entire guide in PDF
Guide your company’s sustainability journey
Mapping Stakeholder Expectations
WHAT IS IT?
WHY IS IT IMPORTANT?
We refer to ‘external reporting’ instead of ‘sustainability reporting’ as the ideal situation in the assessment is integrated financial and non-financial reporting combined with strategic communication. We are doing this because the call by the IIRC1 for clear and concise reports encapsulating the triple bottom line value of companies is gaining momentum as the demand from the investment community becomes an important factor in raising the quality of integrated thinking, management and performance.2
1 The International Integrated Reporting Council published the Framework of Integrated Reporting in December 2013.
2 See also SustainAnalystics: See Change, How Transparency Drives Performance
Businesses today are valued primarily on financial performance and prospects. However, there is a growing recognition that the true value of a company should reflect both its financial and non-financial performance, as well as future prospects in both spheres.
On the one hand, an approach that integrates both financial and non-financial performance and prospects, underpinned by appropriate transparency and disclosure, will enable companies and investors to make informed decisions that are not influenced solely by financial returns. In addition, an integrated report underpinned by a strong culture of integrated thinking and management will also benefit reporting towards other stakeholders.
On the other hand, the preparation and year-on-year improvement of a corporate report including non-financial information3 is often the first lever for strategically integrating non-financial thinking and management processes within the organisation, rather than approaching environment, social and governance areas as compliance issues.
As Thorsten Pinkepank, Sustainability Director of BASF and board member of CSR Europe put it: “The road leading to the report is often more important than the report itself”.
3 A separate sustainability report prepared according to e.g. the GRI’s standard qualifies as economic indicators are core elements of disclosure.
We chose to put the bar high on external reporting by advocating for the preparation of an integrated report and the execution of strategic tailored communication to all stakeholders.
Strategic tailored communication to all stakeholders refers to a comprehensive process of:
It may not be a surprise that most companies in this sample have a separate sustainability report and tailored communication for certain stakeholders. Integrated reporting is still not the norm, but optimist views attest that just as with financial transparency, integrated non-financial and financial disclosure will become an inevitable and strategic exercise in coming decades.
We are assessing trends in both sustainability and integrated reporting, considering the former as complementary to the latter.
LEGAL REQUIREMENTS ON NON-FINANCIAL/SUSTAINABILITY/INTEGRATED REPORTING ON THE RISE
Europe is creating a level playing field on non-financial transparency affecting the management of sensitive topics like human rights, corruption and board diversity. This transparency requirement will affect the way companies manage triple-bottom-line issues, as approach to strategy, due diligence and risks have to be explained. The legal measure will affect an estimated 6000 companies in Europe and their first reports are due in 2018. Further information.
REPORTING FRAMEWORKS ENVISION CONCISE REPORTING ON MATERIAL ISSUES
INVESTOR INTEREST ON THE RISE BUT NOT COMPLETE
In Europe, during 2010, the European Federation of Financial Analysts Societies (EFFAS) and the Society of Investment Professionals in Germany (DVFA) published a list of sectorial ESG key performance indicators that companies are free to use. Project Delphi (under the leadership of EFFAS and State Street, in collaboration with CSR Europe) is finalising a broader range of sectorial key drivers, metrics and indicators of material environmental, social and governance issues that certain investor communities are likely to take up in their company valuation models.
INTEGRATED REPORTING HAS A LONG WAY TO GO WHILE NON-FINANCIAL/SUSTAINABILITY REPORTING QUALITY ALSO NEEDS TO IMPROVE
Although the majority of CEOs think sustainability is important for their companies’ future success, only a third of them think business is on track to ensure sustainable operations. (UNGC – Accenture CEO Study 2013)
The PRI investor study shows that although 57% of CEOs say they are capable of explaining their sustainability strategy to investors, only 9% of investors surveyed believe the CEOs are able to explain it at all.
In addition cascading expectations and engaging the supply chain to improve sustainability performance and be transparent also poses a challenge to companies.
Titan - Integrated Reporting
The annual Dutch Crystal Prize awards integrated reports