Hourglass: Making the Most of Your People
Governance, reporting and assurance.
As someone who has spent most of his working life trying to improve corporate reporting, I think it is critical that everyone involved in this space clearly understands the value of the International Integrated Reporting Committee's (IIRC) work and its recent discussion paper (page 28). Put simply, it provides a vision of the future, a clear sense of the direction in which reporting should be moving.
This vision is, I believe, something around which companies, investors, policy makers, regulators and standard setters can engage and start to consider the procedural, structural and institutional implications for the reporting system we have today. We must be clear that what the IIRC has developed is a response to a market need, driven by innovating companies who recognise that the way both mainstream and sustainability reporting has evolved is not sufficient to meet changing economic, social and market needs.
The ambition of the IIRC is to make the case for a change to the mainstream model and, if successful, to put itself out of a job. But to do this, those who are responsible for the system need to consider how this type of model can evolve in a structured, valuable and logical way. This is not about ignoring all that is good about financial and other aspects of reporting today. But it is about creating a new integrated reporting model that focuses on what is strategically important and material to an understanding of a business' long-term sustainability.
Is the vision of integrated reporting in the discussion paper the answer? No, it isn't. Should we be rushing to introduce new standards tomorrow? Again, the answer is no. But we do need a reporting blueprint to help inform and guide the reporting innovation that is taking place right now in the marketplace. This is what the IIRC has started to create. And it will be greatly informed by the pilot company programme that has just kicked off (page 29). This blueprint, even in its current form in the IIRC's discussion document, can equally help policy makers, regulators and standard setters think through the implications for the evolution of regulatory reporting and the mandates and skills needed within the core institutions on which the reporting system relies.
At a time when so many aspects of the capitalist system are being debated (as this edition of World Watch illustrates), and when domestic agendas dominate the thinking of many policy makers and technocrats, it is interesting to see how much global interest and engagement there is around the IIRC's work on integrated reporting. We should cherish this position - the IIRC's ambition and momentum and the collaborative nature of its endeavour. We should also recognise success as the IIRC's ability to find consensus and shape global thinking. It could be an important factor in achieving more effective business reporting that meets the needs of the capital markets and a resource-constrained world, both today and tomorrow.
David Phillips, senior corporate reporting partner, PwC