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Posted by Ricardo Stachezzini and Laura Girella, on behalf of the EAA Stakeholder Reporting Committee (SRC)
In May 2020 the IIRC launched a 90-days consultation process aimed to collect feedbacks and suggestions to inform the revision of the International <IR> Framework (originally launched in December 2013) (https://integratedreporting.org/2020revision/). The SRC submitted its response to the issues raised therein and attached here.
The IIRC consultation is structured as follows. A first set of questions (i.e. Q. 1-10) focuses on testing the revisions that the IIRC is intended to implement to its current Framework. A second set of questions (Q. 11-14) goes beyond the scope of the present revision, informing longer-term strategic matters. At the end, the consultation allows respondents to provide open feedbacks.
Submitted on the 18th of August 2020, the SRC’s response to the consultation is generally supportive of the IIRC’s proposals. In particular, with reference to the first set of questions, the SRC appreciates the adjustments made to simplify the statement of responsibility for an integrated report (Q. 1). The SRC believes that disclosures about an organization’s reporting process and related responsibilities foster governance bodies to clarify their engagement with integrated reporting during the phases of the integrated report preparation (Q. 2). While the SRC believes that process-related disclosures do not jeopardise the principles-based approach of the Framework (Q. 3), it underlines that the potential inclusion of management personnel in the scope of those charged with governance may weaken the accountability of top corporate governance bodies and their full engagement in sustainability-related issues (Q. 4). The SRC thinks that the same governance bodies that are charged with approving the financial annual report should be also charged with approving the integrated report, in the case it is published as a separate document. A change to the paragraphs related to variations in governance models is also suggested (Q. 5).
With reference to the description of outputs and outcomes, the SRC suggests some minor changes to the narrative of the Framework (Q. 6) as well as to the “Figure 2”, related to the organization’s value creation process (Q. 7). Further, the SRC encourages the IIRC to explicitly state the need to provide evidence-based and accurate qualitative and quantitative information (Q. 8). The SRC is supportive of the increased emphasis on value preservation and value erosion, and suggests that “Figure 2” may report “positive and negative outcomes” rather than “short, medium and long term outcomes”, making reference to these time frames in the arrow below (Q. 9). The SRC is more critical with reference to the concept of “impacts” (Q. 10). This concept does not appear to be adequately explained by the Framework, which refers to “impacts” and “outcomes” without defining the boundaries and the difference between these concepts.
The SRC also replied to the second set of questions. With reference to the possibility to shift the emphasis from “providers of financial capital” to “providers of other forms of capital” as recipients of integrated reporting (Q. 11), the SRC believes that an extension to “providers of other forms of capital” may enhance the organization’s accountability. The SRC agrees on the idea that this extension aligns with the fundamentals of integrated reporting and encourages disclosures on the full range of capitals on which organizations rely or have an effect. As recognized by a growing number of scientific and professional analyses, investors and other financial stakeholders (e.g. rating agencies and analysts) are more and more interested in the information provided by means of integrated reports. As such, the SRC does not believe that the extension of the plethora of stakeholders would reduce the relevance of integrated reports to investors.
The SRC is also supportive about the creation of a resource outside the Framework to showcase authoritative sources of indicators and methodologies across the capitals (Q. 12). Indeed, practitioners usually refer to standardized sector-specific indicators as a fundamental aspect for making their non-financial disclosure more comparable and facilitating investors’ decision-making. The IIRC’s Examples Database may be extended to include examples of indicators. Some possible sources of KPIs might be GRI, SASB, WBCSD (“Reporting Exchange”) and WICI.
The SRC does not believe that the IIRC should additionally address the concept of integrated thinking (Q. 13), considering that the “Integrated Thinking & Strategy State of play report” published by the IIRC’s Integrated Thinking & Strategy Group significantly improved the general understanding and application of this concept (https://integratedreporting.org/resource/integrated-thinking-strategy-state-of-play-report/). However, it may be convenient to create an ad-hoc guidance document. Referring to the need to explore the role of technology in future corporate reporting (Q. 14), the SRC suggests the IIRC to consider extensibility of XBRL to integrated reporting information.
As final open feedback, the SRC proposes to consider adding a few paragraphs (or a cross-reference) to the Framework regarding its application to SMEs and public sector entities.