The Integrated Reporting Movement. Eccles Robert G.

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СКАЧАТЬ time – a phenomenon that has come to be referred to by many, including King, Roberts, and the IIRC, as “integrated thinking.” This meant that the skill sets and responsibilities of audit committees would need to expand to account for nonfinancial considerations. Furthermore, emphasis was placed on “the principle of materiality, which links sustainability issues more closely to strategy, as well as the principle of considering a company's broader sustainability context.”42 Although King III acknowledged the helpfulness of international frameworks and guidelines like Global Reporting Initiative's (GRI's) G3 Guidelines, it suggested that companies should also develop criteria based on their unique circumstances. King III also advocated independent assurance of sustainability reporting and disclosure.43 In recognition of the King Codes' pioneering nature, Kofi Anan, the Secretary-General of the UN, invited King to chair the UN Committee on Governance and Oversight.44 Shortly thereafter, the King Reports were translated into Japanese.45

      Meanwhile, the IRC of SA,46 established in May of 2010, was created to develop integrated reporting guidelines for South African companies. In January 2011, its “Framework for Integrated Reporting and the Integrated Report Discussion Paper” (IRC of SA Discussion Paper) – the first attempt at integrated reporting codification – was released.

The Integrated Reporting Committee of South Africa's Discussion Paper

      The IRC of SA Discussion Paper outlined three categories of principles for the integrated report. The first included principles to define the scope and boundary of the report.47 The second pertained to the way in which the report's content was selected and the dependability of the information that comprised it: companies must ensure that the information they provide is appropriate (relevant), material, complete, neutral, and free from error. Thirdly, the information presented should be comparable and consistent, verifiable, timely, and understandable.48 The IRC of SA Discussion Paper also suggested specific elements of the report. It was to include a profile outlining its scope and boundary and an organizational overview discussing business model and governance structure. The company operating context was to be explained by including information on material issues, impacts and relationships, and identifying risks and opportunities. Strategic objectives and targets were to be covered along with the Key Performance Indicators (KPIs), Key Risk Indicators (KRIs) that would track performance, and a demonstration of the competencies required to pursue the objectives. The IRC of SA Discussion Paper also emphasized that the account of organizational performance, financial and nonfinancial, should include a list of objectives and targets, along with a discussion of whether or not they were achieved. Companies were to state future performance objectives and internal activities along with the structures required to achieve them, remuneration policies should be brought to light, and an analytical commentary on the company's current state and anticipated performance in the context of strategic objectives was to be described.

      The IRC of SA Discussion Paper also devoted a fair amount of attention to the topic of materiality, noting in its discussion of the second principle that it is defined differently for financial and nonfinancial information. For financial information, the IRC of SA Discussion Paper used the common definition: “For financial information, materiality is used in the sense of the magnitude of an omission or misstatement of accounting data that misleads users and is usually measured in monetary terms. Materiality is judged both by relative amount and by the nature of the item.”49 For nonfinancial information, the IRC of SA Discussion Paper observed, “In the context of sustainability, materiality is a more difficult measure to define and a great deal of judgment is required.”50

      Recommending assurance on sustainability disclosures by an independent third party under the oversight of the audit committee, the IRC of SA Discussion Paper noted that “the organisation's board should ensure the integrity of the integrated report.”51 Using a metaphor that has since gained considerable traction among members of the integrated reporting movement, it also observed that “Developing the ideal integrated report will be a journey for many organizations and so too will the extent and level of assurance.”52

      While companies were not required to follow the principles and elements in the IRC of SA Discussion Paper, and the JSE did not attempt to assess the extent to which they were doing so, it likely had credibility in the corporate community due to the impressive multistakeholder group that prepared it. The members of the Integrated Reporting Committee and the Integrated Reporting Committee Working Group included senior representatives from individual companies and investors, company and investor associations, accounting firms and the accounting association, the stock exchange, nongovernmental organizations (NGOs), and academics.53 After this groundbreaking publication was released, the International Federation of Accountants (IFAC) launched a revised edition of its sustainability framework, discussing the specifics of sustainable business operations – like stakeholder engagement, goal setting, carbon foot printing, KPIs, and the nature of integrated reporting.54 The IRC is now promoting the international harmonization of integrated reporting by working with the IIRC55 and, in March of 2014, the IRC of SA endorsed the International Integrated Reporting Framework (published in December 2013) as guidance for how to prepare an integrated report.

      South African Assessment of the South AFrican Experience

      As South African companies began practicing integrated reporting and issuing integrated reports, the Big Four accounting firms began to study them to identify trends and best practices. After the first mandatory integrated reporting season on an apply or explain basis concluded for 2011, Ernst & Young (E&Y) South Africa published a short report, “Integrated Reporting Survey Results,” examining 25 companies listed on the JSE to interpret their understanding of integrated reporting and its perceived benefits and challenges.56 The next year, the firm began to publish its annual “Excellence in Integrated Reporting” awards as a way to improve best practices by providing special scrutiny of the top 100 companies in terms of market capitalization. PricewaterhouseCoopers (PwC) followed suit, analyzing the top 100 companies listed on the JSE in the period after March 1, 2011, in the second full reporting season after the third King Report on Governance was released, and its analysis even contained screenshots of successful integrated report sections' layouts.57 From 2011 to 2013, Deloitte and KPMG conducted similar surveys, publishing their results along with white papers reiterating the business case for integrated reporting, clarifying best practices, and addressing ongoing challenges. Local accounting firm Nkonki also began to produce an annual awards program covering the largest listed companies.58

      Other organizations got involved in reflecting on the South African experience as well. For example, the University of Pretoria's Albert Luthuli Centre for Responsible Leadership collaborated with E&Y South Africa to interview 16 thought leaders, some of whom had been involved for over two decades in corporate governance and corporate reporting, lending nuance to the accounting firms' quantitative assessment of South Africa's integrated reporting experience.59 Chartered Secretaries Southern Africa undertook an annual awards program for integrated reports. The IRC of SA began to release the results of a survey of the top 100 companies listed on the JSE covering general areas, such as the size of the reports. While one can assume that things have progressed in the past year since these reports were published, below we consider trends indicated by the most recent reports and surveys available at the time of this writing.

Report Quality

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