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Company reports: integrated vs sustainability vs ESG vs responsibility?

In my series of articles for Pure Advantage on the six capitals I speak generally about “accounting for the six capitals” in order to span the wide variety of reports companies prepare to address their financial and other performance, whether in integrated reports, or in annual reports accompanied by separate sustainability and/or ecological, social and governance (ESG) or other corporate responsibility reports.

The six capitals addressed in integrated company reports are:

  • financial
  • manufactured
  • intellectual
  • social/cultural/relationship
  • human
  • natural

“Every entity uses and affects every one of these capitals,” says Ray Skinner of Sustainability Matters. “Depending on what it does, an entity will use more or less of each capital either directly or indirectly. We know that for some entities up to 80% of their perceived value is not included in their annual reports. We also know there are numerous risks and opportunities which are not included. So why can’t, or don’t companies provide reports which tell all interested parties what they would really like to know – which is usually far more interesting than the arcane financial figures?”

But is it better for companies to tell this story in one Integrated Report or to prepare separate reports on environment and sustainability, or a separate ESG (ecological, social and governance) report, or in separate corporate social and/or environmental responsibility reports?

There is a vigorous and learned debate about the merits of integrated vs various forms of separated reporting, and whether in some cases it is better to separately report on environment and sustainability.

Here is a very short summary of some of the views on either side.

Firstly, the IIRC says an integrated report may be a standalone report or an accessible part of another report; that is, reports on the other five capitals don’t have to be included in the annual report.

Not everyone sees an integrated report as defined by the IIRC as a substitute for a sustainability report because the primary purpose of an integrated report is to “explain to providers of financial capital how an organization creates value over time” (my emphasis) and some aspects of environmental, sustainability and social reporting may add little or no value.

My concern with this is that sticking to this narrow interpretation could mean, according to a colleague in the field, that “a lot of the information you would associate with a sustainability report may not make the cut in an integrated report”. So if it’s not reported separately, it may not be reported at all.

I’ve boiled down the pros and cons of integrated vs separate reporting into two main groups, relating to a company’s audiences and its expertise.


How a company operates across the five capitals other than financial capital may affect its short, medium or long term ability to create financial value, for example with respect to health, safety and turnover of staff or ability to qualify for sustainable procurement bids. However, not all investors will take the trouble to turn to a separate report, so an opportunity is lost to communicate a more holistic view of such matters. This is equally true of other audiences which may be interested in non-financial information, such as people and communities in a company’s locations and along its value chains who are less likely to read a traditional annual report.


While still building their expertise, some firms may baulk at including early attempts to address the other capitals in their annual report, but are comfortable with doing so in a separate summary report. This approach also has merit where there are pressing issues affecting one of the other capitals but not enough information to consider all of them to the same level of detail at that time. My proviso would be that these separate reports are also made fully available to financial stakeholders and likewise that the financial reports are made fully available to wider sustainability stakeholder groups. This may generate useful feedback for these firms, and will grow organisational learning and confidence to carry on doing better.

Conversely, in firms where directors, senior managers and staff are leading the market and are confident in their expertise around the six capitals, they may also be ahead of their financial capital providers in terms of their understanding of the firm’s risks and opportunities. In preparing their integrated reports such firms may well consider that they should not restrict themselves to the material issues identified by their financial stakeholders where they believe other issues also have a material effect on the company’s ability to create value across the capitals. This is a strong argument for an all-in-one integrated report

My view?

I think all the information should be on one place, because financial and wider stakeholders can more easily explore each other’s perspectives. We need an open dialogue on the six capitals to help us start working together for a better world.

What do you think?

The links below give an indication of the much richer analysis out there of this interesting debate:

The paid image above is from the great selection at http://www.123rf.com/