Interview – Every year, most of the organisations released their annual reports, in which their financial situation is presented. Is that what stakeholders are expected? Yes, but not only. Can anyone understand annual reports? Not really… Transparency is key in nowadays communication, but that must imply accessibility of information: communication of information must be made in such manner that anyone can reach it and understand it. Today, stakeholders are expected to see organisations they follow to be committed into not only economic issues but also initiatives related to environmental and social initiatives; that is to say, see that corporate responsibility is actually taken into account by these organisations. Sustainability reports are a mean for organisations to communicate on such issues. However, cumulating many reports may discourage them… Integrated report might be a solution! Mervyn E. King – former Chairman of Global Reporting Initiative (GRI) and currently Chairman of International Integrated Reporting Committee – is explaining www.sustinable.com what benefits Integrated Reporting can bring to organisations.
Tina Ly: Why organisations should release reports related to sustainability issues?
Mervyn E. King: Sustainability reports are critical because every company uses natural assets and the company is itself part of society and not apart from society. Further, one is dealing with stakeholders and a company needs to know its key stakeholders’ legitimate needs, interests and expectations in order to strategize on an informed basis. Sustainability issues relevant to the business of a company as water is to the beverage manufacturer, is critical in developing strategy. It is also critical so that the reader of a report knows that the board has applied its collective mind to the sustainability issues, such as water, to ensure that the company will continue to sustain value creation.
Tina Ly: Could you explain briefly, what is Integrated Reporting and what are the aims?
Mervyn E. King: The integrated report is to make a report in concise, clear and understandable language. To be accountable the report must be understandable. It must also be understandable to the person in the street because it is no longer merely the wealthy family who provides capital to companies. A large provider of capital today is in fact the pension fund which is the money of the average individual who is also the consumer. The trustees of pension funds need to make an informed assessment that the equity of the company in which they are investing, the ultimate beneficiaries’ money, is carrying on a sustainable business.
Tina Ly: The Integrated Reporting standards are being released in April 2013 and GRI 4 in May 2013. What are the differences between the Integrated Reporting standards and GRI?
Mervyn E. King: The GRI sets standards for sustainability reporting whilst integrating reporting does not have standards. It is merely a framework which sets out the content elements and how you should word an integrated report containing the material financial and non-financial issues, showing how the one impacts on the other and how you have embedded sustainability into your long term strategy. It is a framework in which the company tells its stakeholders “the state of play” in a company.
Tina Ly: You are participating to many seminars and conferences in Turkey since 2006, so regarding sustainability issues how the business environment has evolved since then?
Mervyn E. King: Teodorina and I have been at many seminars and conferences in Turkey since 2006. There is, without question, an important improvement where businesses more and more are seeing sustainability issues in the light of performance as a business initiative, not a “do good” factor.
Tina Ly: What would be your top 5 advice for an organisation to get ready to report based on the Integrated Reporting framework?
Mervyn E. King: The most important issue is for the collective mind of the board to be informed of the needs, interests and expectations of key stakeholders, what are the value drivers of the business, what are the sustainability issues material to the business, how are these embedded into long term strategy and how is the company meeting the needs, interests and expectations of stakeholders?
Tina Ly: According to your opinion, what should be the role “sustainability” within companies’ and organisations’ communication strategies?
Mervyn E. King: Communication is a critical issue today with companies. Strategic communication with stakeholders is absolutely important so that management can be informed about stakeholders’ expectations. This drives management to manage on a more informed basis and develop strategy on a more informed basis for the board. The board at each board meeting has reports on stakeholder relationships with the company and is consequently more informed on deciding on strategy.
Tina Ly: How can be companies/brands/organisations act as role models towards general public regarding sustainability issues?
Mervyn E. King: Companies today have to be, and be seen to be, good corporate citizens, otherwise stakeholders, particularly civil society, will reject the company. Civil society no longer accepts that companies can profit at the expense of human rights, or by adverse impacts on society or the environment. Google Nestle and the KitKat campaign by Greenpeace as an example.
Tina Ly: Is there any other issue that you would like to underline?
Mervyn E. King: The only issue I would like to underline is that integrated reporting is the future and management can no longer think in silos. One has to think across the six resources used by every company: financial, manufactured, human, natural, intellectual and social capitals, and the relationship with key stakeholders. Integrated thinking is thinking across those resources and the relationships in managing and developing strategy. The resources and relationships are interrelated, interconnected and interdependent in the functions and operations of a company.