Companies aiming to combine financial and non-financial material into a single, integrated report should begin by framing their business goals and environmental and social objectives with capital opportunities and risks, according to an Ernst & Young guide for executives.
Integrated Reporting: Driving Value discusses the benefits and challenges of integrated reporting and outlines four initial steps companies should take to implement the reporting practice.
Once goals have been defined, companies should complete a thorough materiality analysis to determine what integrated reporting risks and opportunities are important to their leadership, investors and stakeholders. Their responses should be prioritized to determine material issues and related business strategies, the report said.
The third step is to evaluate integrated reporting best practices and select the methods that best fit that company’s particular needs. Executives should mirror the quality, processes and controls of these leading companies and organizations, the Ernst & Young report said.
Finally, companies should create a road map. Begin by prioritizing reporting on the environmental, social and fiscal activities and projects that further the company’s ability to create and preserve value, Ernst & Young advised.
The road map should include processes and controls that support credible, high-quality reporting. Executives building the road map should engage leadership, investors and stakeholders to prioritize projects that best ensure return on investment and communicate those successes to an outside audience.
Companies have turned to integrated reporting because it provides a holistic view of short-, medium- and long-term value, the report said. Integrating reporting also improves brand value and viability, Ernst & Young said.
Last month, FSinsight editor Jeroen Derwall, assistant professor at the Tilburg Center for Sustainability and at Maastricht University, said there’s an upward trend of more companies reporting on their sustainability practices, although the quality of the reporting differs. He has called integrated reporting “the next step.”