CEO, National Association of Corporate Directors
The National Association of Corporate Directors (NACD) has supported integrated reporting for many years - for example, by publishing an article in 2001 on the then emerging concept of the ‘triple bottom line’ (people, planet, profit). However, our formal involvement in integrated reporting did not begin until 2003, when NACD headquarters received a visit from Grant Thornton partners Mike Krzus and Paul Herring, who were representing a new initiative called the Enhanced Business Reporting Consortium (EBRC).
The EBRC was developed within the American Institute of Certified Public Accountants (AICPA), and emerged from a 1994 effort, headed by Edmund L. Jenkins, called Improving Business Reporting. The Jenkins report was aimed at enabling companies to “focus more on the factors that create longer-term value, including nonfinancial measures indicating how key business processes are performing.” The founding members of the EBRC were AICPA, Grant Thornton, Microsoft, and PricewaterhouseCoopers. The central tenet of this group was that accounting standards should change to reflect the true value of a company.
It so happened that one of NACD’s thought leaders at the time, former Lockheed Martin chair and CEO Norman Augustine, who co-chaired our Blue Ribbon Commission on Risk Oversight (2002), was a champion of the cause. Within weeks, we ran Augustine’s article calling for enhanced financial reporting in our membership periodical.
By 2005, acceptance of the idea of enhanced reporting had become widespread in the United States. On 18 October 2005, the EBRC announced that it had, “released its first version of a comprehensive information framework to help companies better communicate with their investors and other key audiences about business strategy and current and expected performance.” Partners included NACD, as well as the Business Roundtable, the National Investor Relations Institute, and Nasdaq. This first framework included four elements: the business landscape (competition and customers); strategy (risk management and ESG); competencies/resources (innovation, supply chain, and intellectual property); and performance (profitability and liquidity).
The year 2005 also marked year one for the Global Director Development Circle (GDDC), a new initiative cofounded by the Institute of Directors in London and several other director institutes, including NACD.
Integrated reporting was becoming an area of shared interest across the globe. In 2009, we noted with interest that HRH The Prince of Wales had convened an international group. By 2011, this would become the IIRC.
Meanwhile, NACD had become more serious about global governance. By 2012, the old GDDC had become reinvigorated, and had expanded to become the Global Network of Director Institutes (GNDI).
In 2013, IIRC CEO Paul Druckman visited NACD headquarters asking us to recommend a US-based director to serve on the Council, which we did. As members of GNDI, we were up-to-date on the IIRC because we had participated in a GNDI paper on integrated reporting and also written one of our own.
In a 2013 paper on ‘Integrated Reporting’, GNDI had featured highlights from its various member countries, including the United States, where we told the story of integrated reporting in our country.
Furthermore, in the 2013 article ‘Sustainability Rising’, published in NACD Directorship, we noted that by that year, more than 80 of the world’s largest global companies were piloting integrated reporting, including Coca-Cola, HSBC, Microsoft, Volvo, and Unilever.
Today the EBRC still exists as an AICPA initiative, and it’s now affiliated with the IIRC, which is well known for promoting disclosure of six capitals: financial and manufactured (the ones organizations most commonly report); intellectual, social/relationship, and human (all linked to the activities of humans); and finally natural capital, which surrounds all the other capitals. This model has come a long way since the early EBRC concepts, but it comes from the same desire to capture value accurately.
NACD’s flagship publication, NACD Directorship, will soon feature a report on integrated reporting for our 20,000 members. But a national association can do only so much. Integrated reporting is ultimately a global movement, and we applaud the work of the IIRC for making it a reality.