Does your Annual Report tell your whole value creation story?

According to recent KPMG guidance: “There is growing recognition that the range of issues and opportunities affecting long term business value is much broader than can be reflected in a set of current year financial measures. Annual Reports need to reflect this if they are to support investors’ capital allocation decisions effectively.”

The guidance also notes that: “Integrated Reporting provides a basis to address this by refocusing reporting around an organisation’s business model and operational priorities. The aim is to reflect the critical opportunities and challenges that affect the business - the same issues that management are dealing with on a daily basis within the organisation. Although designed to support the preparation of dedicated Integrated Reports, this approach can be applied by any company preparing an Annual Report - and indeed to other elements of corporate reporting.”

It concludes that: “For executives frustrated by apparent investor short-termism, this is an opportunity to provide a more complete picture of value, how it’s shaped by current and future events, and explain what management is doing to create and preserve it.” To learn more, read the KPMG’s guidance, Does your Annual Report tell your whole value creation story?

Cutting Clutter from Annual Reports

Recently, there has been a drive to cut clutter from annual reports to help users find the information they need and to avoid wasted time for preparers. One impetus comes from the UK Financial Reporting Council (FRC) and the Accounting Standards Board (ASB) report, Cutting clutter: Combating clutter in annual reports, published in 2011. The report defines clutter as “immaterial disclosures that inhibit the ability to identify and understand relevant information,” and “explanatory information that remains unchanged from year to year.”

As the report explains, “Clutter makes it more difficult for users to assess a company’s progress by obscuring relevant information. Due to the time and effort involved in preparing such disclosures, clutter is also a big issue for preparers.” To encourage change, the report includes two short behavioural aids for use by teams preparing and reviewing annual reports. These highlight key questions to consider at the planning phase and during subsequent review. The FRC and the ASB have also developed three disclosure aids – covering governance, accounting policies and share-based payments – to demonstrate what these key areas of the annual report could look like without the clutter.

Integrated Reporting practices of 100 JSE-listed companies

Deloitte has released its second quarterly report on the state of Integrated Reporting in South Africa. The report is called Integrated Reporting – Navigating your way to a truly Integrated Report. It reveals that Integrated Reporting standards have been adopted by more than half of South Africa’s listed companies. Although it is now necessary for these JSE-listed companies to include a statement of compliance with the principles set out in the King Code on Governance Principles (King III) in their annual reports, many companies are still scoring surprisingly low on corporate governance matters.

The publication (which applies to all members of the C-Suite) was prepared by the Deloitte Integrated Reporting and Sustainability team. It contains the key findings of the empirical research conducted on 100 companies listed on the Johannesburg Stock Exchange. The analysis covered 7 subjects, 58 principles and 160 questions seeking to assess actual performance against good practice. The publication includes practical observations on certain topical subjects which appear to be a challenge for companies.

GRI / Deloitte XBRL Taxonomy for Sustainability Reporting

XBRL stands for eXtensible Business Reporting Language. It is one of a family of 'XML' languages and is machine readable. Use of XML language allows sharing not only the data, but also the format that is used for presenting the data. Machine readable means that computers can recognize various elements of the report and process it without manual labor. Computers can recognize the information in an XBRL document, and select, analyze, store, and exchange it with other computers. XBRL data is set out in taxonomies – data classifications that are defined by industries and organizations for their reports and communications. XBRL information can be presented automatically in a variety of ways.

The Global Reporting Initiative (GRI) Taxonomy, developed in collaboration with Deloitte, is one of the first XBRL taxonomies for sustainability reporting. It will help investors, auditors and analysts to access information in sustainability reports faster, and more simply. An XBRL taxonomy is an industry-specific categorization scheme that defines and 'tags' data in relation to its purpose, framework or outline. It enables users to uniquely tag and identify individual detailed reporting elements which can be easily shared electronically. In the case of the GRI Taxonomy, data can be tagged following the GRI Guidelines.

The new GRI Taxonomy enables organizations to tag their sustainability data in reports. This will help report users – including regulators, investors and analysts – to find and analyze sustainability information. Organizations can benefit from a well-defined structured format for collecting and disseminating sustainability information. It enables reporters, analysts, regulators and others to exchange sustainability data electronically and inform stakeholders with consistent and high quality information.

For more information, see the GRI frequently asked questions webpage. Reporters who use the GRI Taxonomy are asked to participate in the Voluntary Filing Program.

