International Integrated Reporting Council (IIRC) Chief Executive Richard Howitt reflects on his week at the World Economic Forum.
This year’s World Economic Forum started with a return to focusing on mainstream economic issues, with the PwC Global CEO survey headlining a sharp drop in business confidence, combined with traditional business concerns about over-regulation and trade protectionism.
But the most compelling evidence of a change in the business landscape to one based on inter-connectedness, ‘Industry 4.0’ technological change and external social and environmental shocks, is that short-term economic ‘ups and downs’ fail to quell business leaders’ attention to this profoundly changed world.
The rest of this week in Davos proves the point.
The aggregator of social media posts from Forum participants undertaken by KPMG, saw climate change and gender equality being two of the four most talked about issues during this year’s Forum.
Three of the top five threats to business outlined in the WEF’s own Global Risks Review 2019 presented here in Davos, reflect concern over extreme weather and climate change. However, the report is strident in warning us not to be distracted from the human side of global risks.
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The Deloitte ‘Readiness Report’ also launched here, saw 2,000 c-suite executives rating “societal impact” over financial results, as the most important factor when evaluating their organizations’ annual performance.
Korean conglomerate and a leading member of the International Integrated Reporting Council’s own business network, SK Group, hosted a debate here showing how the company had changed its articles of association to give equal emphasis to social as well as financial value – and had investor support for doing so.
This year’s Edelman Trust Barometer launched here showed two thirds of employees wanting their company to take action on societal issues. Interestingly, it showed very much higher levels of trust in their employer compared to business generally, indicating the leverage companies do have – if we choose to use it.
Two more reports published by the World Economic Forum itself to mark the week, specifically signposted to integrated reporting itself.
Integrated reporting is recommended as a guiding principle of ‘effective climate governance’ for company directors, in a report published as part of the Forum’s Compact for responsive and responsible leadership.
Meanwhile the WEF ‘Advancing the Reporting Ecosystem’ report in which the IIRC has been a partner, sets the ambitious but proper target of system-level progress.
The report says the two year ‘better alignment’ project convened by the IIRC in the Corporate Reporting Dialogue, in which the major financial and non-financial reporting frameworks are our partners, has real potential to reduce the confusion and complexity of reporting and to encourage increased reporting of material environmental, social, governance (ESG) information.
We look forward to continuing to contribute to the WEF project in the coming year, as part of the Forum’s efforts to shape the future towards long-term investing, infrastructure and development.
I was also able to talk in Davos about this potential for alignment in the reporting landscape, at both an EY-hosted debate calling for collective action to drive the shift to long-term value and at a Deloitte-hosted debate on inclusive capitalism.
“It used to be let a thousand flowers bloom, but now is the time to produce some bouquets,” Global Leader of the EY Beacon Institute Valerie Keller told the first meeting.
At the latter, Executive Chair of the Prince’s Accounting for Sustainability Forum Jessica Fries, told the audience: “Don’t think it’s different frameworks, they really are joined up. Integrated reporting is the umbrella, companies can choose individual frameworks like SASB to report metrics, and convergence is taking place.”
To show that this was not simply an exclusive debate amongst Davos participants alone, this debate was live-streamed and has already been viewed by nearly half a million people worldwide.
If we’re taking about societal value, there can be no better endorsement.
The call for alignment in reporting also came from the finance sector in Davos, as UBS Chairman Axel Weber put the case for simpler, more consistent sustainability data and terms, as part of presenting the significant progress being made towards the Swiss bank’s 2017 World Economic Forum commitment to raise USD 5bn in impact investments.
As leading Harvard Professor George Serafeim told the Forum, there is an important link between the outcomes approach of integrated reporting and the growing interest in impact investment.
This may be a summit at the summit, but it is also a normal working week for me.
That included taking part in a roundtable with the World Business Council on Sustainable Development, on how changing valuations can support their project with food, water and land-owning companies.
It meant joining a discussion convened by the Global Partnership for Sustainable Development, to advance plans on how business reporting can contribute to real-time data for Governments to measure progress towards achieving the UN Sustainable Development Goals (SDGs).
Meanwhile, we took part in a multi-stakeholder session with our partners at the Green Economy Coalition, with whom we partnered with on our previous work on integrating SDG reporting for companies, to plan work for the year ahead. The meeting was based on another provocative but necessary question: ‘What is wealth?’
That gathering brought together the specialists and the committed including our friends in the Natural Capital Coalition, in which the six capitals of integrated reporting – social, natural, human and intellectual alongside financial and manufactured capital – were widely known and accepted.
But perhaps what excited me most about Davos 2019, was that this message about “multi-capitalism” – a fundamental concept of integrated reporting – went to the main stage for the entire membership of the World Economic Forum.
New Zealand Premier Jacinda Ardern explained her country moving to a “well-being budget”, based on multiple capitals and challenged others to do the same.
“We must focus specifically on living standards and human, social and natural capital when we set targets and track progress,” she wrote in an article to coincide with the speech.
The New Zealand Government has been a member of the IIRC’s Public Sector Pioneer Network – we are as committed to integrated reporting being taken up by public as well as private sector organisations.
But perhaps the private sector business leaders present this week are increasingly doing so, because Davos 2019 has shown multi-capitalism is no longer seen as a pioneering concept, but one which has joined the mainstream.