27 Feb 2014

Businesses cool on integrated reporting

Most companies are waiting to see who moves first on integrated reporting (IR) before making the jump themselves. This is the finding of a new report from the Association of Chartered Certified Accountants (ACCA) showing uncertainty among business leaders about IR.

After a three-month consultation and trial in 25 countries, the International Integrated Reporting Council (IIRC) released its framework for integrated reporting in December. It is based on applying principles and concepts focused on bringing greater cohesion and efficiency to the corporate reporting process. The framework involves “integrated thinking” as a way of breaking down internal silos and reducing duplication.  

The ACCA study, which gauged the views of finance chiefs in the UK and Ireland, shows a certain hesitancy about the new framework, highlighting perhaps that more needs to be done to educate companies about the benefits of the standard. Most were thinking about implementing in the coming years, though one in ten had no intention of doing so.

Investors, on the other hand, are strongly in favour of IR. Ewan Willars, director of policy at ACCA, said: “On the face of it, what our research has shown is that when it comes to IR the finance profession is less enthusiastic about it than investors.

“However, CFOs are telling us that they do see the benefits of integrated reporting, not just presenting the company as an advocate of sustainability, but helping to align the company’s risks with its opportunities, adopt a more holistic view of the true drivers of corporate performance, and build better relationships with external stakeholders.”

Others are also looking to tread carefully with IR. The Institute of Chartered Accountants of Sri Lanka is giving a “cautious” welcome to the concept, according to The Nation. “We don’t want to jump into a new concept just because there are other countries looking at adopting this,” said the body’s president, Arjuna Herath.

Nonetheless, the IIRC business network consists of more than 100 firms already, including HSBC, Unilever, Deutsche Bank, China Light & Power, Hyundai Engineering and Construction, National Australia Bank and Tata Steel.

The ACCA report also looked at the interaction between businesses and auditors. Most finance chiefs said the relationship with their auditors was good, but many hoped for improvement around costs and a lack of competition in the audit market. Half (47 per cent) want more competition in the market, while 60 per cent called for lower fees.