“With much fanfare, integrated reporting <IR> was launched as the next big thing for companies. ”
With much fanfare, integrated reporting <IR> was launched as the next big thing for companies. <IR> is intended to supplant the glossy and cumbersome annual reports of yore by illuminating exactly what makes companies tick so that investors are well informed where to place their money. Or will it really?
Now that the definitive integrated reporting (<IR>) framework has been out there for six months, how are businesses responding? Will integrated reporting fly – or quietly disappear as a knee-jerk response to the 2008 global meltdown?
Most company officers tasked with wrestling these reports into publication are painfully aware that South Africa’s JSE was the first regulator anywhere to mandate integrated reporting, albeit on a “comply or explain” basis.
Now, is integrated reporting to be a peculiarly South African regulatory yoke – or is it being adopted internationally as a management and investor tool of value?
My research shows that integrated reporting and its sustainability reporting twin are both taking root everywhere.
Earlier this year PwC surveyed the spread of integrated reporting across 400 companies in more than 20 industries and in 10 countries. PwC found that South Africa, the UK/Ireland and Germany are leading the way, though particular <IR> reporting elements such as strategic priorities, key risks and key performance indicators are becoming universal. The <IR> framework is being trialled in 25 countries, of which 16 are members of the G20 group of nations. Giant corporations such as Unilever, Danone, Eni, Coca-Cola and Volvo are using the format.
The Brazilian Integrated Reporting Network has amassed 70 companies and organisations, while Singapore’s and Malaysia’s exchanges have indicated that integrated reporting is imminent.
In April 2014 the European Parliament overwhelmingly passed a bill that all medium and large companies will have to report on their business models, sustainability practices and supply chains.
Investors are also paying serious attention. In May 2014, Juan Costa Climent, EY’s global leader of climate change and sustainability services, wrote that: “In a recent global survey of 163 institutional investors with $7.3 trillion in assets under management, 89% of investors said that non-financial performance information has played a pivotal role at least once in their decision-making over the last 12 months. This significant uptake of non-financial information is a warning for those companies not currently reporting.”
So why then is integrated reporting taking off? Simple really, when annual reports don’t accurately portray a company’s true worth and impacts, we’re staring into the barrel of another 2008. ❐
Author: Clive Lotter is an Integrated Reporting Consultant and writer of annual reports for listed companies
