IIRC Newsletter: Conference Special

Global governance and reporting bodies convene business leaders to drive shift towards long termism globally

 

Leaders in business, investment and standard setting are meeting in London today for a global conference hosted in joint partnership - for the first time - by the International Integrated Reporting Council (IIRC) and International Corporate Governance Network (ICGN). The two-day conference, which convenes over 400 people from more than 30 markets, signals a call from major international business leaders and global investors for aligned systems of corporate governance and reporting that drive long term value creation.


After dinner keynote, Lady Lynn Forester de Rothschild, CEO, E.L Rothschild; Co-Founder & Chairman, Coalition for Inclusive Capitalism with IIRC Board Chair Barry Melancon and IIRC Council Chair Professor Mervyn King.

ICGN and the IIRC are partnering for this conference in a shared belief that better transparency through comprehensive reporting leads to more resilient companies. ICGN’s Executive Director, Kerrie Waring said, “ICGN has long advocated for reporting which puts historical performance into context while taking into account longer term growth drivers. This enables a wide range of stakeholders to understand the risks, opportunities and prospects of the company for the future. Informed investment decision-making is vital to ensuring shareholders can act as effective stewards in holding corporate boards to account. This is emphasised in the ICGN Global Stewardship Principles - our flagship document which is being emulated around the world.”

This view was shared by Richard Howitt, CEO, IIRC who said, “Capital markets moving towards the long term with a broader approach to value creation improves performance. The diverse international coalition which is the IIRC is committed to making this a reality. Integrated Reporting is a key vehicle for businesses and investors to have a better dialogue. It is my goal for Integrated Reporting to become a reference point for 21st century corporate governance, to create long term value for businesses and investors together."

ICGN draws from a global membership led by investors responsible for assets under management in excess of US$26 trillion and the IIRC is a global coalition of regulators, investors, companies, standard setters, the accounting profession and NGOs. Organizations from their members and networks speaking at the conference include, from the investor perspective: Newton Asset Management, CalSTRS, Schroders, Florida State Board of Administration and BlackRock and from business: Itaú Unibanco (Brazil), Interserve (UK), SAP (Germany), Eisai (Japan), Tata Steel (India) and Microsoft (USA).

Speaking at the conference, Bertrand Badré, former-CFO, World Bank said, "As we continue to struggle in the aftermath of the global financial crisis it remains crucial to focus on tools and practices that can make a difference and contribute to restore trust in the market economy system. Proper corporate governance and integrated reporting can help to achieve this.”

Sir Win Bischoff, Chairman of the Financial Reporting Council, said, “Values, behaviours and a good governance structure are central to the way an organisation achieves its objectives. By weaving these attributes into your business model, you are not just contributing to the overall success of your business, but creating an environment on which all stakeholders can depend. In that way we all create sustained growth. This ICGN-IIRC conference is an ideal opportunity to consider for implementation strategies to achieve long term value creation.”

Our thanks to Conference sponsors:  

Joint statement: ICGN and the IIRC call for dialogue for longer term value creation


The IIRC and ICGN are calling for aligned systems of corporate governance and reporting that drive long term value creation. In a joint statement they have suggested practical ways to encourage longer term thinking and behaviours by capital market participants. 

This includes:

  • A focus on the longer term with strategy, performance, governance and prospects aligned to value creation over time
  • Investors as stewards, taking a proactive interest in all aspects of value creation
  • Reporting as a key pillar of 21st century governance, leading to transparency and information disclosures which help investors to better understand companies and make better investment decisions.

IIRC and ICGN both promote dialogue between participants in the capital markets to encourage a longer term focus in generating sustainable business and investment. This is expressed in ICGN’s policy theme ‘promoting long term investment priorities and sustainable value creation’ and the shift the IIRC is calling for from ‘short term capital markets to sustainable capital markets.’