Integrated Reporting: The New Big Picture

Financial statements are becoming increasingly long and complex with vast tomes of technical detail, requiring a high level of financial expertise to interpret. Complicating matters further, the world has at least two primary sets of standards under which these financial statements are prepared, although a convergence project is underway.

Beyond the financial reporting complexity issues, there is the reality that the tangible assets included in financial statements reflect a steadily diminishing component of shareholder value. Since 1983, when tangible assets represented 83% of market value, to 2009, when they represented only 19%, there has clearly been a change in business models that may not be fully reflected in traditional financial statements. Current financial statements often do not include the “true” value of inputs from, or reliance on, natural capital and other forms of capital. Conditions are ripe for new ideas.

Today, companies produce an increasing array of reports not necessarily linked to the financial statements. Governance issues, including executive pay, are sometimes reported on, as well as some of the impacts of the business on society and the environment. But, these are often reported to different audiences, in different formats and at different times. In this context, the idea of simplifying all the reporting under a consistent banner—integrated reporting—is very attractive.

Just as most of the world has moved steadily toward the adoption of International Financial Reporting Standards (IFRS), the progression toward a single, global, common framework for integrated reporting seems all but inevitable. Less clear, however, is the timing of adoption, which may be affected by a variety of economic, political, social and other factors.

To learn more, read the complimentary article reprint “Integrated Reporting: The New Big Picture” in Deloitte Review, Issue 10, January 2012 (also available online).

FEE Factsheet on Integrated Reporting – January 2012

The FEE (Fédération des Experts-comptables Européens - Federation of European Accountants) initially published a Factsheet on Integrated Reporting in January 2011, introducing the concept as an emerging approach to reporting by organizations. Since then, debates and developments around integrated reporting have grown and will continue.

According to a recent FEE news release, “Integrated Reporting is seen as a major development in corporate reporting. FEE releases a factsheet explaining how integrated reporting differs from traditional reporting and highlighting some of the steps taken by the International Integrated Reporting Council (IIRC). Planned actions from the IIRC include publishing an analysis of the responses received on the Discussion Paper in March 2012.”

For more information, read the FEE paper “Integrated Reporting Update, January 2012.” Also, read the December 14, 2011, FEE Comment Letter to the IIRC.

Canada’s Corporate Reporting Awards program celebrates 60 years of excellence

For 60 years, the CRA has been Canada’s only national program shining a spotlight on Canada’s best corporate reporting models. The program offers publicly-listed companies, and now federal and provincial Crown corporations, a unique opportunity to showcase their commitment to quality corporate reporting. Entrants demonstrate confidence in their reports by submitting them to an independent panel of judges, who are experts in their respective areas.

Fifteen Canadian publicly-listed companies and Crown corporations were recently honoured in Toronto at a gala event that marked the diamond anniversary of the Chartered Accountants of Canada’s Corporate Reporting Awards (CRA).

When the program started in 1941, the focus was the annual financial report. Over the years, it has evolved to keep pace with the capital markets and the expectations of Canadian investors for greater transparency and better information on which to base their investment decisions. Today’s CRA includes separate categories for corporate governance reporting, sustainable development reporting and electronic disclosure. The criteria have helped drive the development of best practices in all these areas, which are now regarded as essential components of the integrated corporate reporting model.

Sustainability: Environmental and Social Issues Briefing

Environmental and social issues are increasingly having an impact on the bottom line and future prospects of companies in many industries. They can present both opportunities and risks. In addition, they can have important implications for strategy, competitiveness, risk management, stakeholder relations and business resilience. A company’s board of directors has key oversight responsibilities in relation to environmental and social issues.


Board awareness and attention are essential in keeping abreast of the fast-evolving business impacts of these issues. Sustainability: Environmental and Social Issues Briefing highlights the environmental and social issues directors need to consider, providing an understanding of the potential business implications of these issues and offers questions that directors might ask in discharging their oversight responsibilities.

KPMG International Survey of Corporate Responsibility Reporting 2011

According to a recent KPMG survey, leading companies have combined their Corporate Social Responsibility (CSR) reporting and financial reporting, often by merging the two into the annual report. While this has been a valuable stepping stone in building an understanding of how CSR impacts the business, greater value will be gained once both sets of information are treated as part of the company’s comprehensive business performance reporting, both to internal management and external stakeholders.

Companies are also quickly evolving the method by which they communicate their CSR information to their various audiences. As more and more companies start to employ multiple vehicles for communication, the focus will be on developing and implementing a comprehensive communication strategy that enhances trust and value for the company within its different stakeholder groups.

