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08/26/2014 | Blog entry by BASF: The Trilemma of Reporting

Blog of International Integrated Reporting Council (IIRC)

Guest Author: Thorsten Pinkepank, Director Sustainability Relations, BASF

Reporting companies find themselves in a colorful landscape of codes, frameworks, indicators. Many of these companies – not only SMEs – are concerned and overburdened by this complexity. Many discussions are summed up with one thing most agree on: the need for “alignment” of the different frameworks or approaches which suggests principles or indicators.

What I see is that the experts in the corporate reporting field very quickly enter a quite technical level of capitals, indicators, assurance-potentials … – but is not the question: What exactly needs to be aligned – for what purpose? In these discussions it came to my mind that any attempt at alignment in this field needs to address three cornerstones – which I see as the “Trilemma of Reporting”: Materiality – Comparability – Audience.


All agree on the importance of Materiality. However, not all understand exactly the same thing. Is it about impact on or impact by a reporting entity? Who should (and could) assess materiality? Could and should there be something like a mandatory core of issues set by regulation?

There is a broad understanding that a fixed, or even mandatory, set of material aspects would not be helpful and feasible for different sectors in order to include the results in internal strategic steering processes. Critics could argue that this leads to an “anything goes” situation and currently one can already see a “race to flexibility” in the evolving frameworks. In terms of the relevance of a materiality process, I would argue that we need this “freedom of materiality” in order to find the most value-adding approach for a company’s decision-making processes. This leads us to the question of:


There is an assumption that reported information of a company needs to be “comparable” to information published by other reporters. This assumption is based on a presumption that recipients want to compare information because they want to choose between alternatives – what I would call “decisions on preferences”: What level of comparability is needed for that exercise – what level is feasible? Do we want to compare transparency or performance?

The overall answer for the time being is: It depends to a large proportion on the recipient who decides on preferences. Which leads us to:


Many discussions try to find an answer to the question: Who wants to know what? Do different stakeholders want to know different things? How to inform investors – what to tell employees or society? We might sharpen these questions to: Who cares?

I think that whatever stakeholder or shareholder a reporter addresses – they want to influence the recipients’ decision on preference. Then we should be clear what we intend different audiences to do with that information – meaning what action we want to see: More investment from investors – more licensing from society?

This shows: What kind of information or focus a report wants to achieve differs with regard to target audiences.

Is the way out of the Trilemma an aligned one-way exit or a diverse grid of exits? To think about the exit we need to think about the purpose of reporting. In my view this is twofold:

  • externally to show (be transparent, open to stakeholders in order to get their license or investment)
  • internally to steer (make use of the information you have – and sometimes even more so, make use of the information you do not have – to steer the reporting entity).

The external purpose is different to the internal (although the internal ought to be reflected in external reporting). The Trilemma of Reporting shows many differences and a diversity of requirements and rationales of corporate reporting – this suggests that there is no silver bullet.

We need principles, such as those set out in the International <IR> Framework. We need indicators and we obviously need an intelligent but necessarily individual use of these elements for “impactful” reporting. A single standardized “tick-box” approach, would result in a more bureaucratic exercise mainly discussed in the legal departments of reporting companies. We need to think of reportingaddressing different understandings of materiality and different needs of information. This way forward might reduce comparability, but shouldn’t companies be better compared by their performance than by their reports?


Forum for Sustainable Development of German Business e.V.

econsense is an association of leading, globally active companies and organisations of German business specializing in the area of sustainable development and corporate social responsibility (CSR). Founded in 2000 on the initiative of the Federation of German Industries (BDI), the goal of econsense is to provide a dialogue platform and think tank, with the dual objectives of advancing sustainable development in business and assuming social responsibility.