HSBC: action on the IR framework

21 Aug 2013

Russell Picot, chief accounting officer at HSBC, tells Jessica Fries why they’re one of the first to join the IIRC’s pilot programme to test integrated reporting. He explains the risks of not being involved and the benefits they’ve experienced so far

You’ve been on board from the start of the integrated reporting (IR) journey – so why are you involved, and why is HSBC a pilot company?

We believe in expressing our corporate voice on issues that we think matter to society quite broadly. We also believe in a voluntary approach in this area, and that’s why we’re heavily involved in the pilot programme with the International Integrated Reporting Council (IIRC). We’re trying to develop good ideas, bring corporate and institutional voices together and avoid the concern that some of these very innovative ideas might get hard-coded into legislation too early.

In February, we released about 700 pages of investor material to the market – it’s a big challenge for us to distil the important messages about our strategy. So we see integrated reporting as holding the promise to provide a major breakthrough in the quality of corporate reporting, globally.

So what steps have you taken as a company to really shape the reporting?

Our annual report is our main communication to the market – we don’t have a preliminary results announcement. So we’ve been experimenting with restructuring our risk document – bringing upfront what happened in the market during the year, how we responded to it, and how it’s reflected in our numbers. Then we put all our standing data and boilerplate information about our systems (which may not change) at the back of the document.

Are there a few key messages f rom investors about what they want from integrated reporting?

It really is a classic example where less will be more. No one wants to see another 50 or 100 pages of material. So the challenge is to distil it down.

If you look at the banking industry, investors said very clearly that they thought banks’ business models were quite opaque, and that in some parts of the market, they were uncertain about the viability of funding models. They said that they were exacting a heavy penalty in terms of our equity prices being marked down.

For investors, it’s all about clarity and transparency, which all good corporates should want to achieve anyway.

And what are the key challenges?

Because this is a voluntary programme, it requires voluntary support, and that’s one challenge – to harness the interests of all the stakeholders.

Also, this won’t be successful if we don’t get a strong investor voice. My message for investors is: "please get involved, please send us your views".

If it’s just a programme by the finance function, for the finance function, the company’s not going to reap the sort of benefits that they should expect.

So what are the key benefits of adopting an integrated reporting approach?

The major benefit of IR is clarity of communication to the market. I think that over time, we will see that this could lead to a lessening of the financial reporting burden – creating a much more relevant model of corporate reporting.

It also provides a unifying, integrating force within a company. The CEO, the major business heads and the department heads are getting into a room and discussing how they create shareholder value and how they communicate that to the market – and that’s really powerful. It has both internal and external benefits.

See also Interview with Unilever on integrated reporting.