(For more information, read the full report, KPMG International Survey of Corporate Responsibility Reporting 2011, available online.)

CICA seminar on integrated reporting features Robert Herz

Robert Herz, the recently retired chair of the US Financial Accounting Standards Board (FASB), will be in Toronto, Canada on November 23, 2011, for a breakfast seminar.

At the seminar, organized by the Canadian Institute of Chartered Accountants (CICA), Mr. Herz will review the proposals outlined in a Discussion Paper, Towards Integrated Reporting – Communicating Value in the 21st Century. The Paper was published on September 12, 2011, by the International Integrated Reporting Committee (IIRC) with a call for comments by December 14, 2011.

The IIRC was established in August 2010 by the Prince of Wales Accounting for Sustainability Project, the Global Reporting Initiative, and the International Federation of Accountants.  The IIRC brings together a cross section of representatives from the corporate, investor, accounting, securities, regulatory and standard-setting communities.

The Discussion Paper features proposals for the development of an International Integrated Reporting Framework and outlines the next steps toward its creation and adoption. The goal of integrated reporting is to provide more comprehensive and meaningful information about how an organization creates and sustains value.

(For more information, see the CICA media release on November 18, 2011.)

Integrated Reporting: Performance insight through Better Business Reporting

KPMG has issued the first edition of the publication Integrated Reporting: Performance insight through Better Business Reporting. It focuses on the challenge of providing better corporate reporting. Many who read this may not be familiar with the topic but, with the publication by the International Integrated Reporting Committee (IIRC) of its Discussion Paper, it is likely to receive more attention in the future. In the past, KPMG has looked at this as “Better Business Reporting” which captures the essence of the subject.

The first edition provides some background on Integrated Reporting with a series of short articles by some of the firms’ specialists. After a brief summary that explains what Integrated Reporting is, Michael Bray sets out the case as to why senior executives and non-executives ought to be interested.

The World is Changing – Reporting Must Too

The Integrated Reporting Discussion Paper, Towards Integrated Reporting – Communicating Value in the 21st Century was launched on September 12, 2011. It is available for reading online and as a PDF document. The Paper considers the rationale for Integrated Reporting, offering initial proposals for the development of an International Integrated Reporting Framework and outlining the next steps towards its creation and adoption. Its purpose is to prompt input from all those with a stake in improved reporting, including producers and users of reports. The International Integrated Reporting Committee (IIRC) welcomes general comments on the Discussion Paper, as well as responses to the questions posed. The deadline for submission is December 14, 2011.

Corporate Sustainability: A progress report

Corporate Sustainability: A progress report is a KPMG research report, conducted in cooperation with the Economist Intelligence Unit. It reviews the importance of sustainability within business today and executive attitudes toward this issue. According to the report, sustainability is rapidly becoming a strategic priority for businesses.

Around the world, there are encouraging examples of pioneering companies that have recognized the imperative of sustainability and created strategies and solutions. For a growing number, the concept of sustainability goes far beyond corporate social responsibility (CSR). It has become the strategic lens through which they view their businesses. For these organizations, sustainability offers an undeniable opportunity to gain competitive advantage, drive innovation and generate real bottomline results. Despite a complex array of challenges, these companies are already taking great strides towards shaping the global approach to sustainability. What propels these organizations past their competitors is the recognition that sustainability goals must be tied to operational strategy and measured in the same way as other investments. By treating sustainability as an investment rather than a cost, they have adjusted their business models to drive long-term change and make them more competitive in the market. 

This research report is based on an October 2010 global survey of 378 senior executives encompassing a range of industries and evenly split among North America (US and Canada), Asia Pacific and Europe, with a smaller representation from the Middle East, Africa and Latin America. Organizations of all sizes were represented: 40% of respondents worked for firms with revenues of at least US$ l billion, whereas 47% were from firms with revenues of US$ 500 million or less. The respondent base was very senior: 26% were CEOs, presidents or managing directors of their firms; half represented the C-suite or board; and all respondents were in a management position. To complement this and to provide specific context, the Economist Intelligence Unit conducted extensive desk research and in-depth interviews with numerous corporate sustainability executives and experts.

Integrated reporting - Exploring the business benefit

Black Sun is one of Europe’s leading strategic corporate communications consultancies. It brings together corporate reporting, corporate responsibility communications and digital communications for clients to create powerful integrated solutions.  Offering a combination of strategic research and analysis, and ambitious creative thinking, it aims to help large UK and international organizations produce effective communications that build greater trust and confidence with their stakeholders.

