Self-Declared Integrated Reports

Although integrated reporting principles were discussed as early as 2005, the first formal definition with reporting criteria did not appear until the Integrated Reporting Committee of South Africa published its 2011 Discussion Paper (IRC of SA Discussion Paper).7 No database exists regarding how many reports fit these criteria. However, Global Reporting Initiative's (GRI's) Sustainability Disclosure Database for the period 2010-2013 provides a useful indicator of the rise in the number of integrated reporting companies, based on self-declared integrated reports.8 The number of organizations declaring the publication of an integrated report grew from 287 in 2010 to 596 in 2012.9 In 2013, for which we do not have a complete count at the time of this writing, 61% were listed companies; 31% unlisted, for-profit entities; and the remaining 8% were other organizations—like nonprofits and municipal governments.10 Two-thirds were classified by GRI as "large" and another quarter as "multinationals."11 While the main focus of the integrated reporting movement is listed companies, these statistics reveal that the idea has broader application—for instance, by cities.12 The fact that 51% of the reports came from European organizations, with only 3% from North America (just slightly below the 4% of the comparatively small Oceania region), suggests major differences in awareness of and receptivity to integrated reporting between these two regions. Compared to companies in the European Union (EU), U.S. companies perceive greater litigation risk surrounding voluntary disclosures. Latin America and the Caribbean accounted for 12% of the reports, Asia for 9%, and Africa—predominantly, South Africa—the remaining 21%. Even as many of these declared integrated reports might more aptly be labeled "combined," the volume of companies publicly declaring themselves to be advocates for integrated reporting is a positive sign of receptiveness.13

Trends in Sustainability Reporting

Companies that publish sustainability reports have taken a big step towards voluntary transparency and, in many cases, they have implemented systems to gather nonflnancial performance information. Thus, they represent a pool of candidates that might also be receptive to integrated reporting. At present, most companies that issue an integrated report did so after publishing a sustainability report for some number of years.14

Though only 1% of the world's 46,000 listed companies were self-declared integrated reporters in 2012,15 companies producing sustainability reports are more numerous and the number is growing rapidly (Figure 3.2). In 1999, only 11 companies produced a sustainability report using GRI Guidelines. By 2012, the number of reports had grown to 3,704, for a compound annual growth rate of 56.5%. The growth rate in Asia (68.3%) was higher than in Europe (54.0%) and North America (43.5%), indicating a growing interest in sustainability reporting there. According to Peter DeSimone of the Sustainable Investments Institute, while only eight S&P 500 companies issued an integrated report in 2013, 89% (450) engaged in sustainability reporting, up from 76% in 2012,16 and 43% of the S&P 500 made use of the guidelines, up from 36% in 2012.17 Even in the United States, the strong growing trend of sustainability reporting could provide momentum for integrated reporting.18

FIGURE 3.2 Number of GRI Reporters 1999-2012

Data Source: Global Reporting Initiative. Excel Spreadsheet of Sustainability Disclosure Database.

The Spirit of Integrated Reporting

In 2009, RobecoSAM, the organization that has prepared the Dow Jones Sustainability Indices (DJSI) since 1999, began to look for evidence of integrated reporting.19 For the 2011 and 2012 annual reports, their Corporate Sustainability Assessment20 of 2,000 of the world's largest companies looked for whether the company had provided data on how environmental and social initiatives have led to cost savings or increased revenues. While not the same thing as a fully integrated report, this is an indicator of companies putting some of the principles of integrated reporting into practice, particularly "connectivity of information" in the <IR> Framework.21 Thus, we will take this as signifying the "spirit" of integrated reporting. Reasoning that only data from annual reports' main sections would signify true integration—as putting data in a sustainability section is indicative of a "combined" rather than integrated report—they found that only 12% of the companies provided an example of environmental or social cost savings or revenue generation in 2012. Still, this was up from 8% in 2011, a 50% increase.22 Seventy-four percent of the 2012 examples concerned environmental initiatives split evenly between cost savings and revenue generation. For social initiatives, two-thirds concerned revenue generation and one-third cost savings.23

Supporting our use of these examples as indicators of the "spirit" of integrated reporting, a far greater proportion of these reporting examples concerned strategic, groupwide initiatives related to the company's core business (72%), as opposed to sustainability programs focused on noncore business activities or activities isolated in a single location (28%).24 Reflecting the difficulty in quantifying these relationships between financial and nonfinancial performance, 60% of the total number of examples were expressed in qualitative terms.25