Partner, KPMG Netherlands, Chair of the KPMG Better Business Reporting network
When the IIRC was established in 2010, KPMG was one of its founding fathers. Our then global chairman, Tim Flynn, attended the inaugural Council meeting in London. KPMG has been an active contributor to the IIRC and its cause ever since.
The IIRC should be commended for its progress since establishment, evidenced by the number of companies applying the International <IR> Framework, often on a voluntary basis, and an increasing number of regulators signposting to the <IR> Framework in regulation or regulatory guidance, or including a recommendation or recognition for its adoption or consideration in corporate governance codes.
The <IR> Framework is widely acknowledged to be at least the starting point for the conceptual framework for connected corporate reporting. It is anchored on the business (integrated thinking) with the integrated report an outcome of the integrated reporting process. The integrated report provides a window into the quality of the organization’s business, particularly its ability to apply integrated thinking when allocating resources and making business decisions. It supports business resilience, and clear communication of performance, challenges and prospects to all stakeholders.
At the time of writing, the world is still gripped by Covid-19. The pandemic is testing business model resilience and in some instances is challenging business survival.
As the 2020 reporting season approaches, boards and management are being challenged to report on their business, performance, position and prospects. Investors and other stakeholders will focus on the fundamentals of each business, including how well is it set up for ongoing success in a changed business environment.
Corporate reporting must clearly and openly respond to these information needs, as the connector within the business, and between the business and its stakeholders. Discussions must focus on how the board and management have maintained good governance and demonstrated agility in driving strategy and managing other important resources and relationships upon which the business depends – all while protecting the financial position of the business. The current crisis is amplifying just how crucial good corporate reporting is. The <IR> Framework drives integrated thinking and enables boards and management to effectively communicate business resilience and value to the organization’s stakeholders.
Moreover, information that is key to stakeholder decision making needs to be reliable. As investor and other stakeholder demands for assurance grow, and integrated reporting instances increase in number, it is critical to integrate assurance into the global corporate reporting system in the interests of the credibility of and trust in corporate reports, including integrated reports.
As to the future, we have seen a proliferation of reporting frameworks, standards and other guidance in particular on environmental, social and governance matters, driven by global developments such as climate change and digitalization. A broad consensus is building that we need a more structural global solution for interconnected standard setting that links financial and pre- or non-financial information. The recent joint statement from the IIRC and four standard setting organizations (Sustainability Accounting Standards Board, Global Reporting Initiative, Climate Disclosure Standards Board and CDP) is a welcome move, and potential stepping stone, in response to that call for alignment and rationalization.
The momentum for a more integrated corporate reporting system is clearly gaining pace and the IIRC is going to be an integral part of that. Let’s build on the success of the first ten years!