GOVERNANCE: Integrated Reporting
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Integrated reporting is the main topic of discussion in many boardrooms around the country. Although this is one of the key changes in the King III report on Governance, companies, especially those listed on the JSE, are focusing their attention on this new requirement as it is expected that these reports will be issued for financial year ends commencing on or after 28 February 2010. Essentially, any annual report issued on or after 28 February 2011 will need to be an integrated one.
So why the rush?
It is important to notice the wording selected. It is not referred to as “the combined report”, implying that companies should not merely combine the financial and sustainability reports in an attempt to produce an integrated report. The reference to integrated was specifically chosen to ensure that sustainability be integrated into the strategy of the company.
Many companies mistakenly report on Corporate Social Responsibility activities as part of sustainability. Sustainability is not about making other people sustainable, it is about making the company sustainable and the products or services it delivers in the future sustainable. If your company uses non-renewable natural resources is it clear that there is a very definite sustainability issue. If your company’s future depends on attracting and retaining the best employees, then this should be considered as a strategic objective.
The process therefore starts with integrating sustainability measures or Key Performance Indicators into the strategy. If one then considers the integrated report then as the vehicle to report on the outcome of the company’s strategy, it makes sense to produce an integrated report and thus disclose information about the impact the company has had on its stakeholders, both positive and negative.
Integrated reporting also requires integrated management. Often this information is available in the company, but not consolidated or assessed as part of the monthly reporting process. It is also conceivable that existing Information technology systems do not currently support this process but could do so with very little effort and cost.
One element very few people are however focusing on is the word ‘reporting’. King III specifically addresses the fact that this type of reporting can take the form of a single report or many reports. Integrated reporting does not require only one report to be issued annually. In fact, if one reads this statement in conjunction with the chapter on stakeholder relationships and the importance of communication with stakeholders, the concept of integrated reporting becomes clear.
Companies should consider the information needs of the various stakeholder groupings and may decide to report different aspects of the strategy in an integrated manner at different times using different methods. The use of technology and especially websites will prove to be a valuable tool to support integrated reporting.
Business News Sector Tags: Business| Management|