Sustainable Reporting a Case for Corporate Governance?

Hitherto, the focus of companies had been only on the financial aspects of reporting up until the end of the 20th Century. Focusing only on the financial aspect of company’s activities is tantamount to just looking at the rearview mirror of a vehicle without looking forward through the windscreen. It is pertinent to note that financial aspects impact on the non-financials and vice versa, hence, the need for Integrated Thinking and Integrated Reporting.

The new concept of integrated thinking for corporate reporting is a rather dynamic concept that emerged at the turn of the 21st Century. Integrated thinking is important because stakeholder expectations have become very high and there is a sporadic emergence of new and energetic activism of civil society groups whose main objective for existence was the pursuance of sustainable practices by corporate organizations.

Integrated thinking is essentially understanding, knowing and then planning. It focuses on how a company makes its money and how the company would maintain its value creation in a sustainable manner in years ahead. Boards and Managements of companies cannot continue to use the same tools from the corporate toolbox that created problems in the first instance. Companies have to start thinking differently and operating differently in a way that would ensure a symphony of resources and key relationships especially those of stakeholders’ legitimate expectations

Reporting value was hitherto based on silo thinking which focused mainly on financial and manufactured capitals but at present, value reporting should include intangibles such as human capital, intellectual capital, natural capital and social capital, as this would allow companies to attract young talents, great ideas and build strong brands that can sustain customers’ loyalty and trust.

The purpose of corporate reporting is to allow stakeholders make an informed assessment about the actual state of the business by considering both the tangible and intangible assets, which must be done by embedding sustainability issues into business strategy in a clearly understandable language. Traditional financial reporting gives only a part of the state of business and says nothing about the impact of products and services on the society and the environment; and as such, stakeholders cannot make an informed assessment of the sustainability of the business. Integrated Reporting on the contrary offers the much-required platform for including sustainability issues into corporate financial reports and a means for ensuring accountability and transparency. It is thus the duty of boards to spend large amounts of time trying to understand all the dynamics in an integrated report (IR): reading and understanding the non-financial information, and taking up the material information defined as that which affects how the company makes its money and the consequence on Environmental & Social (E&S) issues.

Source: Excerpt from Professor Mervyn King at the 5th Africa CEO Roundtable Conference on Corporate Sustainability and Responsibility (AR-CSRTM). 

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