As the International Integrated Reporting Council publishes answers to the most frequently asked questions on integrated reporting, its CEO, Richard Howitt, discusses why the time is right to adopt integrated reporting.
Would it worry you to know that you might only be looking at 20% of the likely value of your organization?
Yet that is the reality that up to 80% of the value of the company is not on the balance sheet.
Over the past thirty years, relationships in the market and in society, the skills of the company’s own workforce and the knowledge and ideas contained within the company may be ‘intangible assets’, but they are now the true value drivers of a successful company in the 21st century.
These concepts are at the heart of why the concept of integrated reporting is winning fast-growing acceptance amongst companies around the world. It is one in which social and relationship, human, natural and intellectual capital are just as important to the company, in the new era of ‘multi-capitals’ in which the business can prosper – or fail.
It is also why the role of the accountant is changing.
The International Federation of Accountants has spoken for the global profession with their position paper, saying “integrated reporting is the future of reporting.”
Those at the forefront of the profession recognize the need to understand and advise on more than just the health of an organization’s finances – understanding and articulating how all of the resources and relationships the organization uses and effects are being harnessed create long term value.
Advances in globalization, technology, the rise of social media and the ever-increasing risks surrounding climate change are just some of the emerging drivers that have led to this new recognition that the health of a company is synonymous with interconnected financial, manufactured, social and relationship, intellectual, human and natural capitals.
Accountants are helping to embed this concept of multi-capitalism through the adoption of integrated reporting. In over 70 countries, accountants are supporting their organizations pursue this new way of thinking, acting and communicating.
To support them, they are turning to the International Integrated Reporting Framework, developed by the International Integrated Reporting Council (IIRC) with the help of businesses and investors around the world, first published in 2013.
A worldwide consultation – our ‘Framework Feedback Exercise’ – held in 2017, reviewed the effectiveness of the <IR> Framework, and found strong evidence demonstrating that it is a robust and successful tool for supporting this new approach to reporting.
It helped form the basis for the launch of a new global strategic phase for the IIRC – the ‘Momentum Phase’ – as the world moves rapidly towards integrated financial and non-financial reporting becoming the global norm.
But whether you are an accountant new to integrated reporting or a practitioner helping companies to implement it, already well-informed about these developments, we recognize there are still many questions about how to approach the principles of integrated reporting.
Indeed that 2017 consultation helped us highlight some of the key questions which are being asked by integrated reporting practitioners around the world.
That is why the IIRC has today published a set of answers to some of the most ‘frequently asked questions’ about integrated thinking and reporting – available through this link to the IIRC’s website.
When using the IIRC’s frequently asked questions webpage, you can directly feed back to the IIRC about which answers were helpful – and which were not. And the IIRC will use this feedback to evolve and add to the webpage over time.
This is part of a two-year programme of technical guidance about integrated reporting following our consultation, which we are developing and publishing through to the end of this year, 2019.
Over the following months, we will also be producing a ‘Getting Started’ guide, as well as practice notes on the capitals and on the concept of value creation.
Please use these free resources, share them with your colleagues and your clients.
Integrated reporting has been forged and is gaining momentum, led by global businesses and investors who recognize that it is key to future success.
However, the global accountancy profession is playing a key role in our coalition in delivering our mission, and individual accountants have a great opportunity to forge this in your work.
I encourage you to reflect on how much your organization truly understands the interconnected risks and opportunities within your business model.
I hope our new ‘frequently asked questions’ will help you and them find the answers.