The new business reality
It’s time to wake up and face facts: integrated reporting and fully informed decision-making must be the new business reality. It is the only way to scale up our efforts to improve the state of the world.
Business as usual isn’t going to work for much longer. The population is growing, the climate is changing, and we need to be smarter and do more with less if we’re going to sustain more than 9 billion people living well, and within the boundaries of the planet, by 2050. Science is clearly telling us that humanity is pushing up against the planet’s boundaries. We are confronted with the possibility that we may very well destroy our capacity to succeed – not only as businesses, but as an entire species.
Last year the world sent a powerful signal that it’s ready to make a change. The Sustainable Development Goals (SDGs) and Paris Agreement form the basis of a new global development framework that calls on every global citizen to contribute. Business has a clear opportunity to lead the way and change the system according to this new framework. But in order to make a real impact, we need to get serious about understanding our own impacts, the world around us and our effect on society and the environment so that we can make appropriate decisions accordingly.
Integrated reporting for better business decision-making
Using integrated reporting for better business decision-making is one of the clearest and most effective ways to accomplish this. Focusing solely on financial performance has – for too long – allowed companies to neglect important aspects of material risk management and disclosure, reinforcing business patterns that are sometimes harmful; for the environment or the people in our supply chains.
Companies are beginning to see that it’s imperative to integrate additional performance metrics in order to set appropriate goals, understand progress and share accurate and appropriate information. By incorporating a wider set of metrics into corporate reporting, companies will improve their visibility on global challenges, while equipping themselves with the best information for accurate decision-making. And as regulatory frameworks and consumer preferences change, transparent, sustainable companies will come out on top, attracting investment as true leaders in the new global economy. The trick is understanding where to start, what to measure and how to communicate the results.
Integrated reporting is the gateway to changing the system and to saving the world.
Lack of consistency
As more companies pursue sustainable outcomes as a business strategy, a lack of consistency has emerged – with each company using its own metrics and methods for putting together an integrated report. This means that the process for publishing a complete and useful report has become unclear, particularly for investors. This is a problem for businesses and for the capital markets, who need a solid direction, logical business case and a feasible execution plan in order to go full force and/or to invest. Fortunately, there’s a great deal of work around clarifying the corporate reporting space through the online reporting platform, the Reporting Exchange (reportingexchange.com).
The Reporting Exchange
Using a crowdsourcing model, the Reporting Exchange identifies reporting regulations, rules, policies, practices, initiatives, standards, codes and guidance that make up the reporting landscape as it evolves over time – and this provides much needed clarification to business. Understanding what to report on, and how to report, will bring business a long way towards achieving sustainable development as an output of daily operations. The Reporting Exchange will also be a useful tool for regulators, investors, academics, NGOs and civil society, helping them find the regulatory approach that works best for business, while enabling them to understand how to best encourage transparent reporting and good corporate behavior. Once companies get a handle on how to report, next step will be to ensure that companies who “walk the talk” and report well are rewarded in the marketplace. Which basically means, if we’re going to get anywhere, the finance sector needs to get involved.
Finance leads much needed change
Our current system is defined by incomplete information about the business impacts on natural and social capital. As a result, we often don’t incorporate socio-environmental externalities into everyday business considerations. All of this is about to change. In July 2016, the world took a giant step towards natural capital accounting with the Natural Capital Coalition’s launch of the Natural Capital Protocol – the first ever standardized framework for businesses to measure and value their impacts and dependencies on nature. The Protocol provides a generally accepted pathway for companies to move towards natural capital accounting. It helps companies understand their relationship with the natural world. By thinking strategically about natural capital decisions and implementing the Protocol, forward-thinking companies now have the opportunity to really move the dial on sustainability.
It’s time for business to make the first move.
Race to the top
The combination of integrated reporting and natural capital literacy will transform the global economy, and business has the opportunity to lead the way.
New systems like the Reporting Exchange and the Natural Capital Protocol are the first steps. From now on, leaders will need to be educated in new ways, CEOs will need to become sustainability experts and investors will need to demand integrated reports, simultaneously rewarding companies who perform well on financial, social and environmental metrics.
We look forward to a world where the biggest industries compete on sustainability performance, initiating a swift “race to the top” for companies across the globe. It’s time for business to make the first move and to keep on going. Integrated reporting is the first step. It’s the gateway to changing the system and to saving the world.