Putting it all together: Why AEP published its first combined CSR and Annual Report

Sandy Nessing

Sandy Nessing

Last month, American Electric Power published its first integrated report that combines the traditional Annual Report to Shareholders with the annual Corporate Sustainability Report. It was a bold decision and one that few others have made, but I think we’re on to something big. For the last four years, many of our stakeholders have been pressing the company to go this route. The idea is that your financial success is intertwined with your environmental, social and governance (ESG) performance and reporting one without the other doesn’t give you the full picture. Makes sense, right?

The fact is that investors, customers and other stakeholders have been increasingly asking us for more information on a broader range of issues. What we weren’t doing well enough was framing the whole picture by tying the financial aspects of our performance together with our policy positions, environmental compliance, safety performance, work force development and technology investments. At the same time, investors are taking a closer look at ESG factors that can add value or mitigate risk across an entire institutional investment portfolio. A 2008 study conducted by SustainAbility and KPMG confirmed what stakeholders want – integrated reporting, seamless access to information through all mediums and sustainability elements embedded in business goals that are linked to business strategy.

To find out if that was really what investors were asking for, I went to our Investor Relations team. They told me that beyond the numbers, which they get through SEC filings, investors were hungry for some of the non-financial data that we were reporting in our Corporate Sustainability Report. In particular, they wanted to know about how we are managing risks associated with climate change and changing environmental regulations and our positions on public policy. They were asking for information that is voluntarily reported through the Corporate Sustainability Report but not necessarily found in the 10K. Consequently, our IR team took the Sustainability Report to their investor conferences – not the Annual Report. That was the revelation I’d been waiting for so I built a business case for it and this time it was an easy sell to management.

Last week, during the Ceres conference in Boston, our approach was validated. NGOs, investors and other companies are taking a closer look. I think many were waiting for someone else to take the plunge first. And while the feedback so far has been positive, we know there is room for improvement and we expect our reporting will improve year over year. My plan this summer and fall is to tag along with our IR team to hear, first hand, what investors of all stripes are saying and asking for. That, and continue to keep my ear to the ground for any other new issues that are coming around the bend. It’s going to be a busy year!.

About Sandy Nessing

Sandy Nessing is the Managing Director of Sustainability & ESH Strategy & Design for American Electric Power Co. Inc. She wrote and published AEP’s first Corporate Sustainability Report in 2007, and in 2010 published AEP’s first integrated Corporate Accountability Report, a combination of the annual sustainability report and Annual Report to Shareholders. Follow her on Twitter at @Watts4U.

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  1. elaine cohen

    May 17, 2010

    Hi Sandy,
    Well done on your report, which I have read. It’s written in a nice straightforward style which I like and discusses issues frankly and openly.
    I have not been a fan of integrated reporting to date, mainly because I feel they play to financial stakeholders and significantly short-change the non-financial interests, and are often constrained/burdened by financial reporting formats. And lets not forget that even sustainability reports must contain a certain amount of financial, profile and strategy information, to be contextually complete.
    Your new report does not contain a consolidated statement of financial accounts which usually runs to pages and pages, and has been previously included in your prior year annual reports. So I have two questions:
    (1) Will the Annual Integrated report be enough to satisfy investors. Do you expert this to be the only report they read?
    (2) Is your Integrated report primarily targeted at shareholders and less at non-financial stakeholders ? If so, in addition to working with the IR Team, what will you be doing to ascertain the preferences of non-financial stakeholders who, after all, are significantly greater in number and diversity of interests (and I believe, in influence) than the investment community alone?

    Thanks for being open to discussion and feedback. Rregards,
    elaine cohen

  2. Bruce Klafter

    May 17, 2010

    How about a real link to the report – I could not find it on AEP’s website. I looked at the last 10-K, but the content you describe is not in there. Thanks.

  3. Stephen Evanoff

    May 18, 2010


    Thanks for sharing your insights and for being a pathfinder on this important, emerging element of EHS communication.

  4. john

    May 20, 2010

    What was the resource costs (people dedicated to providing and reviewing content), IT and publisher expenses (on line or hard copy).

    I think communicating lessons learned on resourcing requirements would help others

  5. Sandy Nessing

    May 21, 2010

    Great question on resources! We assembled a core team made up of my group within ESH, Corporate Communications (for writing and graphic design support), Investor Relations (to keep the financial perspective always in front of us) and Legal (to ensure alignment with the 10K). We also relied heavily on support from Finance and Corporate Planning and Budgeting, mainly for information but also for business perspective. We identified subject matter experts (SMEs) across the company who were responsible for providing, reviewing and verifying data/information. We established a set group of people strategically placed in key departments/functions affecting the report to be our official reviewers for all content and context. Senior management also got it for review. We printed only 32,000 copies of the report; produced a shorter summary brochure to be used more widely and pushed tons more data/info to a dedicated web site. The printing was about $75k all in. Plus, there are mailing and photography costs. But we also estimate that we saved nearly the same amount by producing one report versus two. Make no mistake, you need resources — people and money — to do it and do it well. Hope this helps!

  6. casimonek

    August 8, 2010

    I was curious whether other companies have published their reports combined and if you have any perspective on what was shareholders’ response. Any insight? Great post. Thanks

    • Sandy Nessing

      August 9, 2010

      Only two other U.S. companies have published integrated reports — United Technologies and Southwest Airlines. The jury is still out on shareholders’ response since it’s so new. However, if analysts are any indication, the interest is certainly there.

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