The Integrated Reporting Movement: Meaning, Momentum, Motives, and Materiality

PRAISE FOR THE INTEGRATED REPORTING MOVEMENT

"Integrated reporting is a vitally important new trend for investors like CalPERS which rely on long term, sustainable returns to meet their liabilities. This book is essential reading for investors, companies, and regulators concerned with ensuring that corporate reporting becomes integrated, and thereby captures the critical elements that drive long term, sustainable returns and risk mitigation."
Anne Stausboll, Chief Executive Officer, California Public Employees′ Retirement System

"For long–term investors, environmental, social, and governance factors will have a material impact on the value of a firm. These investors need to better understand how a company views ESG factors and how they relate to its ability to create value and mitigate risk over the long term. The Integrated Reporting Movement aptly delineates how ESG factors can be used by both companies and investors to achieve this end."
Mark D. Wiseman, President and CEO, Canada Pension Plan Investment Board

"As business has gone global, its relationship to society is fundamentally changing. The ability to proactively manage environmental, social, and governance issues is increasingly critical to long–term success. Integrated reporting is rapidly becoming indispensable for companies to navigate this transition. This book not only presents the state of affairs, but it also sketches pathways for the future."
Georg Kell, Executive Director, UN Global Compact

"Eccles and Krzus do a good job of describing the current state of play in integrated reporting. In our increasingly fragile world, the integrated capital markets we need for tomorrow will require companies to demonstrate to investors and all stakeholders respect for allocation of all forms of capital (financial, human, natural, social, intellectual, and manufactured) and their strategic role as sustainable sources of long–term value creation."
Christianna Wood, Chairman, Global Reporting Initiative

"Integrated Reporting as a business–led initiative will have significant impact on sustainability, financial stability, people, the planet, and profit. This book is a very valuable and welcome contribution to the global discussion and rising momentum around Integrated Reporting."
Jane Diplock, Former Chair, New Zealand Securities Commission, and former Chair, Executive Committee, International Organisation of Securities Commissions (IOSCO)

"This book is an invaluable guide to developments in integrated reporting. It is a must read both for those who are devising approaches to disclosure and integrated reporting and for those who are interested in corporate reporting in general."
Mary Schapiro, Former Chairman, U.S. Securities and Exchange Commission

Foreword ix

Preface xiii

Acknowledgments xvii

Chapter 1: South Africa 1

The Uniqueness of South Africa 2

South Africa s Journey to Integrated Reporting 3

South African Assessment of the South African Experience 10

Our Reflections on the South African Experience 18

Notes 18

Chapter 2: Meaning 31

Company Experimentation: Examples from the First Integrated Reports 32

Expert Commentary: The First Reflections on Integrated Reporting 40

Codification: Creating Common Meaning 44

Notes 51

Chapter 3: Momentum 59

Adoption 61

Accelerators 63

Awareness 78

Notes 80

Chapter 4: Motives 97

Companies 98

Audience 102

Supporting Organizations and Initiatives 106

Regulators 107

Service Providers 109

Notes 111

Chapter 5: Materiality 119

The Social Construction of Materiality 120

Materiality in Environmental Reporting 122

Comparing Different Definitions of Materiality 123

Audience 127

Governance 129

Materiality for Integrated Reporting 132

Notes 134

Chapter 6: The Sustainable Value Matrix 147

A Short History of the Materiality Matrix 147

Issues with the Matrix 150

The Current State of Materiality Matrices 152

From the Materiality Matrix to the Sustainable Value Matrix 157

Notes 165

Appendix 6A: Comparing the Ford and Daimler Materiality Matrices 173

Notes 177

Appendix 6B: Methodology for the Materiality Matrices Review 179

Note 189

Chapter 7: Report Quality 191

The Six Capitals 192

Content Elements 194

Special Factors 200

Assurance 207

Notes 209

Appendix 7A: Methodology for Analyzing 124 Company Integrated Reports 221

Notes 223

Chapter 8: Reporting Websites 225

Methodology 226

Website Category Analysis 227

Website Feature Analysis 233

Three Examples 241

Notes 246

Appendix 8A: Methodology for Website Coding 253

Chapter 9: Information Technology 261

Integrated Reporting Processes 262

Four IT Trends 265

Contextual Reporting 269

(World Market Basket) 271

Notes 274

Chapter 10: Four Recommendations 281

A Very Brief History of Financial Reporting 282

Balancing Experimentation and Codification 283

Balancing Market and Regulatory Forces 285

Greater Advocacy from the Accounting Community 287

Achieving Clarity Regarding the Roles of Key Organizations 289

A Possible Scenario 290

Final Reflection 292

Notes 292

About the Authors 299

Index 301

ROBERT G. ECCLES is a Professor of Management Practice at the Harvard Business School. He has written four books on corporate reporting. He has also written over 25 articles and 20 teaching cases on integrated reporting and sustainability.

MICHAEL P. KRZUS is an independent integrated reporting consultant and researcher. He has provided advisory services to participants in the International Integrated Reporting Council Pilot Program, companies exploring the adoption of integrated reporting, and consulting organizations seeking to enhance integrated reporting capabilities for clients.