A report on voluntary and mandatory approaches to
sustainability reporting has identified three global trends. KPMG’s
Wim Bartels speaks with Nicola Maher about integrated reporting,
progressive governments and the work towards non-financial
Combining corporate governance,
financial and sustainability reporting into one integrated
reporting framework was one of three trends identified in a recent
report on approaches to sustainability reporting around the
Integrated reporting was a major
theme at this year’s Global Reporting Initiative (GRI) Amsterdam
Global Conference on Sustainability and Transparency where the
report, Carrot and Sticks – Promoting Transparency and
Sustainability, was published.
The two other trends identified
were an emphasis on a combination of voluntary and mandatory
approaches to sustainability reporting, and the importance of
stronger regulation to ensure a minimum level of disclosure and
The report revealed that during the
past four years, international and national standards, codes,
guidelines and legislation for sustainability reporting have been
evolving rapidly, as have the number of organisations that report
environmental, social and governance information.
There has also been a steep
increase in companies and public agencies issuing sustainability
reports based on GRI guidelines.
The report was produced in
partnership by GRI, KPMG, the United Nations Environment Programme
and the University of Stellenbosch Business School. It examined 30
countries – 17 from Europe, a few from Asia and the Americas,
Australia and South Africa.
KPMG global head of sustainability assurance Wim Bartels says
the trend towards an integrated report is positive for the future
of reporting because it provides a deeper insight into a company’s
performance in society. But Bartels warns the integration of
corporate governance, financial and sustainability information
could also mean relevant audiences other than financially-oriented
users are lost due to complexity.
The orientation of organisations’
annual reports towards a financial audience has led to them
becoming quite complex. This, in turn, has led to many relevant
stakeholders no longer reading annual reports.
For accounting firms, integrated
reporting will require audit teams to enhance their skills.
“Assurance skills need to be
broadened, as providing assurance on ‘extra-financial’ information
is somewhat different from auditing financial figures,” Bartels
This means firms will incur further
costs for training and acquiring more professional staff, but
Bartels says it will also provide accounting firms with new
opportunities to increase the relevance of external audit.
Bartels says national governments that aim for a combination of
voluntary and mandatory regulation are more progressive.
“They recognise that the ultimate
change will not only be driven by requiring companies to report on
certain topics, but also by stimulating them to progress and have
the ability to experiment without immediately being non-compliant
with regulation,” he explains.
South Africa provides the best
example of this practice. Since June, every company listed on the
Johannesburg Stock Exchange has been required to file mandatory
integrated reports. The US is also becoming more progressive.
“However, they still narrow down
sustainability to carbon and the environment and do not yet show
progress conceptually on integrating extra-financial reporting with
financial reporting,” Bartels says.
The regulators in the countries surveyed were all conceptually
in favour of one set of international non-financial reporting
standards but there are serious challenges.
“When it comes to the
implementation of such a concept, regulators fall back on current
regulatory boundaries, sovereignty and other constraints,” he
The GRI is working with leading
organisations in financial markets, accounting, corporate
responsibility and other stakeholders to establish an International
Integrated Reporting Committee (IIRC) to drive further
harmonisation of non-financial reporting standards.
The IIRC plans to ask the G20 to
endorse its standard-setting.
“If this is accepted, a robust
platform would be in place to overcome some of the hurdles that
government regulators currently face,” Bartels notes.
The trends found in this report
indicate the momentum for change in the type information presented
in annual reports, the way reports are compiled and the regulation
behind them is starting to pick up speed.
How fast the changes will come to fruition globally is unknown,
but it is inevitable they will come.