Integrated Reporting: The Future of Corporate Financial and Sustainability Disclosure

Part One of Two

The TakeAway: New Harvard Business School eBook provides insights from first global conference on integrated reporting

Last week, Harvard Business School published its first free eBook, featuring contributions by participants at the recent global consultation on integrated reporting.  Conference convener and HBS Professor Bob Eccles invited all attendees to contribute their insights, then edited the resulting 64 articles into The Landscape of Integrated Reporting: Reflections and Next Steps.  Co-editors Beiting Cheng and Daniela Salzman helped divide the 334-page downloadable volume into 11 parts, assembled and published in record time, just one month after the meeting. (A free set of Executive Summaries of the 2-day session, including workshop summaries, is available online.)

This extraordinary resource sets “a baseline from which we can evaluate the progress of the integrated reporting social movement over time,” as Eccles writes in the introduction.  Even its online publication – with an interactive Table of Contents – models what’s increasingly preached: digital technologies will play a greater role in corporate reporting and stakeholder engagement, beyond both the social media baby steps currently used, and XBRL, the electronic tagging process that improves information access and comparability.

Today, we highlight articles that address the philosophy of integrated reporting; in Part Two, we’ll look at those examining the role of technology and stakeholder engagement.

Big Picture View | The eBook kicks off with six articles that explicitly address the role of the corporation in society, beginning with Murninghan Post Publisher Bob Massie writing on “Accounting and Accountability: The Role of the Firm in Society”.  Beyond the numbers, integrated reporting can balance two competing theories – shareholder primacy and stakeholder theory – of corporate purpose and materiality within a pluralist global context.  “Differing assumptions about shareholder [primacy] and stakeholder theory are likely to affect how integrating reporting will be designed and carried out,” says Massie, a member of the Working Group of the International Integrated Reporting Committee (IIRC).  He supports a holistic approach that goes beyond integrated reporting to “integrated theory.”  “The real challenge,” Massie says, “which can be met only if it is honestly faced, is whether the creation of a system of integrated reporting will affirm and support a more accurate view of the role of the corporation in creating long-term value for individuals, for firms, for stakeholders, and for communities.”

In the second section on the concept of integrated reporting, Tellus Institute Senior Fellow Allen White reminds us that corporate reporting is not just about the money in “The Five Capitals of Integrated Reporting: Toward a Holistic Architecture for Corporate Disclosure”.  Integrated reporting does more than merge financial and sustainability metrics, he says.  It scaffolds a new corporate design that involves the idea and vocabulary of capital stewardship – e.g., “the preservation and enlargement of multiple forms of capital, all of which contribute to long-term value creation by the firm”.  More than money, “capital stewardship” encompasses five dimensions: intellectual; natural; financial; organizational; and social.  This “INFOS” framework provides a “unifying theme that cuts across stakeholders and issues to frame how a company’s activities serve to undermine, protect or expand the stock of various forms of capital.”

Fiduciary Stewardship | Adam Kanzer, Managing Director and General Counsel of Domini Social Investments, offers thoughts on the implications of integrated reporting for investors in “Toward a Model for Sustainable Capital Allocation”.   Echoing Bob Massie, Kanzer reminds us that the goal isn’t to pour social, human rights, and environmental policy goals and ethical values into “market efficiency” models, but to put markets in service to the needs and values of human and ecological community.

Laura Berry, Executive Director of the Interfaith Center on Corporate Responsibility (ICCR), expands on the “values” dimension in the eBook’s section devoted to the investors’ perspective.  In “Integrated Reporting: What’s Faith Got to Do With It?” Berry says ICCR’s 40-year history of active corporate engagement, inspired by faith-based moral and ethical principles, “makes integrated reporting the obvious next generation of corporate reporting” because it helps bridge the money and morality divide.  The larger challenge?  “Truly embedding global stewardship into the 400-year-old corporate model.”

We can’t possible cover the eBook exhaustively, so we encourage you to explore it in more depth, and join the ongoing conversation—for example by requesting to join the LinkedIn Discussion Group on integrated reporting, or on Twitter by following @IntegratedReprt and the hashtag #IntegratedReporting.