Many investors are increasingly engaged in proactive dialogue with companies to support and influence long term value creation and reap the benefit of sustainable returns. It is a call that has been answered by over 1,000 companies across the world that are using the International <IR> Framework to produce integrated reports. ICGN’s own policy framework recognizes the importance of integrated reporting - and integrated thinking more generally - as long term success in today’s complex economic, social and environmental landscape is increasingly dependent on factors not directly reflected in financial statements.

Information is the lifeblood of capital markets and that information should capture as complete as possible a picture of the business’ strategy, value creation, resources, risks and opportunities. The interaction of this with better stewardship by investors will be better capital allocation, serving the wider public interest goals of financial stability and sustainable development.

Professor Mervyn King publishes latest book as he is bestowed the ICGN Lifetime Achiever Award


Professor Mervyn King, Chairman of the IIRC Council, has released his latest book 'The Chief Value Officer: Accountants can save the planet'. Through the book Mervyn King, who has written the book with Jill Atkins, challenges some of the systemic issues preventing organizations from managing in an integrated value creation way.

He states that the 'shareholder-centric governance model, currently favoured by most companies, will not result in changes to corporate behaviour that can create value in a sustainable manner'. The book, therefore, 'firmly places the accountant in the position of change maker' arguing that 'the finance professional today should be more of a value officer than a financial officer. Consequently, the Chief Financial Officer should be known as the Chief Value Officer.' The book explains this approach and encapsulates the essential reasons for adopting Integrated Reporting. 

During the conference Professor King was awarded a Lifetime Achiever Award by ICGN. ICGN Award candidates are nominated by ICGN members who send recommendations to the ICGN Awards Committee for consideration.

ICGN Chair Erik Breen said, "Mervyn King stands for unconditional commitment to true stewardship and a holistic view on the real economy. In his career he has shown remarkable leadership and he has consistently used his influence for the progress of the many rather than of the few."

IIRC Council meet in London

 
The IIRC Council met in London this week, hosted by the ICAEW. During the meeting the Council members identified linkages between Integrated Reporting, corporate governance and stewardship. The Council advised the IIRC team on the potential role of integrated thinking and reporting as the 'information architecture' underpinning 21st century corporate governance practice. This especially will happen through their alignment to corporate governance and stewardship codes around the world which are bringing about a renewed focus on long term investment and value creation.

2017 will be a pivotal year for the IIRC, as it marks a transition from the breakthrough phase of its strategy (2014-2017) to a new global adoption phase (from 2018). Development of the strategy for the global adoption phase has been informed by the advice and input of Council over the last eighteen months. A key pillar of the global adoption phase is to bring about "a demonstrable shift towards the acceptance of Integrated Reporting as a principle of 21st century corporate governance." The Council discussion focused on what this means in practice and identified the key qualities and characteristics of that principle to ensure it gains broad acceptance. 

Council were also asked to comment on the results of the IIRC's first stakeholder feedback survey. There were 535 responses to the survey which was live between 25 May and 24 June 2016. Important findings included the perceived quality of the <IR> Framework and its alignment to market needs; the strength of support for Integrated Reporting as an umbrella for corporate reporting; and the recognition that Integrated Reporting promotes a more joined up and efficient approach to corporate reporting.

The IIRC team also shared with Council an overview of a review into the second annual reporting cycle following the launch of the <IR> Framework in December 2013. 50 reports were selected at random for a comprehensive analysis, whereby the application of several <IR> Framework requirements were assessed. The review of integrated reports and feedback received from the Council will be key inputs to the post-implementation review of the Framework, which will include engagement with and feedback from a broad cross-section of stakeholders during the first half of 2017.

The IIRC Board, <IR> Framework Panel, Corporate Reporting Dialogue and <IR> Business Network are also meeting in London during this important week for the IIRC.

New endorsement adds significant weight to voice of accountants

 
The accountancy profession has been a lead advocate for Integrated Reporting over the course of its development and adoption. The Global Accounting Alliance has added significantly to this support by releasing a statement of support for Integrated Reporting. The statement states:

"The accounting profession plays a vital role in the global economy. The transparency, accountability and financial management that  accountancy provides leads to well-functioning economies, enables capital flows and increased prosperity. Accountants have a unique window into an organisation understanding how they create and sustain value over the short, medium and long term.

