More work is required on selling the concept to companies, according to Simnett. “People are saying they can see the costs of integrated reporting (IR), but they are wondering what the benefits are. Yet many companies in Australia are a fair way down the track in voluntarily adopting aspects of the vision. The benefits they are discovering from the enhanced business reporting include improvements in both internal decision-making and processes. They are also finding external benefits, such as capital cost reduction and improvements in analyst decision-making.
The IIRC is trying to come up with an agreed international solution to producing a corporate report that investors can readily digest, notes Simnett. “Developing a framework can be difficult at an international level and a lot of impetus might have to come from a bottom up approach – individuals and companies adopting the approach. South Africa and France are showing the way – and proving it can be done, as are many progressive companies.”
Integrated reporting is the way investors want to see things happen, confirms Nick Edgerton, a senior investment analyst at Colonial First State Global Asset Management, a division of the Commonwealth Bank of Australia. “I think the consensus view is that it will eventually be the way things are done. The question is how long it will take to come about. Some companies are leading the way, such as PUMA in its recent annual report.”
The Puma experience
Sports and leisure company PUMA took a step towards integrated reporting with the release of a combined financial and sustainability annual report in April 2011, saying it believed public reporting is not only a venue to demonstrate accountability, “but also a means for us to celebrate success, openly address challenges, and elicit feedback on what we do and how we do it”. It has published an economic valuation of the environmental impacts caused by greenhouse gas emissions and water consumption along its value chain.
Ultimately, PUMA will include further environmental key performance indicators, followed later by social and economic impacts. The company cooperated with the Global Reporting Initiative (GRI) by supporting the call for supplier factories to report on their social and environmental initiatives. The company agreed with 20 key suppliers in south-east Asia and other major sourcing regions to issue their own sustainability reports in 2012.
It found the biggest environmental impacts in the value chain occur not through PUMA’s core operations but at the level of its Tier 4 suppliers, where raw materials are derived from natural resources, such as the cultivation and harvesting of cotton, cattle ranching for leather, and natural rubber production. This part of the supply chain accounts for 36% of the total greenhouse gas emissions and 52% of water consumption. It seems the most water-intensive activity in the production of a T-shirt occurs at the initial step – the cultivation of cotton.
“Through this project, PUMA endeavors to enhance transparency as well as social and working conditions in its supply chain by advising factory management regarding weak points in their operations and enabling them to make improvements independently,” said the company.
