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Restoring Society’s Trust In Business Through Integrated Reporting

I am excited to introduce one of my Clarkston colleagues, Nicole Prince, to the blog today. Nicole and I have been working on the pursuit to articulate the benefits of Integrated Reporting, and I have asked her to share why she is interested in seeing companies create an Integrated Report. Gary Kelly, CEO of Southwest Airlines, is famous for saying, “I want one version of the truth.” The philosophy behind this simple phrase accords with his firm’s recent move to integrated reporting—a new format for reporting on all of a company’s activities.  If integrated reporting is widely adopted, it could lead to profound changes not only in the way corporations do business, but even in the way they view their role in society. What is Integrated Reporting, and why it is an emerging trend? Why should companies pursue yet another sustainability initiative? Currently, 10K financial reports fail to identify all of a company’s risks and opportunities; most do not include any quantified values for sustainability improvements or investment opportunities in areas such as people, green energy technologies, environmental impacts, etc. Additionally, companies are reporting on governance issues in different formats and at different times, making it difficult to compare industry players.  Also, there is a movement toward Conscious Capitalism which is the shifting focus from shareholder value to stakeholder value (discussed in a Clarkston Latest Insight piece, Integrated Reporting: The Next Generation of Transparency). In addition to helping companies identify further areas of risk and opportunity, Integrated Reporting has another enormous benefit, one that I find much closer to home.  More and more when I go to buy groceries, shop for a new pair of shoes, choose a restaurant or make travel plans, I find myself drawn to the product or brand whose story moves me the most. I find it is the authenticity of knowing where the product comes from or how the company is run that really inspires me to want to contribute to the cause. It may be the way in which Southwest Airlines centers its business around its people and strives to lead with a purpose of “luv” as they call it.  Or, how Tom’s Shoes, with their one for one model, donates a pair of shoes to a child in need for every pair sold. Or the packaging on the Kind fruit and nut bars with their slogan “Do the KIND thing for your body, your taste buds, and the world” that inspires me to choose their brand. Setting aside the brands that outwardly shout sustainability, there are also the companies that  include on their products, “Now Reduced Packaging,” “50% Less Plastic Used,” or “Made with 100% Recycled Cardboard.”  These subtle but moving messages ultimately help me choose one company’s product over another. Many of the consumer products companies on the shelf claim to be the best tasting, the most effective, or the most popular which can make it difficult for the consumer to make a decision on their purchase.  It’s the authenticity of a company’s story that will differentiate them from the crowd.  It’s the brand that is as effective as the rest AND cares about sustainability that will win my dollars, even if I have to pay slightly more.  It’s the company whose story inspires people to blog, tweet and facebook about their purpose that will win my loyalty every time. Not everyone is searching for products that claim to “do good,” but these companies are the ones that are succeeding and growing in the market place. Integrated Reporting enables companies to tell their whole story.  It allows them to provide their customers and stakeholders with a direct view into the initiatives that help make the world around them better and more sustainable. They are helping their stakeholders fulfill a need, a need to be a part of something greater than the consumerist pursuit of self.