Making the Annual Report a Social Report Card

Flipping through the pages of the 2008 annual report from United Technologies Corp. reveals some surprising objectives and results aside the usual net income, ROE and capital investment numbers.

"Water consumption decreased 7 percent in 2008 and cumulatively is 53 percent lower than a decade ago."
"Improve by 3 percentage points responses to the 2009 biennial employee survey question that asks whether or not, 'My managers comply with the UTC Code of Ethics.'"
"In 2008, the National Trust for Historic Preservation opened Lincoln's Cottage in Washington,D.C., its first LEED-certified property, also with UTC's support."
"In response to concerns of brain cancer among some workers at Pratt & Whitney's North Haven, Conn., facility, the company is funding an independent study led by leading researchers."
"UTC's carbon footprint decreased 6 percent in 2008."

Although far from the norm, UTC has joined Philips, Novo Nordisk and Natura in trailblazing a new kind of corporate report process called integrated reporting. The idea is to give shareholders and potential investors a clear view into how the company is performing on a broad range of financial and social fronts.

Along the way companies themselves also benefit by pursuing integrated reporting, such as better management decisions, lower reputational risk and a deeper engagement with a broad community of stakeholders, according to Robert Eccles and Michael Krzus, the authors of One Report: Integrated Reporting for a Sustainable Strategy. Eccles is a professor at Harvard Business School, Krzus a partner at Grant Thornton LLP.

"One Report doesn't mean 'only One Report,' since a company can use the Internet to provide more detailed information of interest to specific stakeholders," Eccles and Krzus say in an interview with HBS Working Knowledge. "Through Web 2.0 tools and technologies, a company can engage with all stakeholders in a meaningful dialogue that includes listening as well as simply reporting or talking. By listening, the company learns about the needs and expectations of all stakeholders, how well it is meeting those needs and expectations, and what information will be most useful in reporting on this."

They also offer guidelines on how every company can improve its reporting:

Increase accessibility and understanding by using simple, jargon-free writing.
Ensure key quantitative data points are clear and helpful by highlighting them with color and other stylistic techniques.
Leverage the Internet's drill-down capabilities by linking summary data to more detailed data one or two levels down.
Present in an XBRL format to make it easy to download and analyze.

(Report card image by amboo who, CC 3.0)

Sean Silverthorne

Sean Silverthorne is the editor of HBS Working Knowledge, which provides a first look at the research and ideas of Harvard Business School faculty. Working Knowledge, which won a Webby award in 2007, currently records 4 million unique visitors a year. He has been with HBS since 2001.

Silverthorne has 28 years experience in print and online journalism. Before arriving at HBS, he was a senior editor at CNET and executive editor of ZDNET News. While at At Ziff-Davis, Silverthorne also worked on the daily technology TV show The Site, and was a senior editor at PC Week Inside, which chronicled the business of the technology industry. He has held several reporting and editing roles on a variety of newspapers, and was Investor Business Daily's first journalist based in Silicon Valley.

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