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My beef with integrated sustainability/financial reporting

(An alternative title to this post might read: Integrated reporting and why Marshall McLuhan was right)

Marshall McLuhan was a genius. And his “medium is the message” theory was the bedrock of many a cultural studies debate for decades.

Arguably his work is even more important now: What does Twitter, the Ipad and Facebook say about modern society? This New York Times article offers serious pause for thought on that point.

That digression aside, what happens when you apply the “medium is the message” theory to corporate sustainability communications?

And then throw in the concept of integrated financial and sustainability reporting?

Before I try and answer this, let’s recap for second. This is what Wikipedia says McLuhan was talking about:

“The medium is the message is a phrase coined by Marshall McLuhan meaning that the form of a medium embeds itself in the message, creating a symbiotic relationship by which the medium influences how the message is perceived. The phrase was introduced in his most widely known book, Understanding Media: The Extensions of Man, published in 1964.[1] McLuhan proposes that a medium itself, not the content it carries, should be the focus of study.”

So why is is right if we look at him through a financial/CR reporting prism?

He’s right because the medium (Reports) does influence how the message (CR, financial performance) is percieved.

That is, badly, because the medium is not suited for communication that performs.

McLuhan’s theory is also right because: “a medium itself, not the content it carries, should be the focus of study.”

I would nuance this a bit when it comes to integrated reporting. Both the medium and the content should be the focus of study.

And this is my beef with the current debate about integrated reporting. It’s being portrayed in some circles as our next CSR holy grail. Which of course, it is not.

I find the volume of discussion about it frustrating since, as we know a) no-one reads financial reports and b) no-one reads CR reports.

So the cart is being put before the horse in my view.

We’re talking about producing integrated reports when we haven’t worked out HOW to get the financial and stakeholder communities to engage with our messages now.

So we run the risk of producing all-singing all-dancing integrated reports (like Novo Nordisk, BASF and United Technologies do), but no-one will give a damn as we haven’t worked out how to communicate the messages.

Think about the long-standing problem of educating pension fund trustees on sustainability and risk/opportunity management.

Will they give a damn about integrated reporting? Clearly not. It’s the wrong medium for them. Both CR and financial reporting, viewed historically, proves this (BP anyone?).

McLuhan said the medium IS the message, but he never had a read a CSR/Sustainability report! (Albeit they are improving).

If he was here today, what would he advise? My guess is he’d say “do your reports, but break down your communication into its salient parts, target it at key audience in a way which they are proven to respond to, and embed them into what you do, every day”.

So while integrated reporting is all well and good, and probably where we are heading, we need a proper conversation about CR communication channels, methods and mechanisms that actually work. Or else we risk the cart staying firmly in front of the horse.

How many of you in companies out there measure the effectiveness of your communication channels for CR messages? And link it to your communications planning and refinement? Not many, I would wager.

It can be done. We do it in conference and subscriptions marketing every day at Ethical Corporation. This is not a pitch to hire us (we’re not consultants), I’m simply pointing out that it can be done, if you choose to do it. I think it would be a good idea to start, before you ‘do’ your integrated report.

UPDATE: This news may be of interest to readers: “South Africa- An integrated report is a new requirement for listed companies from June 2010 onwards

