Helping companies prepare and publish their integrated report, profit-driven service providers include accounting firms and others who provide assurance on sustainability reports, consulting firms who help companies prepare and publish integrated reports (including the advisory practices of accounting firms, boutique sustainability consulting firms, and public relations firms), and information technology vendors who provide software and services that are useful in producing an integrated report. Service providers vary in terms of whether they are "meaning makers" or "meaning takers." "Meaning makers" seek to influence the definition of integrated reporting and an integrated report, and how each should be accomplished. "Meaning takers" seek to understand the existing consensus on meaning so that they can design and deliver products and services

The Big Four accounting firms, along with boutique consulting firms deeply involved in the movement, tend to be "meaning makers." As experts on the topic of corporate reporting, they feel compelled to offer their own point of view on integrated reporting through white papers, webinars, and conferences. In doing so, they consciously or unconsciously shape the meaning of the concept. In contrast, IT firms tend to be "meaning takers." Their business models are based on designing software and services to help companies accomplish a task. In the reporting world, these tasks are typically defined by regulation and these firms provide products and services to ensure that their customers are in compliance with them, a mentality most IT firms apply to integrated reporting. As its meaning becomes clearer—and the more detailed and prescriptive the better—the better able they are to design the requisite software and services.

All of these service providers see an economic opportunity in integrated reporting. Whether larger assurance fees for an integrated audit, consulting fees, or sales of software and services, we do not denigrate this motive. It remains an incentive that can help create a market for integrated reporting. In order to create and grow this market opportunity, service providers must develop a deep understanding of integrated reporting, first selling the merits of the concept to their clients before they can "make the pitch" on how they can be helpful. In their product development and marketing efforts, these organizations can learn things that are useful to supporting organizations and initiatives, and even regulators, such as through benchmarking and identifying "best practices." That said, most service providers are "market followers" rather than "market leaders" in that they wait for other forces (typically a combination of client demand and regulation) to develop the market for them to serve.

It is unlikely that service providers will see integrated reporting as simply a revenue-generating opportunity without any real degree of conviction in its merits. These service providers must make their own resource allocation decisions about which new markets to create and pursue. Because there is hardly a market for integrated reporting today beyond South Africa, investments here must be considered risky ones with a long-term payoff. Unless a service provider "believes" in integrated reporting—although not to the extent of economic irrationality—it is not going to make these investments. These investments can be substantial, ranging from cash and soft dollar support to supporting organizations and initiatives (e.g., secondments, office space, and hosting meetings and conferences) to cash and soft dollar investments made for product and service development. In taking on this risk, the service provider also incurs the opportunity cost from not investing these resources in other opportunities. More intangible investments include putting the service provider's brand behind the concept.

Service providers may also see the costs in producing their own integrated report as an investment. By showcasing their integrated report, they signal that it can be done, demonstrate their belief in the concept, and establish a "moral high ground" for recommending it to their clients along with how they can help them implement it. Suggestive of this, the large software firm SAP published its first integrated report in 2012. In its second integrated report, one of its prominent features revised its approach to materiality.33 We now turn our attention to this fundamental but elusive concept.


1. Ernst & Young and GreenBiz Group. "2013 six growing trends in sustainability reporting," in_corporate_sustainability_2 013 /$FILE/Six_growing_trends_in_corporate_ sustainability_2013.pdf, accessed February 2014. The report is also available from GreenBiz Group, six-growing-trends-corporate-sustainability, accessed February 2014.

2. The GreenBiz Group "provides clear, concise, accurate, and balanced information, resources, and learning opportunities to help companies of all sizes and sectors integrate environmental responsibility into their operations in a manner that supports profitable business practices." GreenBiz Group. About Us,, accessed March 2014.

3. Ernst & Young and GreenBiz Group, "2013 six growing trends in sustainability reporting," p. 30.

4. Black Sun Pic is a London-based consultancy focused on helping clients integrate their corporate reporting, sustainability, and digital communications., accessed March 2014.

5. Black Sun conducted the research in association with the International Integrated Reporting Council (IIRC). They emailed all Pilot Programme participants a detailed baseline survey that was administered online. In total, 44 individuals from 43 companies completed the questionnaire, which comprised 44 questions. The research took place between June and August 2012. Black Sun interviewed 19 of these organizations by telephone. These 19 organizations provided detailed examples of what they were doing. Survey participants included 21 listed companies, 11 private companies, 6 public sector organizations, and 7 other organizations, including a development bank and a member-owned credit union. Black Sun Pic. "Understanding Transformation: Building the Business Case for Integrated Reporting," www BUILDING-THE-BUSINESS-CASE-FOR-INTEGRATED-REPORTING.pdf, accessed February 2014.

