ICGN former Governing Board Member and Vice-Chair, and Member of ICGN Nominations Committee
Congratulations to the IIRC on the significant milestone achievement of a decade of fruitful hard work.
The past ten years in corporate reporting has seen so many major changes and at every turn the IIRC has been there to lead, support and facilitate sound, sensible and pragmatic change to corporate reporting. In those ten years, the IIRC has developed, published and refined its International <IR> Framework to encourage better reporting of company value creation and long-term company sustainability.
As an IIRC Council Member, I am proud to be but one voice among a global group of representatives from companies, investors, regulators, standard setters, NGOs and the accounting profession, together working towards the common goal of better reporting from companies on the business model for value creation, including its activities relating to environmental, social and governance risks and opportunities for the company. The collective intellectual capital of the IIRC has resulted in its most useful <IR> Framework.
Company disclosure is vital to stakeholders, especially to investors to inform their investment decisions. Investors have been increasingly vocal about their information needs as they seek to be good stewards of their investments. Some investors, like BlackRock, contact companies directly by letter to express their information needs. Other investors engage directly with companies on key issues of importance to them. Generally, they require consistently developed, comparable, reliable financial and non-financial information. It is also a benefit if that information can be audited or assured by an independent third party.
With this increased pressure for improved disclosure and transparency, many regulators and other standard setters in major capital markets have stepped in and have mandated or recommended more information, particularly in the area of non-financial information related to the long-term sustainability of a company.
Amendments to the Companies Act'2006 and its regulations in 2013, 2016 and 2018 in the United Kingdom require companies to provide a Strategic Report which gives a holistic picture of the business model, strategy, performance and position, and future prospects of a company. The European Union has enacted its Non-Financial Reporting Directive (Directive 2014/95/EU) requiring provision from 2018 of information on company activities for environmental protection, social responsibility and treatment of employees, respect for human rights, anti-bribery and corruption, and diversity on boards. The United States requires companies to provide information that is financially material to the investment decision and Reg S-K specifically requires a description of the business, an MD&A report and disclosure of any factors that may affect the risk to an investment.
Information on company activities in relation to the environment, to the governance of the company and to the society in which it operates has become de rigueur. However, the sheer breadth of required information to be reported is difficult to manage. The IIRC has with its <IR> Framework provided the tool to harness, discipline and link the newly demanded information with traditional financial reporting.
In the past ten years, the IIRC has persistently worked with a wide range of stakeholders to develop and provide a model which would result in quality information for decision making. Yet the IIRC has not rested there. The <IR> Framework is currently under review to ensure clarity of governance and management responsibilities in reporting and transparency of the systems, procedures and controls supporting the integrity of reports. These measures should improve the relevance and reliability of company reports.
What of the future… will the IIRC rest on its laurels? The IIRC is to be commended for its leadership in a group of like-minded organizations (Sustainability Accounting Standards Board, the Global Reporting Initiative, CDP, Climate Disclosure Standards Board) with a shared interest in sustainability and integrated reporting. These organizations have recognized that a plethora of standards, guidelines and reporting approaches creates confusion among producers and users of corporate reports. Collectively, they have committed to work together to provide joint market guidance on sustainability and integrated reporting disclosure, and to work together to develop a comprehensive corporate reporting system.
If the last ten years were busy, the next ten years promise to be busier for the IIRC. Best wishes.