If reporting doesn't influence behaviour, why are we bothering?

It’s a question that those of us surrounded by accounting manuals and data as interim reports are put to bed this month might well ask. It was the question Paul Druckman, IIRC CEO, put to his audience this month, as he talked about integrated reporting (IR) providing a strategic window into businesses.

So what is the behaviour change that proponents of IR are looking for and is there tangible evidence that IR can deliver this?

Looking at the business experience of the early adopters of IR there would seem to be a clear signal that the journey of looking more holistically at how, where and with what a business creates value, is creating behaviour shifts. These are often before the external reporting is ready to change. As a proponent of IR, I would be looking for these shifts to include:

  • extending planning to include a longer-term perspective (while also recognising short and medium-term needs)
  •  a more strategic focus on value creation
  •  understanding and building trust with wider stakeholders.

A longer-term perspective

Christine Lagarde, Mark Carney, Bill Clinton and a host of academics and dignitaries gathered in London at the Inclusive Capitalism conference with the aim to renew capitalism through the adoption of inclusive business practices. The initiative behind the conference is adopting 3 prongs of action with ‘reforming management and governance for the long term’ being one. A critical enabler here will be the information management needs to base longer-term planning decisions on. IR has at its heart a forward-looking assessment of risks to and opportunities for, the business model – what are the business’ key resources, how are they impacted from the business’ activities and what are the surrounding risks.

Already the likes of Unilever have moved away from the focus on quarterly profit reporting. However the challenge often cited is that the pull for a longer-term perspective isn’t there from investors. Research has indicated that a number of business managers would turn down NPV positive projects if the investment resulted in valuations that fell below consensus expectations. Can IR change that behaviour? PwC’s investor team has decided to look at whether there is a shift in investor views and has asked investors how information outside of the historical financial information (key resources, future outlook and other components of IR) impacts their investment decisions. Watch this space for the results which are due in September.

Strategy and value creation focus

That reporting influences behaviours is well illustrated by Mckinsey’s global survey of directors (2013). With the emphasis on historical financial reporting, it is not surprising that c90% of Board directors said they had a good understanding of the historic financial position of their companies. However, only c70% understood how the company created value - a surprise perhaps about those charged with the strategic direction of the company. A reporting model such as IR that focuses on how businesses create value in the wider sense could be the vehicle to make these two statistics more balanced.

Last month PwC and other accounting firms wrote to the B20 (who engage with G20 governments on behalf of international business). The subject was the significant gap between demands for and investment in infrastructure projects. A very interesting connection is made between corporate reporting initiatives such as IR to achieve a longer-term focus on value creation and to unlock investment in infrastructure. Just over a quarter of the letter sets out how corporate reporting innovations are key to support the objective of sufficient infrastructure investment. 


Christine Lagarde at the Inclusive Capitalism conference homed in on Trust as being the lifeblood of the modern business economy. A focus on stakeholders beyond shareholders and stakeholder responsiveness may unlock some of the challenges here. PwC’s early white paper on the barriers to creating trust highlighted the mismatch between what a company and what stakeholders wanted. A good IR process that looks at stakeholder responses and takes a broader look at the vital social and relationship inputs to its business, might begin to move this forward.


The first tentative steps towards a different business approach are there. They would seem to very much depend on businesses looking internally at their strategy and with reporting acting as the prompt but not the sole target.

Superna Khosla | Integrated Reporting Policy Lead
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