The Role of Technology and Engagement in Integrated Reporting

Part Two of Two

The TakeAway: Integrated reporting relies on new tools of technology and engagement in blending financial and sustainability disclosure – and practice.

Harvard Business School Professor Bob Eccles designed last month’s consultation on integrated reporting, which gathered about 100 global leaders in corporate accountability and sustainability, to brainstorm a series of recommendations on merging financial and sustainability disclosure —and perhaps even spur a “social movement”.  The Landscape of Integrated Reporting: Reflections and Next Steps, the free eBook of 64 short essays by participants presenting diverse ideas coming out of the workshop, seeks to establish “a baseline from which we can evaluate the progress of the integrated reporting social movement over time,” according to Eccles.

Following up on our Part One overview of the philosophical underpinnings in the eBook, Part Two delves deeper into the text to survey two key topics – technology’s role, and the importance of reflective engagement – that drive integrated reporting.

Tech Tools and Progressive Engagement

Several authors noted that integrated reporting relies on interactive digital technologies that progress from passive reception to active engagement.  Beyond simple online disclosure, such as simply posting .pdf documents, they include:

• use of sensor technology to transmit real-time, on-demand information;
• reconciling financial and sustainability XBRL “tagging” into a holistic XBRL taxonomy; and
• digital platforms and information flows enabling various forms of stakeholder engagement, from dialogue to collaborative innovation

Confused by this jargon?  Read on for some explanation.

From .PDFs to real time and XBRL formats | The Exeter Group’s Kyle Armbrester describes ways Internet tools such as videos and podcasts can help companies achieve sustainability through stakeholder engagement.  Eventually, adoption of sensing technology throughout an organization can change the timing and content of reporting.  For example, real time information flows on companies, industries, and geographical regions can be aggregated and communicated through handheld devices, helping to spot problems (such as the BP oil disaster) before they escalate.

The biggest wave, however, involves the use of eXtensible Business Markup Language, or XBRL, for reporting on environmental, social, and governance (ESG) criteria.  Maciej Piechocki and Olivier Servais, both with the IFRS Foundation, provide an overview of XBRL and the trend toward convergence of established financial tags with newer sustainability tags, enabling comparability. XBRL International Co-Founder Liv Watson and Colcomgroup’s Brad Monterio discuss the need for synchronization of various disclosure frameworks, driven by governmental and regulatory requirements.  Watson and Monterio cite efforts of the Global Reporting Initiative (GRI) and the World Intellectual Capital Initiative (WICI) to develop XBRL taxonomies for non-financial information.

Better engagement through digital platforms and information flows | Denis Riney, Executive VP of BrandLogic, describes the importance of online co-creation communities, where customers actively participate in shaping how ESG gets factored into a company’s business strategy.  “Co-creation is not a new idea; it has been used in product development processes for some time,” he writes, citing the work of the late University of Michigan business school professor, C.K. Prahalad, a proponent of shared value creation.

Kathy Miller Perkins, psychologist and CEO of Miller Consultants, and Kate Parrot of the MIT Sloan School of Management extend this idea into the realm of employee and multiparty engagement.  Miller (who contributed two articles) reminds us that in the end, integrated reporting involves real people, and that as employees see themselves as part of a larger whole, their sense of belonging, worth, and motivation are likely to increase.  Parrot writes that investors and other stakeholders desire transparency, trust, honesty, and mutual learning in engagements – essential qualities for integrated reporting – but achieving these is more difficult.  We need better designs and processes for authentic engagement, involving “double loop learning”—first coined by organizational behavior theorists Chris Argyris and Donald Schön to describe reflective practice that considers interests, not just positions.