Integrated Reporting (IR) is changing what
information companies choose to disclose, according to a discussion
paper issued by the Association of Chartered Certified Accountants
(ACCA).

The paper Reporting pre- and
post-King III: what’s the difference?, analysed the
differences in 10 Johannesburg Stock Exchange listed companies from
before they were mandatorily required to produce an integrated
report in 2009 and post-mandating in 2010/2011.

It found significantly more social,
environmental and ethical information was reported in 2010/2011
reports than those before IR became mandatory. In the 2009 reports,
this type of information is, for the majority, restricted to
certain sections but mainly to the sustainability report
itself.

According to the paper, the biggest change
comes from a shift towards more stakeholder orientated reporting in
the integrated reports particularly in the chairman’s statement and
chief executive’s review.

The ACCA makes five recommendations in its
discussion paper:

  1. The way in which information is set out could
    be more concise to avoid repetition;
  2. The form of reporting could be extended to
    incorporate more feedback from consultation with stakeholders
    regarding social and environmental issues and corporate
    responsiveness to feedback;
  3. Organisations should solicit the views of
    their major stakeholders about the social, environmental and
    ethical information (and underlying policies and practices) that
    they report and include these views within integrated reports;
  4. Academics can and should play a significant
    role in researching the IR framework and its applicability;
    and,
  5. Academics should, can and do play an
    important role in educating potential managers and users in IR
    through university and professional education in which they are
    involved.

The paper also found a discourse of care for
stakeholders emerging in the integrated reports and a greater level
of attention is given to stakeholder engagement than in 2009.

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ACCA head of sustainability Rachel Jackson
said the main goal of the larger academic report,
Integrated reporting: the new face of social, ethical and
environmental reporting in South Africa?, the
paper is based on is to find out what “works, what does not; how
companies approach IR; and, importantly, whether or not IR makes a
difference”.

“Our findings show there is a difference
between then and now, and it appears that the organisations
examined have had a growing realisation that non-financial issues
have financial implications for their firms. There has been a
change in how sustainability issues are now linked to materiality
and risk,” Jackson explained.

She warned that while IR presents new
opportunities it also brings challenges, pointing out that the
International Integrated Reporting Council (IIRC), which is
currently working on producing the world’s first IR framework, will
have to take these into account.

“The ‘stakeholder engagement’ approach could
present a challenge to the IIRC, whose recent documentation
suggests that it does not favour such an approach. Instead, the
IIRC’s focus has been on the production of integrated reporting for
decision-making purposes, and for shareholders – the IIRC itself
has made clear its emphasis on shareholder, not stakeholder,
accountability,” Jackson concluded.

IR is the combination of financial and
non-financial information into one annual report and is thought to
be the next evolution in corporate reporting.

On the back of King III report on corporate
governance this is now a mandatory requirement in South Africa and
the ACCA said countries that are looking to develop and introduce
IR can learn a great deal from developments in South Africa hence
its use as a case study for its report.

 

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