9 Comments

  1. Olaf

    Dear Tobias, although you may be right that CSR reports are not the best read publications on the planet,it seems to me that your no-one-ever-reads-reports crusade is overshooting its objective. First, your arguments are based on the assumption that companies fail to package reporting content into appealing bite seize chunks, all according to the needs of the target groups. This obviously untrue, observing the growth in the number of companies that have invested heavily in communication, and that already do a lot more than publishing plain pdf. See Heineken, Marks & Spencer, Air France KLM,Novo Nordisk, BASF (how on Earth could you conclude that they are all singing and dancing?) and many more. Second, as you admit in your article, reports have the purpose to report, and that is why they do. They are just not the means nor the source to get across vision, policy, plans and the way forward. At your very own conference on CSR reporting, last November in London, the credo – very all dancingly and all singingly – put forward by your key note speakers and by yourself was: "report to manage, not to communicate". Strange to see efforts to be more communicative being mocked at (by you) or being found suspicious of greenwashing (by others). And that is why the reports are useful, necessary, and do a lot more than not-communicate: these days, before anything can appear in a report, it is five times double checked, independently assured, and reviewed 500 times to not make any statement that the reporter couldn't back up by proven facts looking oversight boards and regulators straight into the eye. Third, you claim that companies are not doing enough to get the message across in a clear way. What is the evidence for this assertion? Fact is that companies often spend lots of time and energy to get their messages across, just not in direct relationship to the report. This communication is realized towards clients, governments and NGOs in many other ways as well, but if you only count what is happening around the annual reports, you will not be able to see them.
    Seeing what integrated reporting disciples have in mind for companies to disclose in the near future, I expect that this will only fill, obstruct and clutter the medium, so that ANY message in this medium will be hopelessly lost in space. Just because the requirements are being increased in terms of quantity, quality and detail. One could wonder whether the disclosure indicator creators thought a lot about 'who wants to really know this', and where they got their license to complicate from. It seems your complaints about the communicative aspects of reports should also be addressed to the demand side of disclosures, rather than only to the supply side.

  2. Couldnt agree more. CR reports have become an expensive exercise in document creation and consultancy-speak, in other words, a communication tool that tries to please everyone and consequently pleases no-one. You are right, even the investment analysts find them boring!

    At best, the jobbing CR report is just a piece of corporate wallpaper. At worst it is a duvet hiding all manner of governance failings – see RBS for details. In essence, these reports singularly fail as tools of openness and transparency.

    What then, is the aspirant CR communicator to do, be they a listed or a private business? Firstly, they need to recognise that being open and transparent is perhaps more important now than it has ever been before. Firstly because the private sector has paid the price of the banks’ mismanagement and is subject to a greater level of cynicism and scrutiny. Secondly because the interconnected digital world means that business reputations can be questioned globally at the touch of a button. On the plus side, there is a growing cannon of evidence showing that companies which are prepared to open themselves up and listen to their customers and others, will be more successful. This aspiration is given impetus by the growth of blogging, online video and other social media, which can work for, as well as against, a company.

    Having established that openness and transparency are good, the business must then decide what are the best methods of communicating with the many groups interested in its CR record – be they customers, regulators, investors, employees, local communities, suppliers and so forth. While it may be harder to do, I would venture to suggest that a combination of different communication methods would be most effective, be they web based (including social media tools), printed summaries, presentations, one to one meetings, debates, adverts, maps, graphs, exhibitions, postcards or tea towels.

    While a baseline level of communication will be required, be it according to stock exchange or limited company rules, there remains a huge amount of scope for businesses to be genuinely interesting in relation to CR. If nothing else, it is about telling a story and responding to the resulting debate and questions. The digital world also allows the story to be told in real time, with video, blogging and graphics that show what is happening right now within the business and even across its supply chain.

    Adopting a greater level of CR openness may be daunting to the ‘on message’ communication control freaks out there, but I’m afraid they will just have to get used to it. In fact they will either adapt or be trampled into the soil when the CEOs, CFOs and CIOs born into a social media dominated world, start to get their hands on and create businesses. Its already happening, so come on you corporate suits, accept that the digital diaspora will be one step ahead of your finely crafted communiqués and open yourselves up a little more.

    I look forward to a time when I can see data on corporate carbon emissions that is only a day or week old, rather than a summary from the previous year. I look forward to reading or hearing the reaction of those that have benefited from the support of a corporate donation. I look forward to seeing the responses from suppliers to an ethical sourcing questionnaire. I look forward to seeing video of a production process and up to date information on pollution and safety incidents. I look forward to being able to e-mail the CR or environmental manager and get a quick response. This may all sound onerous and a logistical nightmare, but I can guarantee that it will be great for business and great for the morale of employees and those working with the company. Let us hail the end of the dull catchall CR report and welcome the world of interesting, varied, up to date CR dialogue.

