Global perspectives

Jessica Fries

IIRC Council Member

Executive Chair, The Prince’s Accounting for Sustainability Project


Eleven years ago discussions to establish the International Integrated Reporting Council began. For a number of years, The Prince’s Accounting for Sustainability Project (A4S) had been exploring ways to reflect an organization’s dependencies and impacts on people and the environment as a core part of its annual reporting, rather than financial reporting and sustainability reporting living in parallel universes, as was largely the case at the time.

I joined A4S as its Executive Director in 2008, and one year on, after a series of fateful conversations with Alan Knight at Accountability and Bob Eccles, then at Harvard, the idea to bring together the Chairs and CEOs of all of the major standard setters and players in the financial and sustainability reporting worlds emerged.

It was at about this time in November 2009 that I was putting the finishing touches to a discussion paper to be launched at the A4S Summit that year (a copy of which can be found on the A4S website for those interested in the history!) and finalizing the guest list for a roundtable which His Royal Highness The Prince of Wales hosted. Those roundtable and discussion paper were to agree the need to establish the IIRC. The following July, we held the first meeting of the IIRC, at the time housed within A4S, and run in partnership with GRI and IFAC. I became the IIRC’s first Executive Director, working alongside Eric Ligteringen from GRI, who is sadly no longer with us.

The IIRC’s aims, extracted from the papers of that meeting, were agreed:

Background

The over-consumption of finite natural resources coupled with the very real risk of catastrophic climate change are possibly the greatest challenges facing the world. An effective response to these challenges will require deep-seated changes to our current economic model.

Information currently required under accounting standards and listing rules does not fully reflect material environmental and social factors, such as climate change, resource use or human rights, despite the fundamental impact that these factors have on an assessment of both the current and future performance of an organisation and its contribution to the creation of a sustainable economy. Where organisations disclose this information, it is seldom presented in a manner which is connected with strategic direction and financial performance, assists comparison between businesses and years or makes clear risks and opportunities.

Aims and objectives of integrated reporting

The IIRC is being created to respond to this need for a concise, clear, consistent and comparable integrated reporting framework structured around the organization’s strategic objectives, its governance and business model and integrating both material financial and non-financial information.

The objectives for an integrated reporting framework are to:

  • support the information needs of long-term investors, by showing the broader and longer-term consequences of decision-making;
  • reflect the interconnections between environmental, social, governance and financial factors in decisions that affect long-term performance and condition, making clear the link between sustainability and economic value;
  • provide the necessary framework for environmental and social factors to be taken into account systematically in reporting and decision-making;
  • rebalance performance metrics away from an undue emphasis on short-term financial performance; and
  • bring reporting closer to the information used by management to run the business on a day-to-day basis.

By December 2011, after the publication of a discussion paper which set out the core principles still contained in the <IR> Framework today, the IIRC had achieved sufficient traction globally to be established as an entity in its own right. It left its first home with us at Clarence House. I handed over leadership of the IIRC to Paul Druckman and Sir Michael Peat passed the Chairmanship to Mervyn King. A4S has, however, remained closely involved, and I went on to be a board member and now member of the Governance and Nominations Committee. The Prince of Wales’s support for the IIRC has also remained strong.

Ten years on and enormous progress has been made. We are at an exciting point where the vision that we developed for reporting so long ago is at last becoming a reality. Over the decade, reporting globally has been transformed. Sustainability is no longer sitting in a silo. Environmental and social issues are recognized as some of the most critical risks and opportunities faced by organizations, and a stakeholder-centric view of the world is becoming the norm, central to how successful organizations think, act and report. Regulators and standard setters have also responded, and are making the principles of integrated reporting, and the metrics which underpin it, mandatory.

The merger of the IIRC and SASB and formation of the Value Reporting Foundation is an important milestone marking the progress made. The work of the two organizations is very complementary. The IIRC has developed a framework which helps organizations to reflect the impact that material social and environmental issues have on their strategy and decision making; SASB provides sector-specific metrics that can help to illuminate how these issues impact financial performance.

Over the coming months, we are likely to see further, rapid developments towards a corporate reporting system which provides the information we need to guide our decisions towards a sustainable future.

As we celebrate the IIRC’s ten-year anniversary, I am proud of the impact that we have had working in partnership with so many around the world. Time is, however, running out. Over the next decade, progress must be even swifter. Working in collaboration, with integrated thinking and reporting guiding our decisions, we can – and must – rise to the challenge.