By Ellie Winninghoff

Corporate giants American Electric Power, United Technology Corp., Southwest Airlines and PepsiCo are among the growing number of companies that have merged their separate financial and sustainability reports into a single "integrated report."

"It helps us break down this concept of financial reporting and non-financial reporting," says Ceres president Mindy Lubber, who spoke in a virtual broadcast sponsored by the Association of Chartered Certified Accountants in August. "If a company is in the agricultural sector, is it going to have enough water to grow these crops? That's not non-financial; that's financial, and we have got to merge these concepts of financial and non-financial because they can and do have interlocking implications."

Environmental, social and governance (ESG) data has become its own separate silo, much like the rest of the data collected by the investment industry. Non-financial information isn't limited to ESG data; it also includes things like intellectual property and knowledge, organizational relationships, reputation, brand and other intangibles.

A study by NYU Stern Business School accounting guru Baruch Lev is one of many that shows balance sheet items (including traditional bricks and mortar, as well as financial capital) represent less than 20% of a company's book value.

"We are trying to deal with problems of the 21st century with 20th century systems, and in this case, reporting systems," says Paul Druckman, CEO of the International Integrated Reporting Committee (IIRC.)  

According to Druckman, integrated reporting is not simply about ESG reporting or financial statements reporting. Rather, it's about connecting the dots between a company's strategy and the relationships it creates with and between the different types of capital--financial, manufactured, human, intellectual, natural and social. In this sense, integrated reporting is holistic, and it is as much about integrated or holistic thinking and strategy as it is about reporting. Ultimately, the hope is that integrated reporting will be forward-looking rather than backward looking.

"[Integrated reporting] is not the evolution of sustainability reporting," Druckman says. "It's the evolution of corporate reporting."

This is the final segment of a three-part series about accounting for sustainability. Part one ( traced the trajectory of the Global Reporting Initiative, or GRI, a hyper-Democratic, multi-stakeholder-based consensus-seeking global institution that has developed and continues to refine frameworks and guidelines for environmental, social and governance (ESG) reporting.

Part two ( discussed some of the tricky issues related to verification/assurance by accounting firms and others of the information contained in corporate sustainability reports.