Why is Telefónica committed to integrated reporting?

At Telefónica, we decided to take an initial step towards an integrated report with this 2012 Annual Report.  For this purpose, we have incorporated strategic, operational, environment, Corporate Governance and performance aspects within the same book, as well as other issues related to sustainability. What are we hoping to achieve with this?  In this way, we are striving so that the reader can better understand how Telefónica is able to create and sustain value in the future through its business model.

The integrated report is a positive factor, both for stakeholders who interact with a company as well as for the company itself, since it is able to provide information with a much broader perspective, with an integrated view of the business model, strategy, risks, remunerations, performance, etc.  But that is not all, as it also helps us, from an internal perspective, to have a more overall reflection within the organization and encourage more strategic cross-thinking.

It is important to point out that this integrated report does not just refer to a mere joint publication, in a single volume, of financial reports and sustainability reports, as many might believe. It has to do with the comprehensive consideration of all financial and non-financial information within the context that we operate as a company and determining its impact on the different capital that the company uses to generate its business activity: financial, industrial, intellectual, human, social and environmental.

In this way, the integrated report will help our companies better explain how our organization creates value over time.  A value that, in order to be sustainable, is manifested in the benefits for financial lenders, while having a clearly positive effect on other capital and interest groups.

The current economic crisis that we are experiencing in the world and, especially in Europe, has again shown us that markets and companies are much more complex realities in their interaction than the traditional accounting and financial valuation models we were taught at the university. These are numbers that provide us aseptic, isolated and historic information, i.e. far from being a strategic factor for our organization.  Thus the publication of traditional annual reports has become little more than an institutional factor to support the media show of a shareholders’ meeting, of no interest to investors (who, furthermore, already have the information about the next quarter before the meeting on the results of the previous year is even held), a business card of little use.  How do we intend to respond to the new globalized and changing world, using information that is not up to date, rigid and out of context if it does not involve changing our business card?

To specifically answer this question, at Telefónica we have joined, with enthusiasm, the international IIR initiative, where we have spent three years forming a consensus around the idea that the current business information model must change in order to meet the needs of current businesses and investments. Perhaps it is still too early to define exactly how we will do it, i.e. to establish a clarifying universal consensus as the financial information reporting model is today, which will allow comprehensive audits and direct comparisons with any other company in the world.  However at Telefónica, we are convinced that this path is the right one, that it will take some time to achieve, but that we will ultimately reach our goal: the integrated report.

Finally, it is important to remember that the integrated report is also consistent with the legislative proposal that the European Commission presented this past 16^th April, amending Council Directives 78/660/EEC and 83/349/EEC regarding the disclosure of non-financial information and information on diversity by certain large corporations and specific groups.

You can read the original version of this article in Spanish here.