2023 will bring more changes for corporate reporting. The tumult of the past few years has
seen the rise of international sustainability reporting standards and the falling away of some
beloved reporting organisations in the midst of the industry consolidation. This year, we can
expect the finalisation of the first international standards, a scramble to push their inter-
operability, and a major thrust for their early adoption.

The International Sustainability Standards Board (ISSB) will release its first two standards on
IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information
and IFRS S2 Climate-related Disclosures this year – expected in June. The standards are likely
to carry a delayed effective date and the date currently being mooted is for financial years
starting on or after 1 January 2024 with early adoption allowed. The next exposure draft due
out from the ISSB – maybe late this year – could be biodiversity/nature as there is plenty of
existing sustainability guidance material from which the ISSB can draw (human rights is another possible exposure draft. Also significant is that the ISSB will – around April this year – seek stakeholders’ input on determining its line-up of new standards to be worked on over the next two years (i.e. what matters most).

The ISSB will also be hard at work on other projects too, such as its arrangement with the
GRI to enhance inter-operability between the two sets of standards, as well as with other
regional sustainability reporting initiatives such as the EU’s European Sustainability
Reporting Standards (ESRS) and the SEC’s climate disclosure requirements.
Both projects feed into its building blocks approach whereby the ISSB standards are positioned as the global baseline and facilitate inter-operability with each country’s specific requirements to meet
multi-stakeholder information needs (see this as a sort of layered cake approach).

And then there’s its major thrust to encourage the early adoption of its standards in the 145
countries that use the IFRS Accounting Standards issued by the International Accounting
Standards Board (IASB), its sister standard-setting body under the IFRS Foundation.

In Europe, the EU’s first set of twelve sustainability standards (ESRS) should come into play
under a phased-in approach that will see the first companies getting ready to report in their
2024 financial year. The second set of draft standards should be released in exposure draft
form later this year too – these will notably include sector-specific standards and
proportionate standards for SMEs.

And what’s in store for integrated reporting in 2023? Well, its carry on as usual in
integrated reporting and applying the Integrated Reporting Framework. But know that some
changes could be on the cards. The prime change could stem from the IASB and ISSB’s
moves to try and reconcile the widely used Integrated Reporting Framework with the newer
and untested management commentary exposure draft.

And perhaps on the cards too, is a joint IASB and ISSB project looking at the overall
corporate reporting structure – but no guesses on the timing of this one. (And hey, they
could just look at our octopus model to corporate reporting which has worked well in
South Africa over our ten years of integrated reporting).

Things are moving quickly in international corporate reporting … and there’s more change afoot.

On 31 March 2022, the International Sustainability Standards Board (ISSB) released its first two IFRS Sustainability Disclosure Standards Exposure Drafts – a general requirements draft standard and a climate draft standard. (The link to these is on the home page of this website.)

On 29 April 2022, the European Union’s EFRAG released the European Sustainability Reporting Standards (ESRS) Exposure Drafts. The range of draft standards offer general principles and a general standard, as well as specific ESG topics (including climate). (The link to these is on the home page of this website.)

The two sets of standards have a different focus. The ISSB draft standards are designed to meet the information needs of investors and call for the disclosure of material information about all of a company’s sustainability-related risks and opportunities.

The ESRS draft standards are wider and call for the disclosure of material information about all the sustainability-related impacts, risks and opportunities of a company.

The word that pops out between the two is of course “impacts”. A single word that means oh so much. The enlightened approach of the EU wants companies to disclose their impacts (effects/ outcomes) on society and the environment over the short, medium and long term.

And who on earth would not want to know such information? Surely investors want this information too (except maybe the short-term traders, although they could go short on learning of a negative impact and the reputational harm it could impose on a company). Such information is surely relevant in assessing the longevity of their investment in a connected world.

From the ISSB we seem to just be getting more of the same financial accounting stuff…. But the world is moving on from the historical singular focus on financial capital to embracing, respecting and being responsible for the six capitals that a company relies on for its success and longevity. The saving grace for this rather old-fashioned view is their building blocks approach which allows individual countries (who adopt their standards) to add-on their own jurisdictional reporting requirements, including any multi-stakeholder information needs. Ummm….. is this a side-wards nod to the importance of reporting on impacts?

• This blog reflects Leigh’s personal views and should not be read as the IRC’s view.

Their significance is that they will form the basis of the first Exposure Drafts to be released from the ISSB. In terms of the ISSB’s due process, the Exposure Drafts will be issued for public comment and thereafter the updated versions issued as ISSB Sustainability Disclosure Standards. Each of the 140 jurisdictions that already follow the IFRS Accounting Standards will have the option of mandating use of the ISSB standards and instructing any ‘add-ons’ for local regulations and practices.

So, what’s in the General Requirements for Disclosure of Sustainability-related Financial Information Prototype, and what does it say about the hot issue of materiality, and does it offer clarity on enterprise value?

The Prototype should be seen as the overarching presentation guideline for all future standards addressing specific sustainability matters, e.g., climate, biodiversity, water. It sets out the overall requirements for disclosing sustainability-related financial information relevant to the entity’s sustainability-related risks and opportunities.

Some salient points and statements from the Prototype (headings added):

• The aim: The standards address sustainability matters that affect the assessment of enterprise value by investors, creditors, and other lenders.
• Enterprise value is defined in the Prototype as: The market cap of the entity plus the market value of the entity’s net debt. It is determined by capital market participants, based on their estimation of the amount, timing and certainty of future cash flows spanning the short, medium, and long term. Enterprise value reflects users’ assessments of future cash flows, including the value attributed to those cash flows by users.

Essential inputs in determining enterprise value include corporate reporting in financial statements, as well as reporting on sustainability matters that it is [reasonably likely] will affect the entity’s business model over time (that is to say, affect revenue, costs, assets, liabilities, cost of capital and/or risk profile). The term captures the notion of expected value creation, preservation or erosion over time for an entity’s equity and debt investors. This expected value creation, preservation or erosion is distinct from but fundamentally interdependent with an entity’s creation, preservation, or erosion of value for its stakeholders.

• The extent: An entity is required to report material information on sustainability risks and opportunities, which would assist users in predicting the value, timing and certainty of the entity’s future cash flows over the short, medium and long term and therefore their assessment of enterprise value.
• Materiality: Is defined as: To the extent it could influence the assessment of enterprise value, material information includes information about the entity’s impacts on society and the environment, and how those impacts affect its future cash flows. [This aligns with the IFRS Conceptual Framework for Financial Reporting.]
• On connectivity: Seeks to enhance connectivity within the entity’s general purpose financial reporting, including between the entity’s financial statements and sustainability-related financial information.
• Scope: Sustainability matters that do not affect the entity’s enterprise value are outside the scope, however, it states that reporting on such matters may inform a wider range of stakeholders (including users) who want to understand an entity’s positive and negative contributions to sustainable development
• General purpose financial reporting: An entity’s general purpose financial reporting shall include a complete, neutral and accurate depiction of an entity’s significant sustainability risks and opportunities A complete depiction shall include all material information about significant sustainability-related risks and opportunities. [So, this captures beyond the first standard on climate.]
• Disclosure: The Prototype follows the TCFD format …Information about significant sustainability-related risks and opportunities is built on a consideration of an entity’s governance, strategy, risk management, and metrics and targets.

Governance – the governance processes, controls and procedures a reporting entity uses to monitor sustainability-related risks and opportunities.

Strategy – the sustainability-related risks and opportunities that could enhance the entity’s business model and strategy over the short, medium and long term.

Risk management – how sustainability-related risks are identified, assessed, managed and mitigated.

Metrics and targets come into each of the above and is the information used to manage and monitor the entity’s performance in relation to sustainability-related risks and opportunities over time.

Where is this information disclosed?

• The Prototype says it’s a part of the entity’s “general purpose financial reporting” explained as providing the financial information that is useful to existing and potential investors, lenders and other creditors. Subject to any local regulations or requirements it says there are various places within general purpose financial reporting for the disclosures.
• It can be included in management commentary. It states: Management commentary can be known by or incorporated in reports with various names, including management’s discussion and analysis, operating and financial review, integrated report and strategic report.
• The information which is not material can be included provided it does not obscure ISSB information.
• ISSB information can be included by cross-reference from another report if that report to users comes out at the same time and on the same terms as the financial statements. Also, material information that is included by cross-reference means that the information forms part of “general purpose financial reporting” and hence has to comply with the ISSB standards.
• Acknowledgment of overlap and interdependency: The Prototype states that there can be significant overlap in the scope of sustainability matters that they address. This overlap stems from the interdependency of impacts on people, the environment, and the economy, and the effects those impacts have on enterprise value because entities depend on people, the environment and the economy to generate value over the short, medium and long term.

So, what’s in the Climate-related Disclosures Prototype?

•  As expected, the Prototype states that it incorporates the recommendations by the TCFD, and uses as its starting point the relevant components of the frameworks and standards of international sustainability bodies, as published in a prototype climate-related financial disclosure standard in December 2020.
• The industry disclosure requirements (Appendix B) form part of the requirements, and have been derived from SASB Standards.

The Value Reporting Foundation (VRF) was formed in July 2021 through the merger of the International Integrated Reporting Council (IIRC) and the Sustainability Accounting Standards Board (SASB). On 3 November 2021 it announced that it will be consolidated into the new International Sustainability Standards Board (ISSB) together with the Climate Disclosure Standards Board (CDSB). It’s a life too short to mourn.

Importantly let’s talk to are the developments in international corporate reporting. Who said reporting was boring!

The new ‘kingpin’ player is undoubtedly the ISSB. It’s IFRS Sustainability Disclosure Standards could potentially be enforced in 130 jurisdictions around the world (each country will have to mandate their use). This is definitely taking sustainability reporting mainstream and putting it right alongside financial reporting.

