Initiatives
IIRC ... Integrated Reporting

IIRC Newsletter ... May 2016 ... The IIRC meets in Frankfurt and other news

Burgess COMMENTARY

Peter Burgess

IIRC Newsletter

The IIRC meets in Frankfurt

One of the world's leading exchange organizations, Deutsche Börse has said, 'Integrated Reporting has become the approach of choice for state of the art communication to the capital market.' Deutsche Börse was exploring the role Integrated Reporting can play in providing mainstream investors a holistic view of a company's performance and its ability to create value over time. In collaboration with the IIRC, they hosted an event that brought together directors of European listed companies with senior investors to discuss the value of Integrated Reporting for bringing about integrated management and enhancing investment dialogue.

Leading German organizations such as EnBW, Munich Airport and BASF discussed how Integrated Reporting has benefited their organizations. Examples of their reports are available on the Integrated Reporting Examples Database and really demonstrate how the reporting practices of these organizations have evolved over recent years.

This event coincided with an IIRC Council meeting held in Frankfurt on 27 April 2016. Council meetings are an important opportunity for the global coalition to understand and take action on insights from the key players in the capital market system and the corporate reporting field. Council members from the investor community gave a strong indication that investment decisions are increasingly based on wider sets of information. Integrated Reporting will play an important role in linking this information to strategy and insights on what is really driving value creation in an organization.

Participants of the Corporate Reporting Dialogue also gathered in Frankfurt to take part in a day-long retreat facilitated by Professor Richard Barker, Saïd Business School, Oxford University. The Dialogue is an initiative designed to respond to market calls for greater coherence, consistency and comparability between corporate reporting frameworks, standards and related requirements. The retreat was an opportunity for the eight leading framework developers and standard setters globally to explore aspects of the current corporate reporting system. They traced the different drivers of their frameworks and standards, such as diverging interpretations of the purpose of the corporation. They also explored the influence of leading practice, soft and hard law, and the impact these have on the corporate reporting system.

The meeting was a good basis for future discussions Dialogue participants will have on alignment opportunities. The IIRC is committed to playing a role in resolving the confusion felt by many regarding the current state of corporate reporting through its participation in the Corporate Reporting Dialogue. The system of corporate reporting has developed in jurisdictional and organizational silos and it is now time to consider how best to develop an aligned corporate reporting system.

Linking EC Non-Financial Information Directive to

The Federation of European Accountants, the Association of Chartered Certified Accountants, Eumedion and PwC are just a few of the range of organizations that referred to the International Framework in their response to the European Commission on the Non-Financial Information Directive.

In the IIRC's own response to the European Commission we stressed that the guidelines should be non-prescriptive and should seek to build alignment and promote conceptual consistency with frameworks at a strategic information level. Reporting should not just be seen as a data exercise, but about making strategic decisions using broader information sets. Disclosure should reflect management judgement, demonstrating how management use data and take it into consideration in developing their strategy for value creation.

We highlighted the importance of connectivity of information, in providing connection to the business model in order to achieve behavioural change, emphasizing that compliance cannot replace judgement.

Other organizations sent a similar message to the European Commission - in a position paper on the Directive, FEE states, 'The Federation believes that the implementation of the NFI Directive should follow the underlying approach of the framework' because the framework emphasizes the connectivity of information and 'highlights the key role that materiality has to play.'

Member states have also been consulting on how to implement the Directive. In Germany, Thomas Kusterer, CFO, EnBW; Dr Wienand Schruff, Senior Partner, KPMG; and Christian Strenger, a member of multiple supervisory boards including Deutsche Asset & Wealth Management and TUI AG; have responded to the local consultation saying Integrated Reporting is necessary for companies to show their integrated corporate governance and for management report audiences, especially investors, to understand value creation.

Furthermore, Deloitte have responded to the UK's Department for Business, Innovation and Skills saying, 'Overall we think the concept of holistic or 'integrated' reporting is extremely important - providing companies with one way to tell their stories and investors one source of reference for all key reporting.'

