Dear Fellow Supporters of Integrated Reporting,
This message concerns GE’s first “Integrated Summary Report,” an article about sustainable investing, an article by Tim Nixon about big data and sustainability, a recent speech by Cardinal Turkson, a competency model for sustainability leaders, and two recent posts by me.
GE Integrated Summary Report
On March 14, 2016 GE published its first “Integrated Summary Report,” which “shows investors GE through the lens of management,” with an accompanying short video that explains that this succinct 68-page report contains the key information from its annual report, proxy statement, and sustainability website. In introducing the report, Chairman and CEO Jeff Immelt states:
Public company reporting has become so complicated that what matters to investors can get lost. Our priority is to provide meaningful information that all investors can readily access. For investors to make investment and voting decisions, we don’t believe that more information is necessarily better. Instead, we’ve challenged ourselves to provide better information. Over the past several years, we have already been enhancing our reporting in response to feedback from investors, and they have told us how much they like it. This year, we are taking it even further with our new Integrated Summary Report.
Nor surprisingly, the publication of an integrated report by GE, still one of the few companies in the U.S. to be doing so, has generated a great deal of attention. In “Easy consumption is goal of GE’s first integrated summary” Corporate Secretary notes that although “GE’s integrated summary is a long way from the triple bottom approach” it recognizes that “Design featuring less text and engaging graphics aims to keep company relevant and could expedite US adoption of integrated reporting.” In this piece my co-author, Mike Krzus, notes that whether this report would fit a purist’s definition “the fact that GE is voluntarily doing integrated reporting as a US company is very important to integrated reporting in the US. Their size, their stature, their global presence -- it means a lot. GE is a leader.”
“VW, Morningstar and COP 21: Welcome to the Year of Ethical Investing,” reviews the rise in sustainable investing. “The number of retail funds whose investment strategies incorporate ESG principles is growing fast. According to Vigeo Eiris, a ratings agency, there were 1,204 socially responsible investment funds in Europe by June 2015, which was 25 per cent more than a year before and a 221 per cent increase over a decade ago. They managed, together, more than €136bn (£107bn), almost six times as much as in 2005.” It also discusses the reasons for it. “The reasoning is that, if a company respects the environment, plays a social role and complies with the rules applicable to its business, this can only be good news for stakeholders. Consequently, its market value tends to go up and its ability to pay bonds is less likely to be compromised. ‘We see them as prudently managed companies,’ says Andreas Feiner, a partner at Arabesque Asset Management, an ESG specialist.”
Big Data and Sustainability
In “Big data means real sustainability,” Tim Nixon (Director and Managing Editor of Thomson Reuters’ Sustainability website) explores the implications of big data for sustainability. His central thesis is that big data can dramatically increase transparency about a company’s performance on a range of environmental, social, and governance factors. It can make possible real-time rankings, not only of companies but of their products and services. “Imagine that the frame of reference for these rankings is not how entities compare with each other—which is largely what we do now—but rather how their products or services or decisions are likely to impact the sustainability of the planet. Big data could have the ability to create a system for measuring our progress on key sustainable development goals such as eliminating extreme poverty, improving climate health, and providing universal education.”
Speech by Cardinal Turkson
On March 17, 2016 Cardinal Peter Turkson (President of the Pontifical Council for Justice and Peace) delivered an address “Is business to care for our common home?” at Catholic University of America’s School of Business and Economics and the Napa Institute, Conference on Human Ecology, Washington, DC. The Cardinal focused on promoting the role and responsibility business leaders have, to safeguard our common home in the context of the social teaching of the Church. The answer to his own question is a definite “Yes!” However, he cautions that this cannot come from “business as usual” since 200 years of this have brought “our common home to the brink of both environmental and social collapse.” What is needed now is for business “to adopt and implement a new idea of progress and development.” He also emphasizes the important role the board of directors has to play. “It is incumbent on corporate directors to see the corporation as a multi-generational entity and therefore to guide managers and shareholders in providing for its long-term health—its sustainability within a healthy natural and social environment.”
Competency Model for Sustainability Leaders
“A Behavioural Competency Model for Sustainability Leaders,” by Beth Knight (Head of Corporate Sustainability for EY’s financial services business in Europe, Middle East, India & Africa) finds “that Sustainability Leaders need a wide-ranging and divergent mix of behavioural competencies to be effective. Where leaders have more developed competencies, they are able to respond to sophisticated challenges in a way that others are not.” This study is based on a literature view that produced a set of hypotheses regarding the critical behavioral competences for sustainability leaders. The statistical results largely confirm prior qualitative studies. However, two new competencies, impressing people and valuing individuals, were identified. Four others (convincing people, directing people, embracing change, and taking action) did not receive statistical confirmation. The resulting model identifies 10 critical and prominent behaviors which have been mapped to five corresponding competency groupings.
Two Blog Posts
My HUFFPOST BUSINESS blog discusses “Actions to Achieve Inclusive Capitalism.” I note that “There are no silver bullets for achieving inclusive capitalism. However, integrated reporting can play a major role in bringing it about if it achieves large-scale adoption by companies and large-scale use by investors.
My Forbes.com blog “Why It’s Time for Boards to Take a Stand on Sustainability” introduces the idea of an annual board “Statement of Significant Audiences and Materiality” to this readership, citing Atlas Copco as the first company to publish one. Stay tuned for a more in-depth treatment of this great contribution by Atlas Copco.
Robert G. Eccles | Professor of Management Practice | Harvard Business School
Movement: Meaning, Momentum, Motives, and Materiality