Well, actually, to be technically correct, let’s call rather it sustainability-related financial reporting. Because while the first exposure draft on climate is likely to be released in Q1 next year, it’s still unclear as to the extent of the new standards – that is, will they cover the inward impacts of sustainability matters on the organisation, to the extent they affect investors decision-making, plus the impact of the organisation on society and the environment? It’s the great materiality debate and the inward/outlook focus.

The IFRS Foundation does make some encouraging statements in its media release announcing the changes today, 3 November 2021. It says: “It is expected that there will be a great deal of overlap between information needs of investors and broader stakeholder groups on sustainability matters. However, there focus of the ISSB will be on meeting investors’ needs, as the Foundation’s remit and expertise is to set standards that provide information for the capital markets.”

So what do preparers do in the midst of the changes? My suggestion is to carry on using the existing frameworks and guidelines. And we’ll keep you updated on how the international corporate reporting developments align with integrated reporting in South Africa.

There’s a lot going on in the international corporate reporting arena; leaving many bewildered, bemused, and, for some, a tad irritated to see the main players jostle to get their agendas met. So, here’s my personal view on what’s going on in this unfolding (and still uncertain) story.

The ISSB (International Sustainability Standards Board) looks like a done deal and will be announced by the Trustees of the IFRS Foundation in November this year. The ISSB is likely to focus on developing international standards to uniform the disclosure by companies of the impacts on them arising from certain sustainability matters (the ‘inward impacts’). This stems from the recognition that: Non-financial factors can hugely affect a company’s longevity; the financial performance/ factors covered by accounting standards only amount to a small and ever-diminishing percentage of a company’s market value; and, investors want better information from companies to enable them to make informed risk-reward investment decisions.

On the ISSB standards that could come out… They will be aimed at meeting the needs of investors. The targeted sustainability matters are climate change, biodiversity, with others to follow. The standards could be tailored to be industry-specific (dedicated KPIs, material issues, etc.). Each standard could be structured around the TCFD recommendations (its four disclosure areas are governance, strategy, risk management, and metrics). The standards could have a limited focus – that is, they address the ‘inward impacts’ on the company (hits to cash flow projections, risks, strategy changes, etc.) with limited disclosure of the company’s impacts on society, economy, and environment (the ‘outward impacts’).

(Those up in arms over this last point – and the obvious contradiction to the generally accepted understanding of the term ‘sustainability’ – should be aware that this positioning neatly secures continued relevance for the GRI, and hey, if companies were to account for all their external impacts would any still be in business and would any investors still invest?)

There is another tangent at play. The IFRS Foundation’s existing IASB (International Accounting Standards Board), which will be the ‘brother’ to the new ISSB, recently issued an Exposure Draft to seek public comment on its revised Management Commentary (MC) Practice Note. The MC is traditionally a voluntary letter of explanation accompanying the Annual Financial Statements which aims to put the financial figures in context. The IASB started a project a few years ago to pick up integrated information and other reporting innovations to include in the MC. A lot of this has been taken from the International <IR> Framework.

But, there are some major problems within the revised MC…. As it’s a letter from management it could muddle board accountability; it’s narrow as it focuses largely on ‘inward impacts’ rather than ‘outward impacts’; it’s only a partial inclusion of the International <IR> Framework; it excludes information on Governance; its role is unclear (is it a part of the Annual Financial Statements under the IASB, or a part of the new ISSB’s framework, or does it overlord as the ‘head of the octopus’/ top of the pyramid?); and there is the oddity of the Annual Financial Statements and Sustainability Report being approved by the Board and connecting the two will be a comment by management).

If I were a company, my personal view at this stage of the game, is that I would:

• Carry on with the status quo. There is still much uncertainty in international developments and who knows how long it will take.
• Keep a beady eye on international developments (the IRC of SA keeps its members updated with webinars and there is an update page on this website). Know that whatever happens internationally will have to dovetail in with national laws, governance codes and practices.
• Companies adept at integrated reporting will have the advantage of sustainability systems and controls already being in place and making the connections between the financial and non-financial (6 capitals).
• Ensure the internal controls and systems on sustainability matters are ‘assureable’ as external assurance is likely to come next.
• Become au fait with the TCFD recommendations (they’re pretty entrenched in global thinking and likely to be the basis of the ISSB standards and maybe whatever comes out in the final MC).
• Take a look at the SASB indicators – talk is there’s a big push to get the indicators into the new ISSB standards.
• Take the time to get your voice heard with comment submissions.

Let’s all aim to get what matters most measured and accounted for by companies. Respect for all 6 capitals used and affected by a company and its products. For short-term thinking to switch to the longer term. Awareness that what a company does today sets it up for tomorrow. Transparent reporting. Board accountability.

It is, for sure, the mindful adherence to the 19 requirements of the International <IR> Framework. It also stems from the organization’s intention of producing a meaningful and concise integrated report.

So, what is meaningful and concise? The Integrated Reporting Committee (IRC) of South Africa set about honing this broader term into targeted focus areas for preparers in its Delivering a Meaningful and Concise Integrated Report: An Information Paper (Paper) released in January 2021 and available at https://integratedreportingsa.org/a-meaningful-and-concise-integrated-report/ We ended up with six focus areas.

1. Alignment: Optimize and align the reporting suite

In South Africa, our preparers like to apply “The octopus model” to their corporate reporting suite (for the IRC FAQ on this see https://integratedreportingsa.org/faq-the-octopus-model/).

It’s a sensible way of ordering and aligning all the legislative, regulatory, and stakeholder reports released by an organization. The integrated report is the “head”, and the other reports are the “arms”. The integrated report informs on the holistic story with the other reports focusing on subject-specific and more detailed information.

2. Connectivity: Connect the information in the Content Elements

The integrated report should be a good read, rather than a weighty tome for insomniacs. It should have a logical structure and flow: this supports connected information, helps to avoid inconsistencies, and can limit duplication. A logical flow to the unfolding story in the integrated report could be. . . information on the organization and what it does; the external environment in which it operates; the business model; stakeholders’ needs and the responses (this shows the all-important feedback loop); the strategic objectives that direct the path ahead; the risks and opportunities; performance; and governance. (Outlook information is often given throughout the report and a summary thereof is a useful readability tool.)

3. Conciseness: Balance conciseness and comprehensiveness

Achieving a concise report is an oft-cited bugbear of preparers. Our tips in the key considerations section in the Paper include: have a robust materiality process; be firm in only including relevant information; use the website and other reports to house detailed information; use considered infographics that give meaningful information; write in plain language and get straight to the point.

4. KPIs: Explain KPIs and the link to value

Continually assess whether the disclosed KPIs actually reflect the value that is being created, preserved or eroded over time: are they relevant and used internally by the organization? Give the context to each KPI: what it measures, why it was selected, trends and industry benchmarks.

5. Outcomes: Report clearly on outcomes and trade-offs

Good and complete disclosure of outcomes is essential to an integrated report. They are, after all, the “lasting effects” of the value process. Be brave about showing both the positive and negative outcomes on each of the six capitals. For a report that is biased to the positive can lead to questions over its completeness and credibility, and is there any organization today that can faithfully say it does not rely or affect each of the six capitals?

6. Technical: Apply the International <IR> Framework’s requirements.

And with the governing body opining on whether or not the 19 requirements have been met in the integrated report. (Preparers new to adopting the <IR> Framework can use the “extent to which” leeway clause offered in the <IR> Framework (2021).)

Like most things in life, if something is not done meaningfully and with intention, it may not be worth much. www.integratedreportingsa.org

Leigh Roberts is the CEO of the Integrated Reporting Committee of South Africa and the Chair of its Technical Working Group. She is a member of the IIRC’s Framework Panel.

 This blog first appeared on the IIRC website in March 2021

In a volatile operating environment, issues seem to rise to the surface. There’s no place to hide. Our current context has certainly catalyzed broadscale rethinking of business as usual.

At the virtual IRC Annual Conference 2020 – Integrated Thinking in Action, Professor Mervyn King took delegates through an eloquent round-up of the journey to here. He narrated a path that began with shareholder primacy in the hopes that wealth and prosperity would trickle down to society at large, with this supposed trickle, unfortunately, becoming unmoving treacle, exacerbating ever-growing divides. Today, the pandemic has shone a harsh light on social inequalities and racial injustices with these holes in the social fabric of our society only set to increase given the unequal impacts of climate change. Indeed, the COVID-19 crisis has been described by many as a dress rehearsal for the scale of upheaval we can expect from climate change – again, with the most impoverished and vulnerable in society enduring the brunt of the consequences.

The crisis has demonstrated the importance of #integratedthinking and integrated management and understanding how non-financial aspects affect the financial and vice versa.
– Dr @LeilaFourie (@JSE_Group). #IRCSAConf20 #HappeningNowhttps://t.co/3SD5p2zUYC

— Integrated Reporting Committee of South Africa (@ircofsa) November 26, 2020

With the World Economic Forum’s Global Risks Report 2020 citing the top 10 global risks as being sourced to environmental, social and governance (ESG) concerns, the desperate need to integrate information beyond the financial into corporate decision-making is clear. Indeed, significant progress has been made over the past two decades in the move towards disclosing information beyond the financial in corporate reporting and making use of this information in strategic decision-making. Interestingly, as pointed out by Dr Leila Fourie (CEO of the JSE) during the panel discussion on reporting in a time of crisis, companies that have integrated aspects beyond the financial into their operating models have shown greater resilience during the pandemic.

(For the full panel discussion  Reporting in a time of crisis: Showing the integrated picture with Professor Mark Graham, Alfred Visagie, Ian Kramer and Dr Leila Fourie, see the IRC Annual Conference 2020 webcast.)

