There has been a remarkable shift in financial reporting over the past few years. Simply put, numbers are no longer enough.
These days, investors, customers, and prospective staff want to know more about a business than its profit and loss. They also want to know about a business’s values and dedication to its surrounding community. This shift in preferences has led to a rise in integrated reporting.
What Is Integrated Reporting?
Integrated reporting is a type of financial reporting that delves deeply into a company’s performance. It reviews more than just the finances and accounting trends of a business. Instead, it provides a more comprehensive view. This includes an overview of an organization’s financial, environmental, social, and governmental successes.
The benefits of integrated reporting include the following:
- It allows stakeholders, shareholders, and prospective employees to learn more about a business’s values and long-term strategic goals than they would by merely looking at numbers.
- It alters and expands on the traditional definition of “value” by ensuring that companies are moving towards more than just profit-oriented goals.
- Breaking down of internal silos and governmental barricades to provide a comprehensive snapshot of how a company seeks to position itself for long-term success – and how it will define that success.
This leads to another important question: What additional components do you need in your integrated financial reporting?
Highlight Your Sustainability Initiatives
Businesses that seek to enhance their integrated reporting must discuss sustainability initiatives. These initiatives can take various forms, including enhanced reliance on renewable energy, how a business will incorporate sustainability into its purchasing decisions, and how an organization will seek to enhance its sustainability in the future.
The last point is particularly important, as cookie-cutter references about sustainability that are not specifically tied to an organization may ring hollow. Organizations that seek to discuss sustainability in integrated reporting should:
- Have concrete measures of success and discuss how those measures will be met.
- Connect their sustainability initiatives to societal and financial benefits.
- Ensure that the sustainability initiatives highlighted will have a positive local and global impact.
Enhance Stakeholder Communication
Financial reporting is critical to meeting goals of transparency and accountability, but information communicated in mere financial reporting can be opaque and incomplete. Yes, profit and loss statements, as well as long-term projections, can be in financial reporting. However, in these instances, the information left out — including governance structure, long-term goals, and societal benefits — may be far more useful measures of success.
By providing additional information and using integrated reporting, companies can better inform stakeholders about an organization’s values, people, and commitments. In doing so, businesses can better inform stakeholders about successes, failures, and the potential for future growth. This tactic will open up new lines of questioning, give stakeholders better insight, and allow individuals who interact with the company in question to be better informed about their potential for long-term growth and positive community impact.
Promote Long-Term Value Creation
All businesses seek to create value and have sought to create value since the dawn of capitalism. What has changed is the definition of value — integrated reporting demands that businesses discuss value in more than just financial terms. Instead, value may be defined in many ways, including benefits to employees, customers, shareholders, and the community.
Organizations that use integrated reporting can define their value. In doing so, they can also discuss how they seek to create that value and how stakeholders and customers can help. By adhering to this strategy, organizations can position themselves to do business with customers more well-suited to their needs. They can also use integrated reporting as a recruitment document, attracting prospective staff that align with their mission and are best suited to meet their needs.
Align Reporting With Your Organizational Strategy
Financial reporting is about more than meeting governmental regulations when done right. Financial reporting can work to get all staff on the same page regarding business planning. Integrated reporting can help a business understand its values and what it wants to accomplish. It can also help businesses inform their customers, staff, and stakeholders about their short-term and long-term goals.
As such, reporting can help to align an organization around shared goals. It can also ensure that everyone in an organization can have an open and honest discussion about those goals, potentially improving their end product and the process by which they create that product.
Takeaway
Financial reporting is no longer just about numbers — it hasn’t been in years. Integrated reporting offers a more holistic, comprehensive, and transparent view of an organization’s performance, values, and impact. By utilizing holistic reporting, your business can give interested parties a wider perspective about who you are, what you do, and what you value.