Integrated Reporting. Company Reporting 13/05/2015

Transcription

1 Integrated Reporting Company Reporting 13/05/2015

2 Contents Contents: A. Integrated Reporting (IR) B. Need of IR C. Objectives of IR D. About IIRC E. Value Creation & its process F. Guiding principles G. Content of IR

3 Integrated Reporting (IR): IR is a process founded on integrated thinking that results in a periodic integrated report by an organisation about value creation over time and related communications regarding aspects of value creation. An integrated report is a concise communication about how an organisation s strategy, governance, performance and prospects, in the context of its external environment, lead to the creation of value in the short, medium and long term.

4 IR promotes a more organised and efficient approach to corporate reporting. IR aims to improve the quality of information available to the providers of capital.

5 Need of IR: Macro perspective: Micro perspective: i. Financial stability ii. Sustainability i. Increase in connectivity of information ii. Brief communication on value creation iii. Main focus on strategy & future orientation iv. Reduction of volume

6 There have been tremendous changes the way business is conducted these days, the way it operates and its value creation process. These changes are interdependent and reflect the following trends: i. Globalisation, ii. Growth in policy activities around the world in response to financial, governance and other crises, iii. Heightened expectations of corporate transparency and accountability, iv. Environmental concerns, etc.

7 The current reporting structure is long and getting longer. It contains separate, disconnected information and critical independencies between strategy, governance, operations and performance. Investors need to know how the company s strategy creates value over the time. Businesses also need a reporting environment that is easy to understand and to communicate its strategy, which will help to improve performance and to attract financial capital for investment. So IR is needed by both businessmen and investors.

8 Businesspeople and investors require a document which briefly explains how the company creates value over the time, explaining financial and other information.

9 Objectives of IR: To support integrated thinking and decision-making which focuses on value creation over the short and long term. To improve the quality of information available to providers of capital to enable a more efficient and productive allocation of capital. To enhance accountability and stewardship.

10 To promote a more cohesive and efficient approach to corporate reporting and communicating how entity creates value along with factors affecting it. To increase transparency.

11 International Integrated Reporting Council (IIRC): The IIRC was launched in August, 2010 by HRH The Prince of Wales with international partners including The Prince s accounting for sustainability project, International Federation of Accounts (IFAC) and the Global Reporting Initiative (GRI). In November 2011 the committee was renamed to the International Integrated Reporting Council(IIRC). The IIRC is a global association of regulators, investors, companies, standard setters, accounting professionals and NGOs.

12 The IIRC contains a steering committee, a workgroup committee and three task forces. The taskforces comprise: content development; engagement & communications; and governance. The IIRC is chaired by Professor Mervyn King, Chairman of the King Committee on Corporate Governance and Former Chairman of the Global Reporting Initiative. Membership includes Hans Hoogervorst (IASB Chairman), Leslie Seidman (FASB Chairperson), Maria Helena Santana, (Chairperson, IOSCO Executive Committee), Göran Tidström (IFAC President), Jim Quigley (former global Chief Executive Officer of Deloitte), and others. The Chief Executive Officer is Paul Druckman.

13 The main aim of the IIRC is creation of a globally acceptable reporting framework which provides clear, concise, comparable and consistent information on a company s environment, strategies, governance, social & financial performance. IIRC is not a regulator or a standard setter. So companies adopt integrated reporting with IIRC voluntarily.

14 Funding of IIRC: The IIRC has four fundamental elements in its funding model. Voluntary contributions: IIRC received funds from a range of organisation s which mainly comprise of IIRC members and other support organisations. IIRC Pilot Programme contributions: IIRC receives contributions from IIRC pilot programme participants which ended in September 2014.

15 Pro bono secondments: Also from the major accounting firms who are a major part of the IIRC team. IIRC states that each full time equivalent secondee is estimated to be worth 100K annually to the IIRC. Other in kind support: IIRC also receives support for office premises and events and project support.

16 Following pie chart explains the funding raised by the IIRC in Source:

17 Value creation & its process: IR explains how an organization creates value over time. The organiswation s ability to create value for itself is linked to the value it creates for others. This happens through a wide range of activities, interactions, and relationships. Activities, interactions and relationships which are material to the organisation s value creation are included in IR.

18 For example, the effects of the organisation s business activities and outputs on customer satisfaction, suppliers willingness to trade with the organisation and the terms and conditions upon which they do so, the initiatives that business partners agree to undertake with the organisation, the organisation s reputation, conditions imposed on the organisation s social licence to operate, and the imposition of supply chain conditions or legal requirements. The core of any organisation is its business model, which draws on various capitals as inputs and through its business processes & activities, converts them to outputs.

19 The value creation process is not static. There should be a regular review of each component and its interactions with other components, and a focus on the organisation s outlook & mission, which leads to changes and refinement of the entire mechanism. Value creation depends upon the internal and external environment. The external environment includes economic conditions, technological change, social issues, environmental changes, etc.

