New European proposal "vital" for Integrated Reporting

After serving for more than ten years as Rapporteur to promote corporate social responsibility in the European Union, I became increasingly sure that transparency was the key for businesses and that a global rather than a European approach was the way to achieve it.

I concluded that some of the top companies had achieved much through sustainability reporting, but that integrated reporting was essential to win mainstream business support and engagement.

It was why I was honoured to be asked to serve as an Ambassador for the Prince’s Accounting for Sustainability Project and now for the International Integrated Reporting Council itself.

My efforts have been to help IIRC raise awareness and gain recognition for the movement towards IR with Governments and public policy makers in Europe, in the G8/G20 and at the United Nations.

But when the IIRC’s draft framework was published on the very same day as a draft EU law on company non-financial reporting in April earlier this year, it presented a very important challenge – and not simply, as I had to be present at both launches (I was!).

Nobody connected with IIRC suggests that it is time or even appropriate to legislate for IR. The European legislation could have been a step in the wrong direction, yet it could also be a vital movement towards the right one.

Having first proposed a change in the EU’s Accountancy Directives to encompass environmental, social and (later) human rights impacts of the company, I had pressed equally hard that no “Europe only” approach should be adopted.

So the draft EU proposal avoids falling through any “trap doors,” by promoting international frameworks and refusing to enshrine any one EU methodology in the text; by allowing a ‘comply or explain’ approach and by restricting its application to only the largest of companies.

Crucially for Integrated Reporting however, it brings sustainability reporting in to the annual financial report, making the case that non-financial factors very much have financial implications for the company.

However, reference to the principle of IR was included only in the commentary when the draft law was published but not the text itself, losing a crucial opportunity to raise its visibility, in exactly the same way we have been seeking in other inter-governmental institutions worldwide.

Therefore I have submitted an amendment encouraging EU member states to implement the directive, “consistent with the objective of integrated reporting.” Although in a non-legally binding “recital” to the text, it sends an important signal of intent, which is absolutely right at this stage in the evolution of IR itself.

I hope the companies piloting IR and all those associated with the IIRC, will join me in supporting the European proposal, and specifically this new amendment relating to IR.

When I meet colleagues from India, Brazil and South Africa, I feel Europe is behind not ahead when it comes to business sustainability and its transparent reporting.

The new EU proposal will help put Europe back amongst the forefront of the global debate on Responsible Business and, if my amendment is accepted, provide a globally important step towards Integrated Reporting itself.

Richard Howitt MEP

European Parliament Rapporteur on Corporate Social Responsibility
Ambassador for the International Integrated Reporting Council