Methodology

The data collection exercise proved challenging⁵ due to the vast variation in structure, functionality, and presentation of websites. Approximately 75% of the companies on our list were headquartered outside the United States. Consequently, we encountered language barriers and cultural differences, such as lower use of social media in China compared to the United States and Europe. This may be explained by China's comparatively lower percentage of Internet users and the growing use of social media services unique to China that would not appear on the English version of the site.⁶ Determining which languages were covered on a site was sometimes difficult due to the number of languages and alphabets used by some companies. In some cases, the website did not offer an English version and we relied on Google Translate.⁷ While we initially sought an automated method for gathering the data, we found that it had to be done by hand and carefully checked.⁸ We created a template for coding up the features of each company's website, and the data were then transferred into a spreadsheet.

The last step in the data collection and preparation process was to create a set of logical categories for grouping the individual features (shown in Appendix 8.A).⁹ The categories we created were Financial Transparency (amount and quality of financial information), Sustainability Transparency (amount and quality of sustainability information), Connectivity (easy and obvious linkages of related parts of the website to each other),¹⁰ Interactivity (features to engage the user), and Utility (features to make the website as usable and user-friendly as possible).¹¹ The raw score for each company was aggregated by category and converted to a Z-Score, which was then normalized between 1 and 100.¹²

Website Category Analysis

Table 8.1 shows the average category scores by sector. Technology & Communications has the highest score of 61 (Healthcare is 59 and Resource Transformation is 58) and Infrastructure the lowest score of 40. The high scores may be a result of companies in these industries needing to have high-quality websites in general. Technology & Communications companies attempt to differentiate commodity products through branding and Healthcare companies need to educate consumers and build trust. Resource Transformation companies are necessary, but highly controversial, and need to ensure their license to operate.

For the separate categories, Connectivity shows the least variation across sectors ranging from Consumption (51) to Services (42). Utility has the widest range in scores by sector, from 64 for Healthcare to 32 for Infrastructure. This could be due to the fact that Consumption companies need to have much more useful websites for selling their products in comparison to Infrastructure companies. Financial Transparency, Sustainability Transparency, and Interactivity all have virtually the same range in scores across sectors.

Total Score by region saw more variation, with Europe highest at 67 and Asia lowest at 35 (Table 8.2). However, this comparison may be somewhat artificial since it is possible that the native language version of Asian company websites would receive a higher score. While it is easy for companies based in non-English-speaking countries to translate an integrated report document into English, creating a fully functional English corporate reporting website is more challenging. How much a company should invest in doing so largely depends upon how important its foreign investors and other stakeholders are to it.

Table 8.3 contains data for the six countries with the largest number of Global 500 companies. The variation across each category is even greater than that by region due to the extremely low scores of China, which ranged from 18 to 25 across all categories. The European countries of Germany, France, and the United Kingdom mostly score higher than U.S. or Japanese companies. After China, U.S. companies have the lowest Sustainability Transparency and Connectivity scores. Yet on Interactivity, their score is in the same range as the European countries, and they have the highest Utility score by a wide margin.

The variation in Total Score by size range is the same as it is for the sector differences (Table 8.4). On balance, these data confirm our use of size as a proxy for sophistication. There is a clear relationship between Total Score and size of company, following a rank order aside from the last two size ranges, in which the order is reversed. Yet even the 100 largest companies in the world only received a Total Score of 61. The lowest variation was seen in Connectivity: the 100 largest companies actually received a score virtually identical to that of the companies ranked 200–300 in size. Although these differences are not large, the greatest variation occurred in Interactivity and Utility, suggesting that only the very largest companies see the benefit in making these important features of their reporting website. The least variation occurred in Financial Transparency and Sustainability Transparency.

Since listed companies have more reporting requirements than State-Owned Enterprises (SOEs) or private companies, we correctly expected them to have higher scores for their reporting websites. We compared the scores of the 415 listed companies to the remaining 85 unlisted ones (Table 8.5), most of which are SOEs, with a few private family-owned companies. Our expectations were confirmed. Reflecting the fact that they have no obligations to outside shareholders, the unlisted companies rank much lower, with scores of one-quarter to one-half of the listed companies and especially low scores on Financial Transparency and Utility. However, unlisted companies are still subject to scrutiny and pressures from civil society, perhaps explaining their higher but still modest Sustainability Transparency score and comparable scores on Connectivity and Interactivity.

Finally, we compared the websites of a subset of the integrated reporting companies (Table 8.6) discussed in the previous chapter to the Global 500. Using the same methodology, we analyzed the top 40 non-South African companies in terms of their total score on their integrated report and the same for the top 10 South African companies.¹³ The websites of the South African companies rank distinctly lower in every category except Connectivity, an ostensible artifact of their integrated report production. These results clearly indicate that having a high-quality integrated report and a high-quality corporate reporting website are completely independent of each other.

Website Feature Analysis

The aggregate category scores analyzed above do not reveal some important differences in the individual features comprising each category. Since it is through these features that companies create effective reporting websites, we examined them in order to gain insights into exactly what a company needs to do to improve its corporate reporting website. These data are shown in Tables 8.7 (by SASB sector), 8.8 (by region), 8.9 (by country), 8.10 (by size), 8.11 (by type), and 8.12 (for companies publishing an integrated report). As expected, much of the variation in these specific features matches the patterns discussed above, since these categories are comprised of the items shown in these tables. While some features, such as social media, are used by most of the Global 500, others, like providing data in the Extensible Business Reporting Language (XBRL) format, are used by very few. Most companies could dramatically improve the quality of their corporate reporting website with relatively little effort.

