I came across integrated reporting in a book called Six Capitals: The revolution capitalism has to have – or can accountants save the planet? (Jane Gleeson-White, 2014). It struck me as a sensible model because it gets to the root of value creation on a sustainable basis. The circular model (drawing from a range of capitals and then influencing them in a positive or negative manner) helps a business to better understand its business model and the effect it has on more than just short term financial returns.

Any benefits from adopting integrated reporting?

Integrated reporting allows us to provide a better understanding of the university's story to our varied group of stakeholders. When we went to raise money from the markets three years ago, one fund manager from the United States said he had read the statutory accounts and really understood what we did. This increased his confidence in our business model (value creation model) and by reducing risk permitted him to come to a faster and easier decision to take up a debt issue. By demonstrating how we create and sustain value, by explaining the data and the variances, it's relatively easy to help people understand what we're doing. We have been using integrated reporting as a driver to tell a better story to everybody, to translate complexity into something simpler and to use one set of data – have one version of the truth – both in our management accounts and audited financial statements. 

Integrated reporting is a really good initiative for us as a university as it helped us to articulate our value creation model. To do that we need to have a shared understanding of how the organisation works, its sources of income and the costs incurred to run it on a sustainable basis. As a research intensive university we operate a cross-subsidy portfolio of symbiotic activities but it is important that we are clear what subsidises what. We are here to fulfil an academic mission and to make a positive impact on society; we don't have shareholders and don't pay dividends and all surpluses are recycled to support the academic mission. Consequently we don't focus on just the financial approach but on many non-financial (or rather pre-financial) measures of success. An integrated thinking and reporting approach broadens the discussions you have in almost every meeting.

I would like to think that integrated reporting could give us a competitive advantage. We want to attract as many high potential students and staff as we can. We are very collaborative as a sector and not competitive in a ruthless way against other organisations, but we recognise that students have a choice to learn; researchers have a choice as to where they work; funders have a choice as to where they put money; the government can choose what it wants to support. So whether you like the notion of competition or not, it is the reality.  We have to embrace it and consider what it means for our long-term value creation model – and it means we need a steady supply of people who want to come to us, rather than go somewhere else.

We are already very successful, but integrated reporting will help us to fine tune and optimise our performance. There is more we could do, particularly when it comes to choosing whether to support one initiative or another. For example, prioritising which capital project to support; or choosing revenue investment in a long-term or short-term project. Integrated reporting helps our understanding in an integrated way of how different options fit with our strategic plan and the trade-offs involved.

What critical challenges did you face?

Integrated reporting was reasonably easy to adopt but we still encountered challenges, mainly cultural and organisational. The big challenge is to try and take the rest of the business with you when you are innovating. We spent about a year and a half trailing the fact that we were going to make more substantial changes to the accounts. For the year-ends 2014 to 2017 we were trying to improve the quality of the story we told in in the accounts by improving disclosures each time. We were also introducing leading edge concepts in our university accounts from other sectors and from new reporting guidance from, for example, the Financial Reporting Council and the International Integrated Reporting Council. Some colleagues took more persuasion on these, such as 'fair and balanced' reporting – some people think you only report the good stuff and play down the 'not-so-good' stuff – so that was quite a challenge. Fair and balanced has a specific interpretation from an audit perspective and making such statements would have required more audit work to validate it. Experience across all sectors indicates that increasing disclosure is sometimes a cultural novelty but there is steady progress.

Our biggest debate has been on the presentation of risk. There was genuine concern about how we present information that senior management regard as a potential risk – it's a sensitive issue. We try to write in a nuanced way. The point is to tell a balanced story. You need to understand the ability, appetite and position of your reader. If my perception is that the reader will take the wrong message from the report, or place undue focus on one aspect, then I have probably not done the report justice. 

How easy was it to adopt a value-creation model?

I had already tried to describe our business model before I came across the International Integrated Reporting Council's (IIRC's) Framework. Some of my colleagues thought that calling what the university does a 'business model' was a step too far. So we called it a 'value model' (which actually fits better with the IIRC model). I broke down the end-to-end elements for teaching, research and commercialisation and included this model in the financial statements for the first time in 2013. We have updated it each year. 

I realised that we would have to think very carefully about the 'capitals' we should identify and how they relate to our 'products'. As a university, we have a product which is an undergraduate degree, which takes four years; we also have postgraduate degrees, which take perhaps one year; then we have research products and they all have different lifecycles. So when looking at value creation over time, which box do they go in – short, medium or long term?  

The capitals in our value model are different to those in the IIRC's Framework. We had to change the language to help people in our organisation understand it better. The capitals we report on are university reputation, social and relationship, people, knowledge, finance, physical assets and natural resources. 

In our value model (see the 2016/17 accounts pages 10 and 11) the top half contains the intangible assets, so it starts with reputation. The bottom has the physical assets, such as the estate and the IT infrastructure. Somewhere around the middle is the intangible asset value of knowledge. We are already reviewing this and identified an additional value source; data sets that you can analyse and use as research tools. We will make these more prominent in next year's accounts. In the very middle of our model, knowledge – which is divided into research and learning – is the main stock or capital that every university draws on. It's twisted in our model – because research-informed teaching allows an iterative process of learning, challenging, researching and informing. This cycle is at the heart of our value creation model.

Integrated reporting can apply to all organisations. The question is how are you creating value? And how do you create that value sustainably? It all starts from there. We create about £2bn of gross value added impact in the Edinburgh area and £4bn for Scotland. If we open up a new course bringing in another 100 students, that's created value for them and it's created value for us as an organisation; but what impact has that had on the city or on the accommodation required?

Some people will have benefited because there's more spending, but others may be concerned that another student accommodation block has opened. Meanwhile the carbon the students are burning by plane to come here from all over the world is polluting the atmosphere. So understanding the full value footprint from start to finish – the full cause and effect of what’s happening – really does open your mind up to what your organisation is doing.

What’s next?

We have not been as good as we could have been on a broad enough set of metrics, but we are developing a set of key performance indicators (KPIs) for internal governance use that will look at our performance relative to our strategic plan ambition. Our strategic plan ambition is currently expressed as a narrative in the accounts about delivering impact for society but we are planning to complement this with a series of KPIs and then I would like to start reporting some of these. 

We want to make our reporting more concise. We also particularly want to embed it more in our decision making, so that people are referencing integrated thinking. I've been talking about integrated thinking for the last couple of years and will continue to use this term at senior management and governors' meetings.  

Other developments across the higher education sector will help to too. For example the Leadership Foundation for Higher Education (LFHE) got funding from HEFCE (Higher Education Funding Council for England) for an integrated thinking and reporting project and I sit on that steering group.

One of the benefits of LFHE taking it on is that they will access non-financial members of both senior management and governors. That's a big step because this has definitely been a project driven by finance, but it will only be sustainable if it’s accepted by all governors and senior management.

Visit the University of Edinburgh website for details their annual report and accounts