Integrated Reporting – South Africa leading the way?

According to Tomorrow’s Company UK ‘The success of companies in the 21st century is bound up with three independent sub-systems – the natural environment, the social and political system and the global economy. Global companies play a role in all three and they need all three to flourish.’

In South Africa, the King Report on Governance for South Africa 2009 requested organisations to prepare an integrated report taking cognisance of the impact of the organisation on both the environment and society recognising that related reputational issues can materially affect the very existence of the organisation.
South Africa consequently became the first country to mandate integrated reporting following the incorporation of King III into the JSE listing requirements where all listed companies were required to issue an integrated report for financial years starting on or after 1 March 2010, or to alternatively provide an explanation as to why they were not doing so. Integrated reporting refers to a holistic presentation of the company’s performance in terms of both its finances and sustainability. It enables stakeholders to make a more informed assessment of the economic value of the company and encompasses social, environmental and economic issues – the triple context in which companies in fact operate.

While no official standard exists for integrated reporting both locally and globally, there is some guidance companies can follow. The South African Integrated Reporting Committee (IRC SA) chaired by Mervyn King released a discussion paper on the 25th of January 2011 that provided guidance on how Integrated Reporting as recommended by the King Code of Governance Principles for South Africa 2009 , should be practiced.

The IRC SA is presently considering public comment received hoping to align the South African guidance with the emerging international best practice and consensus as best they can. The International Integrated Reporting Committee (now Council) (IIRC), also chaired by Mervyn King, was formed in 2010 under the aegis of the Prince’s Accounting for Sustainability Project and the Global Reporting Initiative. In addition to representatives from business and investors, the major accounting bodies, standards setters and security regulators comprise the membership of the committee. The IIRC issued their discussion paper in September 2011, and invited public comment. The comments received are presently being reviewed by the Council. It is envisaged that an exposure draft on Integrated Reporting will be issued later this year.

Mervyn King in a recent interview with Summit TV explained that the discussion paper issued by the IIRC was not intended to be a set of rules — but rather a principles-based discussion paper. He further indicated that in the wake of commentaries from numerous countries the consensus on integrated thinking was the outcome, where the board members have applied their minds to financial and non-financial matters, how the one affects the other and how the board has embedded these into its long-term thinking so that stakeholders can read it in clear language and make an informed assessment whether the company can sustain value creation.

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