The new chief of the International Integrated Reporting Council is aiming to build support for integrated reporting in the U.S. as the IIRC begins to gather feedback on how companies are implementing it.

“I think we’re making really strong progress,” said IIRC CEO Richard Howitt during a meeting in New York last week. “We want to make more in the United States. That’s one of the reasons why I’m here. We’ve got some big names that are doing integrated reporting, but it’s not well enough known, and we’re determined to grow it. We’ve got some concrete plans for that, but globally it really has taken off.”

Howitt took over from Paul Druckman as CEO of the IIRC last November after serving 22 years in the European Parliament, representing the East of England (see IIRC names Richard Howitt as new CEO).

Integrated reporting seeks to tie together financial reporting with other types of reporting, including sustainability, human capital and intellectual property. IR encompasses six “capitals”: financial, manufactured, intellectual, human, natural, and social and relationship.

Howitt noted that integrated reporting is now a leading practice in Japan and is part of the stock exchange listing rules in South Africa and Brazil. The Indian securities regulator listed the names of 500 companies doing integrated reporting in a recent circular, he pointed out. The framework has also been adopted by the Chinese Ministry of Finance and will be rolled out across China. However, Howitt admits it's all still at an early stage.

“This is moving towards our ambition of making it really a standard practice globally,” he said. “We’re still in a phase that we call the ‘global breakthrough phase.’ We still feel at the moment that we are introducing integrated reporting. The companies that are adopting it are leaders and are testing it now, but we want to move probably within about a year to what we would call the ‘global adoption phase’ where it starts to become the normally accepted or common practice.”

Last week, the IIRC released an invitation to comment asking for feedback on the framework it issued three years ago to learn more about the issues companies are facing when trying to implement it (see IIRC seeks feedback on integrated reporting implementation).

“We want to make this the standard and typical practice around the world, and we see the phase where that is going to happen starting in about a year’s time,” said Howitt. “Of course that must include here in the United States.”

Richard Howitt of the IIRC
IIRC CEO Richard Howitt
Bob Laux of the IIRC
IIRC North American lead Bob Laux

A number of U.S. companies are using integrated reporting, including General Electric, PepsiCo, Prudential Financial, Southwest Airlines, Jones Lang LaSalle, Entergy and Clorox. GE's integrated report set a kind of standard in itself.

“We’ve definitely put down our roots in the U.S., and we’ve got some very, very important backers,” said Howitt. “So when General Electric came out with an integrated report, that was a very big thing for us because it’s a big company, and the market is watching.”

Howitt was joined in New York by Bob Laux, a former treasury controller at Microsoft who is now the North American lead for the IIRC. While Microsoft has not issued its own integrated report, Laux noted that integrated reporting is having an influence on the tech giant.

“You may not see an integrated report right away from Microsoft, but what you are seeing, in my opinion, is the integrated thinking going on that leads to that thought process,” said Laux.

Technology companies are working with the IIRC to make it easier for other companies to gather information and compile integrated reports.

“What we know is that the technology for reporting is changing very rapidly anyway,” said Howitt. “Then the trick with integrated reporting is don’t have a separate discussion about how you do integrated reporting. Be part of that discussion about technological development. That’s the clever way of doing it. That’s the point we’ve reached. We’re in partnership with those companies. SAP is another member of that network who are one of the leading integrated reporters and who are working at both levels. It’s a very, very exciting piece of work.”

The World Bank is also using integrated reporting. “The really good thing about the World Bank is they have five separate businesses within the World Bank," said Laux. "So you can see how challenging an integrated report in such a diverse organization would be, and they do an outstanding job.”

Howitt described the process of moving to integrated reporting as gradual for many of the companies that have tried it.

“You don't go from siloed, backward-looking, compliance-driven reporting one day and then suddenly leap to fully integrated, forward-looking, broader reporting the next,” he said. “No, that's not how it happens. We've got some good experience now about how this idea grows within companies, and many companies do an internal exercise in year one. They never publish that. They do that as a dummy report in year one in order to test it out and also to build internal support within the company for the process. It's not unusual for companies only to actually publish an integrated report in the second year. We don't say all the information that you get from integration has to be publicly exposed either. There's no necessity.”

Since IR is only a framework and not a set of standards, it doesn't require companies to cover all the bases.

“Many companies are doing what I would call combined reports,” said Howitt. “They're bringing in one of the capitals. We have this multicapital view of the world. Not every company has to report against every capital, though. That's sometimes a misunderstanding. Companies are asked to think about it, more broadly. It's not just environmental sustainability, as important as that is, but this is not ESG. This is about genuinely looking at capitals: human, intellectual, social, relationship, manufacturing capital as well as financial and natural capital. And each company working out for their business their sense of what is material to them and the long-term value creation for them. Of course genuinely integrating it, genuinely understanding the financial impact of that multicapital world, takes time. It's a journey, and integrated reports improve from year one to year two to year three. That's a welcome part of the process.”

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Michael Cohn

Michael Cohn

Michael Cohn, editor-in-chief of AccountingToday.com, has been covering business and technology for a variety of publications since 1985.