Integrated reporting
Encyclopedia
Integrated reporting refers to the integrated representation of a company’s performance in terms of both financial and non-financial results. Integrated reporting provides greater context for performance data, clarifies how sustainability fits into operations or a business, and may help embed sustainability into company decision making. Some companies that report in an integrated manner also report additional sustainability information, often online, for specific stakeholder groups.
In the King III Report (otherwise known as King Code of Governance for South Africa 2009), integrated reporting is referred to in this manner: "A key challenge for leadership is to make sustainability issues mainstream. Strategy, risk, performance and sustainability have become inseparable; hence the phrase ‘integrated reporting’ which is used throughout this Report."
Companies that produce integrated reports include BASF
, Philips
, Novo Nordisk
, United Technologies Corporation
(UTC) and American Electric Power
(AEP). In 2008, UTC was the first Dow Jones Industrial Average member to produce an integrated report.
The Prince of Wales' Accounting for Sustainability project introduced the Connected Reporting Framework in 2007. Companies reporting using this framework, which links sustainability performance reporting with financial reporting and strategic direction in a connected way, include Aviva, BT and HSBC.
Corporate reporting on financial and non-financial information in a single document has grown as socially responsible investing
(SRI) has grown faster than the investment industry overall. Globally, the SRI market has grown at an annual rate of 22% since 2003, while global growth rates for assets under management have stagnated around 10%. As more assets are managed with SRI frameworks, more investors are going beyond financial information to consider non-financial, extra-financial or environmental, social and governance (ESG) information in investment decisions.
IFAC (International Federation of Accountants)
, the Global Reporting Initiative
(GRI), and The Prince's Accounting for Sustainability Project are collaborating to establish an International Integrated Reporting Committee (IIRC) to oversee the development of global integrated reporting standards and guidelines.
Denmark
Denmark was the first country to require its largest companies to report on non-financial information in annual financial reporting. The Danish government hopes to show that by working strategically with corporate social responsibility, companies can become more competitive.
South Africa
In South Africa, the King III Code on Governance, released in September 2009, recommends that organisations produce an integrated report. As the King Code falls within the Johannesburg Stock Exchange (JSE) listing requirements, listed companies will have to produce an integrated report for their financial years starting on or after 1 March 2010 (the effective date of the King III Code). This requirement was implemented ahead of formal standards or guidelines for integrated reports. However, an Integrated Reporting Committee (IRC), chaired by Professor Mervyn King
, and founded by: The Association for Savings and Investment SA (ASISA); Business Unity South Africa (BUSA); Institute of Directors SA (IoDSA); JSE Ltd; and The South African Institute of Chartered Accountants
(SAICA), was established to issue guidelines on good practice for integrated reporting. A working group was also created to develop a framework for integrated reporting. The work of this committee is expected to be in harmony with the IIRC (see in Frameworks below).
United Kingdom
Other countries that have considered such a move include the UK, where the government considered requiring companies to report on non-financial information in an Operation and Financial Review. The OFR was withdrawn by UK Chancellor Gordon Brown in 2005 after six months. In 2010 the new UK coalition government has committed itself to re-introducing the OFR.
In the King III Report (otherwise known as King Code of Governance for South Africa 2009), integrated reporting is referred to in this manner: "A key challenge for leadership is to make sustainability issues mainstream. Strategy, risk, performance and sustainability have become inseparable; hence the phrase ‘integrated reporting’ which is used throughout this Report."
Companies that produce integrated reports include BASF
BASF
BASF SE is the largest chemical company in the world and is headquartered in Germany. BASF originally stood for Badische Anilin- und Soda-Fabrik . Today, the four letters are a registered trademark and the company is listed on the Frankfurt Stock Exchange, London Stock Exchange, and Zurich Stock...
, Philips
Philips
Koninklijke Philips Electronics N.V. , more commonly known as Philips, is a multinational Dutch electronics company....
, Novo Nordisk
Novo Nordisk
Novo Nordisk manufactures and markets pharmaceutical products and services. Created in 1989 through a merger of two Danish companies dating back to the 1920s, it has become one of the world's leading companies in diabetes care, where Novo Nordisk pursues research into pulmonary delivery systems;...
, United Technologies Corporation
United Technologies Corporation
United Technologies Corporation is an American multinational conglomerate headquartered in the United Technologies Building in Hartford, Connecticut...
(UTC) and American Electric Power
American Electric Power
American Electric Power is a major investor-owner electric utility in various parts of the United States. AEP ranks among the nation's largest generators of electricity, owning nearly 38,000 megawatts of generating capacity in the U.S...
(AEP). In 2008, UTC was the first Dow Jones Industrial Average member to produce an integrated report.
The Prince of Wales' Accounting for Sustainability project introduced the Connected Reporting Framework in 2007. Companies reporting using this framework, which links sustainability performance reporting with financial reporting and strategic direction in a connected way, include Aviva, BT and HSBC.
