Integrated Reporting survey highlights areas to focus on

09 Jan 2014

How does current reporting measure up against the International Integrated Reporting Council’s new framework? A new survey highlights elements of reporting that are already aligned with the new framework and where organisations may want to focus their improvement efforts.

The survey benchmarked over 400 companies against 25 aspects of reporting chosen to reflect the IIRC’s IR framework. The research focused on the quality and integration of information in key company reports.

Key global findings

The reporting of risks and opportunities has improved since 2008, from 78% of companies outlining key risks to 93% now. But still only 23% of companies globally clearly correlate risks with issues discussed elsewhere in the report and only 22% discuss how risks to their business are changing over time.

The same goes for performance elements of company reporting. In 2008, only 48% of companies explicitly identified their KPIs. That figure is much improved now, at 74% internationally. But still only 31% of companies align their KPIs with strategic priorities.

Better connectivity needed

Overall, the survey results show that many companies already successfully report plenty of the content elements of the IR framework, but find it harder to address the guiding principles such as connectivity and future orientation. Discussing the latter is crucial, say experts, to give stakeholders an idea of the true value of a business now and into the future.

The survey also shows that some countries, such as South Africa, the UK and Germany are leading on integrated reporting, possibly because of national regulatory changes. Some industries tend to do better than others too, with mining, chemicals and real estate topping the list, maybe because of simpler business models or historically having to respond to stakeholders demanding broader information on material non-financial issues.

A structure for relevant communication

“To build trust, raise capital and drive sustainable growth today, we are starting to see leading companies think more holistically about their strategies, activities, values and behaviours – and this shows in the their reporting,” said PwC Corporate Reporting director Mark O’Sullivan. “Companies tell us that this more integrated thinking helps them make the most of new opportunities and improves their risk awareness.”

“All listed companies need to look beyond the current reporting model that’s rooted in past financial performance to give stakeholders a clearer, more forward-looking perspective on the business. And looking at the Integrated Reporting framework is a good way to kick-start this process.”

Mr O’Sullivan explained that the Integrated Reporting framework is designed around six capitals and focuses on getting companies to describe their value creation in the short, medium and long term. It allows companies to assess where they stand today, and what improvements they need to make going forward.

“It’s a catalyst for integrated thinking and integrated internal and external reporting,” he concluded.

Content elements What’s clear 2013 (and 2008*) Evidence of IR Challenges
Organisational overview and external environment 86%
discuss future market trends
60% - 2008
31%
link market discussions to strategic choices
Governance 65%
discuss leadership effectiveness
54%
have some alignment of KPI outcomes to remuneration outcomes – 15% explicitly
22%
some alignment – 2008
Business model 60%
make meaningful reference to their business
25%
explain the value-adding activities used to execute strategy
21%
identify the material capital inputs to the business model
Risks and opportunities 93%
identify their key risks
78%
outlined risks – 2008
18%
identified which were key - 2008
29%
have clear correlation of risks with issues discussed elsewhere in the report
22%
discuss how risks are changing over time
3% - 2008
Strategy and resource allocation 94%
report strategic priorities
98% - 2008
68%
include some non-financial capital priorities in core strategy
40% - 2008
 
33%
base reporting on strategic themes
33% - 2008
Performance 74%
explicitly identify their KPIs
48% - 2008
86%
report the impacts of activities on non-financial capitals
31%
align KPIs and strategic priorities
25% - 2008
Outlook 43%
explain financial funding plans
20%
comprehensively consider the future availability of material capitals

*Against 178 European, Australian and Canadian companies’ results in PwC’s Recasting the reporting model (2008)