Black Sun has carried out extensive research about current integrated reporting on a country-by-country basis, examining a sample of over 100 companies from 8 of the G20 countries, with representation from both developed and emerging markets. A Seminar will be held in London on August 31, 2011 to provide a summary of this international integrated reporting research and to provide an in-depth analysis of those companies that are found to be leading the way.

(View recent research reports, briefing papers and other guidance, such as the publication on Integrated Reporting – Exploring the Business Benefit at the Black Sun website.)

ACCA launches online Virtual Research & Insights Conference

More than 6,000 finance professionals have signed-up for the Association of Chartered Certified Accountants (ACCA) online Research & Insights Conference which launched last week. The conference sessions can be viewed on-demand via the ACCA website until October 27, 2011.

HRH Prince of Wales delivered a live address at the conference on his involvement with the Accounting for Sustainability Project, as part of the session on integrated reporting. The online audience also heard from Professor Mervyn King, deputy chair of the International Integrated Reporting Committee (IIRC), who talked about the future scope of integrated reporting, as well as the benefits and challenges of creating a framework that brings together financial, environmental, social and governance information in a clear, concise and comparable format.

The conference covered a wide range of topics from a wealth of expert speakers, including: the new business environment: opportunities for growth; why talent management in finance matters; integrated reporting: a framework for the future; financial issues from Brussels; extended audit reporting; the eProfessional: creating the next generation of accountants; making businesses accountable; cloud computing; social media; and XBRL.

(View the ACCA conference program and ACCA Attendee Guide, then register to access the conference presentations.)

What ethics means in business

On July 15, 2011, the Globe and Mail convened a panel of experts to discuss why companies should act with integrity. The panel comprised: Paul Klein, the founder of Impakt; Don McCreesh of Imagine Canada; Andrew Wilcynski, director of cause marketing for Telus; and Ben Packard, VP of global responsibility with Starbucks. Watch the video on What ethics means in business. Also, view related videos on corporate social responsibility at the Globe and Mail online.

Transocean: No Apologies Over Gulf Oil Spill

"Fourteen months after the Deepwater Horizon drilling rig exploded 50 miles southeast of Venice, La., killing 11 men and setting off the largest offshore oil spill in U.S. history, Transocean (RIG), the company that owned and ran the ill-fated 32,600-ton vessel, finally issued its official account of what happened and why. It produced a report on June 22 of no fewer than 854 pages, divided into two volumes, and spared no detail. The bottom line, though, isn’t complicated:It was BP’s (BP) fault." (Read the full story "Transocean: No Apologies Over Gulf Oil Spill" at Bloomberg Businessweek online.)

Integrating sustainability into business practices: a case study approach

Integrating sustainability into business practices: a case study approach was prepared for the Institute of Chartered Accountants in Australia by Kiewa Consulting Pty Ltd. This paper provides some business case studies that shed light on the journey towards sustainable business practices, and some simple steps that should help business leaders take their part in it. The five cases studies include the following organizations: Blackmores; Intrepid Travel; National Institute of Water & Atmospheric Research (NIWA); Woolworths; and World Vision Australia. (Also see Spotlight on integrated reporting.)

Tomorrow’s corporate reporting – a critical system at risk

Corporate reporting matters: it plays an essential role in the effective functioning of the market economy. It should make an important contribution to our understanding of, and respect for, business and the financial sector as creators of value by explaining what drives that value now and in the future. The Chartered Institute of Management Accountants (CIMA), PricewaterhouseCoopers and Tomorrow’s Company set up a global study to explore the barriers to the effective development of corporate reporting and the report summarizing the research has now been published. The report explains the findings from the perspective of a number of market participants – companies, auditors, shareholders, investors, standard setters and regulators. Looking forward the research team has also set out the key principles of an agenda for debate and a roadmap for change in the corporate reporting system. (Visit the CIMA website and download Tomorrow’s corporate reporting – a critical system at risk.)

ICAEW Library and Information Service - Gateway on Environmental, social and sustainability reporting

Environmental, social and sustainability reporting have grown substantially over the last decade.  The Institute of Chartered Accountants inEngland and Wales (ICAEW) provides access to a range of articles, publications and online resources including information on reporting trends and developments. (Visit the ICAEW Library and Information Service - Gateway on Environmental, social and sustainability reporting.)