Stockland’s progress on integrated reporting

prepared by Carol Adams

Source: www.stockland.com.au

This analysis of Stockland’s reporting for 2013 focuses on the principles and content elements of <IR> which make integrated reporting distinctive.

Connectivity

Stockland’s Annual Review 2013 demonstrates connectivity through:

  • setting out briefly the contents of each report in its reporting suite  – this would be a good place to also mention the intended audience for each report;
  • the choice of non-financial KPIs included – they reflect Stockland’s long history of leadership in sustainability initiatives and sustainability reporting (page 7);
  • linking past performance, challenges, opportunities and strategy (pages 16-17);
  • setting the context and linking the various content elements of reporting (see the exemplary business snapshot, showing types of property and location on page 15);
  • setting out the respective roles of management and the Board with regard to performance and strategy (pages 22-23).

But social and environmental trends are not discussed in ‘challenges and opportunities’ on page 15. What are the big social and environmental issues creating challenges and opportunities for Stockland’s future?  And, difficult as it may be to do, it would be nice to see more explicit discussion of the changes and trade-offs made between the capitals relevant to Stockland.

Material issues

A description of the process of determining material issues is important in assessing the credibility of the issues identified. Stockland does this well.  The Annual Review (page 19) identifies key stakeholders and sets out the objectives and principles of its stakeholder engagement processes.  The reporting approach is carefully articulated on page 53.

But more could be done to justify the choice of non-financial performance measures in the report, linking them to the value creation story (and not just cost savings as has been done in the case of energy consumption).

Value creation story

Stockland misses an opportunity here.  The reader is not really told how Stockland defines value, though the relevance of the customer experience is hinted at.  The notion of creating value through a range of capitals is barely addressed.

Reference is made to making “a worthwhile contribution to the development of our cities and great country” on page 14, but the reader is not explicitly told what Stockland considers a “worthwhile contribution” to be.  The Liveability Index (page 44) is perhaps Stockland’s measure of that contribution and part of its value creation story.

On a positive note the Shareholder Review notes upfront that “the company’s vision is to be a great Australian property company that delivers value to all its stakeholders”.  Whilst <IR> is aimed primarily at  providers of financial capital, creating value for them requires delivering value to a broader range of stakeholders. Stockland acknowledges this.

Stockland’s Chairman, Graham Bradley, links being a socially concerned and environmentally responsible organisation with employee pride.  But the report misses the opportunity to go further in more explicitly linking this with long term value creation.  What is it about Stockland’s people and its investment in people that creates values?

A loose link is made between community partnerships, customer satisfaction and creating value, but more work needs to be done to link the various components of customer satisfaction with long term value creation.

Operational efficiency and cost savings are cited as the key driver for environmental initiatives.  At Stockland these focus on Green Star assets and energy reduction.

Very few companies do tell their value creation story well.  A good start would be to define value and disclose the steps taken to maximise value creation according to that definition. Much of this is already in the report, but could be more coherently brought together.

The business model

Similarly, there is enough information for the reader to get the gist of the business model but it isn’t explicitly articulated.  The report does not provide a clear and concise identification of the main inputs, activities, outputs and outcomes.  Business inputs need to be considered in terms of people, infrastructure, relationships, natural resources etc as well as funds.  They are mentioned in the report but not brought together.

Summary

The report is an excellent early integrated report which demonstrates a long history of embedding sustainability and proactively addressing sustainability issues.  The report pulls together social, environmental and financial information, but the seams are visible and some of the key components of an International <IR> Framework integrated report are missing.  Similarly, a rationale is given for Stockland’s customer focus, but it is not developed into a value creation story which flows from a concisely articulated business model describing the relevant capital inputs.

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