INTEGRATED REPORTING: THE FUTURE OF DYNAMIC BUSINESS LEADERSHIP

THE FUTURE OF DYNAMIC BUSINESS LEADERSHIP

As we move towards an increasingly digitised, interconnected world, the challenge of delivering relevant and innovative thinking within professional education programmes accordingly increases too. Given our rich history, South Africa is uniquely poised to offer thought leadership perspectives that embody local thinking within international contexts. Within the University of Johannesburg’s Department of Accountancy, this challenge has been embraced. By Zafeer Nagdee

Life in academia allows one to calmly observe our world and formulate views on the events and trends that shape societies. Through observation, an impactful academic is then directed to developing solutions within the framework of thinking that underpins their skill sets. Within South Africa, we continue to face challenging economic times which in recent months have been reflected through our stagnant economic growth, uncertain credit ratings, and a volatile exchange rate. The nation is also in the midst of political uncertainty given the state of unrest across our institutions of higher learning, the revelations contained in the recently published State Capture Report, and the stark inequality that continues to take the centre stage of political debate.

It is widely acknowledged that in light of the difficult times we live in the impact of these realities are compounded in the absence of bold, principled leadership. The neat lines that were thought to divide business from politics and civil society are disappearing against the backdrop of an increasingly integrated world we are moving towards. As such, governance matters are taking on a new identity given their inherent implications on leadership development. At the heart of good governance lies ethical leadership – a notion that is interpreted differently across industry lines and geographic borders. It is high time that we as South Africans fulfil our responsibility for shaping our own views on what ethical leadership entails and by bringing this debate to the public for widespread scrutiny.

Through governance reports that are developed and debated primarily within the circles of the country’s corporate elite, it is doubtful whether large portions of civil society are suitably included in the developmental process. For instance, in evolving towards a stakeholder-inclusive approach our governance regime has over time moved away from a mindset that embraces shareholder primacy. It is arguable, however, whether this move has come fast enough and holds status that is bold enough given that over 20 years into a post-apartheid era, South Africa is still one of the most unequal societies in the world – an economic reality that has incidentally worsened since 1994 according to historical data. Within the context of director remuneration (though a global issue of concern) it is also arguable whether appropriate governance prescriptions suitably address the issue in South Africa given the small, incremental changes that have taken place as far as code compliance is concerned. In many ways, while South Africa grapples with matters as light as enhanced disclosure, it is questionable whether our corporate conscience has matured enough to embrace far bolder debates such as legislated director remuneration ratios. These examples highlight that as a nation we have not embraced our collective responsibility to lead a progressive discourse around corporate reform. In the interest of maintaining the status quo, corporate South Africa has happily accepted incremental change in a world where radical transformation is needed.

Recent trends in technology are also beginning to fundamentally shape decision-making within organisations. In particular, big data ecosystems and their resultant analytics have created new categories of knowledge. For business leaders, this has necessitated the enhancement of their skill sets to request appropriate data sets, interpret their analytics and to then make smart strategic or operational decisions in response. In essence, the skill of being able to draw meaningful insights from large volumes of data and then convert them to action has become important in holding a competitive edge over one’s peers – be it with a view to enhancing product designs or improving productivity among staff, identifying and securing big data talent has become a priority for many businesses. The need for expertise in big data spans across the technological, into the mathematical and beyond. The legislative constraints around data privacy add further challenge in this regard.

Socially, South African business is no stranger to the widespread impact of HIV and tuberculosis supported by concerning data contained in the latest edition of the World Economic Forum’s Global Competitiveness Report. Out of 138 countries that were ranked in the 2016–2017 report, South Africa ranks 137 (Lesotho being 138th) for the incidence of tuberculosis. Within the context of HIV prevalence, South Africa ranks 135 in the world (ahead only of Botswana and Lesotho). These indicators have significantly affected business development in South Africa where the business impact of tuberculosis and HIV both rank at 130 in the world. Amid the problem of water scarcity across South Africa, these barriers to growth are further compounded through operational disturbances, particularly within sectors that are heavily reliant on uninterrupted water supply, such as agriculture, mining and manufacturing.