The IIRC will continue to liaise with the European Commission and in member states to highlight the importance of ensuring disclosure is linked to strategy and that the Directive achieves greater transparency, combined with the purpose of providing relevant and useful information to markets.

The summary of an event hosted by FEE and the IIRC that explored the transition from the Non-Financial Information Directive to Integrated Reporting is now available.

Framework Panel appointed

The IIRC has appointed of a panel of technical experts from across the world and from a large range of professional backgrounds to support the IIRC in its technical work. The role of the Framework Panel is to recommend to the IIRC Board any revisions, modifications or updates to the Framework. The Panel will also provide input when requested on guidance material that the IIRC develops.

Over 1,000 organizations are now producing integrated reports, with increasing numbers expected to adopt it during next year’s reporting cycle. The Framework was only released in December 2013 and feedback from the market suggests time is still needed for companies to embed Integrated Reporting before we can properly consider whether modifications may be needed in the future.

Erik Breen, Chairman of the International Corporate Governance Network, will chair the Framework Panel - a list of other participants is available on the IIRC website and will be updated as appointments are made.

First training partners announced

The IIRC has announced its first Foundation Partners for the delivery and promotion of Training. This initiative aims to ensure there is sufficient training available to develop individuals’ skills and build capacity for organizations to implement Integrated Reporting. It follows a period of engagement and consultation with the market that led to the development of the Competence Matrix.

The IIRC is working initially through a select group of Foundation Partners to maintain consistent global quality. All partners will offer training programmes developed to meet the learning outcomes set out in the Competence Matrix. To find out about training that is available near you please monitor the Training area of the IIRC website as more partners are announced over the coming months.

Neil Stevenson, Managing Director – Global Implementation, IIRC responded to the appointment of training partners saying, “ACCA, Black Sun and BSD Consulting are the first of a range of organizations helping individuals and their organizations to develop the right knowledge, skills and behaviours essential to the adoption of . Training partners will include consultancies, academic institutions, professional associations and training providers. We were delighted to receive so much positive input from a wide range of organizations across the world when we developed the Competence Matrix. I am excited that we are now in the position of appointing partners to increase skills and capacity to support adoption.”

Commenting on their appointment Felipe Arango, Managing Partner, BSD Consulting said, 'The fundamental notion of value creation by organizations is evolving to include multiple forms of capital. Changing corporate behaviour at scale will require shifts in the mindsets of C-suite leaders and investors towards integrated thinking... We are enthusiastic to contribute to this endeavor as pioneers offering IIRC approved training programmes worldwide to develop the capacities in those that will drive this step-change.'

Sallie Pilot, Research and Strategy Director, Black Sun Plc said, 'We are delighted to be one of the Foundation Partners. Through our work with the IIRC, and our research into and trends in best practice reporting over the years, we have seen the positive impact of organisations today taking an integrated and long-term approach to creating value. We believe that the training programme offers a learning path to change behaviours and drive integrated thinking, decision-making and actions within organizations to help them focus on the creation of value over the short, medium and long-term. Our ambition is to strengthen the commitment of all types of organizations towards focusing on long term sustainable development by providing training methods and tools to equip them to drive change.'

IAASB looking to build credibility and trust in emerging forms of reporting

The IAASB responded to the IIRC's call to action for organization's to strengthen the overall credibility of, and trust in, Integrated Reporting by establishing a Working Group on Integrated Reporting. The Working Group was established to discuss initial thinking on the nature of assurance on integrated reports. The group has now released a draft discussion paper which states that the trends towards reporting of broader information can be seen most comprehensively in the International Integrated Reporting Framework.

In July 2015 the IIRC published a paper which summarized the significant matters raised in the debate on assurance on Integrated Reporting. The paper made it clear that assurance will need to evolve alongside the practice of reporting itself and the IAASB is now taking the lead in developing guidance. This discussion paper is a first step in exploring the factors that influence credibility and trust, and in understanding what the demand is from practitioners for developing assurance standards.

The IIRC welcomes this development as the IAASB analyzes the range of technical challenges that will need to be considered. Relative to the hundreds of years that financial statement auditing has been evolving, we are now only at the beginning of understanding how to develop assurance further and it is important that IAASB plays a central role in achieving this.

