Dr Kristin Köh­ler

is the CEO of the Cen­ter for Cor­po­rate Report­ing (CCR) in Zurich, Switzer­land. Pri­or to this she was a research asso­ciate at the Chair for Strate­gic Com­mu­ni­ca­tion at the Uni­ver­si­ty of Leipzig.

Prof. Dr Chris­tian P. Hoff­mann

is pro­fes­sor for com­mu­ni­ca­tion man­age­ment at the Insti­tute of Com­mu­ni­ca­tion and Media Stud­ies, Uni­ver­si­ty of Leipzig, Ger­many, and a lec­tur­er at the Uni­ver­si­ty of St. Gal­len, Switzer­land, and at Sin­ga­pore Man­age­ment Uni­ver­si­ty.

inte­grat­ed Report­ing

How valuable is Integrated Reporting? – Insights from best- practice companies

By Chris­tian Hoff­mann & Kristin Köh­ler / Illus­tra­tion: Anne Lück

Inte­grat­ed Report­ing (<IR>) is doubtless one of the most-debat­ed top­ics in the cor­po­rate report­ing com­mu­ni­ty. Why all the hype? Inter­na­tion­al­ly, numer­ous cor­po­ra­tions are con­sid­er­ing the adop­tion of <IR>. Yet what ben­e­fits can ear­ly movers expect? To find out, the Cen­ter for Cor­po­rate Report­ing (CCR) and the Uni­ver­si­ty of Leipzig ini­ti­at­ed a joint research project on the ben­e­fits and chal­lenges of <IR> imple­men­ta­tion.

The study shows that <IR> imple­men­ta­tion is tack­led on two lev­els: as a man­age­ri­al change process at the strate­gic lev­el, and as a report­ing process at the oper­a­tional lev­el. On both lev­els there are argu­ments for and again­st imple­men­ta­tion.

Argu­ments for and again­st the imple­men­ta­tion of <IR> as a man­age­ment approach

From a man­age­ment per­spec­tive, <IR> imple­men­ta­tion is dri­ven by the adop­tion of inte­grat­ed think­ing. Cor­po­ra­tions can ben­e­fit from improved infor­ma­tion and data access, advanced deci­sion sup­port sys­tems – and a more holis­tic view of the com­pa­ny. The­se insights facil­i­tate a for­ward-look­ing stance and sound strate­gic deci­sion-mak­ing. Risk man­age­ment can be improved by high­light­ing inter­de­pen­den­cies in the val­ue process. As increased trans­paren­cy leads to bet­ter assess­ments of oppor­tu­ni­ties and risks, man­age­ment finds it eas­ier to align strate­gic objec­tives. Busi­ness­es report a renewed appre­ci­a­tion and improved inter­nal under­stand­ing of the val­ue process as well as employ­ee iden­ti­fi­ca­tion with the com­pa­ny. By dis­clos­ing val­ue dri­vers and ana­lyz­ing the val­ue chain, indi­vid­u­al con­tri­bu­tions of each func­tion and depart­ment are high­light­ed and appre­ci­at­ed. By link­ing finan­cial and non-finan­cial cap­i­tals, <IR> enables a holis­tic pre­sen­ta­tion of the com­pa­ny, which in turn elu­ci­dates the val­ue dri­vers for stake­hold­ers. The sta­tus as an <IR> pio­neer com­bined with increased trans­paren­cy can enhance the pub­lic image of the cor­po­ra­tion and improve stake­hold­er trust – includ­ing investor trust. 

Argu­ments again­st imple­men­ta­tion include inter­nal resis­tance by indi­vid­u­al depart­ments and indi­vid­u­al employ­ees, par­tic­u­lar­ly resis­tance to the changes result­ing from the imple­men­ta­tion. Anoth­er down­side is rec­og­nized in high­er costs and resource require­ments at every lev­el of the cor­po­ra­tion, pri­mar­i­ly due to lack of expe­ri­ence and an increase in guide­li­nes. Fur­ther­more, a greater degree of trans­paren­cy leads to poten­tial new risks for the com­pa­ny due to the dis­clo­sure of neg­a­tives and the cor­re­spond­ing respon­si­bil­i­ties.

