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PROFILE: PwC’s journey to integrated reporting

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PwC South Africa has released its integrated report for 2016. It has been clear for some time that neither financial reporting nor sustainability reporting is sufficient on their own to describe the value created by an organisation. For these reasons, King IV advocates the concept of integrated thinking, of which an integrated report is the end result

This is PwC’s first integrated report, in what will be an annual publication. At PwC, values such as integrity, transparency, good sense and wise solutions through good governance, form the cornerstone of its business practices. Its high standards of corporate governance influence alike its clients’ businesses and its own.

Shirley Machaba, Chair: PwC South Africa Governing Board and partner responsible for risk, says: ‘Producing the first PwC integrated report was a matter close to my heart as I strive to encourage the PwC leadership team to lead by example. The goal of an integrated report is to provide a comprehensive view of an organisation by putting its performance, business model and strategy in the context of its material economic, social and environmental issues. This approach to reporting is becoming widely accepted: for instance in our latest annual CEO survey, 67% of CEOs expressed their belief that a company’s purpose is centred on creating value for wider stakeholders and not only for shareholders.’

Businesses can therefore no longer purely be concerned with returns on investment to shareholders, but the focus has shifted to its impact on the broader economy, society and the environment.

PwC South Africa’s own corporate governance journey involved wide consultations with employees across the more than 156 countries that have PwC offices. Its current values have been translated into five behaviours that enable the firm to become a purpose-led and values-driven organisation. These behaviours are: acting with integrity; making a difference; caring; working together; and reimagining the possible. It is its governance structures that enable PwC to monitor that employees daily live these values in their interactions with clients, society and among themselves.

PwC’s journey in preparing its report was guided by the IIRC framework for integrated reporting, taking into account the six capitals included in the <IR> framework guidelines. These are financial capital; human capital; manufactured capital; intellectual capital; social and relationship capital; and natural capital.

PwC’s legal structure does not mandate it to prepare an integrated report over and above the regulatory financial reports it is required to prepare for its shareholders and for the partnership. The way in which PwC makes money, however, impacts on the economy, society and the environment, which is in turn impacted by its values. ‘We identified the <IR> framework guidelines as the ideal framework to tell the PwC South African value creation story to all our stakeholders, including to our people, clients and relevant regulators and institutions,’ says Machaba.

PwC is mindful that it is in a position of trust, where clients look to it for advice and expect it to lead by example. ‘As a leadership team, we decided that we can no longer advise that integrated reporting is the most appropriate way for an organisation to tell its value creation story to its stakeholders, without getting our hands “dirty” by preparing our own report.

‘We believe that this report goes a long way to explaining who PwC is, the material issues it faces and how these are managed to create long-term value. We also have many highlights to share, such as the Level 1 AAA+ B-BEE contributor status we achieved in October 2016 and our agreement with Google, which supports our Vision 2020 by providing new, innovative and more efficient tools that will enable us to grow revenue. We also want to share with stakeholders our perspectives on opportunities in our industry, such as the proposed mandatory audit firm rotation,’ says Machaba.

The business case for integrated reporting is growing ever stronger as CEOs recognise that it leads to more effective internal processes and enables management to better articulate their strategy and business model. Organisations’ stakeholders include a wide range of groups, clients, communities, employees, the media, professional bodies, regulators and suppliers. The integrated report is an important single tool through which they can engage with each of these stakeholders.

PwC has always been at the forefront of corporate reporting innovation and developments both globally and locally. Globally, PwC has been a sponsor to a number of IIRC conferences and continues to drive the debate through their active involvement in discussions on the topic. PwC has developed a roadmap for integrated reporting based on three fundamental foundations, which it believes should underpin an organisation’s efforts towards integrated reporting. The three foundations are materiality analysis; value creation; and impact evaluation.

Through its consultation with clients, and published annual survey of the Top 40 JSE companies’ integrated reports, PwC has encouraged companies to improve the quality of their reporting locally.

Even though there are well-documented internal benefits to preparing an integrated report, it is still seen by many companies as a compliance report prepared primarily by listed companies. Every single organisation, listed or not, has a story to tell to its stakeholders about the way in which it is able to create value in the long term.

‘The reality in the 21st century is that information about an organisation is no longer controlled by the organisation but rather by its stakeholders. Quality reporting is not about religiously complying with any framework, but about approaching reporting with the right mindset. It’s about taking a longer-term, broader, more operational perspective to the organisation’s business model and how it impacts on all the six capitals. Integrated reporting is intended to challenge how organisations think, operate, monitor and report performance in a connected way.

‘I believe that by preparing an integrated report, organisations are able to build trust among all stakeholders by telling their value creation stories. If by PwC so doing, we encourage other companies that are not yet preparing an integrated report to follow suit, so much the better,’ says Machaba.

Having studied reporting practices locally for the last few years, Machaba explains that it’s clear that changes in corporate reporting don’t happen quickly. It is important to understand that integrated reporting is a journey, not an isolated event. ‘Although this report does not yet meet all the requirements of an integrated report, it is our intention to steadily improve our reporting in future annual reports and perhaps expand the scope of the report into Africa.

‘I look forward to receiving your feedback on this report at integrated.report@za.pwc.com,’ she concludes.