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Richard Howitt on a Sustainability-Inclusive IIRC: I'm Up for the Challenge!
February 15, 2017
The goal to make Integrated Reporting the global norm in corporate reporting is indeed at a breakthrough moment.
Our philosophy that reporting must change to reflect a holistic and long-term view of the business has been championed by many of the corporate supporters of Sustainable Brands, including Nestlé, SAP, PepsiCo, Danone, Unilever and BASF, who are all leading integrated reporters.
I thank Sustainable Brands for its support and its good wishes as I begin a new personal and organizational phase on taking up the role of Chief Executive.
Your article came to the important and remarkable conclusion that after 300 years of history of the concept of sustainability, it was Integrated Reporting that finally got it to be accepted by business and by the accountancy profession.
This is a huge foundation on which to build, but also illustrates the historic scale of the mission on which we are embarked.
This is not just about reporting, but of reforming capital markets and concepts of corporate governance. It does so as part of global debates about financial stability, inclusive capitalism and long-term investment. Integrated Reporting is a key tool to achieve each of them.
Your article also rightly gives credit to the visionary role played in the King Corporate Governance Code, authored by current Chair of the IIRC Council and inspirational leader in Integrated Reporting, South Africa's Professor Mervyn King.
The authors correctly identify the shortcomings in the existing compliance mindset of corporate reporting. But my message is that the IIRC's ambition is precisely to reform the corporate reporting system – to change that mindset.
The IIRC does put equal emphasis on 'integrated thinking' as well as Integrated Reporting. Under my leadership, we will not lose the reporting focus, but I do want to find additional ways to foster, train and develop integrated thinking within business.
The article appeals to the IIRC to develop more performance measurement indicators. This is an area I will address with more caution but genuine interest.
I want to send a clear message that my conviction is not for more reporting but better reporting - with long-term value creation for the business the ultimate objective.
I will be cautious to those who ask the IIRC to duplicate other frameworks who are our partners, and who exist to develop and apply new metrics.
The IIRC has rightly convened the 'Corporate Reporting Dialogue' to bring together the major standard-setters in the world, with the objective of promoting alignment, coherence and comparability between us. Under my leadership the IIRC will pursue the objective of integration through such collaboration, not competition.
The presence of the Global Reporting Initiative, Sustainability Accounting Standards Board, CDP and the Carbon Disclosure Standards Board in the Dialogue clearly shows that environmental sustainability is fully included in the journey towards Integrated Reporting. And reporting against the UN's Sustainable Development Goals was undertaken as a key part of the IIRC's own integrated report.
Indeed, my own appointment was made by a Board which included the former Chief Executive of the Worldwide Fund for Nature and the current CEO of the World Business Council for Sustainable Development, as leading members.
I do not think anyone could seriously suggest that sustainability is not an integral part of our work.
My own style has and always will be an inclusive one, and I will firmly reject the language of exclusion in everything which the IIRC does.
But I question the article's suggestion that there can be any one founding principle in the IIRC's work amongst the six capitals?
A multi-capital world must mean what it says. I will stand behind the concept of all of the capitals: financial and natural, manufactured and intellectual, human, social and relationship. To suggest only one should be the focus would miss the point that they are inter-connected and that each company must ask itself precisely in which way for itself?
Your article goes on to address the proper debate about the audience for corporate reporting.
The IIRC has always insisted that corporate disclosure should first and foremost be aimed at the material interest of shareholders and investors while considering the long-term, multi-capital risks and opportunities of the business. That will not change under my leadership. However, this far from ignores other stakeholders, who are indeed a key part of 'relationships' for business, fully embedded in the <IR> Framework.
The IIRC has provided our own thought leadership in this context as part of debates about redefining fiduciary duty and developing the concept of the 'purposeful corporation'. In the United Kingdom's corporate governance review, we are calling for reporting obligations to match the requirement already contained in company law for directors to “give due regard to broader stakeholders."
The IIRC's council is clearly business-led, but non-governmental organizations, academics and citizen interests are represented and very much part of the 'IIRC family.'
However, disclosure must never be for its own sake, and most activists understand that they will not achieve their aims by simply issuing 'wish lists' for businesses.
That's why I will not shirk from the IIRC's insistence that the focus should be long-term value creation for the business, alongside new understandings of what value actually constitutes.
The authors' own analysis is based on one of many new tools being developed in the market, which together are helping to develop some new, credible and reliable metrics for the multi-capital world.
Under my leadership, the IIRC will stimulate, analyse and provoke debate about such initiatives.
But we will remain true to our belief that reporting must be more concise and strategic, and encompass narrative as well as metrics.
I hope Sustainable Brands will continue to give high profile to the global journey towards Integrated Reporting. Thanks again for your good wishes and commitment. I can assure you that they are reciprocated.