The Future of Non Financial reports: What's the latest in the European Union?

Results on the "Public consultation on Disclosure of Non Financial Information by Companies" executed by the Directorate General of Internal Markets and Services of the EU, have been published. 
To share some insights:
First of all the summary shows the interest in CSR and social & environmental issues as it comes to non financial reporting. Second: Legal regimes differ a lot across the EU and the EU legislative framework lacks transparency. Third: Not administrative burdens, but potential costs for NFR are discussed, unless: the NFR adds value to proper business development and long term performance perspective. Then NFR is an investment and no burden at all.
In the summary is stated clearly that this consultative round does not directly lead to decision making at EU level. 
Non financial reporting, if really used to better the companies strategic performance and business development, 1. should be easy to start with,  2. standardized and 3. affordable: that will make it doable to really leverage Non Financial Reporting as a way to work on long term success. What does this mean to you as a IC practitioner?

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Comment by Anne Marie Hoogland on September 13, 2011 at 5:10am
That's interesting, please let me know all about the development of this global business reporting framework: do you have a concept yet? Or cases that we can learn from? Nice to meet you here Andreas.
Comment by Andrea Gasperini on September 11, 2011 at 11:43am

About the new edge of the Business Reporting I signal you the activities of the World Intellectual Capital Initiative (www.wici-global.com). WICI is a private / public sector collaborative aimed at improving corporate information - with a focus on non / extra-financial information - for more effective decision making. WICI's primary goal is to facilitate the development of a global business reporting framework for measuring and reporting overall corporate performance to shareholders and other stakeholders.

One of WICI’s primary activities in working toward this goal is facilitation of and collaboration on the development of common idea on key performance indicators (KPIs) as one of the important elements of reporting. KPIs may be financially derived and/or non/extra-financial in nature, and may include a wide range of market-oriented, industry-specific, and company specific indicators.

Comment by Jayaraman Rajah Iyer on June 22, 2011 at 7:01am
I welcome it and very pertinent to IC-practitioners. UNGC 10 Principles covering 4 issue areas - Human Rights, Labor Rights, Environment and anti-corruption should be the main focus of attention as Non Financial Report that covers Values that could be expected from a company. The CSR is the functional center of activities within an organization ensuring the 10-principles are followed strictly. IC-calculation should include UNGC 10-principles under Process Capital of Skandia navigator as a value added process of capitalizing on Human Capital, Market Capital, Financial Capital and Renewal & Development Capital in order to assess and measure the Intellectual Capital of the concerned Organization.
Comment by Anne Marie Hoogland on June 21, 2011 at 4:04pm
That's why I like the two pagers we can produce with basic information on IC value.
Comment by Stuart Shaw on June 21, 2011 at 8:23am

This is fascinating stuff. I’m with Abhijit that there isn’t a choice here: we have to go our own way. The question of course is how.  I’d argue very differently than the current model.

According to Deloitte, annual reports recently broke the 100 page barrier. This is mainly down to CSR info of course. But they are big dull 1.0 pdfs aimed at sell and buy side analysts as well as shareholders. Prepared by the CFO, they tell a rear view mirror pov of the firm.  I’d let them continue as they are.

The opportunity here is to accept that reporting can and should be entertaining. That it can be 2.0 and multimedia. That it can tell a story about the brand and its real people and real ideas in a way that makes the ‘other report’ look, well, old hat. Above all to understand that as with everything else these days, you’re in a competition for people’s attention.

More on this here if you like the concept: http://www.hubcapdigital.com/latest-hubcap-news/blog/item/65-the-fu...

Comment by Mary Adams on May 11, 2011 at 8:39am

I think it's interesting that there were 259 respondents to the public consultation. That shows that there are a lot of people out there thinking about the many facets of non-financial reporting.

 

But I share both Anne Marie and Abhijit's concerns that there is no mention of IC. In fact, the report actually makes an explicit definition on page 2 of non-financial reporting as CSR (Corporate Social Responsibility). While CSR is an important external focus for companies, there also needs to be an internal view of sustainability around knowledge intangibles--the human, relationship, strategic and structural knowledge that together drive corporate success.

 

CSR makes everyone feel good and is very necessary. But no one will truly be able to meet the ideals of CSR without reforming how companies are managed internally--with the holistic view of creating long-term sustainability based on husbanding of the organization's knowledge assets for maximum innovation, maximum productivity and maximum long-term profitability. Any company that thinks this way will also think in a way consistent with CSR. You cannot have one without the other.

Comment by Anne Marie Hoogland on May 11, 2011 at 2:42am

Interesting to hear what you would choose. I think most of IC Practitioners have done that. Nor will anyone of us just patiently wait for legislation. But why isn't the word of IC reporting mentioned once in the EU report? Intellectual Capital Reporting is a proven concept in the strategy discussions of companies; Researching intangibles is a proven concept for due diligence: so what is the next step forward? Without waiting for politicians and authorities! 

 

nowadays, with the EU as an example, 

Comment by Abhijit Talukdar on May 11, 2011 at 1:01am

The flaw perhaps is in the nomenclature - "Non Financial Reports". Any report that is not linked to the business's financial performance will continue to raise the kind of questions that you have highlighted. Considering that Europe, especially Scandinavian Europe, has been at the forefront of the Intellectual Capital movement in the world, it is unfortunate to see such fundamental questions being raised now, many many years into this movement. The people who have raised these questions perhaps seek to deal the IC movement a body blow, because the answers to these questions will always be negative - IC reporting will NEVER be easy to start with, it will NEVER be standardized (heck, even accounting has many different world standards) and it will certainly not be affordable.

IC practitioners really have two choices - the first is to wait patiently for Governments the world over to recognize the value of Intellectual Capital Reporting and hope that they bring in legislation to mandate the same. The alternative is to take matters into our own hands and figure out ways and means to make Intellectual Capital Reporting meaningful and interesting to the business as well as to the stakeholders of the business. To me, the choice is clear!

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