Integrated Reporting has a role to play in the shift from short-term capital markets to sustainable capital markets. As the World Economic Forum in Davos focused on “The New Global Context” such as climate change, big data and the increasing necessity to plan for the long term, Paul Druckman, CEO, IIRC was invited to speak about the role Integrated Reporting has in creating sustainable markets.
As research into the businesses moving towards <IR> demonstrates, corporate reporting is central to improving decision-making, strengthening risk management and counteracting the misallocation of financial, natural and human resources – all of which are crucial for operating successfully in this new global context.
Christine Lagarde, Managing Director, International Monetary Fund said, “Growth, trade, development, and climate change: 2015 will be a rendezvous of important multilateral initiatives. We cannot afford to see them fail.” The IIRC will continue to play its part in tackling these issues by encouraging an end to incentive systems, such as quarterly financial reporting, that perpetuate short term thinking and decision-making. We are encouraging the introduction by regulators of principles-based Stewardship Codes for institutional investors that sit alongside the Corporate Governance Codes and underpin strong dialogue focused on strategy, resource allocation and value creation over the short, medium and long-term.
Speaking at Davos, the Colombian Minister of Finance, Mauricio Cardenas said that he is, “no expert in climate change, but an expert in paying bills, and I am paying them every day because of climate change.” This quip gets to the core of Integrated Reporting – for too long reporting has focused on the purely financial, failing to give proper consideration to the fact that the other resources which have been sidelined – such as natural capital – are core to the value creation story, and therefore must be integrated into the same strategy, decisions, and reports as financial capital.
Paul Druckman commented, “The real message from Davos was that the challenges the world faces are interconnected, and to solve them they must be faced together. It is clear that business leaders believe 2015 is the year to act – there has never been a better time for corporate reform. As markets and businesses begin to strengthen and regain trust, there is a real opportunity for reform that focuses decision-making on long term prosperity to take hold.”
The IIRC will continue its involvement in global policy initiatives in 2015 in order to bring about solutions to the challenges highlighted at the World Economic Forum. In particular the IIRC will participate in the B20 process during Turkey’s presidency of the G20 in 2015, which will take forward recommendations from Australia’s Presidency, and will examine whether corporate reporting can become more conducive to long-term investment, particularly in infrastructure.