Archives For Integrated reporting

By Robert Bruce, Accounting and Business commentator and journalist

Accountants might not be stereotypical superheroes but if they can channel their enthusiasm for non-financial reporting into one roadmap, they could help rescue the planet.

It is said that it is hard to get accountants up on their feet a ta conference, let alone exhibiting exuberance. At the September conference of the International Integrated Reporting Council (IIRC) all this changed. Peter Bakker, president of the World Business Council For Sustainable Development, and now the deputy chair of the IIRC, called for all accountants present to stand up. They did. Bakker swept a hand around the room. ‘Ladies and gentlemen’ he said. ‘These are the people who are going to save the world’. It was a bold gesture and a galvanising one.

But as the conference heard from one after another of the companies working in the IIRC pilot programme, which captures the experience of implementing integrated reporting, the more it made sense. The finance function is becoming the engine room for a form of reporting which in the world of the IIRC, ‘aims to communicate the “integrated thinking” through which management applies a collective understanding of the full complexity of value creation to investors and other stakeholders’. And the more investors and stakeholders understand the part that things other than the narrow financials play in driving strategy, the more influence the non-financials will have.

A week later the bandwagon arrived in London at the first Non-Financial Reporting conference, hosted by Deloitte and in association with ACCA and the Global Reporting Initiative (GRI). Referring to the Amsterdam conference, Jenny Harrison, UK lead for the carbon and integrated reporting at Deloitte, described it as ‘invigorating’. ‘You felt these people would go back to their organisations and show the markets that this style of reporting can be concise, relevant and about integrating the thinking throughout their organisation,’ she said.

But it is also clear there is a wide range of views, inputs and attitudes from all the interested parties involved in making this process work. And there is the political difficulty in deciding upon a preferred system for putting all this together. Both the work of the GRI and the IIRC came in for criticism for, in case of the GRI, being too complex and resistant to change, and, in the case of the IIRC, being perceived as a bit of a closed shop. Much of this is the inevitable squabbling that happens when more than one model exists.

‘Some scepticism about the value of lengthy and complex GRI-style reports was expressed’, says Roger Adams, director, special assignments at ACCA, ‘but the lack of obvious widespread support for integrated reports seemed to indicate that preparers and users alike need more time with, and exposure to, integrated reports in order to see whether or not the emerging integrated reporting model represents a real step forward in terms of improved corporate reporting. Whichever reporting model is used, it is the issue of what to report and to whom that remains crucial. Reporters can construct complex risk matrices internally, but it is still of utmost importance to engage with the key stakeholder groups in order to understand how their concerns can be turned into meaningful reporting and enhance accountability.;

At the Amsterdam conference, Paul Druckman chief executive of the IIRC, made this a central point. He described the IIRC community as ‘a growing global community of businesses and investors who recognise that corporate reporting is as much about effective communication as it is about compliance with rigid rules’. And this is why integrated reporting has a transformative quality. ‘Corporate reporting,’ he said, ‘ is more than a good communications tool. It influences behaviour, within organisations and by investors, and it underpins the efficiency and productivity of our capital markets. So when governments, regulators and policy-makers talk about creating the conditions for a more responsible and responsive capitalism, rooted in activity that creates and sustains value, this is the business we are in.’

In the end, the Non-Financial Reporting conference, with all its many disparate contributions, suggested that corralling the different strands into a recognisable business-led movement was probably the answer.

“We need to gather all this enthusiasm into one roadmap,’ says Harrison, ‘Regulation is not the answer to improving corporate reporting. What are needed are examples of how this allows you to manage your business better. It needs to be more widespread. The IIRC is doing a great job, but it is the companies taking part in the pilot programme, and indeed those beyond that will make the difference.’

This post first appeared in Accounting and Business UK November 2012.

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The multiple capitals model

aksaroya —  3 October 2012 — 1 Comment

by James Bonner, independent sustainability contact

As initially introduced in a previous blog post in this series (Natural capital as a material issue) the concept of multiple ‘capitals’ is an approach to sustainable development theory that extends the notion of capital, in a traditional economics sense, to broader sustainability issues. While the conventional economic definition of capital – essentially the manufactured goods which produce, or facilitate the production of, other goods and services – serves to account for the durable goods which are a means of production for businesses,  it ignores the vital inputs garnered  from the natural environment and society. The fundamental essence of the concept of capital is that it is a stock or asset that provides a flow of goods and services for the benefit of human wellbeing. However, it is quite clear that the narrow traditional economic definition does not adequately cover all of the sources that businesses gain benefits from and that there are sources of capital beyond simply the manufactured assets of an organisation which facilitate production and economic output.

It is increasingly recognised that capitals such as natural resources, human knowledge and social cohesion are vital stocks/assets which business and the economy in general draw upon for their products and services. As such, a number of models considering multiple capitals have been developed and supported by various bodies in the past few years – the World Bank, the OECD, and DEFRA – aiming to recognise and distinguish these wider stocks and assets. The IIRC are one such significant body who are incorporating the concept of a multiple capital model into their work, and have, through their Discussion Paper Towards Integrated Reporting: Communicating Value in the 21st century’ and subsequent consultation with stakeholders, begun investigating both how the capital model might be applied to corporate reporting, and the boundaries/types of capital it might include.

Indeed, at this stage, the IIRC have proposed 6 categories of capital, each of which interact and interconnect with one another- and consequently are the fundamental resources that organisations rely upon to function and deliver their products and services. The following extract from the IIRC’s discussion paper highlights these different capitals- financial, manufactured, human, intellectual, natural and social- offers a definition of each, and descibes how they might manifest themselves in the context of a business or organisation:

Source: http://theiirc.org/wp-content/uploads/2011/09/IR-Discussion-Paper-2011_spreads.pdf

This blog post intends to primarily support ACCA’s Accounting for the future session ‘Practical Workshop: 6 Capitals of integrated reporting- practical skills for accountants’ on Tuesday the 9th of October by introducing the concept of multiple capital models, and the IIRC’s work in the area. The session will look at the IIRC’s work in greater detail, and furthermore the role of accountancy in such a model.