The recent BP oil spill that leaked more than 14 million barrels

of oil into the Gulf of Mexico made it readily apparent that our

existing system for corporate reporting has failed shareholders

and stakeholders alike in evaluating a company’s risk. Traditional

reporting of company performance, which primarily consists

of balance sheets, income statements, and the accompanying

directors’ report, is simply not measuring up. Some go so far

as to say that the overconsumption of fi nite natural resources,

the very real risk of catastrophic corporate accidents, and

the implications of climate change are possibly the greatest

challenges facing the world.

In a “post-BP crisis” world, companies fi nd themselves in the

midst of rapid global transformation with increased demand to

perform not only fi nancially, but to also become good corporate

global citizens — remaining accountable to their stakeholders.

The concept of companies looking beyond profi tability alone,

engaging and focusing on their role in society, and reporting

on this activity to stakeholders is generally termed Corporate

Social Responsibility (CSR) reporting. Weaving the CSR report

together with the traditional fi nancial performance report into

one document is referred to as “integrated reporting”. That is,

integrated reporting refers to the combined representation of

a company’s performance in terms of both their fi nancial and

non-fi nancial results. Today, many smart companies are now

providing integrated reports as a means to attract new business

opportunities, safeguard their reputation, maximize competitive

advantages and mitigate operational risks.

WHITE PAPER

Integrated Reporting:A Means for Corporations to Become Socially Responsible and Accountable.By Liv Apneseth Watson, Director of Research & Development, AccountAbility and Executive Advisor, WebFilings

“To make our economy sustainable we have

to relearn everything we have learnt from

the past. That means making more from less

and ensuring that governance, strategy and

sustainability are inseparable. Integrated

Reporting builds on the practice of Financial

Reporting, and Environmental, Social and

Governance — or ESG — Reporting (also

known as Corporate Social Responsibility —

CSR), and equips companies to strategically

manage their operations, brand and

reputation to stakeholders and be better

prepared to manage any risk that may

compromise the long-term sustainability of

the business.”*

— Prof. Mervyn King, Chairman of the Global

Reporting Initiative, (GRI)

Source: International Integrated Reporting Committee (IIRC)

According to Klaus Schwab, the Executive Chair of the World

Economic Forum, “corporate global citizenship” means that

companies must not only be engaged with stakeholders but

must be stakeholders themselves alongside governments and

civil society. His reasoning is that companies depend on global

development, which in turn relies on stability and increased

prosperity; it is in their direct best interest to help improve

the state of the world. This thinking among global leaders

today is increasingly driving companies to produce Corporate

Social Responsibility reports — mostly on an annual voluntary

basis. Over the last few years, a select number of companies

has started to integrate CSR reporting into their annual

reports. Integrated Reporting is part of the shift in business

responsibility driving companies to become corporate global

citizens. Integrated reporting therefore provides greater context

for performance data, clarifi es how sustainability fi ts into a

company’s DNA, and helps embed sustainability into company

decision making processes.

There is increasing demand from international investors,

accounting bodies, governments and other stakeholders for

integrated reporting. The best illustration of this trend is the

growing number of organizations that make CSR reporting their

actual business. Some of those organizations include:

Principles for Responsible Investment (PRI) —• Represent

signatories to the United Nations’ Principles for Responsible

Investment Initiative (PRI). Launched in 2005, the PRI today

accounts for more than 560 global investment institutions

with more than $18 trillion in assets under management.

PRI signatories pledge to integrate consideration of CSR

issues into investment decisions and ownership practices.

They recognize that social and environmental issues can be

material to the fi nancial outlook of a company and therefore

to shareholder value.

Ceres —• An Advocacy Non-Government Organization

(NGO), Ceres is on the green bandwagon and works with

investors worldwide to improve corporate and public policies

on climate change and other environmental, social, and

corporate governance issues. As part of this mission, Ceres

launched and coordinates the Investor Network on Climate

Risk (INCR), an alliance of more than 90 institutional investors

and fi nancial fi rms that collectively manages nearly $10 trillion

in assets to infl uence companies to issue CSR reports.