6. Over 50% of public company respondents to a 2013 survey conducted by the Boston College Center for Corporate Citizenship and Ernst & Young LLP cited lack of resources as a reason why they had not yet prepared an integrated report. The survey covered ESG reporting, including costs and benefits and making connections to financial performance, a core concept of integrated reporting. "Value of sustainability reporting," Services/Specialty-Services/Climate-Change-and-Sustainability-Services/Value-of-sustainability-reporting, accessed March 2014.

7. Over 60% of respondents to the 2013 Boston College and Ernst & Young survey cited both availability of data and accuracy and completeness of data as obstacles to reporting. Ibid., p. 15.

8. A word search of "2012 YEAR-END SECURITIES LITIGATION UPDATE" by Gibson Dunn, January 2013, shows not a single mention of the words or phrases corporate social responsibility, sustainability, voluntary disclosure, nonfmancial, or risk factors. However, there is substantial mention of "material" and "materiality," the focus of Chapter 5. Lending support to the fact that there is very little legal risk in voluntary disclosures for sustainability or integrated reporting, "SEC Enforcement Data Analyses" of SEC cases filed in 2013, Morvillo Abramowitz notes that in 2014 the SEC's "Enforcement's Financial Reporting and Audit Task Force will focus on violations relating to the preparation of financial statements, issuer reporting and disclosure, and audit failures." Morvillo Abramowitz Grand Iason & Anello PC, "SEC Enforcement Data Analyses," Analyses of cases filed by the SEC in calendar year 2013, Ql 2014, 5. This too suggests that the focus is reporting done by companies under existing regulations.

9. Ernst & Young and GreenBiz Group, "2013 six growing trends in sustainability reporting," p. 31.

10. Black Sun Pic, Understanding Transformation, p. 20.

11. Ernst & Young. "Tomorrow's investment rules: Global survey of institutional investors on non-financial performance," vwLUAssets/EY-Institutional-Investor-Survey/$FILE/EY-Institutional-Investor-Survey.pdf, accessed April 2014. The Custom Research Group of Institutional Investor magazine ( retained E&Y to examine investors' views on using nonfinancial information in investment decision-making. Using a jointly designed questionnaire, E&Y gathered 163 responses from senior investment decision makers around the world through an online survey in September 2013. Follow-up interviews were conducted with investors who completed the survey. Survey respondents represent large financial institutions such as third-party investment managers, banks, pension funds, foundations, endowments, sovereign wealth funds, insurance companies, and family offices. Fifty-nine percent of respondents work for institutions with more than $10 billion in assets under management. Approximately 72% of the investors were domiciled in the United States, Canada, and Latin America. Eleven percent were based in Europe or the United Kingdom and the remainder were in the Middle East, Africa, or Asia-Pacific.

12. Ibid., p. 11

13. Ibid., p. 17.

14. SustainAbility was founded by John Elkington and Julia Hailes in 1987, the same year that the Brundtland Commission published Our Common Future. SustainAbility describes itself as a "think tank and strategy consultancy working to inspire transformative business leadership on the sustainability agenda." safactsheet/1/sustainability_factsheet.pdf, accessed April 2014.

15. SustainAbility. Rate the Raters Phase 5, The Investor View, sustain ability.eom/projects/rate-the-raters#projtab-9, accessed April 2014. SustainAbility partnered with Bloomberg to survey over 1000 investment professionals, of which almost 50% were research analysts or portfolio managers. About half of these professionals had over 11 years' experience and 74% covered equities. The survey had global coverage, including 33% from the U.S., 8% U.K., 6% India, 4% Brazil, 3% China, and 3% Germany.

16. Some investors track selected environmental data for use as a proxy for production efficiency and cost control. See Eccles, Robert G. and Michael P. Krzus. "Novo Nordisk: A Commitment to Sustainability." Harvard Business School Case 412-053, p. 10.

17. "Long-term investors, who are interested in relevant, credible, and timely information for assessing the long-term prospects of the firm, could be more likely to hold shares of firms that practice IR. These firms presumably provide information that is value relevant in the long-term, decreasing information asymmetry between interested investors and corporate managers thereby decreasing financing frictions and monitoring costs. Thereby, all else equal, I expect long-term investors will be attracted to firms that practice IR."

Serafeim, George. "Integrated Reporting and Investor Clientele." Harvard Business School Working Paper, No. 14-069, February 2014. p. 13.

18. We should qualify this statement by noting that most sell-side analysts are notoriously short-term oriented, focusing heavily on quarterly earnings estimates largely within a one-year time frame.

19. Eccles, Robert G., Kathleen Miller Perkins, and George Serafeim. "How to Become a Sustainable Company," MIT Sloan Management Review 54 No. 4 (2012): 48.

