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The new plans to draw up a global framework for the integration of non-financial and financial reporting are certainly interesting. But where will they lead us?
Among those involved are big hitters in the corporate world, such as the International Accounting Standards Board and the International Organization of Securities Commissions, with the capacity to make things happen. The fact that so many have put their names to such an ambitious project suggests there is considerable weight of opinion in favour of its aims. It is also a reflection of the growing belief at large that social and environmental matters must become fully integrated into business strategy.
But the newly formed International Integrated Reporting Committee (IIRC) will have to make sure it can chew what it is biting off. Present practice is often criticized for producing annual reports that are too long and largely incomprehensible. CSR reporting itself needs to get better before it is combined with financial information.
Corporate responsibility reports are still in their adolescence and exhibit the faults of their tender age. Much of their content tends to be irrelevant and immaterial to the general concerns of society – and even to specific questions relating to the company of which they speak. They also need to be more honest and open (on issues such as executive remuneration, for instance) in order to repel the suspicion of being primarily exercises in PR.
Integration, by itself, will not eliminate these defects, especially given that much is still wrong with financial statements. To succeed, future integrated reporting will have to take the sound and proven elements of the financial and non-financial models, melding them into a comprehensive document that presents a company in the round and provides readers with a solid basis to gauge the sustainability of the business.
It is not entirely clear what the IIRC is looking to come up with over the next year, which is the deadline the committee has set itself for publishing a framework. But it is hard to imagine anything of great significance to be produced in that short period, for the task it has taken on is fraught with huge difficulties. If the new, London-based body is to do a thorough job, patience is required on all sides. In the meantime, it behoves everyone in the corporate world to work at improving the two halves of reporting in preparation for the yearned-for day when they become one.
Among those involved are big hitters in the corporate world, such as the International Accounting Standards Board and the International Organization of Securities Commissions, with the capacity to make things happen. The fact that so many have put their names to such an ambitious project suggests there is considerable weight of opinion in favour of its aims. It is also a reflection of the growing belief at large that social and environmental matters must become fully integrated into business strategy.
But the newly formed International Integrated Reporting Committee (IIRC) will have to make sure it can chew what it is biting off. Present practice is often criticized for producing annual reports that are too long and largely incomprehensible. CSR reporting itself needs to get better before it is combined with financial information.
Corporate responsibility reports are still in their adolescence and exhibit the faults of their tender age. Much of their content tends to be irrelevant and immaterial to the general concerns of society – and even to specific questions relating to the company of which they speak. They also need to be more honest and open (on issues such as executive remuneration, for instance) in order to repel the suspicion of being primarily exercises in PR.
Integration, by itself, will not eliminate these defects, especially given that much is still wrong with financial statements. To succeed, future integrated reporting will have to take the sound and proven elements of the financial and non-financial models, melding them into a comprehensive document that presents a company in the round and provides readers with a solid basis to gauge the sustainability of the business.
It is not entirely clear what the IIRC is looking to come up with over the next year, which is the deadline the committee has set itself for publishing a framework. But it is hard to imagine anything of great significance to be produced in that short period, for the task it has taken on is fraught with huge difficulties. If the new, London-based body is to do a thorough job, patience is required on all sides. In the meantime, it behoves everyone in the corporate world to work at improving the two halves of reporting in preparation for the yearned-for day when they become one.
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