Director, Chair of the Board of Mizuho Financial Group,
Vice Chair, Keizai Doyukai (Japan Association of Corporate Executives)
COVID-19 exposed and highlighted a wide range of fundamental problems in our society and our daily lives. It forced individuals and organizations to reassess the balance of nature against convenience for the human population. We are all realizing now that we need to modify the direction we are currently going to achieve a sustainable society and earth. These modifications may not be small but are essential. We have been talking about this agenda for a number of years, but this pandemic has made us realize its seriousness and we do not have much time for action. For companies, there is no other way to survive and to increase their value unless they respond to the changes in today’s society and its demands.
When being asked to survive and increase value in an evolving and uncertain future, management of companies going forward must now look to build a more sustainable business model. They need to better integrate the variety of assets in the organization. The board is in charge of reviewing and modifying such strategy through integrated thinking, which is the essence of integrated reporting. With this aim, the IIRC has played a critical role in the market to introduce corporate reporting beyond financials.
Demands by stakeholders for better disclosure and increased communication have accelerated due to the current pandemic. Companies must talk to external stakeholders, disclosing the variety of its internal assets and its strategic direction. There are differing ways to disclose how a corporation executes its daily business, for example regarding financials, climate change, environmental matters and human rights. However, unless the company can show the interdependence and interrelationships between all of its assets in addressing these issues, the stakeholders will not be able to understand their connectivity in a strategic way or how the company efficiently performs and creates value over time.
It is therefore critical to have a more effective framework to describe the business and its future growth, based on integrated thinking. The framework the IIRC provides is a tool to connect current financial and non-financial assets and investments to the future value and growth of the company. Using integrated reporting, views from differing facets of a company can be connected to provide a more cohesive and comprehensive report to internal and external stakeholders. It will help management to achieve better governance and proactive dialogue with investors.
The corporate reporting community has been developing various reporting methods and frameworks over the years. To meet the requirements of companies and markets within today’s dynamic changes in society and life, the IIRC is expected to go to the next stage, to act as an initiator and coordinator of integrated corporate reporting.