Argu­ments for and again­st the imple­men­ta­tion of <IR> as a report­ing for­mat

An inte­grat­ed report can opti­mize report­ing, e. g. enable mul­ti­ple depart­ments to col­lab­o­rate on an inter­dis­ci­pli­nary lev­el, share infor­ma­tion and cre­ate syn­ergies. It can broad­en the under­stand­ing and knowl­edge of the over­all cor­po­ra­tion and dif­fer­ent depart­ments. A pos­i­tive out­come of the imple­men­ta­tion process is a strength­en­ing of the inter­nal dia­logue beyond depart­men­tal bound­aries. <IR> imple­men­ta­tion can also enhance resource effi­cien­cy as finan­cial, sus­tain­abil­i­ty and gov­er­nance reports are merged (up to and includ­ing pro­duc­tion and dis­tri­b­u­tion costs). Oper­a­tional deci­sion-mak­ing process­es are expe­dit­ed due to an improved con­sis­ten­cy in indi­vid­u­al reports on the corporation’s val­ue chain. The inte­grat­ed report can also facil­i­tate exter­nal com­mu­ni­ca­tion by pro­vid­ing a con­sis­tent tool applic­a­ble to var­i­ous stake­hold­ers, and through dis­clo­sure of rel­e­vant infor­ma­tion and link­ages to the finan­cial com­mu­ni­ty. The inte­grat­ed report sat­is­fies investors’ need for a holis­tic pic­ture of the com­pa­ny to enable eas­ier, more com­pre­hen­sive assess­ments.
On the down side, the intro­duc­tion of <IR> can cause sweep­ing changes and a lengthy imple­men­ta­tion peri­od. It may well take sev­er­al years from the ini­tial imple­men­ta­tion deci­sion to the pub­li­ca­tion of the first report. A tremen­dous coor­di­na­tion effort is need­ed when there is lack of expe­ri­ence in inter­de­part­men­tal coop­er­a­tion. Gen­er­al­ly, the resource require­ments are per­ceived as high, although each cor­po­ra­tion can active­ly shape the process and edit the report accord­ing to dis­tinct require­ments. To enable a step-by-step imple­men­ta­tion of Inte­grat­ed Report­ing, it is pos­si­ble to draw and build on exist­ing report­ing struc­tures and process­es which are then adapt­ed and extend­ed incre­men­tal­ly. How­ev­er, respon­dents agreed that they would embark on the jour­ney again if they had to do it all over again (see fig­ure for overview of ben­e­fits).

From Decem­ber 2015 to April 2016, expert inter­views were con­duct­ed with indi­vid­u­als respon­si­ble for cor­po­rate report­ing from 13 inter­na­tion­al com­pa­nies (Bay­er, DSM, EnBW, exxaro, JLL, Munich Air­port, Novo Nordisk, Novozymes, Palfin­ger, PPR, SAP, Stan­dard Bank, Takeda), as well as four con­sul­tan­cies (BSD, EY Switzer­land, EY UK, Pauf­fley & Com­pa­ny). All of the com­pa­nies had already imple­ment­ed Inte­grat­ed Report­ing at the time of the sur­vey.
The study was spon­sored by CCR cor­po­rate mem­ber Clari­ant Inter­na­tion­al.

If you are inter­est­ed in the research report, includ­ing key learn­ings and rec­om­men­da­tions for action, please con­tact us: info@corporate-reporting.com


Argu­ments for the imple­men­ta­tion of <IR> from a com­pa­ny per­spec­tive

INTERNAL BENEFITS
MANAGEMENT LEVEL
•    Improved risk man­age­ment and deci­sion-mak­ing
•    Detailed under­stand­ing of val­ue cre­ation
•    Holis­tic under­stand­ing and man­age­ment of the orga­ni­za­tion

REPORTING LEVEL
•    Enhanced effi­cien­cy of report­ing process (esp. due to mate­ri­al issues)
•    Strength­ened inter­nal dia­logues
•    Sim­pli­fied oper­a­tional deci­sion-mak­ing

EXTERNAL BENEFITS
MANAGEMENT LEVEL
•    Holis­tic and trans­par­ent com­pa­ny pre­sen­ta­tion
•    Com­pet­i­tive advan­tage as a first mover
•    Improved stake­hold­er com­mu­ni­ca­tion

REPORTING LEVEL
•    Report as a new com­mu­ni­ca­tion instru­ment
•    Investor sat­is­fac­tion from a com­pa­ny per­spec­tive
•    Improved sell-side prog­no­sis