Framework providers should be collaborative rather than competitive

Posted
28 June, 2019

Corporate Reporting and Investor Expectations Conference and the Bell Ceremony, 18 June 2019, Borsa Istanbul

Along with the development of and the growing interest for integrated reporting in Turkey, an international conference had been initiated by the Integrated Reporting Network Turkey (ERTA) for exploring corporate reporting and investor expectations.

The conference, which was organized in collaboration with and held in Borsa Istanbul (BIST), began with the bell ceremony of June 18th, 2019. Followed by the opening remarks, the bell was rung together by BIST CEO and Deputy Chairman Murat Çetinkaya; Chairman of Capital Markets Board of Turkey Ali Fuat Taşkesenlioğlu; International Integrated Reporting Council (IIRC) Chair Emeritus Professor Judge Mervyn King; Chairman, World Benchmarking Alliance and Former CEO of IIRC Paul Druckman and on behalf of ERTA, myself in the name of all the companies preparing integrated reports.

In his opening remarks, Mr. Ali Fuat Taşkesenlioğlu stated that we were living through times in which companies were expected to be responsible and transparent to their employees, shareholders, the society, and the entire ecosystem. Integrated reporting, enabling financial and non-financial information to be presented as a whole and in relation to each other, has emerged to meet this need. Through integrated reporting, it is stated that investors see the non-financial risks as well as financial risks of companies while making decisions, and understand how they manage these risks and create value in the short, medium and long term. Finally, he emphasized that the widespread use of integrated reporting in Turkey would contribute positively to Turkish capital markets.

Mr. Murat Cetinkaya expressed that together with regulatory authorities, BIST had worked towards directing at least 10 percent of the asset allocation of certain funds in the private pension system particularly to companies listed in the BIST Sustainability Index and BIST Corporate Governance Index. Additionally, he highlighted that developments in integrated reporting and the future of reporting were closely following and BIST would continue to support such efforts as a competent institution in both regulation and implementation in Turkey.

Keynote speaker, Professor Judge Mervyn E. King has emphasized that humans were still learning the lessons from a financial crisis that had shaken capitalism to its core; and that we had to strengthen our model for the future collectively. Good corporate reporting has a significant role to play in helping to restore the trust that has been lost. Corporations need to communicate more clearly, openly and effectively with investors and other stakeholders. They also need to report in concise and comprehensible language for their long term strategic plans. Professor King also stated that senior executives of the companies had to increase the awareness of integrated thinking and implement integrated thinking into corporations’ value creation process. He also highlighted that the key point was that the information in an integrated report should be fundamental to the creation of value. By this way, such kind of information could allocate capital more efficiently, decreasing the short-termism and increasing long-termism in corporations. Furthermore, he stated that the board had to spend more time understanding that which was material and put it in clear, concise and understandable language in its report and had to inform stakeholders about the true state of play in a company and its outlook. Additionally, he stated that corporate reporting as we had known it for decades was not fit for purpose for the 21st century. We need robust strategies for a radical transparency and for satisfying stakeholders’ higher-than-ever expectations. In regard to future corporate reporting, framework providers should be collaborative rather than competitive. The outcome of such collaboration in each cluster of framework providers will be the ability of stakeholders to make a more informed and comparable assessment of the company as to its present state and its outlook.

Paul Druckman first highlighted some of the misconceptions about the understanding of integrated reporting. He stated that integrated reporting was not yet another kind of reporting, but rather an evolution in the way corporations think and act. Corporate reports are becoming more about a true communication about the story of a business, rather than just compliance disclosures.  This story should be more accessible to all stakeholders. Additionally, he emphasized that capital market players, including investors and companies, were responsible for creating sustainable value for beneficiaries, the economy and society. Currently they are struggling to know how to do that. Last but not least, he mentioned the task force on climate-related financial disclosures. He stated that such a reporting could change the formulation of disclosure principles related with the climate risks in the corporations.

The participants from Capital Markets Board of Turkey, Central Securities Depository of Turkey, Public Oversight Accounting and Auditing Standards Authority highlighted that high-quality corporate reporting mattered to capital market participants. Integrated reports have a potential to bring the benefit of an improved information environment for reporting companies. Both of the regulatory bodies in Turkey declare that a mechanism to ensure the reliability of the information in integrated reporting and audits of integrated reports are significant.

The other participants of the conference declared that integrated reporting practices would provide significant benefits for providing qualified information and that that kind of information would increase the investment confidence in the emerging markets. Additionally, the importance of incentive mechanisms for firms with integrated reports had been highlighted. Furthermore, all participants stressed that ERTA should set up projects, hold such kind of conferences and organize training for corporations in order to increase the awareness of companies in integrated reporting.

Along with the development of and growing interest for the integrated reporting in Turkey, researches in this field for creating necessary strategies and road maps have become crucial as well. In line with this requirement, we conducted a comprehensive research titled ‘Integrated Reporting in Turkey: Current Situation, Stakeholders’ Perceptions and Expectations, for determining the current status and potential development in Turkey regarding the integrated reporting. In this research, we intended to refer the entire stakeholders to comprehensively put forth the perceptions and expectations with regard to the integrated reporting and corporate reporting practices. The research was carried out by Yildiz Technical University, Center for Finance Corporate Governance and Sustainability (CFGS) in cooperation with Association of Chartered Certified Accountants (ACCA), KPMG Turkey and supported by ERTA.

Hence, I wish that conference results help the shaping of future strategies on corporate reporting and become beneficial to all stakeholders by contributing to the movement towards integrated thinking. As Professor King stated; it was collaboration 70,000 years ago that made humankind the superior and most populous creature on planet earth. We need that collaboration or integration today between a company’s business model, its strategy, its outputs, its outcomes, and even its impacts. Thanks to both Mervyn King and Paul Druckman’s incredible motivation, alongside with the Turkish regulatory bodies support, I have assumed an important responsibility as an independent founding member and the executive committee chairwoman of ERTA to maintain the ongoing efforts under a corporate umbrella through IIRC.