Another month – another corporate reporting standard. Over the past year a plethora of new financial and corporate reporting guidelines have been released by various bodies, including the IASB, the International Integrated Reporting Council and the Global Reporting Initiative.
Sure, we do grasp that the world – and the world of business – is reaping the consequences of the risky behaviour that triggered the 2008 global recession. At the same time the realisation is dawning that planetary climate change is probably more real than imagined. However, day-to-day reality demands that we run our businesses efficiently and ensure that the numbers balance. How will these make businesses more responsible and yet keep them profitable? New standards, especially if these add extra burdens, may foster rather than lessen confusion.
The latest is the GRI G4 standard, launched at a high-profile global sustainability conference in Amsterdam on 22 May 2013. It follows hot on the heels of the IIRC Consultation Framework released on 16 April 2013. With regulators around the world urging compulsory integrated and sustainability reporting for stock exchange listed corporations, why two differing standards?
Fortunately the GRI and IIRC are officially cooperating and their guidelines dovetail rather neatly. Using both to structure an annual report – or more accurately – an integrated annual report, as is required these days, should result in a well-balanced outcome. In essence, the IIRC framework of 16 April offers exactly what its title states – a broad framework upon which the company integrated report should be structured. Going deeper than the IIRC framework, the GRI G4 document of 22 May lists the indicators against which environmental, social and environmental impacts can be quantified and reported.
When comparing the two standards, these broadly agree on primary reporting aspects such as organisational impacts, value creation, materiality of information, company strategy, stakeholders, and the comparability and reliability of reports.
Each offers key reporting aspects that the other doesn’t. In the IIRC framework, the resources that any organisation utilises are tidily allocated into six ‘capitals’, being financial, manufactured, intellectual, social, relationship and natural capitals. Once the organisation has identified its ‘capitals’, these are then fed into its ‘business model’ to simply and graphically illustrate how the organisation creates the value that makes it profitable and sustainable. Although seemingly straightforward, working through this exercise is often an eye-opener for company leadership, as well as an intuitive way of explaining company workings to shareholders and stakeholders.
Where the IIRC pushes for reporting clarity, the GRI guidelines offer a methodology for how companies can assemble their source data to be the bedrock of that clarity. Yes, the newest GRI and IIRC guidelines are the daylight at the end of that reporting tunnel.
Author: Clive Lotter is an Integrated Reporting Consultant and writer of Annual reports for listed companies.