By David Creelman

Many managers have not even heard the term “integrated reporting” so they might be surprised that Mark Carney, now Governor of the Bank of England, is earnestly urging its adoption. Integrated reporting is a big, sprawling topic, so this white paper will hone in on what we think is most important for British Columbia.

First, let’s answer the question, “What is it?” Integrated reporting is a smarter kind of annual report that integrates financial and non-financial data to show how the organization creates value for various stakeholders. The two biggest elements of non-financial data are human capital data and sustainability data.

At this point, some readers will have noted the words “annual report” and will think, “This doesn’t have anything to do with me because I’m in a family-owned firm, or in the public sector, or a non-profit.” If integrated reporting were only meaningful to corporations, then it would be of limited interest. Integrated reporting matters to us all because if we only consider financial data we will miss the bigger picture of value creation. The type of organization you are in does not really matter; the top management team needs to have a clear idea, backed by data, about all the important elements that drive success.

Let’s take a concrete example. The future of a privately-held video game company may depend entirely on its ongoing ability to attract talented game designers. If information about talent attraction is not in front of top management, along with the financials, then they may overlook a strategic talent issue. Or consider the public sector: delivering services may depend to a large extent on the quality of labour relations. If useful information on labor relations is not in front of top management, then their ability to serve stakeholders may be at risk.

In this report, we will focus on building human capital into integrated reporting. Of course, this is our area of expertise; however, if companies understand how to handle human capital, then the rest of integrated reporting will come fairly easily.

One last point needs to be made: integrated reporting does not have to be a huge project. Even a small initiative to explore a topic like “human capital risk” is a meaningful step in the right direction. Companies that have created integrated reports talk about it in terms of an iterative learning process. You can move toward integrated reporting one step at a time; as wonderful as it is when firms go all in (we’ll talk later about Deutsche Bank), we imagine that most BC organizations will adopt a gradual approach.

Read the full whitepaper.