Patterns of Frontrunners

Abstract

Peter Bakker, President of the World Business Council for Sustainable Development (WBCSD), is an expert with one of the best seats in the house to witness the evolution of the corporate world. WBCSD is a global, CEO-led organization of over 200 leading companies representing combined revenues of more than €9 trillion with more than 19 million employees. From that prime position, Bakker used powerful words to stress the mounting inevitability of sustainability-based transformation. In Bakker’s view, companies simply need to start changing much faster.

Exhibit 2.1: The Integrated Reporting SpiltIRSpigt Framework

As the topic of sustainability is maturing, so are the ways of measuring and benchmarking sustainability performance. One way of assessing your starting position is through applying the Integrated Reporting SpiltIRSpigt Framework. In order to facilitate the effective reporting of the impact companies have on society, the International Integrated Reporting Council (IIRC) was formed in August 2010 as a global coalition of regulators, investors, companies, standard setters, accountants and NGOs with the ambition of improving accountability, stewardship and transparency.

After much prototyping and co-design discussions among stakeholders, the IIRC came up with the Integrated Reporting SpiltIRSpigt Framework that helps companies report with a focus on value creation from financial as well as non-financial drivers. In doing so, the framework provides investors with improved information for investment decisions and drives further collaborative thinking in boards and strategy departments about objective setting.

The tool is centered around a model that focuses on capturing value through six forms of capital for value creation. The first two forms (financial capital and manufactured capital) are most commonly used in traditional, non-integrated corporate reporting. The other four capitals are new and represent the softer areas such as intellectual capital. In brief, the six standard capitals within the Integrated Reporting SpiltIRSpigt Framework can be defined as follows:

• Financial Capital The funds that are available to your organization for value creation such as debt, equity and grants.

• Manufactured Capital Your manufactured capital is made up of assets such as buildings, infrastructure and production equipment.

• Intellectual Capital The most common forms of intellectual capital are, for example, tacit knowledge, intangibles from brand and reputation and patents.

• Human Capital Human capital is created from your people’s competencies, their capabilities and experiences.

• Social and Relationships Capital The relationships with your main stakeholders and how they ensure your social license to operate, create long-term value and support growth.

• Natural Capital Your natural capital can most often be defined from topics such as biodiversity, ecosystem health and your use of natural resources such as air, water, energy and minerals.

Applying the above forms of capital to corporate reporting, helps disclose matters that fundamentally affect an organization’s ability to create value over the short, medium and long term. The disclosed matters, also known as materialities, can have both positive and negative impacts on your company’s performance.