“Renewing and improving the architecture of our national and international political and economic systems is this generation’s defining task. It will be a monumental undertaking, but an indispensable one”, Borge Brende, President, World Economic Forum
2020 will forever be remembered as a year of great disruption caused by a global pandemic from which some of us are now starting to recover. The combined forces of medicine, scientific ingenuity, academic expertise and private sector innovation – in the form of vaccines developed in the laboratories of major pharmaceutical companies – will ultimately bring an end to this pandemic. We all hope that 2021 marks the return to some sense of normality and a recovery from which all sections of society will benefit. This will undoubtedly become one of the unifying global missions of the next few years.
In many ways, however, the ‘new normal’ will look and feel different from what went before – and so it should. With the UN COP 26 climate change conference on the immediate horizon, just nine years left to meet the UN’s Sustainable Development Goals and further geopolitical changes in prospect, a new sense of urgency is gripping both the private and public sectors. The private sector, facilitated by the potentially game-changing role of technology in driving the transition to a net zero world, must continue to be mobilised as a priority. Away from the daily drumbeat of the pandemic’s deadly force, innovation of a different kind has been taking shape in the form of renewed action to define a corporate reporting system that is fit for this and future generations – taking account of the multi-faceted risks and opportunities that businesses face every day.
We have used this moment to accelerate our own strategic progress by announcing our intended merger with SASB and the creation of the Value Reporting Foundation. The Foundation will be a catalyst for further consolidation and alignment of corporate reporting frameworks and standards. The IFRS Foundation’s work remains of great strategic significance and we look forward to strengthening our engagement with them, the EU and IOSCO to seek agreement and endorsement of a globally accepted comprehensive corporate reporting system, and complements our direct engagement with regulatory authorities in national jurisdictions. The Foundation will provide a powerful platform to influence the development of corporate reporting into the future as we work towards seeking endorsement for our vision that will embed integrated reporting principles and concepts, creating a permanent legacy for our decade-long mission.
As our founder and Chair Emeritus Professor Mervyn King has reminded us, all of the corporate reporting frameworks and standards organizations were founded to pursue public interest objectives and it is therefore right that when the public interest demanded collaboration and alignment, five bodies (CDP, CDSB, GRI, IIRC and SASB) came together to set out a joint vision for a comprehensive global corporate reporting system, fuelled in December 2020 by practical guidance and a prototype standard on climate-related financial disclosures. This work is a response to the demands of the private sector and governments. As Mark Carney, the former chair of the Financial Stability Board who is leading private sector preparations for COP 26 has said, “Companies need to report systematically their climate-related financial risks and auditors need to provide assurance on how companies take the impact of climate change into account”.
The commitment, momentum and innovation by companies has been remarkable. Through a collective effort to address the imperfections in the current system, even more progress and investment will occur in the sectors that will power sustainable growth, increasing progress towards meeting the SDGs and reducing unnecessary complexity, which impacts the uptake of standards that are essential to achieve financial stability and sustainable development.
It is why the IIRC’s leadership has been fully engaged in all the major efforts to provide the impetus for a globally accepted comprehensive corporate reporting system – a new settlement for corporate reporting that will embed the principles of integrated thinking and reporting within mainstream governance and practice. For our own part, we have undertaken a major global consultation on revisions to the International <IR> Framework, which required us to make a minimal number of changes to provide an increased focus on clarity, quality and simplicity. We have also been actively engaged in discussions with IOSCO, the IFRS Foundation and the EU as these organizations consider their own responses to the need for clear and comprehensive standards that respond to investor and societal needs while avoiding market fragmentation.
We have consistently made the case for a globally accepted comprehensive corporate reporting system and believe that the <IR> Framework has a significant role in the development of a conceptual framework that connects financial reporting and sustainability disclosure standards and reporting so that companies are able to provide a complete view of how they are creating enterprise value.
We have been excited by the response so far from market participants both to the combined work of standards and frameworks bodies and the proposed IIRC-SASB merger and the creation of the Value Reporting Foundation. The next phase of our strategy is to provide a secure home for integrated reporting principles and concepts, as well as the standards that enable global consistency and comparability. We believe that the IFRS Foundation, IOSCO and the EU are the institutions best able to translate this vision into reality.