A proposed Integrated Reporting Framework unveiled by the International Integrated Reporting Council this week is attracting some early support.
The IIRC unveiled a “consultation draft” of the framework at a series of events around the world on Tuesday (see IIRC Releases Draft Framework for Integrated Reporting). The American Institute of CPAs announced its support for the proposed framework, which would bring together financial reporting with reporting on other aspects of a business, such as governance, sustainability, human capital and intellectual capital.
“The AICPA has long supported efforts to develop a voluntary global framework for business reporting to complement financial reporting,” AICPA president and CEO Barry Melancon said in a statement. “The release of the draft framework represents important progress toward this goal. We applaud the IIRC for fostering international collaboration and encouraging key stakeholders to contribute to the Framework, which we believe will facilitate meaningful adoption of .”
Melancon was recently appointed to represent the AICPA on the IIRC Council. The Council provides advice on the IIRC’s mission, role and governance practices through thought leadership, intellectual contributions and strategic insight. Melancon also spoke at the New York launch event on Tuesday evening at NASDAQ’s Times Square headquarters (see Integrated Reporting Makes Its Debut).
Integrated Reporting, or as it has been branded to distinguish it from investor relations, aims to link an organization’s strategy, governance and financial performance with the context within which it operates. can help businesses make more informed decisions and enable investors and other stakeholders to better understand how an organization is really performing.
The International Federation of Accountants also applauded the release of the proposed International Integrated Reporting Framework. IFAC has been participating in the development of the framework and is a co-founder of the IIRC.
IFAC said integrated reporting would represent the next step in the evolution of corporate reporting and communications, helping organizations to communicate a clear and candid picture of their performance to investors.
“The accountancy profession plays a vital facilitating role in bringing integrated reporting to more organizations, and the framework will help guide organizations and professional accountants in this process,” said IFAC president Warren Allen, who serves on the IIRC. “Feedback from individual accountants and the profession on the proposed framework is critical.”
In addition to Allen serving on the IIRC’s Council, Ian Ball, a former IFAC CEO and current principal advisor, chairs the IIRC Working Group. IFAC also has a staff member who has been seconded to the IIRC on a full-time basis.
The IIRC is asking all stakeholders to provide feedback on the International Integrated Reporting Framework during its public consultation period, which closes July 15, 2013. The framework has been released in English but will also be available soon in additional languages, IFAC noted.
The World Business Council for Sustainable Development also expressed its support for the draft framework. Businesses and organizations worldwide are being urged to take part in WBCSD workshops during a 90-day consultation period that will allow WBCSD members and non-members to review and provide input to the IIRC’s consultation draft of the framework, ensuring it is “fit for purpose,” to improve decision making and driving integrated thinking for management.
WBCSD president Peter Bakker, who is also deputy chair of the IIRC, said business feedback is essential to improving the consultation draft so it will arrive at a workable framework for business. “This is the next step in the evolution of reporting financial and sustainability performance in an integrated and transparent way,” he said in a statement. “We are passionate about as a means of changing the way investors value businesses and allocate financial capital. The WBCSD is fully committed to the development of the IIRC’s framework as we believe that what gets measured gets managed. Investors need to take a more holistic view of an organization not just the financials. This is the start of the journey to better corporate reporting.”
is currently voluntary for business. The IIRC has designed the consultation draft with investors as the primary user, setting out the principles for a business to follow, linking strategy with financial and non-financial capital streams. will describe and disclose how an organization’s business model uses financial and non-financial capital in producing value. The consultation draft will not provide the rules that must be followed in the creation of an integrated report. Instead, it will provide a framework that an organization can determine how it should disclose its value creation journey in the short, medium and long term through its business model and its use of six different capital streams.
Bakker urged CFOs, investor relations and board members to understand what is, as defined in the consultation draft. He encouraged senior management to embrace and to ask management boards to look at how they can improve the linkage between strategic intent and performance.
“Financial capital is disproportionate in the way in which a company is valued,” said Bakker. “Social and environmental impacts are not recognized to the extent they need to be in investment and capital allocation decisions. This is short sighted. is also about giving credit where credit is due. A company that leaves the environment and the community better off than when it started should have this reflected in its true value proposition.”
Bolstering support for integrated reporting, a new study released Wednesday by Ernst & Young found that shareholder proposals indicate that investors are pushing for more disclosure and enhanced sustainability and social reporting. As of early April, environmental and social proposals accounted for approximately 45 percent of all shareholder proposals submitted thus far in 2013. The new Ernst & Young LLP Corporate Governance Center report showed growing attention to environmental and social topics particularly on the part of institutional investors, with average support for proposals on these topics in 2012 reaching 19 percent, nearly double the 2005 level.
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