Reporting standards are changing, and they will continue to evolve over the next 18 months. To help companies interpret the implications for their reporting strategies, BSR has conducted interviews with the Sustainability Accounting Standards Board (SASB), the Global Reporting Initiative (GRI), and the International Integrated Reporting Council (IIRC).
We discussed the future of the IIRC with Neil Stevenson, Managing Director, Global Implementation.
Dunstan Allison-Hope: The International Integrated Reporting <IR> Framework was published in December 2013. How will it be maintained and revised going forward?
Neil Stevenson: There have only been three annual reporting cycles since the International <IR> Framework was released. Since then, integrated reporting has been established as a permanent feature of the corporate reporting landscape. Feedback from the market therefore suggests that companies still need time to embed integrated reporting before we can properly consider whether future modifications to the <IR> Framework are needed. In the meantime, the IIRC has appointed a panel of technical experts from across the world and from a large range of professional backgrounds to support the IIRC in its technical role. The Panel will recommend any revisions, modifications, or updates to the <IR> Framework to the IIRC Board.
Allison-Hope: GRI and SASB are both in the middle of public consultations about the future of their standards. While each reporting framework has a distinct purpose, what efforts are underway to increase consistency between them?
Stevenson: The IIRC is committed to play a key role in promoting a coherent approach to corporate reporting. Eight of the world’s most prominent organizations in corporate reporting strengthened their cooperation in 2014 through the Corporate Reporting Dialogue, an initiative convened by the IIRC and designed to respond to market calls for greater coherence, consistency, and comparability between frameworks, standards, and related requirements.
The first outputs include the publication of the corporate reporting landscape map last year and, more recently, the release of the Statement of Common Principles of Materiality. We are working with the other participants of the Corporate Reporting Dialogue, which include GRI and SASB, to build on the momentum we have created since 2014 to ensure there is a cohesive direction for the corporate reporting landscape as a whole. It should also be noted that the International Financial Reporting Standards (IFRS) trustees also recently completed their triennial strategic review and concluded that they should continue to collaborate closely with the IIRC.
Allison-Hope: What has been the level of uptake of integrated reporting?
Stevenson: In developing the <IR> Framework, we worked closely with more than 150 businesses and investors from more than 25 countries to ensure it responded to the needs of both report preparers and report users. I believe this approach has led to the impressive uptake that we have witnessed in the last three years. There are now more than 1,000 organizations using the <IR> Framework in their reporting. Adoption is increasing across most world regions, notably in Europe and Asia, building on the leadership shown by South Africa following the King Report on Corporate Governance. Notably, more than 200 companies released integrated reports in Japan in 2015, and a third of listed companies in the Netherlands are introducing integrated reporting. There are also prominent integrated reporting developments in the United States—for example, Eli Lilly, GE, and JLL.
Allison-Hope: How are lessons learned from actual company reporting practice being integrated into the IIRC’s future plans?
Stevenson: A key strength of the IIRC is that we strive to be market-led in our work. This approach leads to a better caliber of corporate reporting by ensuring we have listened to and understood the needs of the market and considered the various views of our coalition. In practical terms, this means engaging with report preparers through our range of networks—both the global <IR> Business Network and smaller sector- and region-based networks. We also maintain the <IR> Examples Database, which has practical examples of current leading practices in integrated reporting.
Allison-Hope: The International Integrated Reporting Framework takes a principles-based approach and doesn’t specify metrics. However, many jurisdictions take a rules-based approach to disclosure requirements. How do you view the relationship between the two?
Stevenson: Corporate reporting is all too often performed in a silo, disconnected from board decisions on risk or consideration of the business model. Integrated reporting is the umbrella for corporate reporting. It deliberately draws on the metrics that other frameworks and standards provide, rather than creating new metrics. This allows reporters to integrate performance metrics material with value creation in a consistent way, to provide information and a strategic context valued by investors. The <IR> Framework helps focus board thinking and decision-making on strategy—which we call integrated thinking. In this way, the <IR> Framework is compatible with reporting in all jurisdictions. In instances where there are complexities adopting integrated reporting, such as directors’ liability, the IIRC is working to remove barriers to adoption. Above all, we want to ensure companies can be innovative in their reporting, in the pursuit of excellence in reporting on value creation.