20. George Roberts, a private equity financier and co-founder of KKR in 19 76 with Henry Kravis and Jerome Kohlberg, has declared that integrating environmental, social, and governance (ESG) factors into private equity is both "good business and the right thing to do" and suggested that in doing so private equity houses should swallow short-term costs in favor of long-term value. Speaking at a conference in New York organized jointly by the United Nations-backed Principles for Responsible Investment and Private Equity International, Roberts said KKR wanted to be: "Skating towards where the puck is going, not where it has been." He said this meant "shared value" between investors and stakeholders, alluding to an article published in the Harvard Business Review at the beginning of 2011 by professors Michael Porter and Mark Kramer, which argues for creating economic value in a way that also creates value for society. At the end of 2010, KKR published its first ESG report titled: "Creating Sustainable Value." The report said that its Green Portfolio Program, established in partnership with the Environmental Defense Fund, covers 16 of its portfolio companies and had identified $160m in cost savings and 345,000 metric tons of CO2 avoided at eight of those. Roberts said that before embarking on the program he was worried: "I said that if we are going to do this then it has to work and that we needed metrics and proper auditing." He said that since its introduction the program had become a "bottom-line business issue." Wheelan, Hugh. "Long-term value should outweigh short-term cost says KKR founder." Responsible Investor, June 6, 2011. The next phase of the Green Portfolio initiative resulted in a KKR collaboration with Business for Social Responsibility (BSR). KKR and BSR developed a framework for analyzing supply chain risk. The framework outlined six risk categories, including: executive commitment, quality of program in-place (e.g., codes and standards), quality of implementation, geography, types of products, and industry. Eccles, Robert G., George Serafeim, and Tiffany A. Clay. "KKR: Leveraging Sustainability." Harvard Business School Case 112-032, September 2011. (Revised March 2012.)

21. Principles for Responsible Investment and PricewaterhouseCoopers. "The Integration of Environmental, Social and Governance Issues in Mergers and Acquisitions Transactions," January 2013, tainability/publications/esg-impacts-private-equity.jhtml, accessed March 2014. Universities Superannuation Scheme. "Responsible Investment Private

Equity toolkit," May 2010, 20internal%20guidance%202010.pdf, accessed March 2014. KKR. "Creating Sustainable Value, Progress Through Partnership," 2012 ESG and Citizenship Report,, accessed March 2014.

22. "NG0 strategies have become much more sophisticated. Recent years have seen NGOs use a broad range of interventions, including: the production of investment analysis in support of campaign issues; direct attempts to move capital into certain investment projects and out of others; ongoing programmes of communication with investors in relation to specific issues of corporate social responsibility (CSR); public policy advocacy on rules that govern the capital markets; and, in some cases, formal programmes of collaboration between investors and NGOs." Waygood, Steve. Capital Market Campaigning. London: Haymarket House, 2006, p. 3.

23. Because the capital markets play a central role in today's global economies, legislators and regulators must address the question of how to assure effective functioning of these markets and how to develop a sound financial reporting infrastructure. Experience suggests that these reporting infrastructures should be built on consistent and comprehensive accounting standards that enable financial reports to reflect underlying economic reality. Rezaee, Zabihollah, Murphy L. Smith and Joseph Z. Szendi "Convergence in Accounting Standards: Insights from Academicians and Practitioners." Advances in Accounting, Vol. 26, No. 1, pp. 142-154, 2010,, accessed April 2014. Herz, Robert H and Kimberly R. Petrone "International Convergence of Accounting Standards-Perspectives from the FASB on Challenges and Opportunities." Northwestern Journal of International Law & Business, Volume 25 Issue 3 Spring, 2005, njilb/vol25/iss3/2 7/, accessed April 2014. PricewaterhouseCoopers. "Convergence of IFRS and US GAAP." ViewPoint, April 07, gx/en/ifrs-reporting-services/pdf/viewpoint_convergence.pdf, accessed April 2014. Tweedie, David and Thomas R, Seidenstein "Setting a Global Standard: The Case for Accounting Convergence." Northwestern Journal of International Law & Business, Volume 25, Issue 3, Spring 2005,, accessed April 2014.

24. Adam M. Brandenburger, a professor at New York University's Stern School of Business, and Barry J. Nalebuff, a professor the Yale School of Management, are credited with developing the principles and practices co-opetition. See Brandenburger, Adam M. and Barry J. Nalebuff. Co-opetition. New York: Doubleday, 1996. "Co-opetition is a business strategy that uses insights gained from game theory to understand when it is better for competitors to work together.

