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KPMG Survey of Integrated Reports in Japan, 2018

This is the annual survey of integrated reports in Japan by KPMG, their fifth report since first issued in 2014.

KPMG have surveyed and analysed the integrated reports of 414 companies, an increase in companies by 23.6% up from 2017’s report (+79 companies), and whose value made up a remarkable 58% of the total market capitalization (JPY 324 Trillion).

The key recommendations for future companies looking to produce their annual report as an integrated report, is first to make sure to communicate the value creation story of the management and board as the demand for constructive dialogue with stakeholders grow. It is no longer enough to produce an integrated report on the basis of it being proactive in information disclosure. The second recommendation is to detail how management is driven by integrated thinking – do not be manipulated by buzzwords, such as the ones that exist around ESG reporting and the 2030 UN SDGs. The third key recommendation is to detail current conditions and state of progress based on the value creation story thus far. For example companies must articulate the steps for achieving their long term vision, as it is hard for the reader to understand their value creation story if they’re not specified. This is what KPMG Japan call ‘backcasting’, which is presenting indicators that illustrate the extent to which the strategy has been achieved.

Other key notes and trends from the report are:

  • 50% of companies are displaying integrated thinking well by explaining the impact that social and environmental outcomes has on economic value.
  • 66% of companies are displaying their value creation via a diagram. However as integrated reporting is a medium for value creation, KPMG Japan do not consider this a particularly high percentage.
  • 36% of companies now produce a materiality report. However, instead of focusing on material that has an impact on corporate value, 74% of those companies who produced a materiality assessment focused on CSR issues instead (111 of 149 companies).