Over the past ten years, the emergence of integrated reporting has played a significant role in assisting companies in embedding greater integration of non-financial matters into decision-making and reporting. The International <IR> Framework (<IR> Framework), as well as the suggested amendments currently under review, provide a holistic scaffold that goes beyond merely reporting financial as well as non-financial information, to developing truly integrated thinking – which, as Professor Mervyn King has described it, is a unifying concept and a strategic tool that helps management bring order to a manifestly complex environment. The <IR> Framework’s relevance has therefore only increased during this time of crisis.

(For the full discussion on the Update on the revision of the International <IR> Framework with Liz Prescott, Technical Director of the IIRC, see the IRC Annual Conference 2020 webcast or see the presentation slides here.)

However, despite the progress made in including information beyond the financial over this time, preparers are still faced with the challenge of a plethora of sustainability frameworks and the resulting complexity of the decision-making process regarding which standards and indicators to use within the integrated report. The veritable alphabet soup of ESG reporting standards and frameworks is an issue that has begged addressing for some time to enable consistent, comparable reporting to support investor and broader stakeholder assessment against other organizations (to the extent that information is material to each company’s ability to create value over time).

#Integratedthinking will be at the heart of the way forward
– Prof Mervyn Kinghttps://t.co/8CZPD49mdR #IRCSAConf20 #IntegratedThinkinginAction

— Integrated Reporting Committee of South Africa (@ircofsa) November 26, 2020

As the saying goes, one should never let a good crisis go to waste. You have only to glance back in history to realize that most progress in system change occurs during a time of crisis. Truly, momentum is building with the growth in pace in corporate awareness, sustainability and the notable rise of ESG in capital markets – and post-crisis, this will likely be further heightened. Evidencing this momentum, the day before the conference, the IIRC announced its intention to merge with SASB to form a unified organization – the Value Reporting Foundation – to provide investors and corporates with a comprehensive corporate reporting framework across the full range of enterprise value drivers and standards to progress global sustainability performance. The merger may indeed advance the work of the CDP, CDSB, GRI, IIRC and SASB as described in the Statement of Intent To Work Together Towards Comprehensive Corporate Reporting. During the conference, Professor Mervyn King described the merger as a critical stepping stone to the future of reporting – one with a single, comprehensive corporate reporting framework that enables comparable, meaningful and genuinely integrated reporting.

Encouragingly, this journey towards enhanced reporting is being further progressed by the work being done on integrated reporting assurance, with the aim of providing users with a greater sense of surety regarding the non-financial information contained in the integrated report. In this way, stakeholders’ confidence in the information and therefore their decision-making is enhanced – a basis for instilling stakeholder confidence and trust.

(See Michael Bray’s full discussion  Assurance of the integrated report: Is it really needed? as part of the webcast or see the presentation slides here.)

While the future of integrated reporting is still being shaped, the role it has played to date in embedding integrated thinking and enhancing accountability has been deeply encouraging. These developments have not been made in isolation but have resulted from the groundwork laid by many passionate individuals and organizations over the past ten years.

So what comes next? Responsibility for the future lies with each one of us as we seek to forge the way forward by putting our #IntegratedThinkinginAction in each of our individual and collective endeavours to set the course for the next decade of progress.

Please see the webcast to see other pertinent topics discussed during the conference to further your integrated reporting journey in the year to come.

#Integratedreporting is the lifeblood of accountability.

Prof Mervyn King#IRCSAConf20 #IntegratedThinkinginAction #HappeningNowhttps://t.co/3SD5p2zUYC

— Integrated Reporting Committee of South Africa (@ircofsa) November 26, 2020

By Michael Bray
Professor of Practice (Integrated Reporting) – Deakin University, director of the International Integrated Reporting Council, former partner – KPMG Australia.

Integrated reporting assurance is emerging: its place in the pathway to the audit of the future is becoming clearer.

Early assurance on integrated reports has been achieved on an incremental basis, with numerous instances of limited assurance on selected metrics, such as under GRI standards, in integrated reports. In South Africa, ‘combined assurance’ has proven a popular assurance model.

Assurance in accordance with the International <IR> Framework is now emerging with five known instances of integrated reporting assurance ‘in accordance with’ the International <IR> Framework (to be distinguished from assurance on selected GRI metrics in integrated reports) to date.  Example 10 in the International Auditing and Assurance Standards Board’s proposed guidance on Extended External Reporting Assurance, an integrated reporting assurance example, should be a propellant of more integrated reporting assurance and a guardian of its quality.

Unique challenges and opportunities of integrated reporting assurance flow directly from the distinctive contribution of integrated reporting. This underscores the importance of guidance for assurance practitioners on evaluation of the narrative describing The Business and resulting self-determined, business-critical metrics (mainly regarding intellectual capital) in an integrated report.

This will involve judgement (by the assurance practitioner) on judgement (by those charged with governance on reporting of The Business) on judgement (business judgements by executive management on The Business – its strategy, business model and approach to risk and opportunity management) – business insight. It will also involve business measurement judgement by management and the assurance practitioner on which self-determined metrics (some will not be in financial and sustainability reporting standards e.g. intellectual capital metrics) best tell the story of the ability of The Business to create value in the short, medium and long term – performance insight.

The Value of Integrated Reporting Assurance

Thinking about the value of assurance for stakeholders, and using the concept of discounted cash flows (DCF) as a proxy for broader stakeholder thinking and decision-making, an example can be constructed using the impact of social licences being subject to financial sanctions, restricted or in a worst case removed as an example. Such licence changes can have catastrophic impacts which can and should have an impact on investor and analyst decision-making. Other stakeholders can use this thinking in their own engagement and decision-making activities. An assured integrated report will contain credible ‘raw materials’ to support such decisions.

Take for example a major environmental incident or loss of a key piece of intellectual property. The removal of a social licence to operate or key piece of intellectual property can result in the elimination or severe reduction of cash flows at least in the long-term. An investor or analyst, or other stakeholder using DCF thinking as a proxy, may reduce their short- or medium-term projections of cash flows or make a discount rate adjustment, if a financial sanction or licence restriction is imposed. Terminal value (long-term) is often thought to be upwards of 40% of net present value and may be removed from a stakeholder’s financial model or thinking for a projected loss of licence or key piece of intellectual property.

The value of integrated reporting assurance – paraphrased, ‘Dear stakeholder, the real strategy and business model is disclosed in the integrated report’ – will be valued by investors and other stakeholders for enhancing their decision-making and will be in the public interest – a basis for instilling stakeholder confidence and trust.

The Roadmap to the ‘Audit of the Future’

The pathway from integrated report assurance to integrated reporting assurance to integrated assurance can be seen as a roadmap to the ‘audit of the future’:

The ‘audit of the future’ is critical to the public interest, the future of the accounting profession and the careers of accountants. At a macro level, it can be an important contribution to business productivity, capital markets, society and international competitiveness. The pathway to integrated assurance is underway with the emergence of instances of limited assurance of integrated reports in accordance with the International <IR> Framework.

By Yvette Lange
Adjunct Professor, School of Accountancy, Wits University, and a member of the IRC Working Group

2020 has so far, been a global uphill battle against the coronavirus pandemic. The advice is clear: to have any chance against the virus spreading we must rely on the behaviors of individuals and their ability and commitment to carry out preventive measures such as regular handwashing, physical distancing and wearing masks. Success will depend on individual, collective action to protect ourselves and each other.

This individual yet collective action required to respond to the pandemic made me contemplate integrated thinking and to what extent individual, yet collective, action would help the shift change in the required thinking. What is integrated thinking? For me, I use the “multiples of integrated thinking” to explain the concept of integrated thinking to others. In other words, when making decisions I must have a multiple capital and stakeholder mindset and my decisions must factor in multiple timelines with collaboration existing across the multiple teams and levels of an organization.

Achieving integrated thinking is no easy task. It is implemented by integrated decision-making, based on an understanding of the important opportunities and risks, which in turn identifies and connects the capitals used to create value. This depends on connecting people, functions, information, and systems. Integrated thinking should result in increased organizational alignment toward strategic goals and value creation in the context of the changing business environment. The result is greater confidence in making value-creating decisions for the short, medium, and long term based on relevant quality information and analysis and robust internal processes.

But most importantly, and acknowledged by the IIRC in the International <IR> Framework, is the concept that “actions speak louder than words”. Integrated thinking is not something the board just talks about in its meetings. It is critical that integrated thinking is embedded across all layers of an organisation’s activities. In this way, the results of integrated thinking will easily be evident in management reporting, analysis, and decision-making. But why does this not seem to be happening in many companies? I think that the importance of the thinking of individuals – especially the organisation’s leaders and management – is not sufficiently recognised as playing a role in advancing integrated thinking within an organisation.

One can of course take this quite literally – as one company I provided consulting services to did. For each management and team meeting there were symbolic green glasses that needed to be worn by each participant of the meeting as a stark reminder that decisions needed to be made in an integrated way, considering the multiple capitals, stakeholders, and timelines when considering matters. So, we don’t all need to be buying green glasses for our meetings, but it is a great illustration of the role individuals have to play in enacting and embedding integrated thinking across all levels and activities of a business.