AccountAbility —• This organization has developed the

AA1000 series of principles-based standards that are

designed to help organizations become more accountable,

responsible and sustainable. They address issues affecting

governance, business models and organizational strategy

as well as provide operational guidance on sustainability

assurance and stakeholder engagement. The AA1000

standards are designed for the amalgamated thinking

required by the low carbon and green economy, and they

support integrated reporting and assurance.

The Global Reporting Initiative (GRI) —• Provides

a framework for companies and organizations on

sustainability disclosure. Its vision is to realize a day

that disclosure on economic, environmental, and social

performance becomes as commonplace and comparable

as fi nancial reporting and equally as important to

organizational success. The GRI Consortium is a network-

based organization that has pioneered the development

of the world’s most widely used sustainability reporting

framework and is committed to this framework’s

continuous improvement and application. More than

1,000 organizations globally declare that they use the GRI

Guidelines for their sustainability reporting, including

3M, Cisco Systems, Citigroup, Dell, Eli Lilly, Intel, General

Electric, Procter & Gamble, and United Technologies.

The Prince’s Accounting for Sustainability Project (A4S) •

— His Royal Highness the Prince of Wales himself leads

this important project. Accounting for Sustainability is a

project to bring organizations and other key stakeholders

together for the purpose of developing practical tools

that enable environmental and social performance to be

better connected with strategy and fi nancial performance

and, thereby, embedded into day-to-day operations and

decision making.

“The case for globally consistent fi nancial

reporting standards is well understood and

accepted. It is appropriate to apply the

same global approach to other aspects

of corporate reporting. This (International

Integrated Reporting Committee — IIRC)

initiative represents an important step on

that journey”.*

— Sir David Tweedie, Chairman of the International

Accounting Standards Board

International Integrated Reporting Committee •

(IIRC) — On August 2, 2010, The Prince’s Accounting for

Sustainability Project and the Global Reporting Initiative

announced the formation of the International Integrated

Reporting Committee. The Committee’s bold vision is to

bring forward a comparable framework for CSR reporting.

They plan to present this global initiative to the G-20

Meeting in Paris in 2011.

The IIRC has been created to respond to the need for a

concise, clear, comprehensive and comparable global

Integrated reporting framework that is structured around

an organization’s strategic objectives, its governance and

business model, and a framework that integrates both

material fi nancial and non-fi nancial information.

All these organizations collectively have a huge infl uence on

corporate behavior and policy makers. From Southwest Airlines

to Walmart, companies of all types and sizes are voluntarily

communicating integrated information to stakeholders about

their business’ impact on the environment. Stock exchanges

are starting to incorporate mandatory CSR disclosure standards

the same way that fi nancial reporting is a requirement for all

companies. At the 2010 UN Sustainable Stock Exchanges event

in China, delegates focused on how stock exchanges and key

stakeholders can improve CSR disclosure and performance

of listed companies, either through voluntary exchange-led

initiatives or regulation. The conclusion of the meeting was that

there is a strong business case for stock exchanges to strengthen

CSR disclosure requirements. Starting on June 1, 2010, all 450

companies listed on the Johannesburg Stock Exchange are

required to publish an “integrated report” or explain why they

are not doing so. Market evidence already exists that indicates

the value that investors, analysts and other stakeholders place

on important non-fi nancial information (e.g., environmental,

social and governance or “ESG” data) which gives a more

comprehensive view of an organization’s performance. Recently,

more than 250 of the world’s largest institutional investors,

representing more than $15 trillion in combined assets under

management, demonstrated their commitment through the PRI

to invest in companies that follow good sustainability and ESG

practices. As we can see, these are several of the many reasons

for companies to “go green” and produce integrated reports

with the ultimate goal of becoming socially responsible and

accountable to all stakeholders.

Integrated Reporting Meets Collaboration

One of the questions facing companies who decide to take on

integrated reporting is “who is and how are we going to do the

additional work required to produce these reports?” Existing

external reporting teams for most major companies are already

stretched thin simply meeting their existing compliance reporting

requirements. The CSR reporting process brings with it many new

The objectives for an integrated reporting framework are to:

Support the information needs of long-term investors •

by showing the broader and longer-term consequences

of decision making

Refl ect the interconnections between environmental, •

social, governance and fi nancial factors in decisions that

affect long-term performance and condition, making

clear the link between sustainability and economic value

Provide the necessary framework for environmental and •

social factors to be taken into account systematically in

reporting and decision making

Rebalance performance metrics away from an undue •

emphasis on short-term fi nancial performance

Bring reporting closer to the information used •

by management to run the business on a

day-to-day basis

Source: International Integrated Reporting Committee (IIRC)

