Our company’s research centre is directed by Prof. Luca Poma. It handles studies, analysis, academic production and professional solutions for reputation management in the broadest sense: building a reputational outline for companies, public bodies and leading lights, and predicting and managing reputational crisis scenarios. The research centre is particularly concerned with perfecting the most innovative, continuous flow, integrated corporate reporting tool ever conceived.
Integrated reporting: state of the art and future expectations
The four key words of reputation management: identity, that is, the company’s DNA, its mission, its values; image, which is reflected in how the organisation’s identity is – often differently – perceived by the public; reputation, or the degree of alignment between the organisation’s identity and image, built up over time together with the public; and last but not least, authenticity: the only way to ensure that reputation is improved.
Organisations more often than not only report to their own stakeholders, using various tools, some adequate, some not so adequate. Thanks to European Parliament Directive 2014/95/EU non-financial reporting has been obligatory since 31/12/2017 for all companies with 500 employees or more (this limit will likely be reduced in future). In reality, it’s also becoming common practice for SMEs that are conscientious about building a relationship of trust with their customers, capable of positively influencing purchasing behaviours.
Nevertheless, corporate reporting as it is currently practised intrinsically violates the basic rules of reputation management. It’s hagiographical, it’s self-referential, it only reports companies’ successes and almost never respects the principle of “comply or explain”, insofar as companies rarely clarify the reasons they were unable to fulfill the pledges they made to the public. How do you build trust without the essential prerequisite of authenticity? The relationship between company and stakeholder is, at that point, like a house of cards, ready to collapse at the first sign of a reputational crisis. Both print and digital media are full of case histories like these.
More recent analysis on corporate reporting places companies into two macro-categories: companies that try to meet the requirements in a proactive way, with more or less up to date reporting systems, and companies who are purely marketing-oriented and view reporting as unnecessary.
Even in the case of CSR-oriented companies, however, the control of the flow of communication is always firmly in the company’s hand. The company manages the strategic integration process, develops the reporting tools and filters the data, deciding the form and substance of the integrated report’s content.
As long as there are no effective checks and balances (social reports are rarely certified by third parties) there is an evident risk of “tweaking”. More importantly, there is almost always a marked absence of any “comply or explain” section, in which the company should clarify which objectives were not met during the year (highlighting a discrepancy between end of year results and initial expectations.
The principal objectives of reporting should be:
- Actively involving external stakeholders in the drafting of the integrated report;
- Actively involving employees in updating the integrated report’s qualitative-quantitative indicators dashboard so as to limit the “tweaking” effect on the part of the directors/stakeholders;
- Increasing transparency and trust, thereby increasing the company’s licence to operate;
- Guaranteeing the public updated, unfiltered information on the company, 365 days a year, without having to ask the company itself every time;
- Above all, guaranteeing information on any objectives the company has not met.
All of the above applies only in part, sometimes not at all. These days companies are expected to make a major effort towards transparency, coherence and truthfulness in reporting. Our team has developed highly innovative tools for increasing companies’ competitive advantages in this area.
Stakeholder Mapping: the story of an innovative project
One of the most innovative integrated reporting projects currently on the market is the Social Hub. Conceived and developed in collaboration with a team of reputation management and comms specialists, it represents the world’s most advanced – successful – experiment in multichannel, multistakeholder, online integrated reporting.
It’s based on a web platform that enables the organisation to communicate with all of its target audiences and report to them in real time on the organisation’s progress in meeting its social objectives.
The Social Hub is a disruption in the field of reporting tools, the conclusion of an experimental project that guarantees an interrupted flow of unfiltered data 365 days a year, directly inputted online not just by the company but also by the stakeholders, who actively work together on the updating of the tables on a bespoke indicator dashboard.
To understand the significance of this model’s contribution to the evolution of good practice in the integrated reporting sector, we must delve deeper into certain aspects of the history of logic.
The system normally applied to all reporting tools is one of Aristotelian logic. In classical logic, the principle of noncontradiction affirms the incongruence of each affirmation which implies that proposition A and its negation – let’s say proposition non-A – are simultaneously both true. Aristotle said that “No one can believe that the same thing can (at the same time) be and not be.”. It follows that – based on this paradigm – there is an exact point beyond which the public is no longer of interest to the organisation. You’re either a stakeholder or you are not: that which is beyond the hypothetical line in the sand should not interest the organisation in the slightest. It can, however, impose a limit on its own licence to operate.
At the start of the roaring Sixties, Lotfi Zadeh, a Berkeley professor renowned for his contributions to systems theory, became convinced that the traditional analysis techniques of said theory were so schematic and precise as to be inadequate for describing many of the problems typical of that era of rapid change. Zadeh developed a new theory, which some initially viewed as contradicting Aristotelian logic (a source of much academic debate!) but as we shall see turned out to be a development of it, one that was very much of its time: the logic of “infinite values of truth” based on the concept of “fuzzy sets”, also known as fuzzy logic. It’s an approach to logic in which one can attribute a variable truth value from 0 to 1 to each and every proposition. This idea, which is extremely useful for explaining many modern phenomena, was already outlined earlier by researchers of the calibre of Bertrand Russel and Albert Einstein, but Prof. Zadeh was the first to articulate and codify it.