The integrated thinking process must happen in the minds of the individual before it can ever really be achieved at an organisational level. Integrated thinking should become in-built into the thinking process of organisational leaders and management so that they can consciously make decisions to arrive at solutions that would not otherwise be put forward. So why is this skill of integrated thinking seemingly not exercised much? Well, putting it to work makes people anxious. People prefer the comfort of simplicity and certainty over complexity and choosing between the so-called “right” and “wrong”. The complexity presents itself in today’s world where decisions have to take account of the impacts of decisions on all of the capitals and no longer just financial capital, the impacts of decisions on all stakeholders and not just shareholders and the impacts of decisions into the long term and not just on an immediate or short term basis. In making decisions, people will recognise that it is unpleasant to consider the trade-offs needed when choosing between options and so tend to pull blinkers over their eyes as to these trade-offs and go with simpler, clearer choices. However, herein lies another lost opportunity to respond to our ever-changing world and business environment – integrated thinking requires proactiveness and so the consideration of trade-offs of capitals, for example, would encourage a rethinking of the problem at hand to find a new way of doing things in response to the tensions arising out of the existing ways; leading to innovative, sustainable business models.

It will be interesting to consider ways in which individuals can elevate their own integrated thinking for this to be applied at organisational level. One such way, which my colleagues and I are working on, is to educate executives and other leaders on the concept of integrated thinking and how it translates into practice. Another way, written about by Nick McGuigan of Monash Business School, is the concept of bubble hopping. Now don’t confuse this with the social bubbles required for limiting transmission of the coronavirus, no bubble hopping should be going on with these. Bubble hopping is about trying to get exposed to different perspectives so that one can build their own ability to create an open mind, to be adaptable, and to be able to process complexity. Bubble hopping can of course also be applied to the context of an organisation as an opening up of different experiences – bubble hopping to different locations, different products, different departments, and so on. So processing the complexity of the ecosystem in which the organisation operates to make decisions that consider multiple perspectives to create value over the short, medium and long term.

It is time for individual integrated thinking to come to the fore to drive collective, organisational integrated thinking forward.

By Leigh Roberts
CEO of the IRC of SA

After ten years the International <IR> Framework is being refreshed by the IIRC. Fear not, it’s not a wholesale revision, but rather a modernisation. And a few tweaks and tucks is really all that is needed for the <IR> Framework has stood the test of time over the past decade since its launch.

The revision process kicked off on 20/2/2020 with the release by the IIRC of three Topic Papers covering various themes: Responsibility for an Integrated Report; Business model considerations; and, Charting a path forward. The three Topic Papers are open for a 30-day feedback period to 20 March 2020. (While this is a tight deadline, there are only five questions to answer in each Topic Paper.)

The IIRC will use the feedback on the Topic Papers to update the <IR> Framework. This will be released in early May 2020 as a Consultation Draft that will be open for a 90-day feedback submission period. The updated International <IR> Framework is expected in December 2020.

So go on – have your say in the revision of the <IR> Framework that gets used by companies and organisations in South Africa and around the world. Your comments on the Topic Papers and the Consultation Draft can be submitted to the IIRC on the online forms in the documents.

Here are my suggested tweaks and tucks to our beloved <IR> Framework:

• Better understanding of value creation: It’s not shared value companies; it’s both the positive and negative effects on the 6 capitals.
• No ‘net’ value creation: Having lotsa social benefits with and equal or greater negative effects on the natural environment is just not on (and is so short-term thinking). There can never ever be a netting of effects. Aim to enhance your positive effects on the capitals and ameliorate or mitigate (using the words of King IV) the negative effects on the capitals.
• Purpose of the integrated report (aka it’s that old audience issue): The IR is the value creation story of the company. If there is growing global recognition that a company relies on the contribution of 6 capitals (and has resulting effects on them that can impact the company going forward) then why single out a specific stakeholder group? The IR is the story of the company. It is the report you will read first to learn about the company (i.e. it’s the head of the octopus). In the 21^st century can we please move beyond singling out investors as the prime audience of the IR (or better said can the rest of the world catch up with King IV please).
• The business model: Designed to be a simple little diagram showing the inputs from the 6 capitals, the outputs produced (goods and services), and the resulting outcomes on the 6 capitals. Not sure where the confusion sets in on this one, but a technically perfect business model in the IR is rare indeed.
• All 6 capitals are material to all companies: The Cape Town drought (and actually the global climate change effects too) are a clear lesson that natural capital (both how you use it and your resulting effects) is material to each and every company and organisation. No water, no business. High temperatures and dramatic weather events, no business (nor animals, plants and humans).

By Dr Nandita Mishra
Associate Professor, Amity University Uttar Pradesh, India

Over the past few years corporate reporting in India has evolved a lot. The main agenda was to change the conventional and complex reporting formats to crisper and more relevant reporting. A few significant amendments were introduced to reduce repetition of information in the annual reports but the disclosure of all necessary information remains. In India, companies include both mandatory disclosures and some voluntary disclosures in their annual report. Mandatory disclosures are required mostly as per the provisions of the Companies Act 1956 along with its various amendments and by the Security Exchange Board of India (SEBI). Whereas the voluntary disclosure differs from company to company and may include forward-looking statements, human and intellectual capitals details, stock market information, foreign exchange information and risk-related disclosures.

The combination of the mandatory and voluntary disclosures adds so many pages to the annual reports that it is difficult to extract important information from them. Also, they sometimes lack uniformity.

Instances of fraud and economic crimes are increasing in India. The Indian banking system reported a fraud of 10 billion USD in the financial year 2018-19. Recent data suggests that fraud will continue to rise in the current financial year (2019-20). Bad loans due to the economic slowdown can be one of the reasons, but the bigger worry are corporate frauds. 73% of the total fraud involve large corporate frauds. Today, the banking industry needs a prompter and more precise reporting system so that stakeholders can make more informed decisions. A more transparent and concise reporting system could be one of the solutions to this crisis.

Integrated reporting could prove to be the best solution to the problem, as it provides a more holistic and inclusive picture than current reporting regimes. It improves the quality of information disclosed in the annual report without adding pages. Because it is more cohesive, it provides more useful information which stakeholders require to assess the ability of the organisation to create value in the short-, medium- and long-term. This will help stakeholders to take more informed decisions. It also enhances accountability and stewardship of the board.

In India, after the International <IR> Framework was published in 2013, the SEBI chairman Mr. U.K.Sinha invited the Confederation of Indian Industry (CII) to prepare a roadmap on integrated reporting for India. The SEBI formed the Kotak Committee to help improve Corporate Governance in listed companies. However, not many companies adopted integrated reporting after 2013. Then on 6th February 2017, the SEBI published a circular stating that the Top 500 listed companies of India should voluntarily adopt integrated reporting from the next financial year. Kirloskar Brothers Ltd was the first to adopt in 2013-2014 followed by Tata Steel in 2014-15. Now, around 40 companies have adopted integrated reporting in India. In an independent study conducted by me on 33 companies (excluding the financial and banking sectors) which have adopted integrated reporting, it was found that company leaders are very positive about the adoption. They also feel that it will lead to increased opportunities to raise finance. The only hindrance which they identify in the adoption of integrated reporting is the lack of understanding of the underpinning concepts of integrated reporting – which will need extensive promotion and the formation of a dedicated body to organise awareness programs in the region. I am working with the International Integrated Reporting Council to try to set up such a body.

Change in corporate reporting is an iterative process. The judges did not, therefore, go into this year’s awards expecting to see annual reports that were significantly different from those of prior years — and what they saw reflected that. If, however, we were to compare many organisations’ reports from five or more years ago to this year’s, there would certainly be many noticeable improvements. Nevertheless, we have to remind ourselves that South Africa has been at the forefront of integrated reporting since 2010. This compels us not to be complacent, but to keep challenging the maturity of our integrated reports.

We have identified four ongoing reporting challenges based on our reviews of integrated reports over the past few years and believe that maturity in reporting would be evident if entities get this right.

• Firstly, how entities are able to effectively use information management systems to make the most out of their internal management information;
• secondly, whether entities are preparing insightful reports that are distinctive and enabling stakeholders to distinguish one organisation from another;
• thirdly, restoring trust and ensuring authenticity of integrated reports through assurance and balanced reporting; and
• lastly, reporting on how executives are held accountable through appropriate governance structures and balanced performance indicators.

The Top 40 category was, once again, the most advanced category in the reporting journey. Most entities in this category have business models that are generally well articulated and visually presented in an easy-to-follow format. The truly advanced integrated thinkers in this category evidenced the fact that stakeholder engagement is an iterative process and not just a one-off communication. Some areas of improvement for this category would include the integration of governance into the rest of the integrated report and a clear and appropriate distinction between outputs and outcomes. The judges would also like to see more entities holding executives accountable by incorporating non-financial performance measures into executive remuneration.

The mid cap category, as with the Top 40 category, showed significant improvement in reporting on stakeholder relationships and engagement. Most of the reports in the small cap category evidence a good understanding of the International <IR> Framework. The state-owned companies were lagging behind the top reporters as reports appear siloed and still lack integration and balance. Overall, the fledgling/alt-x category has been a strong category with most companies disclosing the essential elements required in integrated reporting. In some cases, it was difficult to find fault with the integrated reports presented.

The regional category has been improving in its journey towards integrated reporting. There were excellent integrated reports in the unlisted company category. It is clear that the entrants understood what is required of effective integrated reporting: presenting detailed and thorough feedback on their operations, strategies and risks as well as board committee functions and mandates. The organisations in the not-for-profit category must be commended for making a concerted effort to achieve integrated thinking and, consequently, integrated reporting. The public sector category is strong in performance reporting and tends to report quite a lot of detail that is often very operationally oriented.

The full judges report has more detail on the various categories. We encourage reporting entities and prospective entrants to consider the recommendations to support them on the <IR> journey.

The judges and PwC as the convenor of judges congratulate all the winners in the respective categories and the overall winners, Nedbank Group Ltd. and look forward to seeing continued quality and improvements from next year’s awards process.

