As some of you might have seen, there's been a flurry of activity around the announcement yesterday of the creation of the International Integrated Reporting Committee (IIRC).
According to a briefing note:
"The IIRC is comprised of investors, standards setters, companies, accounting bodies, UN representatives, and members of civil society and will seek to create a global framework for integrated reporting."
Both the Prince’s Accounting for Sustainability Project and the Global Reporting Initiative appear to be heavily involved. The stated aim is to:
"...create a globally accepted framework for accounting for sustainability: a framework which brings together financial, environmental, social and governance information in a clear, concise, consistent and comparable format - put briefly, in an “integrated” format. The intention is to help with the development of more comprehensive and comprehensible information about an organization’s total performance, prospective as well as retrospective, to meet the needs of the emerging, more sustainable, global economic model."
There are some impressive names on the steering member list and working group.
Bob Eccles from Harvard has penned a blog post on the aims of the new group.
Despite my concerns about whether integrated reporting can deliver more than the current system, it does seem to me that this is an important move. I suppose for three reasons:
1) Integration is likely to help companies embed sustainability by providing clearer drivers for doing so. By this I mean the finance department, plus others who often are not deeply involved in sustainability strategy, may become more involved when the 'one report' notion is flagged across the company.
2) One 'holistic' report, if produced in readable, compelling way, may be a better vehicle (or a starting point) for corporate communications to stakeholders that cover the material impacts of the company (see this post yesterday for more on this).
3) And lastly, if a real and honest narrative can be created from financial and sustainability data, investors may have a clearer picture of how the company's prospects look, from a risk and opportunity perspective. This third point is the hardest to argue, since we all know big investors do not go to AGMs, do not read sustainability reports, and already know what is in financial reporting, more or less, before it is published. (I made this point in my earlier post, probably clumsily). Companies will have to work very hard on their reports and investor communications to change this culture. This seems the toughest battle and codes like the new UK stewardship code will have major role to play, if copied elsewhere.
So congratulations and plaudits must go to Bob Eccles and Mike Krzus, authors of the recent book on the topic, for kick-starting this new group, set to explore this very complex issue.
I imagine companies already publishing integrated reporting, such as Southwest Airlines, United Technologies, American Electric Power, Philips, Novo Nordisk and Natura will not be shy in coming forward with their views. And so of course will those firms, from another standpoint, who have little interest in matching environmental liabilities with financial data. I'm thinking fossil fuel firms and heavy industry in particular.
Let's hope the accounting bodies can grasp the nuances of sustainability somehow, and that the NGO stakeholders see beyond the rules-based ideology that has failed us so badly with regard to traditional financial accounting to date.