies were American Electric Power, Clorox, Dow Chemical, Eaton, Ingersoll Rand, Pfizer and Southwest Airlines.