On behalf of the convenor of judges:

Ronel Fourie
Associate Director
Accounting Consulting Services
PwC

Jayne Mammat
Partner
Sustainability and Climate Change
PwC

By Professor Mervyn King
Chairman of the IRC of SA and Chairman Emeritus of the IIRC

In South Africa the common law has always been that directors owe their duties and responsibilities to the company. Notwithstanding, during the 20^th century directors in South Africa were caught up with the primacy of the shareholder model and many times made business judgment calls in the best interests of the shareholders rather than for the long term health of the company.

Likewise in the UK the common law was always that directors owed their duties to the company, but in the 20^th century there was a move to have an enlightened shareholder approach which resulted in the amendment of the UK Companies Act, namely section 172. This section provided that directors owed a duty to …promote the success of the company for the benefit of its members as a whole, while having regard to a host of issues to discharge their duties, namely:

• The likely consequences of any decision in the long term;
• The interests of the company’s employees;
• The need to foster the company’s business relationships with suppliers, customers and others;
• The impact of the company’s operations on the community and the environment;
• The desirability of the company maintaining a reputation for higher standards of business conduct; and
• The need to act fairly as between members of the company.

You will see that this was a departure from acting in the best interests of the company by rather promoting the interests of members while having regard to numerous factors. Some have even argued that jurisprudentially and grammatically the Act has moved to the primacy of the shareholder because the first part of Section 172 trumps the matters to which directors have to have regard.

To be accountable is the obligation of an organisation to account for its activities, accept responsibility for them and to report the results in a transparent manner. A critical question in the context of reporting is who is the most appropriate entity within the corporate architecture to discharge the duty of accountability in the corporate world? After all, the purpose of reporting is to help discharge the duty of accountability. The answer to this question is the informed board.

So it can be said that the Board is the most informed party in the organisation with stakeholders being less informed parties. For the Board to discharge its duty of accountability it must share information with stakeholders – in clear language. The informed board cannot discharge its duty of accountability by doing two silo’ed reports, financial and sustainability, and then leave it to less informed stakeholders to decide what challenges and uncertainties the company is likely to encounter in pursuing its strategic objectives and the potential implications for its business model and future performance. Integrated information is called for.

In South Africa the common law has always been that directors owe their duty to the company and this has been enshrined in Section 76(3) of the Companies Act. Directors are accountable to the company and through the company to all its stakeholders. Thus in King IV in Principle Five it is stated: The governing body should ensure that reports issued by the organisation enables stakeholders to make informed assessments of the organisation’s performance and its short, medium and long term prospects.

King IV has adopted the International <IR> Framework’s definition of an integrated report and the IRC of South Africa has adopted the International <IR> Framework as best practice guidance on preparing an integrated report. The integrated report, as defined in the International <IR> Framework, is a concise communication about how an organization’s strategy, governance, performance and prospects, in the context of its external environment, lead to the creation of value in the short, medium and long term.

The purpose, as per the International <IR> Framework, is to explain to providers of financial capital how an organisation creates value over time, which contains both financial and non-financial information but it is for the benefit of all stakeholders. An important consideration here is that financial capital is widely defined in the International <IR> Framework. The providers of financial capital are defined as equity and debt-holders and others who provide financial capital, both existing and potential, including lenders and other creditors. This includes the ultimate beneficiaries of investments, the collective asset owners and asset wealth fund managers. Other creditors include suppliers and service providers who do so on credit. Consequently even in a narrow reading of the International <IR> Framework the providers of financial capital as an audience includes shareholders, lenders of money, bond-holders, other financial instruments, suppliers, customers and service providers. All of these fall under the definition of providers of financial capital.

The purpose of reporting is exactly as set out in Principle Five of King IV to enable less informed stakeholders to make informed assessments of the organisation’s performance and its short, medium and long term prospects.

By Sheralee Morland

The Integrated Reporting Committee of SA (IRC) Annual Conference 2019 on 18 July at the Johannesburg Stock Exchange (JSE) affirmed that integrated reporting is receiving ongoing focus – demonstrated by the size of the audience (220 in the room and 218 on the webinar).

In his keynote address, Professor Mervyn King, chairman of the IRC, opened the Conference by highlighting the value of collaboration as foreseen by the 17^th Sustainable Development Goal. He noted the issue of the many frameworks that organisations have to comply with or adopt nowadays and the pressing need for reporting to be addressed effectively and collectively between the framework providers.

Roy Andersen and Suresh Kana provided invaluable input in the Chairmen’s panel discussion. They stressed the need for report preparers to involve the chairman early on in the process. Involvement includes agreeing on the tone of the report, material matters and key messages, having an understanding of analysts’ and stakeholders’ comments on the previous year’s report and advocating a separate Board meeting to review and approve the report and ensure that directors provide meaningful insight, review and critique.

Another suggestion provided by the two chairmen was the recommendation for organisations to get an independent person to read the report (prior to publishing) and provide a critique of what messages are being conveyed and what is credible or not. Also useful were their views on when information is regarded as competitive. Their thinking is that while a strategy is conveyed, details of how such strategy is executed can fall into the realm of sensitive and competitive information, as do margins per product allowing competitors the ability to reprice. They suggest a mature but sensible approach getting stakeholders to understand the organisation and its path ahead. The role of the Remuneration Committee was considered, with agreement that remuneration drives behaviour and the behaviour the organisation wants should be incentivised and building in enough to address the future and clawbacks if acts were committed in bad faith.  The Board must have discretion.

Mark Hoffman, Tracey Davies and Henrika Ninham shared great insights on achieving balance in the integrated report. The discussion highlighted the importance of trust through transparency in reporting – a theme which came up in most of the day’s sessions. Some of the standout points on balanced reporting included:

• the need to give perspective,
• use of the report as an opportunity to provide all the facts,
• awareness of the risk of the report being bland,
• trying to surface the unknown,
• ensuring comparability by disclosing current and previous targets,
• appropriate and complete reporting on remuneration policies (executive pay vs the rest of employee pay gives cognisance to the fair and responsible principle)
• forward-looking information that demonstrates what management and the Board are thinking, including the honest reporting of risks and opportunities.

Tracey Davies emphasised climate change which, if not entirely absent, is generally poorly reported. Her call was for the JSE to publicly support such reporting as it’s an urgent global crisis.

In the Materiality session, three companies walked attendees through their different determination processes: Nedbank (Bruce Thomas), Vodacom (Sarah Chetty) and Anglo American Platinum (Adithi Rooplall).  Their slides are available on this website.

In the investor perspectives session, Mark Ingham, Robert Lewenson, Nolwandle Mthombeni and Dumisani Ndlovu with host Esha Mansingh, were definite crowd pleasers with their invaluable critique of the integrated reports they rely on for insights to perform their important roles. They even went as far as to provide a view on the most useful format of a report – i.e. the pdf version so that it can be downloaded and searched to locate exactly what they’re after.  Brevity of reports is essential – and this is not always their experience with some reports so long that they’re almost unusable. In short, they want reports to be succinct, holistic, granular and honest.  The point was made for the need to give some credit to the users – they know where you want to bulk up or hide information.

Some real jewels of information were proffered in the “Implementing Integrated Reporting in the Public Sector” session with the Land Bank (Carolien Samson), Industrial Development Corporation (Celice Lison) and the Airports Company South Africa (Wasfie Ismail). Here organisations and preparers are more often than not faced with complexities that are not those of the private sector. This involves multiple pieces of legislation and regulation; ministerial changes and preferences; and the level of involvement. The speakers shared the highs and lows they had encountered and that a few years down the line they’re starting to benefit from their efforts. All were of the view that integrated reporting aids the level of transparency.

One left the Conference feeling better equipped with useful suggestions to apply in the next reporting period. It reaffirmed that while a good-looking report is nice to look at the key component is demonstrating that the organisation is intent on sharing its story with all of its stakeholders in a compelling account of their ‘reason for being’ now and into the future…. that’s what it’s really all about!

By Patrick Kabuya
Senior Governance Specialist, World Bank. IIRC and AIRC member

What could Africa learn from the 2019 International Integrated Reporting Conference (IIRC) hosted in London on May 16 -17, 2019. This is what I reflected on after participating and speaking in the inspiring conference attended by over 250 business, investor, accountancy and regulatory leaders. I identified four key lessons that the IRC of South Africa and particularly the Africa Integrated Reporting Council (an initiative of the World Bank and PAFA) can champion to accelerate Integrated Thinking and Reporting in Africa.

Firstly, Africa can learn from countries already implementing the reform in addition to South Africa. Integrated Reporting (IR) is gaining momentum across the globe. In 2018, 420 companies issued integrated reports in Japan, 30 major companies in India, and 60 top companies in Malaysia. Europe’s Non-Financial Reporting Directive is a game changer: almost 12,000 companies have prepared non-financial reports. In Brazil, all State-Owned Enterprises are required to produce integrated reports. The New Zealand government prepared its annual report using ‘the Wellbeing and Capitals Approach’, concepts of IR.

Secondly, African countries should increasingly incorporate integrated thinking and reporting in corporate governance codes and empower Board members to understand and apply the concept. The conference was informed of such developments in several countries. As a result, Boards should integrate in their meetings and business strategies long term value creation thinking and the three dimensions of sustainable development: economy, society and environment. I was pleased to note the increased uptake by companies reporting on climate related financial disclosures (TCFD): disclosures that should be considered by African companies.

Thirdly, African professional accountancy organizations (PAOs) should incrementally develop skills needed to conduct audits of integrated reports. It was acknowledged that a different set of skills will be required to meet the increasing demand for assurance of integrated reports and especially to apply the guidance being prepared by IAASB on Extended External Reporting Assurance, whose progress was presented at the Conference.

