Progress in the integration of Corporate Responsibility The debate over the role of business in society has intensified, since the global financial crisis, with growing demand for companies to report in a meaningful way to all stakeholders. The regulatory landscape has evolved over the last few years, along with a proliferation of standards at both a global and national level. In August 2010, there was the announcement of the formation of the International Integrated Reporting Committee (IIRC), whose remit is ‘to create a globally accepted framework for accounting for sustainability’. Heightened enthusiasm and the increased debate on integrated reporting has likely, in some way, been responsible for driving change in the way that FTSE 100 companies are reporting. One of the most significant changes in reporting this year was the increased recognition of the need to demonstrate linkages between a company’s strategy, governance and financial performance and the social, environmental and economic context in which it operates. This year more than half of all companies, up from a third last year, referred to corporate responsibility as part of overall group strategy. This is the first sign of evidencing how these elements are related and interconnected and which will ultimately help companies, investors and other stakeholders to make decisions that will lead to long-term, sustainable economic and social value. Different approaches illustrate the fact that the term ‘business model’ is subject to many interpretations and, in truth, there is no right or wrong approach. Undoubtedly this area of reporting will be a journey for many companies as they discover what works best in terms of explaining their business. For most companies, the new reporting requirements of the Code did not have to be tackled in these reports, but will have to be met in the first report which covers the financial year beginning on or after 29th June 2010. Despite this transitional period, some companies are already attempting to meet the new provision. What is certain, is that this process of disclosing the business model is a good process for management to go through so that they can better understand and communicate what makes their company different. In addition to this, the business model is being seen by many as the ‘missing link’ which connects the different elements of a company’s story – objectives, segmental reporting, risk, governance and CR. Reporting on it can help to tie the whole narrative of a Report together, giving a succinct executive summary of what the business does and what it stands for. Communicating this in the Report illustrates the Board’s view of the company, and the evolution of the business model to meet the challenges which the company faces in its day-to-day operations, as well as in the future. This disclosure will ultimately provide a platform for better engagement with investors and other stakeholders on the basis of a mutual understanding of what the organisation is really trying to achieve. In the end we all love a good story, and we want to hear a convincing account of a company’s activities and objectives. We need to see the logic in what a company is trying to achieve, and understand how it will achieve its goals. We want to know what a company stands for, what it cares about and strives towards. We want, ultimately, to ‘read a story we can believe in’. To this end, companies need to stop hiding behind complexity and simply ‘tell their story’. Clear, accessible storytelling will engender faith and confidence in a company and its future. Business model might just be the missing link Reporting on business models, more than any other issue, has occupied the thoughts of Annual Report preparers over the last few months and there is understandably some trepidation as to how best meet the challenge. For many businesses, having to consider disclosing the business model has acted as a catalyst for internal debate over what it actually is. Indeed, in some cases, several different descriptions of the business model can be proposed by individuals from the same company. This is often quite a helpful and productive debate to have as it helps management consolidate views and ensure that there is cohesion internally in terms of what the business is trying to do and what its purpose is. www.blacksunplc.com © Black Sun Plc 2011 5
