Why South Africa will continue to play a leading role in Integrated Reporting globally

By Leigh Roberts
Chief Executive Officer of the Integrated Reporting Committee of South Africa

After the opening address at the Nkonki IR Awards 2017 at the JSE on 21 August 2017 some of the attendees asked for a written version of my speech, so here it is.

Congratulations to Nkonki on hosting the awards programme for the past seven years, and to this year’s winners who have clearly spent much time and effort on their reports. And indeed to all the companies and organisations in South Africa who strive for better corporate reporting through quality Integrated Reporting.

South Africa is the undisputed world leader in IR and we’re likely to retain our leadership in the years ahead. There are a number of reasons why I see our leadership continuing:

1. We produce the most reports in the world (Japan is behind us).
2. IR is entrenched in our corporate governance codes (with thanks to the renowned King III and now King IV).
3. IR falls into the listing requirements of the JSE as a recommended practice of the King codes.
4. There are many public sector organisations that prepare reports as a mark of good governance. It started out with the big SOE’s and municipalities and has filtered down to the smaller organisations. This is truly laudable! I do wish though that there would be firmer guidance from the Finance Minister and Treasury on what is expected of organisations in the public sector.
5. IR, and its parent concept of Integrated Thinking, is becoming accepted as a good management tool for any organisation , no matter in the private or public sector, large, medium or small in size. It’s been great to see more companies referring to it in their reports – which is a sign of reporting maturity.

IR is a good management tool because, as South Africans, we know that a company’s success and longevity doesn’t depend on financial capital alone. We know this because we’ve seen what a slur on reputation can do; what a lack of regulatory compliance can do; what a shortage of water can do; what a lack of ethics can do; what poor leadership can do; and what a warring labour force can do. In today’s connected world, anyone would be hard-pressed to say that money is the only capital that matters.

So, the beauty of a quality integrated report is that it shows the myriad of resources and relationships that impact on the company’s success and longevity.

A quality integrated report is indeed an object of admirable beauty. In my view, a beautiful integrated report is concise (less than 100 pages); information is logically structured and is connected; explains how external macro-factors affect the company and its response; identifies the important resources and relationships used and how the company affects them (important because how a company treats them today will come back to hurt it or reward it in the future); shows performance against strategy; and how the company is governed.

The most important facet though is transparency. The integrated report is the voice of the board. Has the board given all the material information to enable a complete picture of the company, and that includes the good news and the bad news? The integrated report is definitely not just a pretty PR document.

There is another reason that SA’s global lead in IR will continue and that’s through the ongoing work of the Integrated Reporting Committee of South Africa. Our aim is to promote and develop IR and Integrated Thinking in South Africa and we’ve being doing this since 2010.

• We’ve fed SA’s view of IR into international thinking, notably into the International <IR> Framework.
• We’ve worked with the King Committee to ensure that King IV is aligned with the framework (which must be a great relief to preparers).
• We promote public awareness through our website and annual conference.
• We actively work on the quality of reports in SA through annual technical information papers that highlight observed weaknesses and we suggest tips to improve reporting in particular areas. In the past few years, we’ve covered disclosure of outcomes and disclosure of performance against strategy. We also created a Starter’s Guide. This year, we’ll release a paper on governance disclosure. We had observed the worrying trend that the governance section of reports were ranked as number 1 by the South African insomniacs club. Our information paper will give pointers as to the type of governance information that is relevant to telling a company’s value creation story.
• Our Information Papers are well respected internationally and we are often asked to share our views and experience.

For the first time, this year the IRC of SA opened its membership beyond professional and industry bodies. We welcomed corporate members into the fold. Some accounting firms, thank you Nkonki, and listed companies including Nedbank, Vodacom, Nampak, Sun International, Sasfin, Royal Bafokeng, Discovery, and SOE’s including Eskom and GEMS. What members get is permission to use the coveted IRC member logo in their integrated reports which publicly acknowledges their commitment to better corporate reporting.

The IRC welcomes organisations into the IRC family. The good work of the IRC, and SA’s continued leadership in this area, takes funding.

Finally, I’d like to clear up some carbuncles that may detract from the beauty of an integrated report:

1. Value creation does not only refer to the company’s positive effects on stakeholders and resources, or to the achieved KPI’s set in the shareholders compact for SOE’s. Value creation covers all the effects on the six capitals – the positive and the negative.
2. Some companies address their reports to investors, others to all stakeholders, while yet others don’t specify an audience implying that the report is the story of the company and thus useful to any reader. This is at the discretion of the board.
3. You don’t have to structure your report around the six capitals identified in the International <IR> Framework and repeated in King IV. The purpose of the capitals is a completeness check to get organisations to consider all the resources and relationships that they use or effect.
4. If you follow the International <IR> Framework (the IRC of SA has endorsed this as good practice on how to prepare an integrated report and in turn, King IV states that the guidance of the IRC of SA should be followed) please remember that there are 18 requirements that should be met. I talk to boards and sometimes wonder if the directors even know there are 18 requirements that they’re signing off on when approving their integrated report.

Thank you