Fourthly, there is an opportunity for internal auditors in Africa to increase their role in the integrated reporting cycle. This would include: helping management to understand what IR is and its importance (champion role), provide guidance on processes and systems to collect data (advisory role), and provide assurance to the Board and management on the adequacy and adherence of governance processes of IR data collection processes (assurance role).

Finally, asked about my aspirations of global momentum during a panel session at the conference, I stated: I would like to see, at least three more African countries legally adopting integrated reporting by 2021 in addition to South Africa; more African PAOs, tertiary institutions and business schools including integrated thinking and reporting in their qualification and programs; and Africa playing a more global influential role in integrated thinking and reporting including actively contributing in future IIRC events as participants and speakers, and hosting IIRC in the region within the next three years. I invite you to contribute in achieving these aspirations.

By Leigh Roberts
CEO of the IRC of SA

I attended the IIRC Council meeting in Frankfurt on 11 April. It was well worth the effort of 20 hours’ flying (made more palatable by remarkably good service from SAA) for a one-night stay in Germany.

Notably, because it marked the IRC of SA’s first meeting as a Council member. While there has long been an informal relationship between the two bodies, we are now officially a member of the IIRC Council.  Our association stems back to 2010 when the IRC of SA’s Discussion Paper on a Framework for an Integrated Report (a world first; accessible on the “Our history” page on this website) was used as the basis for the development of the IIRC’s International <IR> Framework. Indeed, Mervyn King, Graham Terry, myself and other South Africans all shared our input in the crafting of the International <IR> Framework that is today used by over 1700 organizations in 70 countries.

Back to the Frankfurt meeting …. Also noteworthy was that it was the first meeting led by Dominic Barton, the new Chairman of Council. Dominic succeeds Mervyn King – who has been honoured for his years of tireless service to the IIRC with the position of Chairman Emeritus. And fortunately for the IRC of SA Mervyn continues as our Chairman, ably assisted by Deputy Chairman Suresh Kana (who is also the Chairman of the King Committee – and who nobly swapped his business class ticket for my coach seat on the return trip from Frankfurt!)

The IIRC Council members really are the who’s who of the global organisations with an interest in reporting. They include (and forgive all the acronyms) IASB, IAASB, A4S, WBCSD, GRI, IOSCO, ICSA, ICGN, SASB, CDP, IMA, IIA, IFAC, PRI, Transparency International and major accounting firms and corporates.

Some points of interest from the day’s discussions:

• IR in the digital world – a move to real-time integrated information in the next five years? (We’ll cover this hot topic in the IRC of SA’s Annual Conference at the JSE on 18 July.)
• The Corporate Reporting Dialogue’s Better Alignment Project is doing good work in its aim of reducing duplication among the many sustainability frameworks and reporting guidelines that organisations are faced with. (The global online survey is open to May 2019 and South Africa hosted the first roundtable discussion event at EY earlier in April).
• The New Zealand government prepares a multi-capitals budget (wow, that’s progressive).
• The IIRC will soon be releasing a white paper on the six capitals.
• The TCFD built the International <IR> Framework into its recommendations.
• A new global survey of integrated reports in ten countries concluded that South Africa has the best quality of reports. And the IRC of SA was recognized as a critical factor in our country’s success in integrated reporting. (A proud moment for us all.)

By Graham Terry
Member of the IRC Working Group, IRC Honorary Member and IIRC Ambassador

In 2015 the United Nations General Assembly adopted the Sustainable Developments Goals (SDGs) with targets to achieve by 2030. We all know how important these goals are to the future of humanity. It is incumbent on all countries and all of us to play a role in achieving the various targets. Business has an integral role to play in the process.

What puzzles me is the lack of discussion about the SDGs in many South African integrated reports. Is it because the SDGs are not considered important or material? What could be more material to social and economic development, particularly in the medium- to long-term? It is not that companies are not addressing many of the areas and building elements into their strategies. It is simply that they are not referencing their activities to the SDGs. Do companies see the SDGs as government responsibility or is it that government doesn’t reach out to companies on these issues? Of course, many companies do report on the SDGs in their sustainability reports and some, especially banks, do so in their integrated reports. My point is that these issues are so important to the longer term that I would have expected more references to them in integrated reports.

I serve on a panel of judges for an integrated reporting award in Sri Lanka. Every report I have seen in Sri Lanka emphasises the role the company is playing to assist the country achieve its goals. Apart from the importance of the areas covered in the SDGs, I would have thought companies would wish to tell their stakeholders what they are doing to assist the country. Maybe stakeholders are not interested or is it that we are only concerned with the short-term?

Recently the South African Institute of Chartered Accountants (SAICA) issued a report on what it and its members were doing to assist in the achievement of the goals. This is the first year that the report has been compiled and I believe it will become an annual report. Hopefully we will see companies picking up on this and referencing their strategies to the SDGs.

By Leigh Roberts
CEO of the IRC

I recently spent time on reading the integrated reports of some of the top 40 companies listed on the Johannesburg Stock Exchange (JSE).

How nice to see the progression of the reports over the years with some of the latest reports being truly excellent! It really is wonderful to see the commitment by companies to releasing a clear, complete and concise integrated report.

That said, there are some companies that need to work on cutting more of the detail from their reports, as well as closer alignment to the 19 requirements of the International <IR> Framework.

And I have a few other general observations:

• The notion of shared value is clearly in fashion! My concern is that the reports ended up being predominantly about the positive value created for stakeholders with the outcomes on the other capitals (and indeed the negative outcomes on stakeholders) being understated or even omitted. This effected the balance of the reports. (Keep an eye out for the IRC’s latest Information Paper: Achieving Balance in the Integrated Report which is due to be released early December 2018.)
• Integrated Annual Report or Annual Integrated Report? I prefer the latter. My reasoning is that Annual refers to the time period (there could well be an interim integrated report released in the future).
• International <IR> Framework… surprising to find that some companies still get the name wrong.
• Marvellous to see that some companies had a summarised corporate governance review in their integrated report with a cross-reference to the longer report on their website. (Ditto for the remuneration report.)
• Disclosure of negative information and outcomes still needs to be searched for in some reports, with few having both financial and non-financial performance and outcomes in their upfront “Highlights of the Year” page.
• Not enough reports clearly set out the company’s strategic objectives, KPIs and targets for the short, medium and long term. This affects the strategy, performance and outlook sections of the report. Clear communication of this can serve as a useful content thread throughout the report.
• Definitions of short, medium and long term – as these terms are usually referred to in the report they ought to be defined in the “About the Report” section (because short term to a miner is quite different to that of an IT company).

By Professor Mark Graham
UCT and Adjudicator of the EY Excellence in IR Awards

Based on a speech at the EY Awards event in Johannesburg on 3 August 2018

The overriding objective in our ranking of integrated reports is the extent to which it complies with the spirit of integrated reporting as defined by the International <IR> Framework (<IR> Framework) as being “a concise communication about how an organisation’s strategy, governance, performance and prospects, in the context of its external environment, lead to the creation of value over the short, medium and long term”. There are four specific areas which we believe are crucial to excellence in integrated reporting. These are: the extent to which the report has a clear strategic focus; an emphasis on value creation; a high level of connectivity between the various elements presented; and, an appropriate balance between positive and negative matters. These four areas are then used to identify the Top 10 integrated reports from all amongst those ranked as excellent and to assign them a ranking within the Top 10 [the JSE top 100 companies are included in the survey].

We have an ‘honours’ award for those high-quality integrated reports that we believe have come closest to complying with all the requirements of the <IR> Framework.

Our overall impression this year is, once again, that those companies who take integrated reporting seriously are continually improving whilst those that do not, are showing very little improvement. This year, we ranked 47 integrated reports in the ‘good’ and ‘excellent’ categories. This certainly shows that almost half of the larger listed companies are, in our opinion, making a serious attempt to produce an integrated report. The number of companies that we consider to have ‘excellent’ integrated reports this year number 23 – this is slightly down on last year’s tally of 27, but of course these are not necessarily the same companies as there is some movement in the composition of the Top 100 companies and because the robustness of our adjudication process increases each year as we learn and understand more about integrated reporting.

This year, in the excellent reports, we saw improvements in:

• Layout and structure of the value creation narrative, and increased disclosures of the value the organisation is creating for itself and others.
• Improvements in the explanation of the strategy to create value and more reports are now incorporating the various capitals (without necessarily using this specific terminology) and explicitly showing the trade-offs between these capitals.
• Increased disclosures of the opportunities that are available.
• Better understanding of the difference between outputs and outcomes.

There are of course many areas where our local integrated reports, including those ranked as excellent, could improve:

• Almost all companies appear to be struggling with governance and remuneration disclosures. Increased attention needs to be given to refocus these sections of the report to show how the organisation’s governance and remuneration structures will create value and to avoid generic, boilerplate, tick-box compliance disclosures.
• Increased emphasis needs to be given to try to achieve a balanced report by including both ‘bad news’ and negative outcomes.
• Disclosing more detailed and less generic explanations of the trade-offs between the various capitals.
• Providing more detail on actual strategies and not just strategic objectives or aspirations, including meaningful measures the will be used to measure the achievement of strategic objectives.
• Improving the linkage between the various Content Elements.

As the momentum of integrated reporting continues to grow worldwide and the academic evidence of the benefits to organisations that produce credible integrated reports continues to mount, we hope that those preparers that are producing excellent reports continue to improve the quality of their reports and we encourage those that are not to move in the right direction.

By Graham Terry
IRC Working Group member, IRC Honorary member and IIRC Ambassador

The fourth annual ‘CMA Excellence in Integrated Reporting Awards’ took place in Colombo, Sri Lanka in July 2018. To be eligible for awards companies were required to submit their latest integrated reports for consideration. This year, over 40 companies applied.

