Every year, most of the organizations released their annual reports, in which their financial situation is presented. Is that what stakeholders are expected? Yes, but not only. Can anyone understand annual reports? Not really… Transparency is key in nowadays communication, but that must imply accessibility of information: communication of information must be made in such manner that anyone can reach it and understand it. Today, stakeholders are expected to see organizations they follow to be committed into not only economic issues but also initiatives related to environmental and social initiatives; that is to say, see that corporate responsibility is actually taken into account by these organizations. Sustainability reports are a mean for organizations to communicate on such issues. However, cumulating many reports may discourage them… Integrated report might be a solution! Teodorina Lessidrenska (co-author of Transient Caretakers with Mervyn E. King) is explaining us what benefits Integrated Reporting can bring to organizations.
- Why organizations should release reports related to sustainability issues?
Teodorina Lessidrenska: We live in a world where transparency is a must for a company to establish and maintain the trust of its employee and investors, clients, suppliers, governmental and non-governmental stakeholders and the society as a whole. By releasing reports on company’s governance and ethical aspects and environmental, social, and economic performance, a company is earning the trust of its stakeholders and maintains the constructive dialogue and engagement with its stakeholders. Such trust and dialogue are necessary not only for good reputation but also for attracting clients, improvement in products and services and positioning to better address potential and real risks and opportunities.
After more than a decade expansion of the practice of sustainability reporting worldwide, the expectations for the quality of the reports have grown significantly. It is not enough just to fill in with data your sustainability report, but a good report must provide the necessary information to the company’s stakeholders needed for them to make informed decisions concerning the company, its products, services, its market value and its ability to create and sustain value.
Today the value of the company has become inseparable from its intangible assets such as for example leadership, strategy, reputation, talent and how they play part in company’s sustainability strategy and in the relationships between company and its stakeholders. The ability of a company to communicate, analyze, and use internally the reported sustainability information for development of sustainability strategy and improvement of the company’s performance is as important as its ability to communicate in a report this information externally to its various stakeholders and to use it as a platform for engagement and dialogue with them.
- Could you explain briefly, what is Integrated Reporting and what are the aims?
Teodorina Lessidrenska: The aim of the International Integrated Reporting Framework is to support the development of and transition towards a new form of company reporting – the Integrated Reporting.
In the words of the International Integrated Reporting Council (IIRC), Integrated Reporting brings together the material information about an organization’s strategy, governance, performance and prospects in a way that reflects the commercial, social and environmental context within which it operates. It provides a clear and concise representation of how an organization creates value, now and in the future. Integrated Reporting combines the most material elements of information presented in separate reports and other documents (financial report and sustainability report, management commentary, governance and remuneration documents, etc.) in a coherent whole, and importantly:
• shows the connectivity between them; and
• explains how they affect the ability of an organization to create and sustain value in the short, medium and long term.
- The Integrated Reporting standards are being released in April 2013 and GRI 4 in May 2013. What are the differences between the Integrated Reporting standards and GRI?
Teodorina Lessidrenska: The GRI and the GRI Sustainability Reporting Framework are globally recognized and accepted as the standard for sustainability reporting, that enables all organizations to measure and report their economic, environmental, social and governance performance – the four key areas of sustainability. As part of the guidance on development of sustainability report, the GRI offers companies guidance on how to identify material sustainability topics to be monitored and managed, and to prepare for the integrated thinking process, which is the foundation for integrated reporting. According to the GRI, sustainability reporting process defined by the GRI Sustainability Reporting Framework can help companies that want to produce integrated reports, in three main ways:
• Identifying material topics – topics that express the core link between business goals and sustainability impacts
• Stakeholder engagement – dialogue to help determine material impacts and manage risks and opportunities
• Performance indicators – measuring, managing and reporting material issues using an internationally accepted framework
The GRI is the platform for development of sustainability report by an organization, and together with the financial report and other relevant governance documentation it provides the base for development of organization’s Integrated Report. One of the G4 development objectives for May 2013 set by GRI’s Board of Directors is to offer guidance on “how to link the sustainability reporting process to the preparation of an integrated report aligned with the guidance to be developed by the International Integrated Reporting Council (IIRC)”.
To develop an Integrated Report an organization must have a sustainability report, a financial report, governance documents and other documents and must use the information provided in these reports as a base for its Integrated Report development. According to IIRC, Integrated Reporting reflects what can be called “integrated thinking” – application of the collective mind of those charged with governance (the board of directors or equivalent), and the ability of management, to monitor, manage and communicate the full complexity of the value-creation process, and how this contributes to success over time. It will increasingly be through this process of “integrated thinking” that organizations are able to create and sustain value. The effective communication of this process can help investors, and other stakeholders, to understand not only an organization’s past and current performance, but also its future resilience. The main output of Integrated Reporting is an Integrated Report: a single report that the IIRC anticipates will become an organization’s primary report, backed up by separate more detailed sustainability report, financial report and other documents which also will be available.
The GRI is the platform for development of sustainability report by an organization, and together with the financial report and other relevant governance documentation it provides the base for development of organization’s Integrated Report. One of the G4 development objectives for May 2013 set by GRI’s Board of Directors is to offer guidance on “how to link the sustainability reporting process to the preparation of an integrated report aligned with the guidance to be developed by the International Integrated Reporting Council (IIRC)”.
