Global Integrated Reporting Still Has Room for Improvement

The adoption of integrated reporting, or IR, by corporates can be challenging but generates tangible organisational, reputational and commercial benefits, according to a new analysis.

The Insights into Integrated Reporting report, published by the Association of Chartered Certified Accountants (ACCA), reviewed 41 corporate reports from around the world, with one of the main reviewers being Professor Marvin Wee of the University of Western Australia.

According to the IR framework: “An integrated report should disclose information about matters that substantively affect the organisation’s ability to create value over the short, medium and long term.”

The review found that reporting quality was high across IR participants, and delivered several common benefits including: more integrated thinking and management, greater clarity on business issues and performance, improved corporate reputation and stakeholder relationships, more efficient reporting, employee engagement and improved gross margins.

However, the report also identified several areas where reporting could be improved:

• Value creation: widespread challenges in identifying and articulating what the organisation’s stakeholders perceived as “value”.
• Connectivity: companies identified this as one of the biggest challenges with implementing IR. It required breaking down silos within the organisation and changing existing data collection processes.
• Defining performance measures: thinking and practice was still immature in articulating the value organisations derive from non-financial capitals.
• Materiality: companies found it challenging to reconcile the needs of different stakeholders. Improving the materiality determination process could help drive improvements in conciseness, completeness and reliability.
• Conciseness: nearly half of the integrated reports reviewed ran over 150 pages. Companies found it difficult to reconcile conciseness and meaningful communication with stakeholders.
• Reliability and completeness: the reviewers felt that only 51 per cent of the reports reviewed achieved a balance of good and bad news in equal measure. Companies need to know what “good reporting” looks like, before they can implement internal control processes and consider external assurance on their integrated report.

Manager of corporate reporting at ACCA, Yen-Pei Chen said reviewing the corporate reports produced by companies “leading the charge” on integrated reporting had given them unique insight into the progress made on IR adoption.

“The aim of integrated reporting – through integrated thinking – is to create a more stable and sustainable global economy, by encouraging companies to think about how they do business in a more holistic and forward-looking way. In today’s volatile environment, this vision is as pertinent as ever,” Chen said.

“Our research has found passionate support for the aims of IR among business leaders, but it has also pinpointed specific barriers to better reporting.”

CEO of the International Integrated Reporting Council Richard Howitt said: “As the uptake of integrated reporting continues to grow across the world, this study shows there is equal effort put into raising the quality of integrated reports as well as the number.

“It is also shows the concrete advantages not simply of companies undertaking integrated reporting but of their joining the international IR business network, to learn with others and to be global advocates for change.”

Chief executive of ACCA Helen Brand said: “As IR moves towards its global adoption  phase next year, this new report explores the progress pioneering adopters have made – what they have learnt, the challenges they have faced, and the organisational value they’ve gained.

“It’s clear from this report’s findings that integrated reporting is enabling a range of companies to articulate more clearly and fully what truly drives them forward. This, in turn, is leading to greater clarity on, and management of, challenges and opportunities. In essence, integrated reporting is a means to an end, rather than end in itself – and that final destination is integrated thinking.

“Stakeholders rightly expect today’s organisations to safeguard all forms of capital – financial, natural, human, intellectual and social – and so wider forms of corporate stewardship have never been more important. Only by adopting this approach can we instil the public trust and confidence that is so vitally important to the health of the global economy.”