In their summary report, the panel of international judges – of which I was honoured to be a part of – commended companies on the strides they were making from year to year. The judges added that these improvements were being seen not only in the leading reports, but across a broad section of reports. Notably, there was a growing understanding of value creation and the Guiding Principles set out in the International <IR> Framework issued by the International Integrated Reporting Council in December 2013.

Whilst the Awards have been running for four years, some Sri Lankan companies have been preparing integrated reports since 2011. Sri Lankan companies are proud of their reporting heritage and strive to outdo each other in seeking awards. As a result, they are constantly looking for ways in which to improve their reporting.

At a gala evening attended by about 350 people the winning companies were presented with their awards by Rachel Grimes, President of the International Federation of Accountants, and Professor Lakshman Watawala, President of CMA Sri Lanka.

The leading reporters were:

• Overall champion – Diesel and Motor Engineering Plc
• First runner-up – John Keells Holdings Plc
• Second runner-up – Peoples Leasing and Finance Plc

In their summary report the judges complemented companies on the way in which they were embracing integrated thinking and describing their value creation stories.

Having been involved in the judging process over the past four years I’ve noticed great changes in quality of the reports. Major improvements occurred when the International <IR> Framework was published and the companies clearly learn from each other and watch the developments in other countries. Companies were quick to embrace the capitals concept and their understanding of the importance of the capitals and the way trade-offs occur has improved each year. Companies have also worked hard to show the connectivity of the external environment, strategy, risks and opportunities and stakeholder engagement using icons, cross-referencing and diagrams.

One area where they consistently outdo the reports of South African companies is how they link with the UN Sustainable Development Goals, which they build into their strategy. Their greatest challenge, however, is to meet the conciseness principle because of local reporting requirements, but some of the companies are now preparing a stand-alone integrated report which makes up the front section of the annual report.

By Richard Howitt
CEO of the IIRC

Based on a speech at the IIRC-ICGN Global Conference in Tokyo, Japan on 1 March 2018

Stock Exchanges from Tokyo to Johannesburg, Singapore to São Paulo, Botswana to Frankfurt have played an important role in advancing integrated reporting amongst their members. They have done so because they recognise that where companies adopt integrated reporting, it increases investor confidence.

I want to use these few words to update you on some of the key staging posts worldwide for integrated reporting in 2018. I have described the impressive growth of numbers of companies adopting integrated reporting – in Japan and across the world. But this isn’t just about numbers. It’s about leading companies in the market sending a message back to the market to adopt integrated reporting.

Insurance companies Unipol and AXA. Banks Credit Agricole and TKSB Turkey. Chemical companies from America, Clorox, and Europe, Solvay. Big conglomerates including Ayala from Philippines, Mahindra Mahindra in India. Energy company TransAlta. Technology company ASML. Brewer Heineken. All produced integrated reports for the first time in 2017.

Integrated reporting is probably the best reporting in the world..! And all of these reports can be found on our free good examples database on the IIRC’s website – which is a great place to learn how to do your own integrated reporting.

Major progress right across the world

• Establishing a network of integrated reporting companies in the United States – our U.S. community.
• A new partnership to deliver integrated reporting by the French financial market, Paris Europlace.
• A call from the financial regulator the Securities and Exchange Board of India for the country’s top 500 companies to adopt integrated reporting.
• The new committee set up to extend integrated reporting in ten African countries.
• Our international business network has launched special interest groups to help companies to work together to advance their integrated reporting. One for financial institutions. One on integrated thinking and strategy. One on human and intellectual capital – which we think are less well understood and have coined the term ‘hidden capitals’.
• Last year, 15 of the world’s leading investors got together not simply to ask companies to undertake integrated reporting – but to make the point that they use the integrated reports in their day-to-day investment decisions. Investors representing two trillion USD assets under management.
• To make the point that this is not additional reporting, but changing existing financial reporting, we were delighted that the International Accounting Standards Board has started a review of its Management Commentary Practice Statement. The IASB have asked us to be an advisor in its development and – although of course this is not exactly integrated reporting – we see this as an important further step of alignment towards it. The IASB Chair Hans Hoogervorst has told the IIRC he “concludes that there is considerable common ground between financial and integrated reporting.” The decision to undertake the review said that “integrated information provides the context for financial statements.” And to make the point that this is not about more reporting, but better reporting.
• The global Corporate Reporting Dialogue – the CRD – convened by the IIRC but bringing together the main financial and non-financial reporting frameworks, has begun to make real progress in getting the frameworks to align.
• The Financial Stability Board TCFD Task Force is very important to us in that it has shifted climate towards being recognised as a financial issue, and specifically recommends an integrated approach in risk management. The TCFD Secretariat involved us throughout the process of producing their recommendations and have now invited the Corporate Reporting Dialogue to align all the frameworks with their recommendations. I am proud that all of the frameworks have agreed a detailed, three year project to do so – to the TCFD and further. We are in the final phase of timetabling and I am very hopeful that in the next weeks, we will be in a position to publicly announce the project. I tell you this because, if and when we announce the project, it would be a huge step towards alignment of financial and non-financial reporting frameworks in the world. I think it would give the strongest possible signal to the market that the problem of proliferation and fragmentation of reporting frameworks is being addressed. And therefore for those companies who do not yet report, to give them extra confidence and incentive to do so.
• We are also committed to making it easier for companies to undertake integrated reporting. Whilst strictly keeping to the principles-based approach which is fundamental to integrated reporting, we have started a two year-programme of advice and guidance, to respond to the difficulties identified in the global feedback organised last year. On issues like materiality, conciseness and stakeholder interests, our technical programme will clarify how these apply to integrated reporting – which businesses told us is what they want.
• We will also harness the evidence base to demonstrate that that integration is a benefit not a cost. Including the research by TAKARA Disclosure and Investor Relation Research presented to us, that amongst the 1,700 companies in the first section of the Tokyo Stock Exchange where we are today, those that integrate their reporting have a stock price 72.8 points higher compared to the rest of the index.
• In May, we plan to publish not one but a database of three hundred pieces of research, which reinforce that integrated reporting companies have access to a longer-term investor base, a lower cost of capital and enjoy a higher stock price. And we are seeking to develop our relationships with universities and business schools worldwide, to secure a pipeline of future research to further develop this understanding.
• The AICPA research – Purpose before Profit – (stated) that 83 per cent of executives surveyed for the report believe that adopting integrated reporting supports business success.
• And the ACCA report critique project that the number of integrated reports which are genuinely concise – 100 pages or less- has increased from 30 to over 50 per cent this year for the first time.

But I want to remind you that we are not trying to change companies, but that we are companies trying to change the system. There is now a powerful range of actors collaborating towards the common aim of shifting the world towards a sustainable financial system. The World Bank and the Principles for Responsible Investment are two of those forces who are leading members of the IIRC Council and important partners for the IIRC. The whole integrated reporting family stands with those forces – whilst integrated reporting itself is a tool to help realise the common aim.

The High Level Expert Group on Sustainable Finance has led these demands. And in its final report, it has described integrated reporting as “the ultimate ambition.” The draft action plan produced by the European Commission in response proposes experimentation with integrated reporting at the EU level. So there is every prospect for these recommendations to be put in to action.

And similarly, we are cooperating in a number of complementary initiatives to help business understand and report its contribution to the UN Sustainable Development Goals. What was called by integrated reporting company Novo Nordisk as creating ‘system value’. I remind that the single part of the SDGs which is directly aimed at business is Target 12.6: “to integrate sustainability information into their reporting.”

That is the challenge to us all. Already we have published a guide showing how integrated reporting companies can integrate the SDGs in their reporting. This year we will follow-up that work, and are partnering with the UN Global Compact, the GRI, UNCTAD, the European Commission and the Green Economy Coalition to contribute to this work – as well as with all our partners in the Corporate Reporting Dialogue itself.

The model we favour is one of collaboration. We are deeply committed to ending wasteful duplication and competition – where it exists – between different initiatives. Of course much of the talk here as well, is of ‘ESG integration’ which is not exactly the same as the six capitals of integrated reporting. When we listened to Professor Ito describe the growing value of intangibles – including intellectual capital in this era of digitalisation, and manufactured capital when the world is crying out for long-term infrastructure investment – this conference will understand that these are not picked up in the ESG model as it has emerged. It is important to remember that. But it is equally important to remember that change is happening. The argument for ‘integration’ has been won.

Of course it is proper that we should continue to work on specific frameworks, metrics, protocols and other approaches. But the common ground is that it is narrow, short-term and historic financial reporting which may not be broken – but which is increasingly losing relevance. There is an emerging consensus that the new approach is one of integration. And that the IIRC will continue to be a convening point, inclusive to other initiatives, and providing the principles and the process which seek to drive the integration of financial and what is today called non-financial reporting. Integration must be the new consensus.

And what constantly surprises me – always pleasantly – is the visionary Chair of the IIRC Council, Mervyn King. The King codes in South Africa have led thinking on corporate governance across the world. And of course Mervyn is founder and architect of integrated reporting in the world. Our own good corporate governance means Mervyn reaches his term limit later this year, as our Council Chair. But today I’m delighted to share with you is that he has accepted the appointment of Chair Emeritus of the Council and will continue his global advocacy role on integrated reporting on our behalf. Thank-you Mervyn for what you do and what you will continue to do.

By Rob Amponsah
Greymatter & Finch

Greymatter & Finch’s clients come from a diverse range of industries, and despite their different operating environments, a common trend has become clear in the last two years – integrated reporting is gradually transitioning from compliance to value-recognition.

The mindset of tick-box compliance for “reports no one reads anyway” shown by some preparers are giving way to an appreciation of the actual outcomes of the integrated reporting process. Companies are realising that the preparation of their integrated report leads to outcomes that inform readers of their value drivers, stakeholders, and effects on society and the environment.

