Robert Bruce Shares Insights from the Integrated Reporting Roundtable Hosted by The Prince’s Accounting for Sustainability Project in London on 15th December 2011

Robert Bruce gives his take on the ideas and contributions made at the Roundtable event, ‘Towards Integrated Reporting: Communicating Value in the 21st Century’, held in London on the 15th December 2011.  This was the last of some twenty roundtable events held around the world in 2011 on the way ahead for integrated reporting and coincided with the deadline for responses to the the International Integrated Reporting Council’s Discussion Paper on an integrated reporting framework.

 


If anyone wanted an example of the simple things that integrated reporting can do for organisations they would only have had to have listened to one minute of the London Roundtable. This was when Professor Mervyn King, the Chairman of the International Integrated Reporting Council, read out some brief comments from Vodacom, the South African subsidiary of Vodaphone, which has just produced its first report under the principles of integrated reporting. It had gone well. There had been enthusiasm. People said that they for the first time in ages they had actually been excited at producing the annual report.  What they had done initially was form an integrated reporting committee with representatives from all the business streams in the company. And this was where the remarkable insight occurred. ‘Remarkably’, the comments concluded, ‘some of us had never sat around the same table before’.

That, in a nutshell, points to where the integrated reporting revolution is leading. The old days of the financial report being the closed zone of the accountants and the exclusion of much of the rest of the information which investors and users need are coming to a close. And this connecting up of people as well as the information came through in the roundtable discussions over and over again. ‘Companies’, said one member of the discussion, ‘have found that integrated reporting has broken down the silos. People started talking to each other. It begins to create integrated management thinking’.

And that brings more than just a greater collective understanding. It produces savings. The same person pointed to how several companies have started producing a simple 120 page report with a CD in the back. Lord Sharman, the Chairman of insurance giant Aviva, pointed to some of the savings it had made. ‘Our IT technology represents 40% of our energy bill’, he said. And, as a result of people being able to see clearly how impacts right across the organisation could be identified and acted upon, actions become obvious. ‘We recently saved £.5 million by implementing a very simple bit of technology to power down our computers at night’. That had come from the same process – a mixture of input from different teams connecting across the business.

But there was agreement that integrated reporting needs to reach out to more people across the business spectrum to enable its impact to touch the larger issues in business. Christy Wood, Chairman of the International Corporate Governance Network, pointed out that the analyst community was slow to move and tended to exhibit a herd mentality. The changes were coming, though she apologised for US business being further behind than most countries. But she pointed to some bright signs. CalPERS, the giant Californian pension fund, had recently run a workshop on the idea of incorporating environmental, social and governance factors into the investment process of all asset classes. ‘It is’ she said, ‘very important to communicate the idea that integrated reporting is mainstream’.  Others pointed out that integrated reporting is now part of the South African Code of Responsibility. The trustees of pension funds are charged with the need to look at long-term sustainability. And, from January 1st 2012, trustees could be sued if they do not do this.

This seems to be emerging as another pressure to ensure that integrated reporting becomes mainstream. There is logic here, as Mervyn King made plain in his opening remarks. The existing financial reporting model, International Financial Reporting Standards, (IFRS), as he pointed out, is a rear-view mirror. There is nothing there to inform users about sustainable value creation. And that was the key. He suggested there were two great challenges in the world today – financial stability and sustained value creation by business. You couldn’t have one without the other.

A system of integrated reporting also answered much of the popular concern, as dramatised by the Occupy Wall Street movement and the St Paul’s Cathedral camp in the UK. ‘They are saying the operation of companies and society isn’t working’, he said. Integrated reporting enables business to show the outside world that they are operating as good corporate citizens. As Lord Sharman put it: ‘People don’t want more information. They want better information’.

Robert Bruce is a journalist and serves a Committee Member on The Prince’s Accounting for Sustainability Project (A4S).