Effective stakeholder engagement necessitates that business leaders not only action initiatives of good governance but in so doing, reflect on the interdependencies that drive business and report on these practices too. The recently issued King IV report has transitioned away from an ’apply or explain’ to an ‘apply and explain’ reporting era where justification is to be provided for claims of good governance. This necessitates more detailed reports while challenging preparers in staying true to the guidelines of concise, useful reporting.

These discussions highlight the need for broader, more dynamic thinking within business. In shaping future business leaders, academia needs to be innovative in preparing young learners for a world that extends well beyond technical proficiency. In recongising that need, the Department of Accountancy at the University of Johannesburg recently developed the Accounting Studies courses to instil within learners the skills of problem-solving, critical thinking, and decision-making. With a distinct focus on governance, the course requires students to engage with ideas in delivering thought leadership pieces that address contemporary business issues. In preparation, students are exposed to contemporary debates within the governance space and are exposed to examples of best practice to highlight issues of compliance. Through a series of lectures, students apply their minds to specialised issues within the broader discipline of governance as well including among others: business strategy, stakeholder engagement, board composition, director remuneration and integrated reporting. In partnership with the Integrated Reporting advisory division at KPMG, students then undertake ‘The UJ/KPMG Integrated Reporting Project’ that requires them to reflect on the dynamics behind good governance and the reporting thereof by preparing a content analysis of the integrated reporting practices of a selected JSE-listed company.

During the year, a rigorous assessment process was undertaken which included a written submission, a formal presentation, and moderated panel discussion with representatives from UJ, KPMG and some of South Africa’s leading corporations. The outcome of the assessment process gave rise to the project’s Top 3 performers. As project leader, the initiative proved to be enlightening to the academic team, the project partners, and of course to the students too. In time to come, these young learners are certainly to be watched.

AUTHOR l Zafeer Nagdee CA(SA) is a Senior Lecturer of Governance at the University of Johannesburg

An adventurous journey

By Akshay Bhula

On my journey of personal growth the Accounting Studies courses have developed my leadership and critical thinking skills. In addition, the courses have enabled me to develop my communication skills within a team context and encouraged me to develop a mindset entrenched in dynamic thinking and innovation. This held me in good stead when completing the challenging project of analysing the integrated reporting practices of a South African listed company.

Integrated reporting has been developed to reshape corporate reporting norms by encouraging businesses to adopt a more holistic approach to the development of their strategic plans. Given that integrated reporting forms the reporting leg of good governance, its practice has in many ways placed South Africa as a world leader as far as good governance practice and its reporting is concerned. This is a notable achievement for South Africa as a whole.

My research on best practice directed me to Tsogo Sun Holdings Ltd, which is often described as Africa’s premier hospitality, entertainment and gaming group. My content analysis revealed that the group favourably complies with the recommendations of the Integrated Reporting Framework issued by the International Integrated Reporting Council (IIRC). Of great use to readers is the company’s use of a risk matrix to assess the likelihood and impact of various risks. One area of improvement lies in including analyses of the disaggregation of their different business segments with a view to providing commentary on their interconnectedness.

Overall, the Accounting Studies courses instil within students a social consciousness towards business issues on a world scale. This encourages students to take an interest in world issues and, accordingly, to not only focus inwards on South Africa alone. As such, this has been valuable in developing my understanding of the business world beyond our borders.

AUTHOR l Akshay Bhula is a second-year Bachelor of Accounting student at the University of Johannesburg

Integrated thinking,  integrated reporting

By Eric Ndlovu

The Accounting Studies courses have proved to be important in exposing me to broad business issues and the reporting of them. The courses instil within learners the values of principled progress and social consciousness in moving towards an era of sustainable growth within the context of a global business environment. The courses also address world-scale issues in order to improve students’ understanding of South Africa’s competitiveness in relation to its international counterparts.

As a nation, South Africa has a well-established business environment but in order to enhance its performance, businesses need to address issues of growth. For instance, the South African mining sector faces a host of factors that threaten its growth. Issues such as HIV/AIDS as well as political instability pose challenging operating conditions. Within the context of good governance, the communication of issues like these forms an important dimension. In relation to stakeholder engagement specifically, integrated reporting should act as a force to achieve sustainability and financial stability.

