New framework meant to foster more accurate, efficient, forward-looking corporate reporting
The International Integrated Reporting Council (IIRC) has published a draft version of its new International Integrated Reporting Framework (IIRF), aimed at creating the foundations for a new corporate reporting model to improve accountability and the efficiency of reporting, and help capital allocation decisions.
The IIRC, which has been tested by more than 50 institutional investors including Deutsche Bank and Goldman Sachs, is calling on companies, investors and others to offer public input on the draft, which is available for download at www.theiirc.org/consultationdraft2013, by July 15.
The draft, developed over the three years since the founding of the IIRC, seeks to expand beyond the current focus on historical financial reporting to a model where governance, strategy, future prospects and other areas are more crucial in an increasingly unstable environment.
‘The world today faces two critical and interconnected dangers: financial instability and unsustainability,’ says Mervyn King, a former South African Supreme Court judge and the current chairman of the IIRC, in the announcement of the draft.
‘Both these dangers pose threats to the livelihoods of communities across our planet – to their wealth and welfare. They are risks that have been under-managed and under-reported for too long. The corporate reporting landscape has not kept pace with the scale of the changes that have taken place in the world economy, business and society in recent decades.’
The draft’s guiding principles include greater emphasis on assessing and providing insight into an organization’s relationship with its key stakeholders and how it responds to their interests. Integrated reporting should also offer insight on the organization’s strategy and how it can create value in the short, medium and long terms, and show ‘the combination, interrelatedness and dependencies between the components that are material to the organization’s ability to create value.’
The draft is further based on six ‘capitals’, or categories of capital, that aim to illustrate how a company is affected by technology, economic conditions, the environment, societal issues, natural resources and its relationship with business partners, employees, shareholders, customers, suppliers and others. The six capitals are categorized as financial, manufactured, intellectual, human, social & relationships and natural.
The IIRC, a global coalition of regulators, investors, accounting organizations and others, was founded in 2010 and now has a presence in 25 countries. The organization has co-operated with companies including the Coca-Cola Company, China Light & Power, the Clorox Company, National Australia Bank, Unilever and Hyundai in its efforts to enhance corporate reporting models.
