The value creation model as the basis for online stakeholder communication
An increasing number of organizations are taking the step towards Integrated Reporting. This means that their annual report is more than an annual review of financial results. It is also a strategic look-ahead that includes the communication of relevant non-financial information. The concept of 'value creation' is central to Integrated Reporting, and it recurs in every Integrated Report. In essence, an Integrated Report is a story about the way – and the extent to which – an organization creates value. Not just financial value, but also non-financial value, such as value for employees and for the environment. This article describes how the value creation model can be an important tool in online communication with stakeholders.
The International Integrated Reporting Counsel (IIRC) is an organization that has developed Integrated Reporting guidelines. Organizations can decide for themselves whether to base their annual report on these guidelines. The IIRC has also developed a blueprint that serves as a schematic representation of the value creation model process (see Figure 1). They distinguish between different 'capitals' (financial, manufactured, intellectual, human, social and relationship, and natural) to indicate that all these forms of capital have effects that influence the organization.
Figure 1: Value creation according to the IIRC
The value creation model provides insight into the different phases that these capitals go through. In short:
The 'Input' phase describes the capitals an organization works with;
The 'Throughput' phase describes what an organization does with these capitals;
The 'Output' phase describes the results;
The 'Outcome' phase describes the ultimate impact of these results (the value that is created).
The value creation model therefore describes the essence of an organization at a glance. Many organizations are also establishing a link between this process and Sustainability Development Goals (SDGs). For more information about the IIRC’s value creation model, see: http://integratedreporting.org/what-the-tool-for-better-reporting/get-to-grips-with-the-six-capitals/.
Organizations that create an Integrated Report usually translate the IIRC’s blueprint into a representation that fits their reality. The value creation model is therefore different for every organization, often with different visualizations. Examples of value creation models from ABN AMRO (Figure 2) and Alliander (Figure 3) are provided below.
Figure 2: ABN AMRO’s value creation model
Figure 3: Alliander’s value creation model
Many organizations also publish an online version – or at least a summary – of their annual report. This provides clear advantages: the annual report has greater reach and stakeholders are better served. The value creation model is often displayed interactively in these online reports. NS adjusts the design in such a way that it appeals to a larger target group, and visitors can immediately click through to underlying information. See Figure 4 for an example of NS’ online value creation model.
Figure 4: NS’ online value creation model
Recently, more value has been attributed to the value creation model in online communication. It acts as the basis for online communication with stakeholders, in which a visual, interactive presentation of the value creation model forms the 'entrance' to underlying information. This can be specific web pages from the annual report, but also other reports or related information. In other words, the homepage communicates a coherent story about how an organization creates value. Stakeholders can then – if they are interested – click through to the specific information they are looking for.
The Brabant Development Agency (in Dutch, the Brabantse Ontwikkelingsmaatschappij, or BOM) provides a good example of an organization that uses its value creation story as a starting point in online stakeholder communication (see Figure 5). The reporting website homepage offers the following elements from top to bottom: impact stories (examples of Outcomes), results (Outputs), strategic information (Throughputs) and information about knowledge, network and capital (Inputs). This homepage also links to a dashboard with current performance data, the annual report and the multi-year plan. It is a valuable source of information in a central location with steering and accountability information, and the cohesion of the material can be seen at a glance. It is also a source of information that is relevant for both internal and external stakeholders.
Figure 5: Online stakeholder communication from the Brabant Development Agency
Jumbo’s online reporting centre is a good second example (see Figure 6). This website offers all of Jumbo’s annual reports and performance data for the past seven years. Strictly speaking, Jumbo does not report in full accordance with the IIRC guidelines. However, their homepage does tell their value creation story ‘in the 'spirit’ of Integrated Reporting. Here too, insight into impact stories, results, strategic information and information about 'Inputs' can be seen at a glance.
Figure 6: Jumbo’s reporting centre homepage
Using the value creation model as the basis for online stakeholder communication offers organizations the following 5 benefits:
Stakeholders gain insight into the essence of an organization at a glance and in an accessible manner.
Stakeholders can quickly click through to the information that is most relevant for them.
Regular updates of the underlying information create a form of 'continuous reporting' that increases the relevance value for stakeholders.
Components such as impact stories can be distributed via multiple channels – such as social media – which increases reach.
The online communication of the value creation story fits well with the Core & More reporting concept.
Would you like to serve stakeholders better with relevant accountability information? Then use the value creation model as the basis for your online communication!