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Corporate reporting is constantly changing. But where is it going? And what development is actually desirable?
The challenges facing companies are increasing: compulsory reporting on non-financial indicators, new GRI standards, required evidence for contributions to the SDGs. This leaves many companies feeling overwhelmed, especially because of the high demands of impact orientation. Businesses today should report not only on their inputs and outputs, i.e. costs and results, in the form of financial indicators, but also on their outcomes, in terms of the lifestyle of their target groups, and their impacts on social change. At the same time, they are confronted with very few interested readers, with only a small community reading their reports. Even primary stakeholders like owners, employees, customers or suppliers are mostly uninvolved. This can lead impact reporting to become an unpopular exercise within the company that is delivered for auditors and regulatory authorities.
Where is the way out? Are there solutions and companies breaking new ground? And what opportunities for further development exist?
As in many areas, it makes sense to remember the purpose. What is the reporting useful for? What purpose should or could it fulfill? And finally, is this purpose also subject to change?
Why do we need reports?
Reporting was and is primarily a communication tool. Selected target groups should be informed about the further development of the organization. The traditional focus has been on financial indicators. These are typically prepared and explained annually and / or quarterly to a primary audience of owners, lenders, investors and tax authorities. The main objective has been to provide a solid foundation for evaluating the company and related business decisions.
However, it has been recognized that the meaningfulness of these reports is relatively low, as intangible assets and risks resulting from the company’s interactions with its environment have not been sufficiently reflected. As a result, non-financial indicators have become increasingly important and companies have had to include environmental, labour, corporate governance, compliance or selected social responsibility metrics in their reporting. Today, all corporations are asked to report on their material impact on society and the environment. Additionally, the target group has been enlarged to all stakeholders, and companies should aim to involve all these stakeholders in decisions on the content of reports. Interestingly, this huge expansion of both content and audience has had little impact on the design of the reports so far. CSR, sustainability or integrated reports are still predominantly created as a classic brochure or PDF document, without taking into account the enormously increased heterogeneity of the target groups or the complexity of the content.
The expanded reporting on the impact of companies on society and the environment has not only increased the complexity of reporting but has also changed the reporting process itself. This change was triggered by several issues and has meant that indicators on the impact of organizations usually have to be procured externally. In addition, external stakeholders need to be involved in the analysis and evaluation of these indicators, leading to new decision-making processes. This in turn reinforces the role of reports as management tools. This feature of the reports is not new. The analysis and preparation of key figures has already formed the core of corporate controlling and thus a very important basis for corporate management. So far, however, only a small portion of the available numbers has been released, preferably those that make the company look good.
However, this distinction is becoming increasingly difficult for a number of reasons. Firstly, because of existing policies and standards, companies are forced to include negative impacts and unresolved issues in their report. Secondly, they cannot handle many of these impacts on society or the environment on their own. Thirdly, they must communicate openly in their own interest, especially if they expect their stakeholders to acknowledge the limited responsibility of the company for the respective impact as well as recognize and exercise their own co-responsibility. Due to these factors, corporate reports are in the process of developing into a cross-organizational documentation of issues that require a common dialogue and joint action. While the purpose of reporting may not change fundamentally, it will evolve considerably. This requires a rethink of classic reporting concepts.
Three criteria for futurable reporting
Possible solutions concern three areas, all of which require transformed implementation strategies:
1. Digital dialogue
The heterogeneous target group requires target group-specific processing: individual stakeholders must be able to retrieve and respond to the required information as needed. The future of reporting is online through continuous digital interaction with relevant stakeholders.
2. Collective action
Because significant social and environmental impacts can only be achieved together, future reports will provide a platform for cross-organizational management: to work together more closely and to jointly track and report desired changes. Corporate and social policy merge. Every organization is also a political actor and must act and communicate accordingly.
3. Real-time insights
The cross-organizational networking of data and decisions requires a new dimension of transparency: the future of reporting means open access to all relevant information in real time. The current impact of organizations on society and the environment can be viewed by anyone at any time.
Call for Action
Some companies are already on the way to future reporting. The current ranking of Austrian sustainability reports gives a small insight into the current status of reporting. FuturAbility’s mission is to help organizations further develop their reporting by launching multi-stakeholder initiatives to develop appropriate tools. All interested parties are invited to participate.
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