To develop an Integrated Report an organization must have a sustainability report, a financial report, governance documents and other documents and must use the information provided in these reports as a base for its Integrated Report development. According to IIRC, Integrated Reporting reflects what can be called “integrated thinking” – application of the collective mind of those charged with governance (the board of directors or equivalent), and the ability of management, to monitor, manage and communicate the full complexity of the value-creation process, and how this contributes to success over time. It will increasingly be through this process of “integrated thinking” that organizations are able to create and sustain value. The effective communication of this process can help investors, and other stakeholders, to understand not only an organization’s past and current performance, but also its future resilience. The main output of Integrated Reporting is an Integrated Report: a single report that the IIRC anticipates will become an organization’s primary report, backed up by separate more detailed sustainability report, financial report and other documents which also will be available.
- Do you think that with the Integrated Reporting framework, organizations will communicate more on sustainability issues?
Teodorina Lessidrenska: The current experience of companies in South Africa and globally issuing Integrated Reports, and the recommendations of the IIRC and the IR Framework confirm that an integrated report is built on quality sustainability and financial reporting. Based on the information provided in the sustainability and financial reports, the company Board develops an Integrated report that presents the company’s strategy and goals, what values are created by the company and how, what are the risks and opportunities and ways they will be addressed in a long and short-term by the company, etc. Thus for the purpose of meeting the high quality information needs of Integrated reporting, companies won’t have other choice but to improve their sustainability reporting and communicate more and better on sustainability issues.
- You are participating to many seminars and conferences in Turkey since 2006, so regarding sustainability issues how the business environment has evolved since then?
Teodorina Lessidrenska: During the past 6-7 years the business in Turkey has deepened the dialogue on the sustainability concept and issues in relation with the local context, and has developed tools and capacity to begin addressing the relevant and most pressing sustainability issues. However, among the main remaining challenges still is effective engagement of the Turkish business community with its various stakeholders in Turkey on building a common sustainability agenda, and for the individual Turkish companies – the remaining challenge is establishment of constructive dialogue and engagement with their stakeholders on finding practical solutions to specific sustainability issues and problems.
- What would be your top 5 advice for an organization to get ready to report based on the Integrated Reporting framework?
Teodorina Lessidrenska:
1) Improve the quality of your sustainability reports by better more comprehensive coverage and analysis of the issues material for the company and its stakeholders, by clear presentation of goals and targets and by monitoring of and communication on progress towards these targets.
2) Deepen the analysis on: how each of the sustainability issues is relevant to the financial performance of the company; what are the sustainability risks and opportunities and how they are linked to the financial, economic, commercial and other risks, opportunities and business performance; how stakeholder expectations and needs can be translated into product and service improvement and innovation, etc.
3) Set up a sustainability reporting process that enables not just collection of environmental, social and other sustainability data within the company, but also ensures effective engagement with the key stakeholders and getting their regular input on the sustainability issues, priorities and strategic directions of the company.
4) Ensure and strengthen the participation of the top management, CEO, CFO, Strategy, Product and Innovation Executives, and the members of the Board in the development of the sustainability report and most importantly – in the analysis and integrated application of sustainability information for development of company strategy that incorporates the financial and extra-financial aspects and their impact on company’s long-term and short-term performance and value creation.
5) Develop and use efficiently the Internet as a platform for reporting and interaction with stakeholders
- According to your opinion, what should be the role “sustainability” within companies’ and organizations’ communication strategies?
Teodorina Lessidrenska: The communication strategy more and more will include strategic stakeholder communications and engagement with a wider range of stakeholders on sustainability issues. It will go beyond just sustainability reporting and will incorporate ongoing dialogue and strategic focused consultations with specific key stakeholders on specific sustainability issues.
- How can be companies/brands/organizations act as role models towards general public regarding sustainability issues?
Teodorina Lessidrenska:
· Be honest about your successes, challenges and failure and openly talk about them
· Commit to things you can do, act upon them, and deliver
· The things you can’t do at this time – don’t drop or hide them, but analyze further possible solutions, engage with stakeholders and come up with way and concrete steps forward
· Use every opportunity for collaboration
· Define how your company currently contributes for creation of value for the society, and potential areas and ways it can create social value, develop these areas as platforms for innovation so your products and services expand and become more profitable while at the same time they address better the needs of your stakeholders and the society.
· Make sustainability, integration and integrated thinking your signature brand
- Is there any other issue that you would like to underline?
Teodorina Lessidrenska: One of the main factors for successful adoption of sustainability and integrated reporting is establishment of reliable and trusted system and platform for assurance/verification of the sustainability, financial and integrated reports. The lack of proper generally accepted assurance system for sustainability reports is have had negative impact on the quality and wider application of the sustainability reports.
Equally important and challenging factor for the successful uptake of the Integrated Reporting is balanced multistakeholder participation in the IR development and application. This means that civil society and governmental institutions must be involved in the IIRC pilot programs together with business, so organizations of all types, from all sectors and sizes, must start developing sustainability and integrated reports.
