Integrating Integrated Reporting - Part II
Management is the everyday operation of a company and its employees. Good management ensures that all employees and teams have clear objectives that leverage their skills, are engaged and productive, and feel valued.
The Problem: Companies' employees don't know why they are doing Integrated Reporting—or how to do it.
Many do not understand the value of CR reporting, either, which is likely to make Integrated Reporting seem like even more of an "add-on." And while any team could throw together a "combined" report, it will take education, engagement, and proper incentives for the same team to produce a meaningfully Integrated Report.
The Solution: Managers should make sure their employees know how they fit into the process, and how Integrated Reporting fits into the "big picture."
Next, leaders should thoughtfully select those who will be responsible for delivering an Integrated Report. Leaders from line and staff functions should appoint team members with appropriate knowledge and authority to support the Integrated Reporting process. Leaders should set expectations for managers regarding the quality of the report, and make it clear to employees "what's in it for them." Should, for example, the report receive recognition from third-parties as an example of leading practice? Staff involved in the report should understand how its success will affect their performance ratings. Leaders should also set a cross-functional review to understand and reflect on what the information in the reports suggests regarding future strategy.
Knowledge Integration: The systems used to capture, analyze, and report data determine internal and external understanding of a company's performance. The questions of what to measure, how to measure it, and how to present it are tied to successful Integrated Reporting.
The Problem: Integrated Reporting creates an enormous knowledge management and integration challenge.
Little consensus exists on how or what to measure related to sustainable development. It is not intuitively obvious how to understand the links between "traditional" reporting data and ESG data. Existing systems are often barely adequate to handle financial reporting. Collecting information on sustainable development performance taxes existing knowledge management systems beyond what they can handle.
The Solution: build enterprise knowledge management and data collection systems that enable on-demand information gathering.
This should strengthen knowledge management across all dimensions of corporate performance and not solely ESG performance. In addition, companies need to actively participate in industry and cross-sector forums that define standardized and comparable metrics for ESG performance. With appropriate vision, leadership and management systems in place, companies can begin to tackle the knowledge integration challenge.
Companies have been able to muddle through similar challenges in CR reporting. However, Integrated Reporting holds the potential to change the game – creating a more powerful feedback loop that aligns stakeholder and shareholder expectations for corporate performance. The paradox is that companies need to produce Integrated Reports to create the mix of external and internal incentives to change organizational practices and embrace strategies of Responsible Competitiveness. However, in order to produce a meaningful Integrated Report at all, companies need to launch the same kind of organizational change processes the report is meant in part to catalyze.
Breaking out of this conundrum will require internal champions to articulate how Integrated Reporting supports corporate vision, and leaders to actively embrace and advance it. Integrated Reporting must also be translated into clear management and knowledge integration processes. By driving organizational change in these areas, companies, their shareholders, and their stakeholders will find Integrated Reporting a valuable tool to drive a Responsible Competitiveness agenda.
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