Non-financial reporting is set to grow in importance

Source: Financial Times, 1 April 2004

From Mr Paul Hohnen.

Sir, Readers over the past few days will be rightly perplexed about the significance of non-financial data to assessments of a company’s performance. On the one hand, it is contended by one US academic that "non-financial measures just don’t add up" (March 29). On the other, the FT reports growing market interest in non-financial data, on the part of both fund managers ("Fortis plans CSR action in Europe", March 29) and rating agencies ("Companies face an avalanche of questionnaires", March 26).
They might consider three points. First, non-financial performance is difficult to measure. This is precisely why the global reporting initiative (GRI) was developed. When it was created five years ago, few companies reported non-financial performance information because it was not comparable. Now, however, more than 400 companies in some 40 countries prepare reports using the GRI guidelines.

Second, the issue of "questionnaire fatigue" is probably one of the many reasons these companies use the GRI. Because GRI indicators correspond in large measure with questions from SRI (socially responsible investment) fund managers and ratings agencies, a GRI-based report can be an effective first response to incoming questionnaires.

Third, as to the contention that reporting companies do not see the benefits, various studies confirm what seems intuitive: that greater transparency translates into higher market trust, with a positive impact on share price.

As non-financial reporting develops further, including through software applications that will make reporting easier and of higher value to all users, many see non-financial reporting as significant in this century as financial reporting was in the last.

Paul Hohnen, Strategic Development Director, Global Reporting Initiative, Amsterdam, The Netherlands