The Smarter Annual Report
The Smarter Annual Report: How companies are integrating financial and human capital reporting provides guidance to companies on how to respond to the movement toward improved annual reporting to stakeholders. The report focuses in particular on the provision of better human capital information. [We thank Halogen Software, which sponsored the study.]
Click here to download a free copy of the report.
Here’s a quick primer on what’s going on in this area:
What is happening?
There is a well-established global movement to improve annual reports to go beyond narrow financial reporting. The intent is to better convey how an organization creates value and meets the needs of varied stakeholders.
A core element is the integration of human capital and financial information in a single report.
Organizations are starting to grasp that ‘sustainability’ is about both long-term performance and contributing to the planet’s survival – and that people are a critical ingredient of both.
Who is behind this?
The big players pushing for smarter annual reports are the Sustainability Accounting Standards Board (SASB) in the US and the International Integrated Reporting Council (IIRC) globally.
A well-established player in sustainability reporting is the Global Reporting Initiative (GRI). Their focus is more on corporate responsibility than value creation; nonetheless they play an important role in defining the metrics inserted into smarter annual reports.
A variety of other bodies are actively supporting improved corporate reporting. For example, The B-Team is a group of socially-aware leaders pushing corporate responsibility with 'True Accounting' being an explicit part of their mission.
Will anything come of this?
A sizeable number of large, international companies have followed IIRC guidelines for integrated reporting on a trial basis for three years.
Michael Bloomberg and Mary Schapiro are serving as the Chair and Vice Chair of SASB. People of this caliber have the power to drive change in the world.
An Association of Chartered Certified Accountants survey of 200 CFOs indicates that half of the firms surveyed anticipate adopting integrated reports within three years.
Bottom line? Yes, change is coming.
HR’s opportunity & challenge
Human capital reporting offers great opportunities for the HR function to contribute by playing a core role in shaping the organization’s value creation narrative, and in developing better teamwork across functional boundaries.
HR may remain a bit player in the corporate reporting process, however, if it is unprepared, with little knowledge of the various emerging standards. HR information systems and analytics must be integrated and able to demonstrate the cause and effect between human capital investment and business results. Otherwise, HR is unlikely to be able to contribute to — and benefit from — the changing world of corporate reporting.
The text being discussed is available at