We find that, through integrated reporting, our clients gain an enhanced understanding and appreciation of materiality* . Respected governance codes such as King IV have increased the prominence of integrated reporting. Principle 5 of the code states, “The governing body should ensure that reports issued by the organisation enable stakeholders to make informed assessments of the organisation’s performance, and its short, medium and long-term prospects.” The governing bodies of companies that follow this principle focus their reporting, and consequently their decision-making, on materiality and stakeholders.

Based on this consistent trend of improvement, we foresee more robust materiality determination processes to inform integrated thinking and reporting in the near future. The result will be more concise, defined material matters for business use, investor understanding and stakeholder assessment.

Greymatter & Finch is a stakeholder communications company specialising integrated reporting for public and listed companies. Visit www.greymatterfinch.com to find out more

*In terms of the International Framework,, material matters are those that “substantively affect the organization’s ability to create value over the short, medium and long term.”

By Leigh Roberts
Chief Executive Officer of the Integrated Reporting Committee of South Africa

After the opening address at the Nkonki IR Awards 2017 at the JSE on 21 August 2017 some of the attendees asked for a written version of my speech, so here it is.

Congratulations to Nkonki on hosting the awards programme for the past seven years, and to this year’s winners who have clearly spent much time and effort on their reports. And indeed to all the companies and organisations in South Africa who strive for better corporate reporting through quality Integrated Reporting.

South Africa is the undisputed world leader in IR and we’re likely to retain our leadership in the years ahead. There are a number of reasons why I see our leadership continuing:

1. We produce the most reports in the world (Japan is behind us).
2. IR is entrenched in our corporate governance codes (with thanks to the renowned King III and now King IV).
3. IR falls into the listing requirements of the JSE as a recommended practice of the King codes.
4. There are many public sector organisations that prepare reports as a mark of good governance. It started out with the big SOE’s and municipalities and has filtered down to the smaller organisations. This is truly laudable! I do wish though that there would be firmer guidance from the Finance Minister and Treasury on what is expected of organisations in the public sector.
5. IR, and its parent concept of Integrated Thinking, is becoming accepted as a good management tool for any organisation , no matter in the private or public sector, large, medium or small in size. It’s been great to see more companies referring to it in their reports – which is a sign of reporting maturity.

IR is a good management tool because, as South Africans, we know that a company’s success and longevity doesn’t depend on financial capital alone. We know this because we’ve seen what a slur on reputation can do; what a lack of regulatory compliance can do; what a shortage of water can do; what a lack of ethics can do; what poor leadership can do; and what a warring labour force can do. In today’s connected world, anyone would be hard-pressed to say that money is the only capital that matters.

So, the beauty of a quality integrated report is that it shows the myriad of resources and relationships that impact on the company’s success and longevity.

A quality integrated report is indeed an object of admirable beauty. In my view, a beautiful integrated report is concise (less than 100 pages); information is logically structured and is connected; explains how external macro-factors affect the company and its response; identifies the important resources and relationships used and how the company affects them (important because how a company treats them today will come back to hurt it or reward it in the future); shows performance against strategy; and how the company is governed.

The most important facet though is transparency. The integrated report is the voice of the board. Has the board given all the material information to enable a complete picture of the company, and that includes the good news and the bad news? The integrated report is definitely not just a pretty PR document.

There is another reason that SA’s global lead in IR will continue and that’s through the ongoing work of the Integrated Reporting Committee of South Africa. Our aim is to promote and develop IR and Integrated Thinking in South Africa and we’ve being doing this since 2010.

• We’ve fed SA’s view of IR into international thinking, notably into the International <IR> Framework.
• We’ve worked with the King Committee to ensure that King IV is aligned with the framework (which must be a great relief to preparers).
• We promote public awareness through our website and annual conference.
• We actively work on the quality of reports in SA through annual technical information papers that highlight observed weaknesses and we suggest tips to improve reporting in particular areas. In the past few years, we’ve covered disclosure of outcomes and disclosure of performance against strategy. We also created a Starter’s Guide. This year, we’ll release a paper on governance disclosure. We had observed the worrying trend that the governance section of reports were ranked as number 1 by the South African insomniacs club. Our information paper will give pointers as to the type of governance information that is relevant to telling a company’s value creation story.
• Our Information Papers are well respected internationally and we are often asked to share our views and experience.

For the first time, this year the IRC of SA opened its membership beyond professional and industry bodies. We welcomed corporate members into the fold. Some accounting firms, thank you Nkonki, and listed companies including Nedbank, Vodacom, Nampak, Sun International, Sasfin, Royal Bafokeng, Discovery, and SOE’s including Eskom and GEMS. What members get is permission to use the coveted IRC member logo in their integrated reports which publicly acknowledges their commitment to better corporate reporting.

The IRC welcomes organisations into the IRC family. The good work of the IRC, and SA’s continued leadership in this area, takes funding.

Finally, I’d like to clear up some carbuncles that may detract from the beauty of an integrated report:

1. Value creation does not only refer to the company’s positive effects on stakeholders and resources, or to the achieved KPI’s set in the shareholders compact for SOE’s. Value creation covers all the effects on the six capitals – the positive and the negative.
2. Some companies address their reports to investors, others to all stakeholders, while yet others don’t specify an audience implying that the report is the story of the company and thus useful to any reader. This is at the discretion of the board.
3. You don’t have to structure your report around the six capitals identified in the International <IR> Framework and repeated in King IV. The purpose of the capitals is a completeness check to get organisations to consider all the resources and relationships that they use or effect.
4. If you follow the International <IR> Framework (the IRC of SA has endorsed this as good practice on how to prepare an integrated report and in turn, King IV states that the guidance of the IRC of SA should be followed) please remember that there are 18 requirements that should be met. I talk to boards and sometimes wonder if the directors even know there are 18 requirements that they’re signing off on when approving their integrated report.

Thank you

By Dr Pieter van der Walt
Group manager: Information Integration & Sustainability at Altron Ltd.

Our integrated reports, since the first in 2010, have progressively moved from focusing purely on the previous period’s financial performance towards a more integrated view of other aspects of the business and the operating context. Through in-depth stakeholder engagement, aspects of materiality have been brought to the table and this has provided management with a focused approach in addressing issues of risk and opportunity across the group.

Flowing from the integrated report, a harmonising effect on internal reporting processes has been evolving over time. In preparing for our reporting cycles it become evident that a significant amount of time is spent on collating information and preparing reports for board sub-committees and for annual reporting. In addition, the streamlining of the group into a more ICT focused entity has also brought some focus on how we, as a group, align ourselves to better reporting – not only on an annual basis through the culmination into a single integrated annual report, but also through a continued integrated reporting process across all aspects highlighted in our four value drivers.

Although systems can be implemented with relative ease to provide a platform for reporting, the alignment to processes and ultimately business strategy can be problematic. However, given the challenges that all businesses face in terms of increased regulation, transparency and risk, ensuring a solid foundation in reporting processes should help in not only complying with requirements but also in becoming a conduit for increased visibility and the achievement of strategic objectives. Fragmentation and silos of information not only create confusion and unclear reporting expectations, but also lead to a lack of alignment across the organisation.

Driving this process through integrated thinking principles breaks down the silos between functional areas and enables common processes, policies and technology platforms to streamline governance, risk and compliance efforts and build a more risk and opportunity aware organisation.

From a governance, risk, compliance and sustainability perspective, we have started to build on the integrated thinking and reporting principles to continue building on our sustainable business strategy going forward. Given that each of these elements aligns with and is informed largely by legislation, regulatory frameworks, best practice and other recognised frameworks, it provides the ideal platform to ensure that group reporting is standardised across all functions. This ultimately provides a solid foundation for the continued growth of the group’s integrated reporting processes.

On the ground floor of the Johannesburg Stock Exchange is a restaurant. It’s a busy place with people coming and going. It’s also the birth place of the Integrated Reporting Committee (IRC) and the integrated reporting movement in South Africa.

Ten years on, I look back with wonder. Wonder at what we’ve all achieved. Wonder – and pride – at the progress our committed preparers have made in their integrated reporting journey. I’m so delighted to see them strive for continuous improvement in telling their story better in their integrated reports. I thank them deeply.

And I’m proud of the International Framework. It’s stood the test of time because it was – and still is – the right thing at the right time. Just as people evolve in their thinking, so too does corporate reporting. The Framework is modern-day thinking. Looking at the financial is just one slice of the cake; the integrated report shows the whole of the cake. And I shall forever fondly remember the London days and nights spent on developing the Framework with the regular visits to the Technical Task Force’s favourite vegetarian curry restaurant nestled in a tiny street and in a tiny space with only six tables.

So well done to the IIRC and the team for leading the global integrated reporting movement and leading us to corporate reporting that transparently reflects how an organization uses and affects its resources and relationships (the six capitals). This is evolved thinking. Thanks to the IIRC it is the ‘normal’ for corporate reporting.

So what’s next? As global awareness and acceptance of the connectivity of things rises even further, I expect the integrated report to entrench its position as the ‘umbrella’, ‘roof’ or, as we like to call it in South Africa, the ‘head of the octopus’. Detailed information reports, such as detailed financial statements and detailed sustainability metrics, stem from the integrated report as the ‘arms’. The integrated report is not an egotistical being; it’s positioned as the head report because it’s the only report that connects the financial to the ‘pre-financial’ bringing in the external environment influencers, strategy, risk and opportunities, performance, governance and outlook. While the integrated report is the head report, it also holds a hidden gem: the integrated reporting process is a hugely useful governance and management tool as it connects the internal dots and embeds integrated thinking. And in our world of connectivity, integrated thinking is what it’s all about.