Two-thirds of these companies use social media; one-half use webcasts and provide tools for users to help analyze data; one-third provide videos, the name of a specific contact person at the company (vs. a general “Investor Relations” email address); and one-quarter provide data in XBRL. Very few companies ask for feedback on their website (29 companies), ask the user to create an account so they can analyze website usage by type of person (12 companies), enable the user to create a “custom report,” or provide interactive games to help the audience understand the trade-offs the company is grappling with (two companies). The larger companies, especially the largest 100, are more likely to have taken advantage of most of these features. The exception lies in asking for the user to register an account, to participate in instructive games, or create a custom report; even for the very largest companies, only an extremely small percentage have this functionality on their website. This raises the question of whether these are simply not important features or whether even the largest companies are only beginning to tap into the power of the Internet. The private companies, as expected, have extremely low scores: 0% on 4 of the 11 factors and less than 5% on 8. One-quarter use social media and a little more than 1 in 10 had videos.

Unlike financial reporting, integrated reporting can perform a transformation function. With this in mind, we looked for evidence of companies trying to do so by comparing the integrated reporting companies to the Global 500. For the entire sample of integrated reporting companies, they score noticeably higher on providing the name of a specific contact (67% vs. 33%) and tools for analysis (77% vs. 52%). Both features contribute to the transformation function. The latter enables the user to better understand the meaning of what the company is reporting. Perhaps indicative of a desire for greater engagement that comes with integrated reporting, the former gives the user an accessible channel through which he or she can ask the company questions. The latter indicates a desire to foster integrated thinking on the part of the audience. On all other features, this group looks about the same as the Global 500. However, again we found a few areas in which the South African companies are notably weaker: videos (0% vs. 38%) and providing data in Excel spreadsheets (20% vs. 60%).

Three Examples

We will conclude this chapter by looking at the reporting website use of three leading integrated reporting companies previously mentioned in this book: Novo Nordisk, Philips, and SAP.¹⁴ In highlighting their websites, we simply wish to illustrate some of the interesting and useful things being done today that could be replicated with modest effort by any company of significant size. Each company scored high on its integrated report and corporate reporting website.¹⁵ Novo Nordisk uses its website to supplement the PDF version of its integrated report with rich detail and interactive games. The approach to website use at Philips is similar to Novo Nordisk's; however, unlike Novo Nordisk's site, Philips engages the website visitor with video presentations. SAP is distinctive in that it places much greater emphasis on making the site itself, rather than a document, the basis of its integrated reporting.

SAP ²⁴

Containing the only report available exclusively online, SAP's website does an excellent job of organizing integrated reporting content (Table 8.14). Because of its logical structure, for example, “The International <IR> Framework” Content Elements related to the Guiding Principles of Strategic focus and future orientation are relatively easy to find.

Materiality is a separate section accessed from the “About This Report” tab. The materiality discussion provides a link to Stakeholder Engagement, an integral part of the process to determine materiality.

One of the most significant features of SAP's 2012 Integrated Report²⁵ is the interactive graphic connecting financial and nonfinancial performance. The graphic depicts three economic indicators, four environmental indicators, and seven social indicators (Table 8.15) and shows the relationships between them.

SAP's approach allows the reader to click on an indicator to display its relationship to other factors. For example, clicking on the environmental indicator, total energy consumed, displays a link to an economic indicator, operating margin, and to an environmental indicator, greenhouse gas (GHG) footprint. The environmental indicator, data center energy, is identified as the direct driver of total energy consumed. Similarly, Figure 8.1 illustrates this for employee engagement. No other company website we studied illustrated its interdependencies between financial and nonfinancial factors to the same degree.²⁶

A first step in a process toward quantitative valuation of the relationships between financial and nonfinancial performance as contemplated by the International <IR> Framework,²⁷ this graphic representation demonstrates SAP's understanding of how different dimensions of financial and nonfinancial information are related to each other.²⁸

Further, the SAP Integrated Report 2012 includes an Independent Auditors Report²⁹ and an Independent Assurance Report.³⁰ The Independent Auditors Report provides a traditional opinion on the company's consolidated financial statements. The Independent Assurance Report provides both limited and reasonable assurance on selected sustainability information.³¹ Limited assurance is provided on SAP's application of the AA1000 AccountAbility Principle Standard (2008) and on selected qualitative claims and quantitative indicators on sustainability performance. Reasonable assurance is provided on the indicators for Business Health Culture Index, employee engagement, employee retention, women in management, GHG footprint (Scope 1 and 2 as well as selected Scope 3 emissions including business flights and employee commuting), renewable energy, total energy consumed, and customer success.

The fact that SAP's reporting website is one of the most sophisticated we studied is not surprising given that it is a technology company. Yet its website features are based more on the exercise of integrated thinking than sophisticated technologies, and virtually everything their website contains could be easily replicated by any company of significant size. Important as a reporting website is, however, it is only one way information technology can be used to improve integrated reporting and in the process, foster integrated thinking.