20 Value creation process: Source:

21 Guiding principles: These support preparation of an IR, by explaining the contents of the report and presentation requirements. The following guiding principles are applied individually and collectively for the purpose of preparation and presentation of an IR: i. Strategic focus and future orientation ii. Connectivity of information iii.stakeholders relationships iv.materiality v. Conciseness vi.reliability and completeness vii.consistency and comparability

22 Contents of IR: Organisational overview and external environment Governance Business model Risk and opportunity Strategy Performance Outlook

23 Organisational overview and external environment: An integrated report should disclose what an organisation does and what are the circumstances under which it operates.

24 Principle in practice Good reporting should provide insight into: The organisation s: i. culture, ethics and values; ii. ownership and operating structure; iii.principal activities, markets, products and services; iv.competitive landscape and market positioning (considering factors such as the threat of new competition and substitute products or services, the bargaining power of customers and suppliers, and the intensity of competitive rivalry);

25 Key quantitative information (e.g. the number of employees, revenue and number of countries in which the organisation operates), highlighting, in particular, significant changes from prior periods; and Significant factors affecting the external environment.

26 What good reporting looks like: Source: Aspen Pharmacare Holdings Annual Report 2012

27 Governance: An integrated report should disclose how the organisation s governance structure supports its ability to create value in the short, medium and long term.

28 An organisation s leadership structure, including the diversity and skills of those charged with governance; Specific processes used to make strategic decisions and to establish and monitor the culture of the organisation; Particular actions those charged with governance have taken to influence and monitor the strategic direction and risk management approach; How the organisation s culture, ethics and values are reflected in its use of and effect on the various forms of capital, including its relationships with key stakeholders; and How remuneration and incentives are linked to value creation.

29 What good reporting looks like: Source: British American Tobacco Annual Integrated Report 2012

30 Business model: An integrated report should disclose what the organisation s business model is.

31 Principle in practice Good reporting should provide insight into: Key inputs and how they relate to the capitals from which they are derived; Key business activities, considering such factors as: i. How the organisation differentiates itself in the market place; ii. The extent to which the business model relies on revenue generation after the initial point of sale; iii. How the organisation approaches the need to innovate; iv. How the business model has been designed to adapt to change;

32 Key outputs, explaining the products and services that the organisation places in the market, and material by-products and waste; Key outcomes in terms of the organisation s capitals, including both internal outcomes and external outcomes.

33 What good reporting looks like: Source: Kumba Iron Ore Limited Integrated Report 2012

34 Risk and opportunity: An integrated report should disclose the specific risks and opportunities that affect the organisation s ability to create value over the short, medium and long term, and how the organisation is dealing with them.

35 Principle in practice Good reporting should provide insight into: The specific source of opportunities and risks, which may be internal, external or a mix of the two; The organisation s assessment of the likelihood that an opportunity or risk will come to fruition and the magnitude of its effect if it does. This includes consideration of the specific circumstances that would cause the opportunity or risk to come to fruition; and The specific steps being taken to create value from key opportunities and to mitigate or manage key risks, including the identification of the associated strategic objectives, strategies, policies, targets and performance indicators.

36 What good reporting looks like: Source: SABMiller Annual Report 2012

37 Strategy: An integrated report should disclose where the organisation wants to go and how it intends to get there.

38 Principle in practice Good reporting should provide insight into: The organisation s short, medium and long-term strategic objectives; The strategies it has in place, or intends to implement, to achieve those strategic objectives; The resource allocation plans it has in place, or intends to put in place, to implement its strategy; and How it will measure achievements and target outcomes for the short, medium and long term.

39 What good reporting looks like: Source: British American Tobacco Annual Report 2012

40 Performance: An integrated report should disclose to what extent the organisation has achieved its strategic objectives for the period and what are its outcomes in terms of effects on its capital.

41 Principle in practice Good reporting should provide insight into: Quantitative indicators with respect to targets, value drivers, and opportunities and risks, explaining their significance and implications and the methods and assumptions used in compiling them; The organisation s effects (both positive and negative) on the capitals, including material effects on capitals up and down the value chain; and Linkage between past and current performance, and between current performance and future outlook.

42 What good reporting looks like: Source: Aspen Pharmacare Annual Integrated Report 2012

43 Outlook: An integrated report should disclose what challenges and uncertainties the organisation is likely to encounter in pursuing its strategy, and what are the potential implications for its business model and future performance?

44 Principle in practice Good reporting should provide insight into: Anticipated changes over time; Information, built on sound and transparent analysis, about: i. The expectations of senior management and those charged with governance about the external environment the organisation is likely to face in the short, medium and long term; ii. How that will affect the organisation; and iii. How the organisation is currently equipped to respond to the critical challenges and uncertainties that may arise.

45 What good reporting looks like: Source: AngloGold Ashanti Annual Integrated Report 2012

46 References: Wikipedia Miscellaneous sources

47 Thank You!