Corporate reporting on financial and non-financial information in a single document has grown as socially responsible investing
Socially responsible investing
Socially responsible investing , also known as sustainable, socially conscious, or ethical investing, describes an investment strategy which seeks to consider both financial return and social good....
(SRI) has grown faster than the investment industry overall. Globally, the SRI market has grown at an annual rate of 22% since 2003, while global growth rates for assets under management have stagnated around 10%. As more assets are managed with SRI frameworks, more investors are going beyond financial information to consider non-financial, extra-financial or environmental, social and governance (ESG) information in investment decisions.
IFAC (International Federation of Accountants)
IFAC
IFAC may refer to:* International Fine Arts College* International Federation of Accountants* International Federation of Automatic Control* Irvine Fine Arts Center* Irish Farm Accounts Cooperative...
, the Global Reporting Initiative
Global Reporting Initiative
The Global Reporting Initiative produces one of the world's most prevalent standards for sustainability reporting - also known as ecological footprint reporting, Environmental Social Governance reporting, Triple Bottom Line reporting, Corporate Social Responsibility reporting...
(GRI), and The Prince's Accounting for Sustainability Project are collaborating to establish an International Integrated Reporting Committee (IIRC) to oversee the development of global integrated reporting standards and guidelines.
Uptake of Integrated Reporting by country
This section reflects the country by country uptake of integrating non-financial information with financial reporting.Denmark
Denmark was the first country to require its largest companies to report on non-financial information in annual financial reporting. The Danish government hopes to show that by working strategically with corporate social responsibility, companies can become more competitive.
South Africa
In South Africa, the King III Code on Governance, released in September 2009, recommends that organisations produce an integrated report. As the King Code falls within the Johannesburg Stock Exchange (JSE) listing requirements, listed companies will have to produce an integrated report for their financial years starting on or after 1 March 2010 (the effective date of the King III Code). This requirement was implemented ahead of formal standards or guidelines for integrated reports. However, an Integrated Reporting Committee (IRC), chaired by Professor Mervyn King
Mervyn King (judge)
Mervyn Eldred King is a South African corporate attorney, arbitrator, mediator, corporate director, commission chair, author and speaker. A former judge of the Supreme Court of South Africa, he is currently the director of the Global Reporting Initiative and the Association of Business...
, and founded by: The Association for Savings and Investment SA (ASISA); Business Unity South Africa (BUSA); Institute of Directors SA (IoDSA); JSE Ltd; and The South African Institute of Chartered Accountants
South African Institute of Chartered Accountants
The South African Institute of Chartered Accountants , South Africa’s pre-eminent accountancy body, is widely recognized as one of the world’s accounting institutes....
(SAICA), was established to issue guidelines on good practice for integrated reporting. A working group was also created to develop a framework for integrated reporting. The work of this committee is expected to be in harmony with the IIRC (see in Frameworks below).
United Kingdom
Other countries that have considered such a move include the UK, where the government considered requiring companies to report on non-financial information in an Operation and Financial Review. The OFR was withdrawn by UK Chancellor Gordon Brown in 2005 after six months. In 2010 the new UK coalition government has committed itself to re-introducing the OFR.
Integrated Reporting Discussion Timeline
| Year | Source | Aspect of Discussion |
|---|---|---|
| 1994 | SustainAbility | Creators of Triple Bottom Line concept which started sustainability reporting, TBL reporting was historically intended to develop as a single report which considered financial and non-financial performance information in one document. |
| 1999 | PriceWaterhouseCoopers (PWC) | Created the ValueReporting Framework (now known as the Corporate Reporting Framework) that identifies information that all industries and companies share in common: market overview, strategy and structure, managing for value, and performance, all underpinned by relevant performance measures. |
| 2002 | Novozymes | Novozymes, a Danish enzyme company spun off from Novo Nordisk in 2000, produced the first corporate integrated report in 2002. Novo Nordisk began integrated reporting shortly thereafter. |
| Institute of Directors of Southern Africa (KING II) | South African governance code. Integrated Sustainability Reporting. A company is expected to report on its commitments in social & environmental areas. | |
| 2003 | Business in the Community | Release of the report by the Business Impact Review Group, "Indicators That Count", which includes findings of 20 companies in implementing a set of impact indicators covering workplace, community, environment and marketplace for external reporting purposes. |
| 2004 | SustainAbility | Timescale for experimentation with integrated reporting and challenges and opportunities associated with integrated reports. |
| Enhanced Business Reporting Consortium (EBR360) | Mission is to provide a voluntary, global disclosure framework for the presentation of the nonfinancial components of business reports, including key performance indicators. The focus of the model will be on information that delivers a broader view of a company’s current and future performance. | |
| 2005 | Allen White | Puts forward an agenda for integrated reporting, who, why, what could be common approaches. |
