How CIOs set to play a vital role in Integrated Reporting
Global Director of the Corporate Responsibility & Sustainability Office, Atos
Enterprise Performance Management consultant
Posted on: 30 July 2018
One of the mantras of today’s forward-thinking companies is for value creation to be the prime driving force of the company. But what is value? A global consensus is now emerging that value creation must involve more than just increasing financial capital for shareholders. For companies to survive in the present and prosper in the long term, they must also address their use of environmental capital, social capital, human capital, intellectual capital and other critical resources.
The transition to business models based on this vision is one of the greatest challenges facing organizations today. A fundamental step in this journey is the adoption of a next-generation system for reporting performance transparently across all these capitals – a framework for Integrated Reporting. The International Integrated Reporting Council (IIRC), a global coalition of regulators, investors, companies, standard setters, the accounting profession and NGOs, is leading this drive.
The reach of this new framework extends far beyond the traditional CFO’s domain of revenues, costs, cash flows and balance sheets. What is needed is an in-depth assessment of more complex information from inside and outside a company, that is vital to the company’s ability to innovate and flourish. Big data, data analytics, artificial intelligence and other groundbreaking technologies are now playing a transformational role in the speedy identification, collation and strategic analysis of the relevant data.
The arrival of Integrated Reporting gives Chief Information Officers (CIOs) new potential to be actively involved in reshaping their company’s strategies for growth.
I’ve got the power
With Integrated Reporting the common perception of CIOs and their IT departments as cost centers supplying a necessary service is set to change dramatically. The information delivered by the CIO is likely to be just as important in meetings of the Boards of Directors and executive committees as the traditional financial numbers presented.
As a member of the IIRC’s Technology Initiative, Atos has helped produce a paper that we think every CIO should read. The Technology primer for integrated reporting: A Chief Information Officer guide highlights the critical strategic role that CIOs can play in delivering a successful transition towards Integrated Reporting, a decisive lever to facilitate integrated thinking for the day-to-day decision-making processes of a company.
The document provides specific recommendations and guidance about the functionalities that the IT architecture will have to support. In contributing to the paper, we identified four key steps that CIOs need to take to build the right architecture for Integrated Reporting:
- Incorporate multi-capital data
Manage data from all the business capitals that are relevant to the value creation process. This will involve organizing systems where the relevant objects and attributes can be managed. In parallel, the data model for the objects and attributes needs to be aligned to ensure simple integration between the (different) systems.
- Undertake enterprise modelling
We need to understand what is happening in the process. Specific company priorities will require specific modeling. For example, the business processes might be modeled as well as the value creation process, the Integrated Data Model, Performance metrics and/or Product Life-cycle Management.
- Deliver analytics and integrated reporting
Based on the multi-capital data captured and organized as a result of new big data technologies, companies can explore the relationships between the different capitals. The impacts of the different capitals (on each other) can be analyzed and measured. Relations between Finance and other capitals can be identified to provide actionable insights.
New ways of reporting (Integrated dashboards) and communicating the results need to be explored.
- Ensure this is an iterative process
Managing change and establishing a culture of responsible business which acts on the insights of Integrated Reporting whereby the focus is on the value creation process.
Digital technologies to enable multi-capital thinking
Pressure for companies to change their behaviour and improve their transparency is coming from all directions, with regulatory reforms taking place in countries such as the UK and France and investors worldwide increasing their demands for extra-financial information. Today, it is estimated that from stock market capitalization just 20% of the company’s value is based on Financial and Manufactured capitals – the other 80% is derived from the other, more intangible capitals that organizations ignore at their peril.
Atos is committed to taking a leadership role in integrated thinking and integrated reporting, and for us this means being ahead of the regulatory curve. Since 2012 we have implemented new systems to collect extra-financial information and our technology teams are working very closely with the finance department to create a dashboard that will present information from all the different capitals, using common tools and workflows.
Our aim is to use our expertise in technology to explore the relationships between the different capitals, whether it is analyzing the impact of investment in training on the human resources capital and company revenues or seeing how investment in one specific product will impact the environment or society. This will support us in our integrated thinking to design the future strategies of the company.
Already, Integrated Reporting is being voluntarily adopted by over 1,500 organizations in 65 countries. Now is the time for forward-thinking CIOs to seize the opportunity to design multi-capital systems that give Boards and investors alike new insights into how their companies create long-term value.