Integrated reporting a step closer

13th September 2011

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Investors, regulators and organisations are being asked to comment on a proposed international approach to the integration of financial and sustainability reporting.

The International Integrated Reporting Committee (IIRC) has launched a consultation on a discussion paper defining integrated reporting, its benefits and challenges, and outlining a potential framework for collating such reports.

The framework describes the five guiding principles the IIRC believes are key in taking an integrated approach to reporting, such as strategic focus and connectivity of information, as well as a list of issues that should be included in the report, such as the conditions in which the business operates and its strategic objectives.

According to the IIRC, an organisation’s business model and its “ability to create and sustain value in the short, medium and long term” must be at the heart of their integrated report.

The paper and consultation, which runs until 14 December, represent the latest step in IIRC’s work to coordinate international agreement on a consistent approach to integrated reporting which it believes is the best way to meet the needs of organisations and the demands of stakeholders for more information on their sustainability.

“[Integrated reporting] equips companies to manage their operations, brand and reputation strategically and to manage better any risks that may compromise the long-term sustainability of the business,” said professor Mervyn King, deputy chair of IIRC and chair of the Global Reporting Initiative.

Jim Singh, chief financial officer of Nestlé, agreed: “If you are a company committed to the long term, and one of your ambitions is to be trusted, you have no choice – integrated reporting is the way to communicate.”

International accountancy firm KPMG followed the publication of IIRC’s paper by announcing its own introduction to integrated reporting, offering businesses further guidance on how to apply the IIRC’s principles.

David Matthews, an audit partner at KPMG UK and a member of the IIRC’s working group, urged organisations to get involved in the development of an agreed approach to integrated reporting, saying that better communication of sustainability plans will help them to secure capital.

“Providing strategic and forward looking information about the performance and prospects of the company is a powerful way to convince the capital markets of the worthiness of investing in a company,” he said.

“The prize for those that get it right is capital at a reasonable cost through a better relationship with investors and the capital markets. It is in everyone’s best interests to make integrated reporting work.”

However, an analysis of annual reports from 101 G20 firms published this week argues that many are falling to build sustainability into their financial reports. According to the figures, from corporate reporting consultancy Black Sun, the reports studied met just 43% of what is considered integrated reporting good practice.

To read the IIRC’s discussion paper and for information on how to submit your feedback visit the IIRC website.


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