Many stakeholders only see the short term window, when it is important that both organisations and their stakeholders focus on the long term. We believe <IR> helps stakeholders understand what is creating long term value. It brings into focus the business model,risks and opportunities, and the organization’s viability into the future, through taking into consideration all of the resources and relationships that contribute to the organizations success. <IR> means greater transparency and more coherent corporate reporting which should lead to a more effective global economy. 

We, the Directors of the Global Accounting Alliance, an alliance of the ten leading professional accountancy bodies listed below, provide our support to the implementation of <IR>. We believe business and professional accountants should embrace <IR> to achieve greater transparency and shift the focus to more long term thinking and behaviours, leading to better decisions and capital allocation. The Global Accounting Alliance supports the International Integrated Reporting Council’s vision to align capital allocation and corporate behaviour to wider goals of financial stability and sustainable development. This represents an important alignment between the profession’s role to enhance public trust through high professional standards and ethics, and wider societal goals.

Integrated Reporting presents a significant opportunity for professional accountants around the world to enhance the value they offer to their employers and organisations, identifying drivers of value creation and using insight and professional skills to enhance value. Through this they can play a central role in the evolution of corporate reporting, leading to enhanced dialogue with investors and providers of financial capital, and increase public trust. Through an enhanced understanding of the wide range of factors – beyond the purely financial – that affect the organization’s ability to create value, accountants will be in a position to provide leadership utilising the information that is material to the organization and the decisions that need to be taken to ensure its continued success."


The Global Accounting Alliance (GAA) is an alliance of ten professional accountancy bodies in significant capital markets. Over recent years the IIRC has worked closely with both the GAA and its individual bodies to develop, test and ensure the robustness of the concepts of Integrated Reporting. These bodies continue to provide vital support and guidance to the work of the IIRC.

The statement is available online.

New research calls for purpose beyond profit


Research launched at the Conference by CIMA, AICPA, Black Sun and the IIRC concludes that executives globally agree on the increasing value of understanding and communicating the value creation potential of their organizations to build relationships with stakeholders and improve integrated thinking and strategic decision-making. 

The survey of over 400 senior executives globally shows that:
  • 79% agree that a longer term perspective on strategic planning would improve value creation potential
  • 93% agree that corporate reporting is critical to capture the value creation story
  • 83% believe that adopting <IR> would help deliver success to their organisations
  • 79% believe that investors want future perspective.
However, the survey also suggests that executives lack the management and reporting information to understand and interpret the future drivers of their business. The International <IR> Framework is a key means for achieving this and over 1,000 companies around the world are using it to communicate their value creation story. 

The paper '2016 Value of Value: Board-Level Insights' is a regular global survey that finds out how business leaders think they can best tell their value creation story.

ACCA and the IIRC give insights into <IR> Business Network participants' reports


During the Conference ACCA and the IIRC are providing a summary of a review of <IR> Business Network participants' reports with the intention that these findings will support implementation of the <IR> Framework. The reports have been reviewed by investors and <IR> specialists to improve understanding of current progress and opportunities for improvement. 

Key preliminary findings of a review into 41 <IR> Business Network participants’ reports demonstrates that companies are using Integrated Reporting as a tool to support progressive reporting.

Overall the conclusion of the project is that many of the <IR> Business Network participants are at the leading edge of Integrated Reporting and innovations in reporting in general, with others continuing to make progress in the quality of their reporting. Particular strengths include reporting on strategy, stakeholder relationships and value creation.

Out of the reports reviewed:

  • 66% explained well how the organisation creates value for itself and others
  • 88% provided information on the different resources or capitals they rely on beyond the purely financial
  • 71% shared good insights on their strategy for success.

ACCA will use the key findings to inform a wider thought-leadership paper in 2017.

Read IIRC and ICGN address to Conference:

Richard Howitt, CEO, IIRC

and

Kerrie Waring, Executive Director, ICGN
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Contact: juliet.markham@theiirc.org
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