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Can There Be Meaningful Integrated Reporting? (Part 1 of 2)

Image credit: Thomas & McElroy LLC

Last year, prior to the release of the IIRC’s Integrated Reporting (<IR>) framework, the Global Reporting Initiative (GRI) published an interesting report on integrated reporting trends between 2010 and 2012. Over 750 self-declared integrated reports were studied.

One of the key research questions in GRI’s analysis involved the structure of the reports examined and whether or not they could be broadly categorized by type. This would have obvious implications in terms of how the authors of integrated reports interpret the concept of integration itself, while also revealing the approaches they took to measure, analyze and report performance.

Three such structures were identified by GRI (p. 17):

  • First were sustainability reports that meet GRI reporting criteria and also include financial performance information, but which make no clear links between sustainability and financial performance — this structure was referred to by GRI as the “sustainability structure.”
  • Second were sustainability reports that have been published alongside a separate financial report, but as a single publication under one cover — this structure was referred to by GRI as the “one cover structure.”
  • Third were sustainability reports that have an embedded structure, with clear evidence of inter-linkage between reporting on financial and sustainability performance — this structure was referred to by GRI as the “embedded structure.”

For the three years studied, the one cover structure dominated reporting practices, while dropping from 61% of all reports studied in 2010 to 48% in 2012. Embedded reports were the second most preferred structure, and rose from 19% of all reports studied in 2010 to 31% in 2012. The sustainability structure came in last and hovered around 20% all three years.

To be clear, the so-called sustainability structure identified by GRI consisted of reports that are first and foremost sustainability reports in content, augmented with financial performance information, but not in any sort of causally linked way; and certainly not complete in terms of financial reporting.

One cover reports, by contrast, contain both financial and sustainability performance information (comprehensively on both fronts), but are not integrated in any sort of analytically interconnected way. Rather, they are merely physically published together under “one cover.”



Center for Sustainable Organizations'
Mark McElroy,
speaker at
New Metrics '14

Finally, embedded reports include both financial and sustainability performance information as well as analysis that seeks to identify and reveal the inter-linkages between them. One can only assume that by “inter-linkages,” GRI was referring to a kind of cause-and-effect relationship that can exist between social, environmental and economic performance (e.g., if a company despoils the environment, it can expect its financial performance to suffer).

Strictly speaking, then, only the embedded category of integrated reporting (31% of all self-declared integrated reports in 2012) involves a thoughtful attempt to measure, assess and report integrated reporting in a meaningful way.  Put differently, the vast majority of self-declared integrated reports in 2012 (69%) were not at all integrated (analytically or methodologically) in any sort of meaningful way.

As for the embedded reports GRI looked at, it seems safe to assume that the analytical content and methodologies involved were largely self-styled, since the IIRC framework for preparing integrated reports did not yet exist in final form until late 2013. 

Theories of Performance

Although not explicitly considered in GRI’s analysis, another very important consideration in understanding the content and style of integrated reporting are the theories of performance are that lie behind them. What does that mean?

A theory of performance is a proposition for how to determine whether or not a business has been successful. For example, if you believe that performance should be interpreted mainly in terms of how an organization’s activities and impacts affect shareholder value (i.e., the shareholder primacy doctrine), then the only “inter-linkages” of interest to you would be those that reveal the effects of organizational activities and outcomes on shareholder value. Nothing else would be matter and integrated reports, therefore, should be devised accordingly.

If, on the other hand, you believe that performance should be interpreted not only in terms of effects on shareholder value, but in terms of effects on values of other (non-monetary) kinds and for the sake of, say, stakeholders in general (i.e., the stakeholder primacy doctrine), then your approach to integrated reporting might be very different. Impacts on all vital capitals and their effects on stakeholder well-being, not just shareholder well-being, would be highlighted accordingly.

Note here that both of the approaches discussed above would fall into the embedded structure category defined by GRI. They just happen to differ on the criteria that should be used to assess performance. And because of that, integrated reports prepared under the first theory would be very different from those prepared under the second. 

Indeed, the shareholder primacy type reports might be better described as little more than enhanced financial reports, since impacts of all kinds are expressed only in terms of their effects on shareholder value. Impacts of every other kind only matter when they add to or subtract from shareholder value. Short of that, all non-financial impacts are irrelevant. The financial bottom line reigns supreme.

But surely this isn’t how integrated reporting is playing out in practice, is it?

Stay tuned for Part 2 ...


Mark W. McElroy, Ph.D. is the founder and Executive Director of the Center for Sustainable Organizations and the original developer of the Context-Based Sustainability method. He is also co-founder of Thomas & McElroy LLC, creators of the MultiCapital Scorecard™, and… [Read more about Mark McElroy]


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