'Telling a good story'

Holly Hardisty, Principal Policy Adviser, Confederation of British Industry, writes about the role of business

What business does and how it does it have come under challenge in recent years.

In the years since the recession there has been a loud debate about the contribution that business makes to our economy and society.

Negative stories about business continue to make the headlines – from the handling of company tax affairs to how much its executives are paid. Against this backdrop, it’s perhaps no surprise that there has been an increase in public scrutiny and demands for greater transparency.

Public expectations are rising too. According to one CBI poll (CBI/YouGov survey, April 2014), the majority of people agreed that expectations on businesses are higher than they were ten years ago.

But business has a positive story to tell. At the CBI, we believe that when business does well, everyone benefits.

It’s why the CBI has launched the Great Business Debate, a campaign to talk about the value of business to the UK.

Up and down the country, businesses are creating and supporting jobs, putting money in our pockets to save or spend. Firms are contributing the taxes that help pay for things like schools and hospitals.

And let’s not forget that companies are delivering the products and services we need – from increasing the choice and quality of food available, to innovating and driving new technology.

Simply by doing what it does best, business is a force for good in society and in our economy.

And many businesses go even further. Every day, we hear from members that are going further to support society.

For example, around three quarters of firms now have some kind of link with schools or colleges, supporting our education system to deliver more for young people.

Many firms are finding ways to incorporate responsibility into everything they do – from firms like waste management company Veolia, where 20% of their UK turnover now comes from the circular economy, to Greggs the bakers who helped more than 300 people from marginalised groups become more ‘employable’ in 2014.

At the CBI, we think that businesses need to do more to tell their story and speak up about the great many things they do.

Outside of business and policy circles, evidence suggests that awareness of the great things businesses do is low.

For example, CBI research with Ipsos MORI (CBI/Ipsos MORI, Business and Tax – Perils of Perception, October 2015) found that the majority of people significantly underestimate the tax contribution that businesses make, and over estimate the amount of corporation tax that goes unpaid.

Business clearly needs to get better at speaking out about how it makes a difference.

A proactive, credible position on reporting priorities, shared by the business community, is part of this picture. It can also underpin growth, if reporting can better support companies in developing strategies, risk management policies and the identification of future risks and market opportunities. This is a role that Integrated Reporting has been developed to fulfill.

Businesses support the move towards meaningful transparency, provided that it is not just transparency for transparency’s sake.

It’s also why the CBI has created The Great Business Debate, as a platform to set out the facts about what business does, encourage businesses to share their positive stories and to encourage others to give us their views on business and where it could do more.

In an increasingly interconnected world, telling the positive story about business becomes even more important. As a planet we face major challenges, from global warming to poverty and demographic changes. Technology and information systems are changing.

Business has the resource, expertise and scale to be able to make a difference. So let’s get firms thinking about their reputation – the values and ideals which their company stands for.

And let’s encourage companies to think of the next generation and all the challenges they will face.

Let’s show that companies aren’t faceless machines. They’re run by people, with people and for people.

Let’s prove that business is part of society, not set apart from it.
Sign up now for the ICGN-IIRC Conference on 6-7 December 2016 in London
Enter the Finance for the Future Awards 2016 before the 31 May 2016:
New category added this year for 'Communicating Integrated Thinking'. The awards are sponsored by ICAEW, A4S and Deloitte.

New blogs:

Insight into DBS Bank's latest Annual Report from Mikkel Larsen, Managing Director & Head of Tax & Accounting Policy, DBS Bank ------

Synergies between Indian Accounting Standards and Integrated Reporting, by Prof. Sanjay Kallapur, Professor of Accounting, Indian School of Business ------

Paul Druckman addresses the difficult issues, by Carol Adams, Professor of Accounting, Durham University Business School ------

Making good decisions, by Katie Scott-Kurti, Head of Reputation and Communication, CIMA

PwC's Global Investor Survey 2016:

'89% of investment professionals believe change is needed to how companies define and manage risks'

Contact: juliet.markham@theiirc.org

Copyright © 2016 International Integrated Reporting Council, All rights reserved.