Across the globe, integrated strategy and reporting has been undergoing important developments, many of which are ongoing efforts. From my position as the President and CEO of the World Business Council for Sustainable Development (WBCSD), a CEO-led organization of over 200 leading global businesses working together to accelerate the transition to a sustainable world, I have seen these developments first hand. The following aims to give an overview of the current integrated reporting trends worldwide, followed by an update of the global adoption of integrated thinking and strategy, as well as the progress towards a sustainable global economy.
Current integrated reporting trends worldwide
As you might have seen in the recently launched 10-year anniversary report of the IIRC, over 2,500 companies in 70 countries are using the principles of integrated reporting. There is particular evidence of uptake in Japan, Australia, South Africa, Spain and the Netherlands and evidence of growing momentum in many other jurisdictions.
Every year, WBCSD analyzes sustainability reports from our member companies against a set of comprehensive indicators. We then compile the overall results to publish our Reporting Matters report, which showcases good practices and provides recommendations for how to improve.
Based on our research, a few points stand out in our 2020 Reporting Matters report:
An update on the global adoption of integrated thinking and strategy
Among our members, we can see the living practice of integrated strategy and thinking – although there is still some way to go. We can see that our members show integration between strategy, action, SDGs etc. through circular practices, research and development, practical case studies, co-creation of solutions, development of vision for the future and fundamental review of business models and corporate strategies.
Our research shows that our members are increasingly integrating ESG risks into enterprise level risk, and that the level of this alignment is growing:
There is still progress to be made, particularly towards the strategic integration of sustainability as a fundamental component of business purpose, business models and business performance, and away from a separation between sustainability and core business priorities.
We look forward to a future in which companies see sustainability as a fundamental aspect of their business model, performance and disclosure, based upon an understanding that businesses are part of a larger environmental and social system, not separate or distinct from it, is at the heart of integrated thinking and of truly sustainable companies which exist to deliver value to all stakeholders over the long term.
The progress towards a sustainable global economy
Such as progress towards a sustainable global economy depends on a number of factors, but the end vision is very clear – more sustainable businesses should attract a lower cost of capital.
For that to happen we need a few things to happen.
We need to move to a system that optimizes sustainable value creation across Financial, Environmental, Social and Human Capital.
Consistent messaging should be deployed by governments, standard setters, investors, for example, to limit doubt and enshrine requirements about what needs to be done but also to allow flexibility for how it should be achieved – to create the fertile ground for resilient and sustainable enterprises to grow. Alongside highlighting the need and opportunities for sustainable growth, it is also key to call out greenwashing to ensure that we can trust the commitments of business for sustainable change.
Business can do this by integrating ESG information in the enterprise risk management, in their management decision making and in their disclosures to their investors and other stakeholders.
These disclosures need to be integrated in the mainstream filings of a company. In order for these disclosures to be decision useful for investors, we need to get to a mandatory reporting standard. In this context recent developments such as the IMP effort towards a globally harmonized system for ESG disclosures, the merger between IIRC and SASB (and soon, hopefully, CDSB) and the consultations currently being undertaken by both IOSCO and IFRS are important steps forward.
Once standardized, comparable ESG information is integrated and disclosed, we need to make sure that the investor relations activities of business reflect this new language. It is critical to ensure that the information disclosed is both focused on material sustainability issues and also decision useful for investors in order to provide clear signals for business as to how this information will affect investor capital allocation and valuation models.
Defining the role, duties and actions of companies in driving progress towards a sustainable future is vital work, especially in the light of the COVID-19 crisis, which has given rise to urgency for the development of new forms of equitable and sustainable capitalism.
Covid-19 has highlighted the flaws in our current system, and the coming years will test it further. We believe that integrated thinking is essential for building a resilient and sustainable system fit for the future.