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Integrated Reporting

Integrated Reporting

Member: Society Free
Since: 03.08.2015

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IIRC: Progress made towards integrated reporting throughout 2017

19.12.2017 Share

The IIRC started 2017 with our new CEO, Richard Howitt, taking part in the World Economic Forum meetings in Davos, where it was clear that the current corporate reporting system has to change if the growing trust deficit is to be reversed.

At the same time, the International Federation of Accountants released a paper stating, "Integrated reporting is the way to achieve a more coherent corporate reporting system." 

In countries around the world, concrete steps have been taken during the year to make this a reality as 1,600 organizations in over 60 countries advanced their journey towards integrated reporting.  

In February, the Securities and Exchange Board of India wrote to the top 500 Indian companies calling on them to adopt integrated reporting.

EY published a report, 'Is your nonfinancial performance revealing the true value of your business to investors?' which demonstrated unequivocally that investors are looking to businesses to communicate their broad story of value creation, beyond the purely financial. 

In March, the IIRC launched its global implementation review, a three month process during which the IIRC received over 400 contributions including from focus groups in 19 countries around the world. The review found that the <IR> Framework is standing up to the test of implementation. 

In the same month KPMG released research that indicated that adoption of integrated reporting was becoming mainstream in Japan. The publication reviewed the 279 companies that released self declared integrated reports in 2016. Since then, over 400 companies have moved towards integrated reporting with the Japanese Ministry of Economy, Trade and Industry publishing guidelines for integrated corporate disclosure.

In April, the Chairman of the International Accounting Standards Board addressed an IIRC Council meeting in New York stating, "Generally, users seek more forward-looking information than the financial statements currently provide. These elements are often included in integrated reporting." The IASB had discussions throughout 2017 about the role of wider corporate reporting and has since concluded that it will revise and update its practice statement on Management Commentary, signalling greater alignment to integrated reporting. 

During the same month, Malaysian companies were called on to adopt integrated reporting as part of the Malaysian Corporate Governance Code, a move which has led to growing understanding and interest across the region, with integrated reporting also encouraged through the Philippines Corporate Governance Code.

In May, an Africa Integrated Reporting Committe was launched with representatives from Botswana, Namibia, Mauritius, Nigeria, South Africa, Morocco and Kenya to promote and support the implementation of integrated reporting in Africa. 

Also in May, the New Zealand Corporate Governance Code was updated to include a reference to integrated reporting, as increasing numbers of businesses began to use the <IR> Framework. 

In June, the IIRC welcomed the release of the European Commission's Guidelines on Non-Financial Reporting, which references the leadership and knowledge the IIRC provided in the development of the guidelines. The guidelines reflect the key principles of integrated reporting, emphasizing the importance of connectivity, conciseness and avoiding immaterial, generic boilerplate information.

The Institut Français des Administrateurs released a report calling on Boards of Directors to produce an integrated report concluding, "One of the key functions of the Board of Directors is to define a value creation strategy for the company's shareholders. For the French institute of directors integrated thinking and integrated reporting are an inherent part of this function." Over half of the top forty listed companies are now producing integrated reports in France. 

The FSB Task Force on Climate-related Financial Disclosure recommendations were also published, upholding the principles of integrated reporting - that companies should adopt an integrated approach to their risk management and that climate change is a core strategic issue for business, and must be reflected in the mainstream financial statements. 

In July, the High-Level Expert Group on Sustainable Finance launched its interim report which placed significant importance on the integration of information for investors. It cited integrated reporting as key to the ultimate ambition of convergence to low-carbon growth.

Eumedion - which represents institutional investors' interests in corporate governance in the Netherlands- released its evaluation of the 2017 AGM season concluding there was a 55% increase of listed companies adopting integrated reporting in the Netherlands in 2017, with the number likely to increase in forthcoming years. 

In August, the IIRC welcomed the strengthened focus on value creation in the UK Financial Reporting Council Guidance on the Strategic Report that was released for consultation. The updated guidance increased the alignment between the strategic report and integrated reporting in several ways, in particular by recommending that non-financial information should be integrated throughout the strategic report. Since then, the UK government has announced it will revise the Corporate Governance Code and Stewardship Code that will take into account changing approaches to purpose, culture, long term value creation and integration of information.

In September, international investors signaled their support for integrated reporting as a route to better understanding performance. Twelve leading international investor organizations representing around US$2 trillion assets under management were announced as 'foundation signatories' to a statement that emphasizes the value of integrated reporting and commits to its importance in their capital allocation decisions. 

The IIRC was appointed to the European Union Multi-Stakeholder Platform on the Implementation of the Sustainable Development Goals in Europe. Through the Platform, the IIRC will be supporting and advising the European Commission as part of our commitment to help the world achieve the 2030 Agenda for Sustainable Development. As part of this work, in partnership with ICAS (the professional accountancy body), the IIRC published a new approach that supports businesses looking to contribute to the achievement of the Sustainable Development Goals as part of their value creation process.

In October, 250 business leaders and investors met in Amsterdam for the IIRC's Official Integrated Reporting Convention 2017. Delegates heard from leaders in the field about market trends, the impact of integrated reporting, approaches to materiality, and how to navigate the corporate reporting landscape. Research shared by ACCA at the conference concluded that the length of integrated reports is falling among <IR> Network participants. 

In November, research published in the journal of Accounting, Organizations and Society found that integrated reporting is positvely associated with both stock liquidity, higher investment efficiency and expected future cash flows. A KPMG survey demonstrated companies in Australia are beginning to reap the benefits with a quarter of the country's biggest 200 companies now using the principles of integrated reporting.

Last month, an <IR> Working Group was established in the United States to drive the adoption of integrated reporting. The group has launched a US <IR> Website, to help engage the community and will hold monthly webinars with US case studies. The IIRC also signed a memorandum of understanding with Borsa Istanbul to work together through the <IR> Turkish Network to support and encourage local adoption. 

And in December, Richard Howitt, CEO, IIRC visited the United Arab Emirates and Saudi Arabia to support efforts to advance corporate reporting in the region as part of Saudi Arabia's Vision 2030 and the UAE's Vision 2021. Richard met with a variety of key stakeholders including companies, the accountancy profession and regulators in a series of meetings co-hosted at the Dubai International Financial Centre and the Saudi Arabia Monetary Authority. 

It has been a year that has seen the IIRC work with our partners around the world to create the conditions for adoption, to drive understanding and to share evidence of the benefits.

We would like to thank all of our partners and friends for the work you have done to support integrated reporting. Our work is helping to shape a better world.