Co-opetition games are mathematical models that are used to examine in what ways cooperation among competitors can increase the benefits to all players and grow the market. The models also examine when it's best to allow competition to divide the existing benefits among players in order to provide the leading competitors with more market share. The co-opetition model starts out with a diagramming process called the value net, which is represented as a diamond with four defined player designations at the corners. The players are customers, suppliers, competitors and complementors (competitors whose products add value). The goal of co-opetition is to move the players from a zero-sum game, in which the winner takes all and the loser is left empty-handed, to a plus-sum game, a scenario in which the end result is more profitable when the competitors work together. An important part of the game is to learn which variables will influence the players to either compete or cooperate and when it is to a player's advantage not to cooperate." Search CIO., accessed April 2014.

2 5. The U.S. Securities and Exchange Commission (SEC) views itself as an advocate for investors. This is reflected in its simple yet powerful mission statement. "The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation." The SEC's description of what it does goes on to say, "The laws and rules that govern the securities industry in the United States derive from a simple and straightforward concept: all investors, whether large institutions or private individuals, should have access to certain basic facts about an investment prior to buying it, and so long as they hold it. To achieve this, the SEC requires public companies to disclose meaningful financial and other information to the public. This provides a common pool of knowledge for all investors to use to judge for themselves whether to buy, sell, or hold a particular security. Only through the steady flow of timely, comprehensive, and accurate information can people make sound investment decisions." U.S. Securities and Exchange Commission, About the SEC, sec.gOv/about/whatwedo.shtml#.UlE5Y16kJfM, accessed April 2014.

26. "The International Organization of Securities Commissions (IOSCO), established in 1983, is the acknowledged international body that brings together the world's securities regulators and is recognized as the global standard setter for the securities sector. IOSCO develops, implements, and promotes adherence to internationally recognized standards for securities regulation, and is working intensively with the G20 and the Financial Stability Board (FSB) on the global regulatory reform agenda. IOSCO's membership regulates more than 95% of the world's securities markets. Its members include over 120 securities regulators and 80 other securities markets participants (i.e. stock exchanges, financial regional and international organizations etc.). IOSCO is the only international financial regulatory organization which includes all the major emerging markets jurisdictions within its membership." The objectives of IOSCO are similar to the mission of the U.S. SEC; ". . . to cooperate in developing, implementing and promoting adherence to internationally recognised and consistent standards of regulation, oversight and enforcement in order to protect investors, maintain fair, efficient and transparent markets, and seek to address systemic risks; to enhance investor protection and promote investor confidence in the integrity of securities markets, through strengthened information exchange and cooperation in enforcement against misconduct and in supervision of markets and market intermediaries; and to exchange information at both global and regional levels on their respective experiences in order to assist the development of markets, strengthen market infrastructure and implement appropriate regulation." IOSCO. About IOSCO,, accessed April 2014.

27. Liitz, Susanne. "The revival of the nation-state? Stock exchange regulation in an era of globalized financial markets." Journal of European Public Policy 5.1 (1998): 153-168. While this article focuses primarily on German stock exchanges, it provides a comparative perspective for other stock exchanges on pages 10-13.

28. White, Mary Jo. "The Importance of Independence." 14th Annual A.A. Sommer, Jr. Corporate Securities and Financial Law Lecture, Fordham Law School, October 3, 2013. U.S. Securities and Exchange Commission. Speeches, Chairman, UlFAF16kJfM, accessed April 2014.

29. Ibid., p. 7.

30. Other valid reasons for not disclosing a piece of information are that it is not sufficiently reliable or that it may cause competitive harm. In these cases, the IIRC recommends that the company indicate the nature of the information that has been omitted and why. When the reason is unavailability of data, the company should explain what it is doing to correct this situation and how long it will take. "The International <IR> Framework" p. 8, theiirc .org/international-ir-framework/, accessed March 2014.

31. The Deloitte lASPlus website summarizes on a country basis the use of International Financial Reporting Standards as the primary GAAP by domestic listed and unlisted companies in their consolidated financial statements for external financial reporting, use-of-ifrs, accessed March 2014.

32. "Regulation is extremely important for an effective information function in the same way that regulation is necessary to establish accounting standards. Regulation could be less important for the transformation function and, some would argue, can actually inhibit it. The high-level, principles-based framework of the IIRC enables companies to determine the most material issues through stakeholder engagement and then to continue the engagement process. If regulation is more prescriptive and 'rules-based,' the risk is that integrated reporting becomes more of a compliance exercise." Eccles, Robert G. and George Serafeim. "Corporate and Integrated Reporting: A Functional Perspective," Social Science Research Network, 2014, papers.ssrn .com/sol3/papers.cfm?abstract_id=2388716, accessed March 2014. 33. SAP. Integrated Report 2013, About This Integrate Report, Materiality, en/nc/about-this-integrated-report/ mater iality.html?sword_list%5BO%5D=materiality, accessed May 2013.

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