Integrated Reporting Done Right at Novozymes

Yesterday, we covered the numerous challenges presented by integrated reporting (IR), but IR also represents a tremendous opportunity to advance the cause of sustainability if implemented properly. As Jennifer Rice alluded to in a comment on that article, "You can't do integrated reporting until you have an integrated strategy." That means sustainability must be embedded into the organization, not just bolted on, in order for integrated reporting to work. Integrated reporting in an organization that publishes a CSR report purely for marketing purposes is bolt-on integrated reporting. And we all know that's not only an oxymoron, it's a failure and a loss for the sustainability movement.

But for organizations that are sustainable to the core, integrated reporting just makes sense. If social and environmental issues are considered at every level of an organization, it is natural to report on them right alongside financial issues when the time comes to report.

Integrated Reporting was the talk of the town at last week's Global Reporting Initiative conference with people on both sides of the fence. They expressed the hesitations I shared yesterday, but they also shared a number of positive stories of IR done right.

Said Mala Chakraborti, who heads up Corporate Responsibility for Atlas Copco AB, "Integrated reporting was the natural next step for us, it was time that our reporting reflected the integrated goals of the company. For us, integrated reporting adds value the way a sustainability report alone never could - creating vital connections and setting the platform for a more strategic approach."

I was able to sit down with Mette Gyde Møller, Sustainability Manager at Novozymes, a company that is truly a trailblazer in integrated reporting. She gave me all the details: how it works internally, why the company first started to integrate their reporting, and what makes them keep doing it.

Novozymes considers the goal of their reporting to be to describe to the readers how sustainability is a differentiator in their business. Said Gyde Møller, "We focus on how sustainability adds value to our business." Novozymes makes enzymes. Those enzymes have a role in creating everything from biofuels to laundry detergent - these are widely-used products and their creation, use and disposal all have high potential for environmental impact. Novozymes makes its niche by making those products perform as efficiently as possible. That's a financial and environmental savings for for its customers and product end-users alike. As Gyde Møller put it, "The goal is to tell meaningful stories about how sustainability is a differentiator in our business." Integrated reporting has been very successful for Novozymes because it helps the company keep sustainability conversations at a strategic level. By always focusing on the business impact of the sustainability issues they present, Novozymes makes sustainability relevant for both the financial community and sustainability advocates.

For example, with supply chain risk we focus on the fact that if there is an interruption we can’t deliver to customers. Then we address that through a sustainability lens and talk about what we're doing to mitigate the risk. We frame the conversation on greenhouse gases as a big opportunity because our products in many cases offer a solution to this global problem. Risk for the world is something that we have an answer to - it's our business justification.

This approach makes materiality - a focus on the issues that really matter for the business - second nature for Novozymes.

Part of the reason that things flow so smoothly during the sustainability reporting process is that this integrated approach has support from the highest levels of the organization. Rather than having a siloed sustainability department design the report, a high-level sustainability development board made up of VPs sets the strategy for the organization's approach to sustainability: which products the company will focus on, the sustainability risks and opportunities presented by those products and the initiatives the company will undertake. These are all the elements that end up in the report.

The team responsible for actually pulling the report together includes an editor, finance people, folks from investor relations, someone with a sustainability background and a controller to manage everything. The team decides, based on materiality and which information is important to explain to readers, what to include. "We try to be a little selective. For example, if we had more waste than we anticipated in a given year, we need to explain. But, if it's the expected amount, we can skip it."

That team does not always operate seamlessly, but Gyde Møller thinks that is a good thing. "We have pushback sometimes internally, with people asking 'Is this material?' 'Is it important to anyone?' 'Is any stakeholder asking for this?' That is healthy. It's good to get the pushback and to always track our sustainability issues to business."

Integration this seamless can only happen at a company with an integrated approach to sustainability. Novozymes is a great example for any organization seeking to pursue integrated reporting, however, in order to be truly successful, the initiative probably needs to come from the top.