- Case Study: Integrated Corporate Reporting – a new form of reporting corporate performance.
In recent years, the terms “sustainability’ and “corporate social responsibility” (CSR) have become commonplace. There has been growing awareness of the impact of corporate behaviour, not just on shareholders, but on other stakeholders. As the importance of sustainability increases, initiatives such as the International Integrated Reporting Committee (IIRC)’s Integrated Reporting Framework, United Nations Global Compact and Principles for Responsible Investment, the International Finance Corporation’s (IFC) Performance Standards, and the Global Reporting Initiative (GRI) dictate that developing an integrated/comprehensive and ongoing reporting and disclosure program with stakeholders is a necessary business deliverable. To this end, in August 2010, the Prince of Wales’ Accounting for Sustainability Project and GRI announced the formation of International Integrated Reporting Committee (IIRC). The aim is to help with the development of more comprehensive and comprehensible information about organisations, prospective as well as retrospective, to meet the needs of the emerging, more sustainable, global economy. The objective of IIRCC is to create a globally accepted integrated reporting framework which brings together financial, environmental, social and governance information in a clear, concise, consistent and comparable format (Rankin et al 2012).
Integrated Reporting (IR) is about integrating material financial and non-financial information (which includes social and environmental and other value relevant information) to assist investors and other stakeholders to understand how an organisation is really performing. An integrated report focuses beyond the traditional time frame and scope of the current financial report by addressing the wider as well as longer-term consequences of decisions and actions and by making clear the link between financial and non-financial value (KPMG 2012). It also attempts to demonstrate the link between an organisation's strategy, governance and business model. In essence, integrated reporting brings together material information about a firm’s operating environment, business strategy, governance and financial & non-financial performance in one report.
Some regulatory and professional bodies are also making integrated reporting part of their agenda. For example, Australian Securities and Investment Commission (ASIC) in Australia came out supporting integrated reporting and standards in 2013. Then in early 2014, the chief executive of CPA Australia remarked, “the release of integrated reporting framework marks a new era in the way companies report on their performance. Integrated Reporting is the way of the future when it comes to reporting on company performance. By looking beyond purely financial measures and accounting for social and environmental performance as well, it can be a key component in a company’s armory of best practice corporate governance and disclosure,”
Required:
You are the Chief Financial Officer (CFO) of a newly listed Australian company, OZGOLD Limited. OZGOLD is a manufacturer of industrial hardware components requiring heavy metals and minerals as the key raw materials. The manufacturing process is labour and fuel and water intensive and the manufacturing facilities are mainly located in developing countries. Your Chief Executive Officer happened to read the following appended articles in press: (1) “Integrated reporting radar”; (2) Are we heading to Integrated reporting in Australia?; (3) “CPA Australia welcomes new Integrated Reporting Framework”. She wonders whether OZGOLD should also be more proactive with respect to integrated reporting and disclosures. Your CEO asked you to write up a report, analysing the key issues in adopting Integrated Reporting (IR).
In your report, you should address the following questions:
Explain the meaning of sustainability and discuss why corporations might consider it in their business operations.
What are some of the drivers behind various global initiatives on Integrated Reporting (IR) and how will such initiatives affect corporate reporting in general?
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