It may disorientate our Cartesian, black-and-white mentalities a little but when we talk about truth values we mean that a certain property, besides being true (i.e. value 1) or fals (i.e. value 0) as prescribed by classical logic, can also be characterised by intermediate values. It’s true that one is either alive or dead (value 1 or 0), but in fuzzy logic it is just as true that a newborn can be assigned value 1, a young man who has just come of age value 0.8 and an old age pensioner in his seventies value 0.15. Expressed like that it can seem banal, but the codification of this reflex in the form of mathematical algorithms set in motion a true revolution in the world of modern logic.
We therefore applied the above concepts to corporate social responsibility, developing a new type of procedure for mapping stakeholders based on the assumption that everyone is a stakeholder, with infinite and “fuzzy” levels of engagement. Conceived in this way, the map is an innovative tool for understanding the events in which the organisation becomes involved and its communication and interaction dynamics with the public. Whereas traditionally the company was represented as the centre, with lines around it connecting it to the various stakeholders, the new stakeholder map uses a cartesian diagram with four quadrants: no correlation between the organisation and the stakeholders, the organisation dominating the stakeholders, stakeholders dominating the organisation and – finally – strong and reciprocal connections.
Our method of representing the relationships between the organisation and its audience goes well beyond the merely graphical aspects, and finishes by in-depth involvement of the philosophical aspect of this subject. The organisation is represented as a background texture upon which the stakeholders are mapped to represent the exact coincidence of objectives and desires between the former and the latter, visually emphasising the way in which we perceive our role in regards to the public and how we intend to relate – in the broadest sense of the term – to that which is around us.
Inputing a stakeholder will eventually generate a reworking of information even within the stakeholder’s own perimeter, partially changing their DNA, and these changes will inevitably produce changes within the target audience’s perimeter, applying the principle of neural networks to organisation-stakeholder dynamics.
In artificial neural networks the node with a weight vector nearest a certain desirable result at the end of each training phase is considered the “winning” node, and all the values are automatically updated to match that value. Given that each node has a certain number of adjacent nodes, when one node wins, the weights of the adjacent notes are also modified, according to the general rule that the closer a node is to the winning node the more marked the variation in its values. This is what happens in a stakeholder map, where good practice has a higher probability of being adopted by the whole network and therefore becomes the new reference value.
The map that is conceived on the basis of this model is therefore an attempt at graphically codifying these concepts. We feel so strongly connected to our audience that we can affirm that the organisation doesn’t so much have a relationship with its stakeholders as it “is” its stakeholders. And the stakeholders are the organisation, because as an organisation we are an integral part of a complex social landscape, with a mission that goes well beyond the mere involvement of bystanders.
The public’s position on the map is not in any way random either. It is in fact the result of compiling detailed checklists on the part of the stakeholders themselves and their partners within the company. The results of this determine, through the assignment of a numeric value from -5 to +5 (and every decimal place in between), the position of the icon representing a specific audience in a precise point on the diagram, according to the measure of the stakeholder’s influence on the organisation and vice versa.
Throughout the year each stakeholder is therefore the subject of specific communication strategies and actions, which are developed ad hoc by our team and are conducive to generating the change necessary to build strong connections between the organisation and the stakeholder.
The most innovative integrated reporting model: the Social Hub
Later, having successfully experimented with this stakeholder mapping model on a leading company in Italy, the experts we work with asked themselves another question: if the ideal position is – as we have underlined – one of strong interconnections, isn’t it anachronistic to have a reporting system packaged entirely by the company, a unilateral flow of information, not subject to external checks and balances, and in the best case scenario, treated as a mere formality?
As the experts of our research centre have noted for some time, corporate social reports are typically hagiographic documents, written up by companies at the end of the year, more often than not “tweaked” and reporting only positive points and rarely criticism. An obsolete, opaque system, not shared with the stakeholders, who are of course fundamental to the success of the company’s mission.
The Social Hub was born in response to this instance. An experimental web platform born of a process of sharing content with the company’s various target audiences, who actively collaborate throughout the entire phase of writing the company’s report document, periodically amending the report’s text. Each stakeholder can interact directly with the platform, modifying the qualitative-quantitative data of the report according to their own relationship with the organisation, thus building the integrated report together.
The organisation and its stakeholders therefore enjoy an agile, easily accessible and transparent report (available only online as we have for many years noticed a decline in the value of printed material). Moreover, the tool has proven to be a precious instrument for allowing the company to identify the faintest signs of crisis and pockets of inefficiency early on.
The integrated report – a product of many years of work to adapt the theoretical model that inspired it – has been equipped with a dashboard with more than 60 tables in which the data is manually updated directly by the company’s various departments, without any mediation by the shareholders.
It’s the world’s first experiment in integrated online reporting 365 days a year. This project of sharing and total disintermediation allows the public to access the raw data throughout the year, without “treatment” or comment by the organisation, so they can get their own idea of how the company’s activities are going.
This model, already tested in Italy, is a fascinating journey beyond a new frontier of sustainability and transparent reporting, conscious of the fact that “new” isn’t always synonymous with “dangerous”, since new comms scenarios must by necessity be managed. At the same time, it throws down a challenge to companies to decide to open their own doors in the name of authenticity and transparency, and facing the future with optimism and without fear. Our company enjoys full rights for this business model in our country, and is eager to accompany you on the path to exponentially increasing your competitive advantage.