Better sustainability reporting at lower costs
6 april 2009
On the other hand many sustainability reports lack focus and insufficiently deal with the material impact of the company on society and vice versa. Therefore they lack relevance for the professional and truly interested audiences.
It is time for some quality improvement and we believe this can be combined with reducing costs. For that a fundamental approach is required: sustainable reporting needs to be focused on the material non-financial aspects that (potentially) can truly impact the current and future position of the company. Not public relations, but the valuation of the company within the economical and societal domain is the main driver.
This focus on materiality implies that sustainability is to be reported in only one document: the financial report. Because this report should give the complete picture of the health of the company and its expectations about the future. Sustainability is not a side note but truly a part of that. Therefore we argue that companies should publish integrated financial and sustainability reports.
From our own experience we know that integrated reporting is not a walk in the park. It requires the company to have a robust sustainability management system that is truly embedded in the organisation. The finance and control department, that has the responsibility for financial reporting, should recognise and accept that management system. Because otherwise they could sabotage integrated reporting. Moreover the external accountant should be an active participant in the process, because he has to be able to accommodate an integrated verification statement. Without these conditions sustainability will only “drown” in an integrated report.
We are of the opinion that using XBRL may help to improve the quality of integrated reporting; it will discipline the reporters. XBRL is a reporting standard (taxonomy) that facilitates electronic data exchange. Using XBRL is attractive since more and more regulators are promoting or even obliging XBRL. The SEC is obliging XBRL already for big corporations and the Dutch government is promoting it. While using XBRL it is easy for companies to integrate sustainability reporting in the financial reporting system based on IFRS and in the current compliance reporting processes. A new separate reporting process is therefore unnecessary.
Using XBRL forces companies to use clean key performance indicators and managing the organisation on those. With that the core conditions for integrated reporting will be met. Still, integrated reporting will not be a walk in the park. But the perspective of cost savings will definitely be a stimulus for going this road.
Curious for more details? Triple Value and SemansysTechnologies are planning to organise workshops for reporting professionals. For more information, email: Wouter.scheepens@triple-value.com
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