In Praise Of ExxonMobil’s Reporting Transparency

My colleague and co-author, Mike Krzus, and I have just published a paper titled “Constructing ExxonMobil’s First Integrated Report: An Experiment.” In it we describe how we constructed a 2016 integrated report for ExxonMobil based on documents the company has put in the public domain. This was an experiment. When we started it, we had no idea whether we’d be successful. Would there be enough information? There was. Could we do it in a reasonable period of time? It took Mike about 40 hours to do this. Below I’ll describe the construction process in more detail, the structure of the report, and the lessons learned. The reason we did this was to address concerns in the corporate community about the perceived complexity, cost, and litigation risk from integrated reporting. According to the International Integrated Reporting Council (IIRC), an integrated report is “a concise communication about how an organization’s strategy, governance, performance and prospects lead to the creation of value over the short, medium and long term.”

Logo of The International Integrated Reporting Council | INTERNATIONAL INTEGRATED REPORTING COUNCIL

I am a big supporter of the IIRC and of other organizations whose work is helping to advance the integrated reporting movement including CDP, the Climate Disclosure Standards Board (CDSB), Global Reporting Initiative (GRI), and the Sustainability Accounting Standards Board (SASB).

Despite the efforts of these organizations and growing interest in the investment community for integrated reporting, the corporate community has been slow to adopt this practice even though it is in its self-interest to do so. Through an integrated report a company will be better able to capture the value of positive performance on the material environmental, social, and governance (ESG) issues for its industry. Evidence of this can be found in a recent study by the Boston Consulting Group “Total Societal Impact: A New Lens for Strategy.” Companies often complain they aren’t getting credit for investors for good ESG performance, but they aren’t providing the information necessary for investors to assess this performance in the context of financial performance.

Integrated reporting also fosters “integrated thinking” in a company, a more holistic approach to managing the IIRC’s six capitals: financial, manufactured, natural, human, intellectual, and social and relationship. Through integrated thinking a company will do a better job of identifying and managing the material ESG issues that contribute to financial performance.