  3. Alan

    I am not sure that this is a beef with integrated reporting or just a beef with certain forms of reporting. Of course the medium influences the messaging. And of course the possible media must be considered when considering the message. But I am not sure I agree that the cart is before the horse. No need for the horse if there is not a cart to pull. What I do strongly agree with is that if debates on integrated reporting focus only on the messages and not on media, we may end up with a cart that is not going anywhere.

  4. Hi Olaf,

    Thanks for your comments. I'd like to offer responses to three of them, mainly for the purpose of clarification.

    Before I do that though, I am puzzled by your central point, which appears to be that everything is fine in reporting, and the issue is the 'demand' side.

    This does not add up to me. My point is that people do not demand badly packaged information. That's really my central thesis, such as it is.

    With regard to your comments, you say that:

    "…your arguments are based on the assumption that companies fail to package reporting content into appealing bite seize chunks…See Heineken, Marks & Spencer, Air France KLM,Novo Nordisk, BASF"

    Bite size chunks is one thing, but the communication channels are important. Very much so in fact. Only M&S from your list utilise both good communication formats and channels. I haven't see the others do that, and in our office (as CSR media) we get a LOT of corporate communications every day (200300+ daily emails and mailings etc)

    You also claim that I said:

    "At your very own conference on CSR reporting, last November in London, the credo – very all dancingly and all singingly – put forward by your key note speakers and by yourself was: "report to manage, not to communicate". Strange to see efforts to be more communicative being mocked at (by you)"

    This is not correct. I did not say 'report to manage', I said, "as reports exist right now they are just for management, but they are used as communications, which is a mistake as reports are not a good communications mechanism.

    This is a very different thing.

    Lastly, you say that: "Third, you claim that companies are not doing enough to get the message across in a clear way. What is the evidence for this assertion?".

    Well, see above for a response to that. In short: reports are what most companies use, and they are not good communication formats. Other forms of communication are being used, I agree there, and they are better (see Centrica, GSK and PepsiCo recently), and companies like Timberland, M&S and Patagonia are leading the way, but they are so few and far between it is sometimes a little depressing. The problem, as I see it is twofold:

    1) CR teams are under resourced and lack communications experience
    2) CR teams are also nervous about what marketing/comms/legal/PR will do with their messages and so stop at the report and press releases etc, rather than taking on debate. This is possibly related to the first point, but also shows that many teams do not have enough traction in their own companies to get the job done well.

    Look forward to any further comments,

    Toby

  5. hi, actually, I believe Toby's post is insightful and I agree with points made. I also have strong reservations about integrated reporting for some of the same reasons and for several more which I wont take up space here with. I strongly agree with the approach of "do your reports, but break down your communication into its salient parts, target it at key audience in a way which they are proven to respond to, and embed them into what you do, every day".
    There is great value in the reporting process, and in its output, a comprehensive document which gives a snapshot of performance at a given, trackable point in time. But this is not THE communication, it is the platform for communication. The degree of sophistication required for quality , relevant integrated reporting is way beyond anything we see today, even from the companies that currently attempt "integration".

    elaine
    csr-reporting.blogspot.com

  6. Anonymous

    @Toby:
    My central point wasn't at all that all's well on the supply side. One of my points was that the annual sustainability reporting also has other requirements to meet than to only create an awesomely communicative document. There are many other ways in which businesses connect and dialogue with their stakeholders, and these just are not all based on the report (and they shouldn't be).

    On CR teams and lack of communications experience or being nervous about what others will do: this doesn't reflect at all reporting practice as I know it.

    I agree with you that it is not an easy task to create effective, communicative reports, especially in a context where requirements and expectations are rising continuously. Integrated reporting will not make things any easier, although I do see IR as a necessary step that will improve the the insights into the integral performance of organizations.

  7. Mike Wallace

    Chapter 2 – Continued

    Thomson Reuters, through their acquisition of Asset 4 also embeds ESG data into their data collection. They claim to have more than 400,000 global subscribers to their data.

    That doesn't mean (in either the Bloomberg or Thomson Reuters Case) each an every user is accessing ESG data, but there is growing demand, interest and use of this data. Why else would two very profit oriented data firms like these two enter into this space?

