GLOBAL – A new corporate reporting model for consultation has been launched by the International Integrated Reporting Council (IIRC), a business and investor-led coalition.
The consultation draft of the International Integrated Reporting (IR) Framework creates the foundations for a new reporting model that aims to enable a business to provide concise communication of how it creates value over time.
Speaking at the New York launch of the consultation draft at NASDAQ, Paul Druckman, chief executive at the IIRC, said: "The framework is the product of business and investor input and testing involving over 300 individuals and organisations.
"The IIRC has recruited businesses and investors to its pilot programme in 25 countries.
"That is why today we are issuing an invitation to businesses, investors, the accounting profession, regulators, standard setters and other interested parties to contribute to the consultation and shape this corporate reporting evolution that matters so much to the future of business and the global economy."
The goals of IR are to achieve a more cohesive and efficient approach to reporting, inform capital allocation decisions, enhance accountability and stewardship and support integrated thinking.
Speaking at the South African launch of the consultation draft at the Johannesburg Stock Exchange, Mervyn King, chairman of the IIRC, said: "The world today faces two critical and interconnected dangers: financial instability and unsustainability. Both of these dangers pose threats to the livelihoods of communities across our planet – to their wealth and welfare.
"They are risks that have been under-managed and under-reported for too long. The corporate reporting landscape has not kept pace with the scale of the changes that have taken place in the world economy, business and society in recent decades."
King said businesses and investors had a central role in making capital allocation decisions that would ultimately determine the resilience of the financial system and the success of the economy over the "short, medium and long term".
"IR brings businesses and investors to the centre of this debate," he said. "It charges them with the responsibility to communicate how they create value over time. It empowers them to create new tools and mindsets that will improve the quality of decision-making by businesses and investors.
"And, crucially, it will lead to changed behaviour, a focus on the future as well as the past and a reporting model that reflects and communicates the reality of business, its operations and its impacts, in the 21st century."
The World Business Council for Sustainable Development (WBCSD) meanwhile has said the consultation draft is set to challenge the status quo of value creation and transparency in reporting.
Businesses and organisations worldwide are urged to take part in WBCSD workshops held during a 90-day consultation period.
The workshops will allow WBCSD members and non-members alike to review and provide input to the IR consultation draft framework, ensuring it is fit for purpose, improving decision-making and driving integrated thinking for management.
Peter Bakker, president of WBCSD and deputy chair at the IIRC, said: "Financial capital is disproportionate in the way in which a company is valued. Social and environmental impacts are not recognised to the extent they need to be in investment and capital allocation decisions. This is short sighted.
"IR 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."
IR differs from the current reporting landscape in a number of ways, in particular through the introduction of the concept of six capitals, a prism through which organisations should assess, and then report, the degree to which they are creating, diminishing or destroying value over time.
The capitals are: financial, manufactured, intellectual, human, social and relationship, and natural.
The framework will be the subject of extensive consultation until 15 July.