| Vancity | Reviews 12 organizations producing integrated reports and discusses definitions of integrated reporting based on exploratory research. Presents issues & challenges. | |
| 2007 | Alan Willis | Proposes a new corporate reporting model based on Corporation20/20 principles of governance. This includes integrating financial & non-financial information in one report. |
| The Prince's Accounting For Sustainability Project (A4S) | Proposes the Connected Reporting Framework, a framework for approaching reporting that recognizes ESG concerns. Includes reporting on “core” environmental indicators such as waste, water, energy, carbon emissions. | |
| 2008 | Corporate Register | Corporate Register began awarding the first annual award for Best Integrated Report. |
| KPMG & SustainAbility | Trends found in GRI Readers Choice’2008 survey indicate readers are looking for sustainability reports to integrated with annual financial reports. | |
| WICI, World Intellectual Capital Initiative (WICI) | WICI’s mission is to develop a voluntary global framework for measuring and reporting corporate performance to shareholders and other stakeholders. This framework is based on a combination of a PWC reporting framework and KPIs for ESG Issues by the DVFA – Society of Investment Professionals in Germany . WICI is essentially a XBRL taxonomy. | |
| KPMG & SustainAbility | Trends found in GRI Readers Choice’2008 survey indicate readers are looking for sustainability reports to integrated with annual financial reports. | |
| 2009 | International Corporate Governance Network (ICGN) | Puts forward a statement discussing the reasons for integrating non-financial information into annual reports. Couched in terms of risk mitigation and assessing the quality of management in dealing with risk. |
| St. James Palace Meeting | Meeting of key players in sustainability reporting on September 11, 2009. Discussed idea & meaning of integrated reporting and its challenges & adoption. | |
| European Commission Workshops on ESG Disclosure | Series of 5 workshops. Discussed ESG disclosure from idifferent stakeholders perspectives Identified motivations, barriers, challenges & ways of addressing these issues. | |
| Institute of Directors of Southern Africa (KING III) | South African governance code to take effect in March 2010. Provides guidance against Companies Act 2008. Asks companies to provide an integrated report that provides a holistic and integrated representation of the company’s performance. Reports may be presented in a single report or dual reports. If dual reports, then should be released simultaneously. | |
| Tracy Oates | Reports on need for integrated reporting, discusses issues and challenges involved in developing integrated reports. | |
| Jayne Mammat, Ernst & Young South Africa | Paper outlines recent trends in sustainability reporting. References King III in call for integrated reporting. Says “integrated sustainability reporting is more about management than reporting.” | |
| 2010 | Robert Eccles & Mike Krzus | Book discussing trends towards greater transparency in external reporting and how integrated reporting can address this. Coins the term “one report” as a reference to integrated reporting. |
| SAICA | South Africa has established a multi-organisation Integrated Reporting Committee (IRC). The aim is to develop guidelines on integrated reporting. Its first task will be to develop a framework for an integrated report for listed companies. The Committee is chaired by Professor Mervyn King. |
See also
- Triple bottom lineTriple bottom lineThe triple bottom line captures an expanded spectrum of values and criteria for measuring organizational success: economic, ecological, and social...
- Socially responsible investingSocially responsible investingSocially responsible investing , also known as sustainable, socially conscious, or ethical investing, describes an investment strategy which seeks to consider both financial return and social good....
- King Report on Corporate GovernanceKing Report on Corporate GovernanceThe King Report on Corporate Governance is a ground-breaking code of corporate governance in South Africa issued by the King Committee on Corporate Governance. Three reports were issued in 1994 , 2002 , and 2009 . Compliance with the King Reports is a requirement for companies listed on the...
- Social accountingSocial accountingSocial accounting is the process of communicating the social and environmental effects of organizations' economic actions to particular interest groups within society and to society at...
- Sustainability reportingSustainability ReportingCorporate sustainability reporting has a long history going back to environmental reporting. The first environmental reports were published in the late 1980s by companies in the chemical industry which had serious image problems...
- Financial statementFinancial statementA financial statement is a formal record of the financial activities of a business, person, or other entity. In British English—including United Kingdom company law—a financial statement is often referred to as an account, although the term financial statement is also used, particularly by...
- Corporate social responsibilityCorporate social responsibilityCorporate social responsibility is a form of corporate self-regulation integrated into a business model...
- Environmental Social and Corporate GovernanceEnvironmental Social and Corporate GovernanceEnvironmental, Social and Corporate Governance, also known as ESG, describes the three main areas of concern that have developed as the central factors in measuring the sustainability and ethical impact of an investment in a company or business...
External links
- http://www.sustainabilitysa.org/PressReleases/PressReleases2010/Anintegratedreportisanewrequirement.aspx
- http://www.iodsa.co.za/products_reports.asp?CatID=150
- http://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/Pages/Integrated-reporting.aspx
- http://www.accountingforsustainability.org/reporting/