Gold Fields Ltd represents a company that has a well-established integrated reporting system. Through analysing its integrated report one can easily find information relating to the company’s risk factors along with how they are addressed. For instance, in response to the prevalence of HIV/AIDS among mining staff, the company developed and implemented a HIV/AIDS programme in which it provides formal education and training in all aspects of HIV/AIDS prevention and management. Whilst the report is informative on most aspects such as these, it may be useful to provide more information on its engagement in CSR activities outside of the company.

Apart from the core competencies in governance thinking that I developed, I also enhanced my soft skills as far as my writing and powers of expression are concerned. In reflecting on my career, I have also become more aware of the operations of a company such as Gold Fields Ltd and this has inspired me to pursue a career in mining. On an overall level, the project on integrated reporting developed my critical thinking and leadership skills which will be important in my personal and professional growth moving forward.

AUTHOR l Eric Ndlovu is a second-year Bachelor of Accounting student at the University of Johannesburg

Enhancing critical thinking through professional education

By Lenette Fourie

The SAICA Competency Framework identifies various pervasive skills necessary to reach high levels of excellence and innovation. This is important since business cannot be seen in a vacuum. Financial reporting as a result needs to reflect deeper insights into the social, economic and environmental dimensions of business practice. Professional education is a key contributor to the development of these required skills through the implementation of programmes that improve the knowledge and attitudes of individuals. For this reason, the newly implemented module (known as Accounting Studies) at UJ strives to expose learners to the ever-changing business practices and expectations of a chartered accountant.

The module instils within learners a social consciousness towards business. This includes diverse aspects such as the standard-setting process; regulation theory; the ethical dimension of accounting practices; as well as corporate social responsibility – all of which are seen as key aspects influencing business practices as a whole. It is clear that the module addresses world-scale issues while developing innovation and critical thinking.

Critical thinking can be seen as the objective analysis and evaluation of an issue in order to form a judgement. The module allows learners to closely compare and contrast relevant international topics through the application of various theoretical concepts in order to form critical opinions and innovative suggestions. This effective development of critical thinking can be seen in the KPMG/UJ Integrated Reporting Project.

An integrated report aims to provide insight about the resources and relationships (the capitals) used or effected by an organisation. It also seeks to explain how the organisation interacts with the external environment and the capitals to create value over the short, medium and long term. More importantly, integrated reporting includes forward-looking information to allow stakeholders to make a more informed assessment of the future value creation ability of the organisation.

In my assignment a content analysis was done on how Nedbank Group Ltd’s 2015 integrated report adheres to the various content elements and guiding principles of the International Framework on Integrated Reporting issued by International Integrated Reporting Council (IIRC). From an overall perspective, Nedbank succeeded to adequately comply with the various content elements and guiding principles since it effectively took into account the necessary features of each element and principle. This is evident when considering the content element of ‘performance’ since Nedbank included various quantitative indicators along with linkages between past and current performance. This inclusion enhances the guiding principle of ‘comparability’. When comparing the integrated report of Nedbank Group Ltd to that of Barclays Africa, for instance, it was found that Nedbank’s biggest challenge lies in identifying, tracking and collating various trends in the industry.

These findings acknowledge that South Africa has a leading position in the development of integrated reporting. The release of the King IV Report on Corporate Governance notes the emphasis on integrated reporting and integrated thinking. Furthermore, the Companies Act requires all JSE-listed companies to comply with various requirements to enhance responsible practices. It is evident that South Africa effectively regulates the accounting profession through a combination of public and private institutions and regulatory authorities. There is no question about South Africa’s important role in creating a global adoption of integrated thinking and corporate governance.

From the discussion above it is clear that professional education plays a pivotal role in enhancing critical thinking and awareness about international business practices. This is a key element in developing the minds of future business leaders and moving South Africa forward.

AUTHOR l Lenette Fourie is a second-year Bachelor of Accounting student at the University of Johannesburg

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