“I believe we will look back on the creation

of this Committee (International Integrated

Reporting Committee — IIRC) as a turning

point in the development of corporate

reporting.”*

— Jane Diplock, Chairman of the New Zealand

Securities Commission and Executive Committee

of the International Organization of Securities

Commissions (IOSCO)

e: info@webfi lings.com w: webfi lings.com p: 888-275-3125 © 2011 WebFilings LLC | wp0311a

stakeholders, contributors and reviewers. And, if simply getting

the reports done isn’t enough, report accuracy and process

transparency has never held a higher premium than it does in a

“post-Enron” world. Ensuring that integrated reports are accurate

is critical.

Fortunately, there is now a solution available that can make

the addition of Integrated reporting “smooth sailing” for

those charged with the task and streamline the existing

compliance reporting process for the reporting team as

well. Using WebFilings’ unique cloud-based software, entire

reporting teams can collaborate in real-time creating, editing

and reviewing documents. The software’s intuitive and familiar

interface combines and integrates word processing and

spreadsheet editing capabilities in a single application with

process controls specifi cally designed for complex, fi nance-

centric reports. It’s the perfect solution to help companies

embrace integrated reporting.

With WebFilings’ “one active document” architecture, multiple

editors in multiple locations can collaborate on a single

document, eliminating all version control issues — and ensuring

that all team members are always working on the current

document every time. Another key feature is the sophisticated

“linking” tools that enable source values and text to be changed

once and automatically trigger updates to all impacted data

and text throughout the document — helping to ensure the

accuracy of report data. Add to this the software’s integrated

EDGAR HTML conversion and intuitive XBRL search, compare

and tagging toolset, and you’ve got a one-stop shop for your

Integrated reporting needs.

The trend is clear. The momentum is evident. Progressive

companies need to take a serious look at adding integrated

reporting to their corporate reporting process.

About the Author

Liv Watson, Director and Global Head of Research and

Development at AccountAbility, is a highly-regarded expert

in corporate governance, fi nancial reporting, and XBRL. She is

one of the original developers of the XBRL standard, as well as a

founder of the XBRL International consortium. Liv has also served

in several leadership positions related to the XBRL standard,

including as a member of the International Accounting Standards

Committee Foundation (IASCF) Advisory Committee and the

XBRL International Steering Committee.

Liv is also an accomplished writer and commentator, having

been a co-author and contributing author on several books

among them, XBRL for Dummies, and the Governance, Risk

and Compliance Handbook. Her articles and commentary have

been published in leading business journals, including the

Harvard Business Review and Strategic Finance. Prior to joining

AccountAbility, Liv was an Executive Advisor to WebFilings, a

privately-held US company that offers web-based software for

SEC fi nancial reporting.

About AccountAbility

AccountAbility is a leading global organization providing

innovative solutions to the most critical challenges in corporate

responsibility and sustainable development. Since 1995

AccountAbility has been helping corporations, non-profi ts

and governments embed ethical, environmental, social, and

governance accountability into their organizational DNA.

AccountAbility’s unique value proposition brings together

leading-edge research, widely-recognized standards and

strategic advisory services to deliver practical solutions for their

clients. For more information about AccountAbility, please

visit www.accountability.org.

About WebFilings

WebFilings is a privately-held Los Altos, California and Ames,

Iowa-based company that offers the fi rst and only end-to-end

solution for external fi nancial reporting. The company develops

and markets a fully-integrated, cloud-based solution dedicated

to meeting SEC reporting requirements. With WebFilings,

reporting teams collaborate in real-time on their fi nancial reports

from accounting close through SEC acceptance — including

integrated EDGAR HTML conversion and XBRL mapping and

tagging. As a result, WebFilings reduces the time, risk, and costs

associated with the entire external reporting process. For more

information, please visit www.webfi lings.com.

* “The Prince’s Accounting for Sustainability Project.” The Prince of Wales — The Prince’s Accounting for Sustainability Project. August 1, 2010. Web. February 21, 2011