‘Integrated reporting requires a considerable shift in attitude’

I have always enjoyed CIMA’s annual president’s dinner, but I am especially delighted that the guest speaker at this event during my year in office is a fellow resident of South Africa and a major catalyst for change in international business.

It is no exaggeration to say that Professor Mervyn King is a game-changer. He is one of the principal architects of integrated reporting and his work has led South Africa to become the first country to make this form of reporting mandatory for plcs.

King has the gift of being able to see the bigger picture while focusing on the nitty-gritty of an issue at the same time.

Sustainability has been his main area of work for many years. He was chairman of the Global Reporting Initiative (GRI) before moving on to chair the International Integrated Reporting Council (IIRC) in 2011

In recognition of his efforts, CIMA awarded this former supreme-court judge an honorary fellowship in November 2012. He is only the sixth person to receive this accolade.

Like CIMA’s chief executive, Charles Tilley, I am extremely energised by the potential that integrated reporting offers the business world. By providing a more holistic overview of the vision, strategy and direction of public- and private-sector organisations, we can improve both public and shareholder confidence considerably.

The integrated reporting movement gained momentum earlier this year when the IIRC signed separate agreements with IFAC, the International Accounting Standards Board and the GRI to deepen their co-operation in transforming reporting.

The IIRC received more than 350 responses to its consultation document and it plans to produce the first version of its integrated reporting framework in December.

Integrated reporting requires a considerable shift in attitude. But, judging from developments in South Africa, good progress is being made.

For the first time last year, Ernst & Young studied the integrated reports of South Africa’s top 100 companies together with those of the nation’s top 10 state-owned entities.

Given the lack of published examples, EY was “pleasantly surprised” by their overall standard. But there is still work to be done. The research also found that too often organisations were failing to identify and describe their performance in a way that was truly integrated.

EY concluded that companies need to focus more on linking the financial performance aspects of the report to the statutory financial statements. In the same vein, companies are being urged to demonstrate more cohesion between the current key performance indicators they disclose and their future strategies, targets and goals.

It is here that I can see an ideal role for chartered global management accountants. CGMAs are uniquely skilled to start the process of integrated thinking, joining the dots and, crucially, getting maximum value out of the integrated reporting process for their organisations.

Forward-thinking organisations are seizing the opportunity to enhance their sustainability strategies.

More than 85 leading enterprises from around the world, including Microsoft, Tata Steel, Coca-Cola and Unilever, have joined the IIRC’s pilot programme business network. More than 30 investors have also signed up to a parallel pilot.

In Australia the integrated reporting movement faced a setback recently when some directors expressed concern about the requirement to comment on their business models and future plans.

This was based on the fear that a company may be sued by shareholders if its statements prove to be inaccurate. But John Stanhope, co-chairman of the Australian Business Reporting Leaders Forum, has stated publicly that, while Australia needs to clarify legal defences for directors, he feels that integrated reporting is inevitable.

Like him and many others, I support Mervyn King’s view that integrated reporting is a concept whose time has come.

How has the institute helped your career? We’d like to hear from members and students about how the CIMA qualification has accelerated their progress. Email your story to: responses@cimaglobal.com

Illustration: Jörn Kaspuhl/Dutch Uncle

19/09/2013

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