Novo Nordisk supports global dialogue on integrated reporting
Novo Nordisk has published integrated annual reports since our 2004 reporting cycle and we have long advocated for widespread adoption of integrated reporting. We therefore welcome the efforts of the International Integrated Reporting Committee to develop an international integrated reporting framework which ultimately could lead to an international standard for reporters and report users. We believe that agreement on how to move from reporting silos to integrated reporting is very important and we have been pleased to be part of discussions related to this process.
Our company moved to an integrated reporting format to enhance financial valuation and to explore the relationship between financial and non-financial performance. More broadly, the objectives of Novo Nordisk's reporting efforts have both an external and an internal dimension.
- Increase accountability to all stakeholders (to those with a financial stake in company performance as well as those without)
- Increase internal accountability for achieving performance objectives
We were one of the first companies to integrate financial and non-financial reporting. Our commitment to reporting leadership includes a desire to continuously improve. Some of the areas on which we are focused include:
- Reporting non-financial information which is strategic to the company and explaining how it impacts key business activities.
- Reporting information for critical business activities, demonstrating the connection between financial and non-financial performance.
- Reporting performance against targets and explaining the strategic intent of targets.
- Assessing and reporting on how the company is reducing its risk and will earn profits through sustainability-focused management.
- Using metrics that are standardised and comparable over time. Ideally, metrics should also be comparable with companies in and outside of our industry.
Clear and transparent metrics are key to accountability, and this is an area where we seek continuous improvement. Setting ambitious objectives and targets and reporting on progress in meeting our goals are core elements of the Novo Nordisk Way. However, we face challenges in improving measurement of our progress in expanding access to care. We need to develop meaningful and useful processes for measuring performance in areas where there is yet no corporate precedence for reporting.
How our approach differs from the proposal in the IIRC discussion paper
In our experience, the primary benefit of integrated reporting is that it allows a company to better understand, manage and report on multiple dimensions of value. We believe this can help companies make better decisions and to manage businesses in a way that creates shared value.
The IIRC discussion paper describes integrated reporting as bringing together information ‘in a way that reflects the commercial, social and environmental context.’ Because integrated reporting is about value, it is more than a communication process. The process of assessing multiple dimensions of value has led us to push the boundaries of non-financial accounting. To truly integrate reporting and performance management, we believe that accounting systems and standards must evolve to better capture social value and environmental externalities.
Where we see great value in IIRC’s work
The IIRC proposal includes a suggestion for reporting on multiple types of capital. This involves moving beyond looking at financial capital and natural resource consumption to reporting on the use and creation of social and intellectual capital. We applaud the intent behind this suggestion. As a pharmaceutical company, it is imperative that we find ways to measure and manage the creation of social value. While we believe that the IIRC is moving in the right direction with an emphasis on multiple dimensions of capital, this direction will become more fruitful as non-financial accounting becomes more mature and robust.
In addition, we are pleased that the IIRC process has created a dialogue about materiality frameworks for integrated reporting. Integrated reporting should be more than combining or stapling together financial and sustainability reports. Integrating materiality frameworks is one key to truly transforming corporate reporting for the benefit of all report users.
More information about our approach to reporting is here.
The IIRC is soliciting feedback on their integrated reporting discussion paper. Please visit www.theiirc.org. Comments and feedback should be submitted by Wednesday 14 December 2011.