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SAP Integrated Report (detail below)

Integrated reporting gains momentum

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18th Jun 2014
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A new body was launched in Amsterdam on Tuesday to drive “better alignment and reduced burden in corporate reporting”.

The Corporate Reporting Dialogue (CRD) is a loose affiliation of organisations brought together by the International Integrated Reporting Council (IIRC). It’s objective is to push for more coherent corporate reports that include social, environmental and strategic analysis alongside traditional financial statements.

Huguette Labelle, the chair of Transparency International and a member of the IIRC council, will co-ordinate the CRD’s activities.

She commented: “The corporate reporting landscape is changing. For too long, reporting has been fragmented and disconnected from the strategic drivers of value. In an interconnected world, isolated change is insufficient to reflect the complexities of modern business and investment practice. The CRD is a collaboration that will promote greater cohesion and efficiency, rebalancing reporting in favour of the reader, helping to re-establish the connection between a business and its principal stakeholders.” 

More cynical commentators might question whether the profession really needs another body sticking its oar into the already over-complicated quagmire of international accounting standards, but integrated reporting (trendily abbreviated to <IR>) is gaining ground in the corporate world.

More than 100 multinational businesses signed up to the IIRC pilot programme and practitioners of the new approach include all the Big Four accountancy firms along with corporate giants such as Volvo, Marks & Spencer, Microsoft and SAP.

In April, the European Commission signalled its support for the initiative with the amended accounting directive introduced in April that extended the requirement for large entities across Europe to disclose more non-financial and diversity information.

“The commission is monitoring with great interest the evolution of the integrated reporting concept, and, in particular, the work of the International Integrated Reporting Council,” an accompanying memo said.

The influence of <IR> movement is apparent elsewhere, for example in the recently pubished FRC guidance on strategic reports, which leans heavily on the movement’s emphasis on clear narrative reports that set out companies’ wider objectives and market challenges. In return, the UK regulator reciprocated by welcoming the IIRC's efforts and confirming it was ready to "participate in the dialogue".

The talking will obviously continue, but in the real world companies are embracing integrated reporting. Earlier this month, Greek bottling company Coca-Cola HBC published its second integrated corporate report, amid much publicity about its position as an industry leader for sustainability (first in Europe and second worldwide).

“Integrated reporting reflects how our company thinks and does business,” said Coca-Cola HBC chief executive officer Dimitris Loi. “This approach allows us to discuss material issues facing our business and communities and show how we create value, for shareholders and for society as a whole.”

German business software company SAP has been reporting on financial, social, and environmental performance in its online-only SAP integrated report. The site is notable for its non-linear, graphical presentation of the content (see image below), but SAP’s financial statements are still prepared in the usual way in accordance with IFRS.

SAP’s social and environmental data is collected and presented using Global Reporting Initiative guidelines on sustainabilitystakeholder inclusiveness, and materiality. For anyone interested in understanding current trends and challenges facing the business software industry, SAP’s market analysis provides a very convenient quick summary.

Thanks to its investments in mobile solutions, in-memory analytics and cloud technology, SAP said its business was only slightly affected by relatively weak global growth during 2013. “Despite a slower than expected start to the year, in 2013 our growth surpassed that of the global economy and of the IT industry,” the report said.

Replies (3)

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Teignmouth
By Paul Scholes
19th Jun 2014 16:46

Gains Momentum?

Hi John, given that it's been pretty stagnant for nearly 25 years I guess any movement could be seen as momentum.

So yet another acronym "CRD" unfortunate they couldn't have come up with one that doesn't immediately makes you think of Criminal Records.

All in all though what's the point? Scientific views and the environmental industry change the goal posts so often what chance (or will) is there to come up with standards that everyone can sign up to and integrating this with the CSR stuff merely makes it all so much more complicated and prone to stagnation.

It's now merely tinkering or just fashion following, with only a tiny number of businesses like Coke & M&S actually "living" it.

If anyone's interested here's the last piece along similar lines nearly 4 years ago, and my observations.

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By redboam
20th Jun 2014 08:55

Profit; Cash and Liquidity Strategy yes: The rest - Why?

Quite what companies should be expected to report on "social" and "environmental" issues is unclear; they are after all charged with a duty to operate within the law on such matters. As for "strategic" analysis, the most common practical examples of this for SMEs in practice arise when banks ask for profit and cash flow forecasts. Perhaps brief headline results of such forecasts should also be included by way of a statement attached to accounts. With the arrival of sites such as figurewizard.com that would not be difficult to do or costly and would not only be beneficial to creditors and investors but very likely to the principals of the business and their advisors too.

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Teignmouth
By Paul Scholes
20th Jun 2014 11:23

redboam

Hi - The whole thrust of integrated reporting has been towards the largest companies, so there is no question that this should also apply to SMEs.  The hope was that this would have a trickle down effect and that SMEs would follow in an unregulated way, ie by pressure from their larger suppliers & customers, but, in my view, this is not going to happen, SMEs (and their advisors) don't get it.

Having said that I would be the first to applaud any company which takes the whole CSR/Environmetal impact issue seriously and which does something about it.  My complaint has always been that putting the emphasis on reporting is coming at it from the wrong end, the emphasis should be on enabling companies to understand what they could be doing to recognise the issues and do something about them, and then to report.  In reality, what tends to happen is that those companies that do see the benefits of becoming more aware of their impact and responsibilities and doing something "report" via their marketing.

Finally, on the legal front, it's worth reminding people, including clients, that directors have a legal duty, under the Companies Act to have regard for the impact of their company's operations  on the community and environment.  Not much but maybe the Companies Act 2106 will take it further.

PS:  As to "Why" any organisation that looks further than the spreadsheet of it's bookkeeping and cashflow will soon realise that making itself more environmentally efficient and in recognising the importance of people other than shareholders will soon see profits rise.  This has been the case for all the major companies who have got onboard.

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