    The question to reporters is do you want to leave a blank in this data? Especially when a few mouse clicks lets the user see Scope 1, 2 & 3 data not only on you, but every peer in your sector. Water, waste, Board Diversity, etc. can all now be quickly brought up compared and contrasted not only within a sector, but back in time.

    Quick math again – Look at the list of signatories on the CDP, UN PRI, ICCR and/or INCR. Note that these numbers are all growing very quickly and include a wide range of organizations – from faith based investors, to government officials (public pensions/sovereign wealth funds), mainstream financial firms, to corporations. They seem to be asking for greater transparency and more useful ESG data.

    Print out those signatory lists out, take them to your contacts at Thomson Reuters & Bloomberg and ask them which of the signatories are their clients.

    That's just the supply / demand side.

    Now have another look at those lists and note to "government" overlap. These are mostly Treasurers/Comptrollers or some Financial Markets related branch, but they all feed eventually to regulatory decision making bodies.

    Given the massive global confusion around "green and/or sustainability claims", governments are stepping in and taking action by mandating certain types and levels of disclosure. This is true at the organizational level, as well as the product/service level.

    All these governments (especially in their financial markets departments) have Bloomberg and/or Thomson Reuters subscriptions/services. Many are already doing their own analysis of disclosure patterns based on what is loaded into the most accessible ESG platforms in the world (i.e., Bloomberg and/or Thomson Reuters).

    Question is, what type of "reporting" makes it into the Bloomberg and/or Thomson Reuters system most accurately and efficiently?

    Is it the TV commercial placed in the middle of a global sporting event? The strategically placed Tweet to thousands of followers? Is it the print ad in some national or international medium? Is it placement on one of the hundreds of rankings, ratings and/or listings saturating and confusing all of us? Is it one of the hundreds of eco-labels creating the same confusion?

    They (the research analysts), like so many of us, prefer that formal reports on non-financial information be produced in a standardized form. In fact, both Bloomberg and Thomson Reuters have developed methodologies that integrated GRI indicators directly into their systems. If you were the analysts having to read thousands of sustainability reports, how would you want your information presented to you?

    In conclusion:
    All kinds of readers are reading for all sorts of reasons.
    The largest collective group of consistent readers come in the form of analysts at shops like Bloomberg and Thomson Reuters, as well as the dozens of other SRI/ESG/sustainability research specialists.
    Publicly listed companies are at the front line of this type of analysis, but all companies are part of someone's supply chain. The fact that Scope 3 GHG is very obviously being documented in these data bases and terminals means that every company feeding into some supply chain will eventually need to do "some" type of reporting.
    Integrated Reporting IS happening, but needs input and support from a variety of stakeholders to help define it. One place to start is through the wikipedia definition.

    Mike Wallace

  8. Interesting POV, Tobias. Integrated reporting has the potential advantage of getting the ball rolling on better standardization – even if its main audience is investors (and particularly SRI folks).

    As someone who spent several decades in marketing, I completely agree with the comment about tailoring the communications to the appropriate readers/audiences. This is how companies can have the greatest impact and the greatest chance of their messages being received.

    Thanks for a thought-provoking post.

  9. Toby
    I couldn't agree more. In my view, companies that have emebedded good practice in the way they operate, have good data and great. This is ideal digital content that is simply too valuable to store up until the next reporting round. There is a business imperative to get this out early. It influences markets and, with more of the people that matter being digitally enabled, the first place they'll find this information is online.

    As for the change you hope one day to see, the signs are there of a change in the right direction. We are receiving an increase in requests from corporate communications teams that are beginning to question the effectiveness of the reporting cycle – integrated or otherwise. They are much more open now to the idea of treating CR and, in particular, sustainability communications, as an ongoing dialogue with a very wide community, not just an occasional (annual) event with a select few.
    In difficult times, CR people need more support to get up to speed with digital distribution, and a higher standing in their workplace to influence people internally. It's time these 'tempered radicals' stepped into the spotlight to engage a new generation. This cannot be done just once a year. It's time to innovate.

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