Sustainable development, which requires the recognition that the three dimensions of sustainable development, the economy, society, and the environment, are indivisible and integrated, is critical to the future of society and our planet. Globally, businesses have significant impacts on sustainable development issues including the environment, climate change, global wealth distribution, natural resource consumption and gender inequality. Society has become more informed and less tolerant since the advent of the internet and social media, particularly in light of increasing concerns over climate change, social inequity and injustices, corporate scandals and the 2008 global financial crisis. This has contributed to society’s trust in key institutions reaching crisis point, according to a survey of over 33,000 respondents globally. Therefore, companies who fail to consider their impacts on society and the environment will see an impact on their value through loss of trust, reputation and customers. Reputation can have a significant impact on company value as recent research in this area found that, for the average FTSE 100 Company, a 1% decline in reputation can knock about £266 million off a company’s market value.
Driven by concerns that organisations’ corporate reporting processes fail to adequately address social and environmental issues in a meaningful and transparent way, Integrated Reporting (IR) has emerged as a key development. IR is defined as a process founded on integrated thinking which results in a periodic integrated report by an organisation about value creation over time, and related communications regarding aspects of value creation. IR, through the process of integrated thinking, offers the potential to shift corporate mind-sets towards alignment of proﬁt maximisation with societal and environment wellbeing and provides the opportunity for organizations to respond to the United Nations Sustainable Development Goals. IR is currently adopted globally by 1,750 organisations and many of these organisations are starting to reap the benefits.
My own research of seventeen UK FTSE 100 early adopters of <IR>, based on an analysis of their reports and 36 interviews with leading executives in the areas of finance, sustainability, legal and communications, found that integrated thinking led to enhanced decision-making which led interviewees in twelve organisations to report either enhanced and/or more focused organisational performance through broader consideration of impacts and value creation. For interviewees in four of these organisations, all of whom have produced an IR for several years, benefits to the economic performance have been seen through increased focus on social and environmental impacts. Therefore, this research provides evidence of the economic benefits of IR. For other organisations, although they found that IR facilitated more focus on the impact of sustainability elements, it may, in many cases, be too early, particularly for those who have commenced their IR journey in the last 2/3 years, to assess economic impacts, due to the longer term nature of IR and its impacts.
Learn about this and more at the Governance North conference on 30 April 2020 where we'll be discuss why organisations with a strong purpose and greater transparency about social and environmental impact outperform those that don’t.
The author of this article is Fiona Robertson, senior lecturer at Leeds Beckett University, member of The Good Governance Academy. Fiona will appear as a keynote speaker at the Governance North conference.