ABN AMRO is a Dutch based bank with around 20,000 employees.
Achieving long-term value creation is enabled by both integrated thinking and reporting. In terms of the journey, some organizations start with integrated thinking and others initially focus their efforts on their reporting. ABN AMRO’s starting point in 2015 was integrated reporting and using the guiding integrating reporting principles in the International Integrated Reporting Framework to enhance their reporting and communication on value creation.
ABN AMRO uses the core and more approach to reporting which allows for a more targeted approach to concisely telling its story and addressing the interests from different stakeholder groups. The Integrated Annual Review is their core report concisely bringing together relevant information on how the bank creates value for various stakeholders. Additional ‘more’ reports include a suite of reports and disclosures including the annual financial report, SDG report, human rights report, and an impact report. This reporting approach is based on targeting different stakeholders with specific information that they are seeking.
ABN AMRO’s journey has since evolved to focus on integrated thinking. A bank-wide integrated thinking community was established in 2017 and comes together every quarter. This group identifies, monitors and reports on value-creating topics (currently around 35 significant value creating topics) for which different functions and teams are responsible e.g., human resources for human capital information. As a result of this greater internal connectivity, pre-financial information is increasingly integrated and used across the bank to make better decisions related to long-term value creation.
Although initially slow to become actively involved in the process, the finance team has become a critical part of the community providing needed data and support.
Value creating topics and indicators evolve over time, so integrated thinking is a continuous and dynamic process – what was relevant historically may not be as relevant today or in the future – and can change quickly according to external events and trends.
The benefits of integrated thinking and reporting to the Bank.
- Enhancing management reporting by incorporating relevant pre-financial evidence-based information that provide insights on where the company is heading;
- Aligning the strategic risk assessment and risk reporting to the value creation and materiality process; and
- Aligning management and risk reporting to the annual integrated review and external reporting process.
“At ABN AMRO, we consider financial and non-financial value to be equally important. The process of creating an Integrated Annual Review works like a management tool: it raises questions, introduces discipline, and gives us insight into the value we have created in the previous year and what steps we need to take in order to keep creating sustainable value for all our stakeholders. Our integrated reporting helps make this value transparent.”
From value creation to impact
- A challenge in measuring value creation is evaluating whether value is being created or destroyed, and whether all relevant stakeholders and capitals are being taken into account in decision making and reporting.
- To make the concept of value creation more actionable, ABN AMRO emphasizes the need to measure, report and steer on value creation for all stakeholders. This involves measuring and monetizing impacts.
- Their Impact Report (2019) captures ABN AMRO’s positive and negative impacts on relevant stakeholders (clients, employees, investors and society) across the six capitals captured in the International Integrated Reporting Framework. Impacts are summarized in an integrated profit and loss report.
- Ultimately, the goal is to incorporate this information to steer the organization towards creating greater positive impacts and minimizing negative impacts. The approach helps to highlight trade-offs between stakeholders and make decisions on how to create greater positive impacts. For example, the opportunity to create significant positive social value in the current crisis is being achieved by suspending loan payments. The implications of this can be tracked through impact measurement.
- ABN AMRO’s approach is evolving and is based on an open source methodology that includes definitions and assumptions. Although challenging, ABN AMRO is finding that monetization of impacts is helpful for decision making and communication and is an opportunity to connect a range of functions into discussions on the overall value creation approach linked to the Bank’s objectives.
- Tjeerd is also chair of the IIRC Special Interest Group on Integrated Thinking and Strategy which recently released Integrated Thinking and Strategy State of Play Report.
This was a presentation to the IFAC Professional Accountants in Business Advisory Group during their March 2020 meeting. See here for the full meeting report: Supporting Accountants in Business & Public Sector Through Uncertain Times