7 Things I Learned from Writing My First Integrated Report

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My last blog described six reasons that I decided to do an integrated report for my sole proprietorship, Sustainability Advantage, for 2017. The report is finished and is proudly posted to my website. There are 7 things I learned from writing my first integrated report <IR>.

  1. The recipe calls for good ingredients

An integrated report tells the story of how a company created value during the reporting period. The International <IR> Framework recipe requires eight ingredients / content elements:

  • Organizational overview and external environment
  • Governance
  • Business model
  • Risks and opportunities
  • Strategy and resource allocation
  • Performance
  • Outlook
  • Basis of preparation and presentation

I based my table of contents on these elements and it enabled both forward- and backward-looking perspectives on how my sole proprietorship is doing. It’s a cohesive, customizable, flexible checklist of report topics. The Performance section is the largest and can accommodate as much detail as would normally be in a typical annual financial report. The <IR> framework is a comprehensive recipe for a wholesome report.

  1. Capitals are a capital idea

An integrated report redefines company “success” during the reporting period. Success depends on how much a business impacted the value of six capitals―natural, human, social, financial, manufactured and intellectual. This echoes what economist Mark Anielski says is required for “genuine wealth” / success at a personal level. In his book, The Economics of Happiness, he explains how our happiness depends on how well we are doing on the first five of the six <IR> capitals.  That’s a close-enough endorsement of the capitals terminology for me. The challenge, though, is to assess how a company is doing on the first three, non-financial capitals. I tried using my progress toward the Future-Fit Business Benchmark (FFBB) goals as a proxy for whether Sustainability Advantage had added value to, or subtracted value from, natural capital, human capital and social capital last year. That worked well. The <IR> framework guidance encourages showing interconnections among the capitals, so I used the logic in the Sustainability ROI Workbook to show how co-benefits from impacts on natural, human and social capital contributed value to Sustainability Advantage’s financial, manufactured, and intellectual capitals in 2017. That worked, too. The capitals provide a handy, holistic scorecard for company success in the 21st century. They are a capital idea!

  1. It’s okay to be 100% successful at causing no harm

At first, I was tempted to use “not applicable” or “not material” as my score on some of the FFBB cause-no-harm goals. For example, “Water use is environmentally responsible and socially equitable” is a goal that applies to water used for commercial or industrial purposes. I’m a sole proprietor working from a home-office. I don’t use any water for commercial or industrial purposes, so this goal seemed to be “not applicable.” However, because I am 100% successful in not doing any harm to natural capital as assessed by this goal, my score on this goal is 100%.

  1. A good visual aid helps tell a coherent story

An integrated report tells a story of how things went during the reporting period. Stories have settings, characters, and plots. I created a business model for Sustainability Advantage as a core graphic to depict the setting (the business nested in society, which is nested in the environment); the characters (stakeholders, including the environment and society); and the plot (the input-process-output flow that enables Sustainability Advantage to create value for stakeholders). The business model graphic is used to orient the chapters in the story / report and to show how each relates to the big picture. It helps tell a coherent story.

5. The big Why is a big deal

I was surprised at how often I referred to my purpose, vision, mission and values throughout the report. They are the underlying theme of my story. They provide the context for everything I do. The up-front Governance section provided an opportunity to state these overarching Whys and their companion polices. As a sole proprietor, I am not required to have a board of directors. Nevertheless, it was helpful to document explicit policies to reinforce my implicit intentions. As Simon Sinek says, the big Why matters. Governance drives everything.

6. Sustainable procurement may be a gottcha

I know that a company is mutually accountable for the impacts of its supply chains. Taking it personally was a good reminder of how challenging it is to walk the talk on sustainable procurement. Do I know where and under what conditions my supply of Wheat Sheet paper is made? No. Do I know how much imbedded carbon, water, or energy there is in my laptop computer or whether there are environmental or social hot spots in its supply chain? No. Do I know how to find out? Sort of. Can I figure this out and stay sane? I’ll find out.

7. The first time is always the hardest

That saying is true for changing a washer on a leaking tap; it’s also true for writing an integrated report. I needed to decide what format to use―I ended up writing the report in PowerPoint and its appendices in Excel, with a lot of help from my friends. The appendices are where my performance on FFBB goals is calculated to quantify how much I added or subtracted value to / from natural, human and social capitals. Even though I helped develop FFBB Release 1 goals, formatting the worksheets and double-checking the Excel formulas took some effort. So did deciding on the business model graphic, and endlessly tweaking it. And deciding how much or how little content to write in each section. And digging up all the performance data for last year and 2016. And … and … and. But now I have an integrated report template that works for me. I already have ideas about how to do a better job on my next report, but it will be much easier to build on a known base. Bring it on!

 

So, how did Sustainability Advantage do in 2017? My story has a happy ending. It turns out that I am doing well on all six capitals. On the other hand, if a sole proprietor who has been immersed in the business relevance of sustainability for over 15 years―and who offers e-products and services for sustainability champions from a home office―can’t do well, who can?

The real value of doing an integrated report was not the deliverable―the report. As suggested in the CPA Canada Spotlight on Integrated Reporting, the real value came from reflecting on questions during the process: the thinking and rethinking of the why, what, how, and so-what of Sustainability Advantage. The prize is that the assessment of performance on various parts of my business model provides a teaser for a sequel―it pinpoints areas where improvements would make the ending even happier in my next <IR>, for this year.

Some of the tools used to create my <IR> (e.g., business model graphic, assessment of performance on the capitals, performance-at-a-glance infographic dashboards) may be templates that would help quick-start others’ integrated reporting efforts. Check out my 2017 <IR> and stay tuned for derivative plug-and-play resources that operationalize the above lessons learned and may ease others’ effort when doing integrated reports, especially for the first time.

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