Better government decisions through the integration of non-financial information

Although much has been said about the public sector lagging behind in terms of integrated reporting, research shows that integrated information and stakeholder engagement enable public sector pioneers to make better decisions, attune strategy to society’s needs and consequently create more public value or a better balanced budgeting system.

Integrated reporting was one of the topics of the conference on THE ROLE OF PROVINCIAL/REGIONAL AND LOCAL GOVERNMENT IN MAKING GOVERNANCE MORE EFFECTIVE, ACCOUNTABLE AND INNOVATIVE, held by the School of Public Leadership, Stellenbosch University, South Africa, August 19-21, 2015. 

Public need for understanding the creation of public value 

In many governmental organizations, much effort has been made to improve the quality of public administration. Attempts from different perspectives, but with the same underlying goal. In order to improve governance, much effort is aimed at developing organizational structures and leadership role models to support improvements in policymaking and decision-making. The increasing importance of governance has been a trend for several years. Linking outcomes to organizational activities as a basis for effective governance is a complex matter. It is often referred to as “an ongoing challenge" to be able to demonstrate a logical and explanatory relationship between public sector activities and societal outcomes. Simply linking outcomes and activities is not sufficient for a comprehensive understanding of the creation of public value. 

Integrated information improves the creation of public value 

With case studies and practice reviews, Hans Bossert (School of Public Leadership, University of Stellenbosch) and Lianne Dijkstra (Sustainalize) substantiated that integration of non-financial information improves government decisions. Their study confirmed the hypothesis that integrated information leads to better government decision-making, i.e. decision-making that is more focused on the process of public value creation and stakeholder engagement.  Use of information on the effectiveness of the organization’s strategy and policies as well as its efficiency and legitimacy leads to more efficient and productive allocation of capital for public value creation. 

Improved management decisions through stakeholder engagement 

Bossert and Dijkstra’s case studies regarding the 2014 annual reports of Avalex and the NOM also showed that stakeholder involvement in the reporting process plays a crucial role. For one, involvement will result in better management decisions, due to a better understanding of what stakeholders expect of government organizations’ creation of public value. In addition, providing stakeholders with integrated information facilitates better understanding and articulation of governments’ strategies, which in turn will improve stakeholder engagement.

Integrated reporting enables government organizations to better attune strategy to society’s needs 

Comparative case reviews of subnational government pioneers in integrated reporting show a clear correlation between the business model, the outcomes and the impact on society. In their annual reports, the cities of Melbourne, Warsaw and Johannesburg claim that by managing and disclosing both their financial & non-financial performance data, their strategies will be better attuned to society’s needs. Furthermore, the case reviews show that (subnational) government organizations apply leading protocols and standards on governance and integrated reporting (King III, GRI-G4, IR) in order to link outcomes to their business strategies and provide internal and external stakeholders with insight into how they intend to address sustainability issues.

Conclusion: the results of the study call for (subnational) government organizations to follow in the footsteps of public sector pioneers and private sector organizations in terms of integrating non-financial information and being transparent and accountable regarding their public impact.

Lianne Dijkstra is consultant at Sustainalize (www.sustainalize.nl). A globally active consulting firm that specializes in Integrated Reporting, CSR, CSR Reporting, CSR Strategy and performance monitoring in the private and public sector.