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VIEWPOINT: Annual reports – moving beyond ‘one size fits all’

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Is differentiated reporting for investors and other stakeholders the way to go?

Just the other day I was having a contemplative beer or two with a sustainability adviser who sometimes collaborates with me on annual reports. As the wordsmith, I assemble and tell the company value-creation story, where he’s a veteran CA(SA) who adeptly crunches the numbers to find the relationships between financial, social and environmental data in pursuit of that ‘holy grail’ of a truly integrated report.

On the big screen the wickets were tumbling as the Proteas imploded yet again, while we debated whether the sustainability reports traditionally issued with annual reports are redundant, now that integrated reporting is gaining international traction. What triggered this debate was the recommendation in the latest integrated reporting framework that these reports should be predominantly prepared for ‘providers of financial capital’ (i.e. shareholders and investors), rather than the broader stakeholder community.

Though this consultation framework is not yet finalised (scheduled for December 2013), this stance is a distinct sidestep from earlier guidelines, which saw the full spectrum of stakeholders as the focus.

Some practitioners are vehement that sustainability reports be discarded, as merging ‘triple bottom line’ streams into an integrated report are sufficient. After all, a proper integrated report should contain the most relevant information – financial, governance, social and environmental – for its readers to make well-informed decisions regarding that company’s performance and prospects.

The integrated report is supposed to be a ‘gateway’ through which readers can link to the company website for more detailed information on the financials, corporate citizenship, or whatever aspect they want to dig deeper into.

However, Justice Mervyn King maintains that sustainability reports are still essential, and I tend to agree. Outside of the investor and analyst community, how many stakeholders have the reporting industry insight and capacity to drill down into company websites to find information pertinent to them? As much as integrated reports can illuminate, are they not also an opportunity to hide pertinent information behind the guise of materiality?

As the last South African wicket inevitably went down, my associate clinched the debate, much as accountants tend to do. He argued that whereas an integrated report may be aimed primarily at the providers of financial capital, much of the information to be channelled into it is best organised by working through the indicators offered by the Global Reporting Initiative (GRI), a set of guidelines gaining rapid acceptance throughout the world of commerce.

Rigorously performing this exercise also provides the content for a comprehensive sustainability report that can inform the broader stakeholder community. It also adds value as a useful marketing release alongside the integrated report, offering a fuller picture of a company’s viability into the future, warts and all. No prizes for guessing who bought the next round … ❐

Clive Lotter is an Integrated Reporting Consultant and writer of annual reports for listed companies.