What is the value of a park?
Grant Patterson, Programme Lead, Public Sector Pioneer Network, IIRC, talks about a Public Sector Pioneer Network debate, held to coincide with the first IIRC Council meeting of 2015.
It was clear from the Public Sector Pioneer Network event that interest in the public sector for Integrated Reporting <IR> is gaining considerable momentum. Public sector bodies are realizing that they can use <IR> to not only help them think of innovative and different ways to operate in an era of austerity, but also to better communicate with their stakeholders. Just as much, if not more so, than private companies, public sector bodies have a duty to be accountable for their actions – and to be accountable they must make sure that they are understandable.
Guests used the event as an opportunity to discuss how, through using <IR>, they can build and improve stakeholder trust and confidence in public sector bodies. As Zinga Venner, Financial Reporting and Analysis Manager at the World Bank articulated, in the private sector shareholders have the ability to choose who they invest in, in the public sector there is a contract through taxes. This means public sector bodies have a duty to explain their resource allocation decisions and the trade-offs between resources that they use.
Continuity in the public sector is crucial, and yet often when a new government comes in, with their own policy ideas, old work plans are forgotten. Through <IR>, there is more transparency regarding the strategy an organisation is persuing, and what resources and relationships are needed to contribute to its success. New officials are able to get relevant, concise information in order to bring them up to date, and understand the direction the public sector entity is moving in.
John Lelliot, Finance Director, The Crown Estate, gave astute insights into how his organisation has been working towards <IR>. He spoke of the crucial aspect of integrated thinking, about the necessity of having a well thought out business model, and the importance of understanding what outputs are needed to achieve desired outcomes.
Mr Lelliott also signalled that from his experience the move towards <IR> needs to come from the top of an organisation. The Crown Estate embarked on a journey towards <IR> when their new CEO asked senior management to produce a 10 year strategic vision, something they felt could best be achieved through applying <IR>. He made a strong call for finance directors to embrace <IR>, acknowledging that a crucial part of their role is now to look beyond the financial statements.
KPMG’s Ben Wieglus asked, ‘What is the value of a park?’ Traditional financial accounting cannot give the full picture – you cannot simply weigh up how much it costs against how much it makes. However, you can use the six capitals to estimate its true value – through for example, social and relationship, natural, and human capital set against the financial and manufactured capital put into the park. As he explained, this becomes even more important where local councils look more to parks as a potential substitute for when they can’t afford to run public gyms or use libraries as community hubs, and so it is important that they have a way to communicate the value of these efforts and the trade-offs they are having to make.
Mr Wieglus announced that KPMG is recommending <IR> to Bristol City Council as the best basis for reporting to stakeholders about a sustainable city, and for communicating the ‘true value’ of its work. Bristol has been awarded European Green City for 2015, which is driving it to look for new approaches to reporting, as a means to communicate its efforts to drive sustainability in the city.
Professor Mervyn King, Chairman of the IIRC, closed the meeting with a challenge to public sector bodies to embrace the opportunity to realise the potential benefits and opportunities that <IR> provides and be a source of innovation to continue to take this evolution in corporate reporting forward. Over the coming weeks I will be working closely with the Chartered Institute of Public Finance & Accountancy (CIPFA), which supports the IIRC’s work in the public sector, to ensure the benefits, challenges and opportunities discussed at this event are introduced more widely in the public sector community, to ensure that increasing numbers of public sector bodies have the opportunity to use <IR> as a means for communicating in the 21st century.