A pilot Integrated Reporting <IR> database created by Assistant Professor Elizabeth Castillo at Arizona State University, and populated by students in her OGL 260 course, revealed that on average, US companies are not yet embracing the language of capitals in their reporting. The intent of the database is not to “name and shame,” as Castillo said, but rather to help reporters map where they are on their reporting journey and have better insight on how to progress.

In the long run, Castillo hopes the database will raise awareness

 of <IR> in the US and encourage more integrated thinking within companies. First though, the database needs to be scaled and the criteria refined. For the purposes of building the beta version, Castillo asked students to rank financial reports on a scale of 1 to 4. The scoring took into account how many capitals companies reported on, whether the report used metrics or narrative only and if the reporting covered multiple years. Companies that scored a 1, for instance, reported only three capitals in narrative format.

The average report score in the database was 1.5 with the highest score a 2.5. Companies generally reported financial, human, manufactured and intellectual capital, with little reporting of natural capitals. Castillo noted that due to the length of the course (one semester), students were only able to review annual financial reports and could not also consider CR or sustainability reports.

In some cases, the reports covered material related to intangibles or certain capitals but weren’t named as such. Attendees of Castillo’s presentation were split on whether the scoring should allow for discussion of different types of value creation or whether the use of capitals as a term signaled a significant shift in thinking. The goal of reports, attendees urged, is to make them relevant and interesting, using language that appeals to their audiences.

For Castillo, populating the database and increasing awareness of it within reporting circles is only part of her goal. She also wants her students to fundamentally rethink corporate resources and valuation. By moving away from the traditional syllabus and course books, students can think beyond the balance sheet toward social accounting. “They become integrated thinkers,” said Castillo.

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Post authored by Rachel Riccardella of Kite Global Advisors, a thought leadership advisory firm helping clients shape the debate on the issues that matter most to them.