Ten years of integrated reporting celebrated in a crisis: What lies ahead? A round-up of the IRC Annual Conference 2020

IRC of SA

IRC of SA Guest Blog

By Bronwyn Forsyth, IRC team member and independent consultant

In a volatile operating environment, issues seem to rise to the surface. There’s no place to hide. Our current context has certainly catalyzed broadscale rethinking of business as usual.

At the virtual IRC Annual Conference 2020 – Integrated Thinking in Action, Professor Mervyn King took delegates through an eloquent round-up of the journey to here. He narrated a path that began with shareholder primacy in the hopes that wealth and prosperity would trickle down to society at large, with this supposed trickle, unfortunately, becoming unmoving treacle, exacerbating ever-growing divides. Today, the pandemic has shone a harsh light on social inequalities and racial injustices with these holes in the social fabric of our society only set to increase given the unequal impacts of climate change. Indeed, the COVID-19 crisis has been described by many as a dress rehearsal for the scale of upheaval we can expect from climate change – again, with the most impoverished and vulnerable in society enduring the brunt of the consequences.

With the World Economic Forum’s Global Risks Report 2020 citing the top 10 global risks as being sourced to environmental, social and governance (ESG) concerns, the desperate need to integrate information beyond the financial into corporate decision-making is clear. Indeed, significant progress has been made over the past two decades in the move towards disclosing information beyond the financial in corporate reporting and making use of this information in strategic decision-making. Interestingly, as pointed out by Dr Leila Fourie (CEO of the JSE) during the panel discussion on reporting in a time of crisis, companies that have integrated aspects beyond the financial into their operating models have shown greater resilience during the pandemic.

(For the full panel discussion  Reporting in a time of crisis: Showing the integrated picture with Professor Mark Graham, Alfred Visagie, Ian Kramer and Dr Leila Fourie, see the IRC Annual Conference 2020 webcast.)

Over the past ten years, the emergence of integrated reporting has played a significant role in assisting companies in embedding greater integration of non-financial matters into decision-making and reporting. The International <IR> Framework (<IR> Framework), as well as the suggested amendments currently under review, provide a holistic scaffold that goes beyond merely reporting financial as well as non-financial information, to developing truly integrated thinking – which, as Professor Mervyn King has described it, is a unifying concept and a strategic tool that helps management bring order to a manifestly complex environment. The <IR> Framework’s relevance has therefore only increased during this time of crisis.

(For the full discussion on the Update on the revision of the International <IR> Framework with Liz Prescott, Technical Director of the IIRC, see the IRC Annual Conference 2020 webcast or see the presentation slides here.)

However, despite the progress made in including information beyond the financial over this time, preparers are still faced with the challenge of a plethora of sustainability frameworks and the resulting complexity of the decision-making process regarding which standards and indicators to use within the integrated report. The veritable alphabet soup of ESG reporting standards and frameworks is an issue that has begged addressing for some time to enable consistent, comparable reporting to support investor and broader stakeholder assessment against other organizations (to the extent that information is material to each company’s ability to create value over time).

As the saying goes, one should never let a good crisis go to waste. You have only to glance back in history to realize that most progress in system change occurs during a time of crisis. Truly, momentum is building with the growth in pace in corporate awareness, sustainability and the notable rise of ESG in capital markets – and post-crisis, this will likely be further heightened. Evidencing this momentum, the day before the conference, the IIRC announced its intention to merge with SASB to form a unified organization – the Value Reporting Foundation – to provide investors and corporates with a comprehensive corporate reporting framework across the full range of enterprise value drivers and standards to progress global sustainability performance. The merger may indeed advance the work of the CDP, CDSB, GRI, IIRC and SASB as described in the Statement of Intent To Work Together Towards Comprehensive Corporate Reporting. During the conference, Professor Mervyn King described the merger as a critical stepping stone to the future of reporting – one with a single, comprehensive corporate reporting framework that enables comparable, meaningful and genuinely integrated reporting.

Encouragingly, this journey towards enhanced reporting is being further progressed by the work being done on integrated reporting assurance, with the aim of providing users with a greater sense of surety regarding the non-financial information contained in the integrated report. In this way, stakeholders’ confidence in the information and therefore their decision-making is enhanced – a basis for instilling stakeholder confidence and trust.

(See Michael Bray’s full discussion  Assurance of the integrated report: Is it really needed? as part of the webcast or see the presentation slides here.)

While the future of integrated reporting is still being shaped, the role it has played to date in embedding integrated thinking and enhancing accountability has been deeply encouraging. These developments have not been made in isolation but have resulted from the groundwork laid by many passionate individuals and organizations over the past ten years.

So what comes next? Responsibility for the future lies with each one of us as we seek to forge the way forward by putting our #IntegratedThinkinginAction in each of our individual and collective endeavours to set the course for the next decade of progress.

Please see the webcast to see other pertinent topics discussed during the conference to further your integrated reporting journey in the year to come.