“The integrated report is an outcome of the integrated reporting process – and importantly, it is based on the foundation of integrated thinking in a company.”
The finalised integrated reporting framework may transform corporate reporting worldwide
This year will be remembered for the birth of a new prince … and the birth of an accepted international framework for an integrated report.
This framework is expected to give a growth spurt to integrated reporting around the world. Its existence will offer clarity and reduce uncertainty, allowing local jurisdictions to determine how the integrated report can fit into their current reporting rules and regulations.
Scheduled to be released by the International Integrated Reporting Council (IIRC) on 5 December 2013, the framework is the culmination of an intensive process of analysing the many public comments that were received on the consultative framework released in April this year (which followed three previous iterations that started with a discussion paper in September 2011).
So, what comes next in integrated reporting, post the December framework?
The IIRC has its work cut out for it. It will have to promote the framework – and the integrated reporting approach – around the world. In this, it will have to work with the reporting bodies in different countries. To date, South Africa is the only country where the stock exchange (by virtue of King III falling into the listings requirements) encourages companies to prepare an integrated report. A few other exchanges are reportedly interested, but there’s nothing concrete yet. The IIRC will also be spending time and resources on updating its guidance when necessary (the framework released in December is version 1.0).
There are other unresolved issues in the world of integrated reporting. The assurance of the integrated report is a looming one. There is a demand for assurance as a measure to increase the credibility of the integrated report, but the challenge for assurance providers lies in how to do it. The IIRC will be releasing a background paper covering the assurance debate and, hopefully, the International Auditing and Assurance Standards Board will take up the cudgels.
Integrated thinking is yet another issue. The integrated report is an outcome of the integrated reporting process – and importantly, it is based on the foundation of integrated thinking in a company. How to embed integrated thinking in the strategy, operations and daily decision-making of the company is the challenge. While embedding a company’s material sustainability matters is not new, watch out for a rise in the number of practical tools and tips to assist companies. And these could come from international bodies like The Prince’s Accountability for Sustainability Project, which is a founder of the IIRC, along with the Global Reporting Initiative (GRI), International Federation of Accountants and others.
Another issue will be the alignment of integrated reporting (IR) with sustainability reporting (SR). There is a degree of confusion as to how IR fits with SR, especially following the release of the GRI’s new G4 Guidelines in May (the GRI is widely acknowledged as the standard setter in sustainability reporting). In my opinion, both the IIRC and the GRI need to undertake a concerted communication exercise on the alignment because this is an issue that can easily be relegated to a non-issue. Sustainability reporting – just like its sister, financial reporting – will always have a place (as will their relevant standard setters). Each type of reporting is needed to service different information types and the needs of different stakeholders. Interestingly, both types of reporting have a new focus on materiality – at last, away with the clutter in favour of what matters most! The integrated report draws on information from both of these reporting types. Integrated reporting offers what financial statements and sustainability reports don’t – it connects the financial and non-financial in the context of the company’s business model, strategy and risks, with a view to explaining value creation over time.
Long live integrated reporting!
Leigh Roberts CA(SA) is the Project Director: Integrated and Sustainability Reporting at SAICA and a member of the IIRC’s Technical Task Force