Less than half (46%) of the integrated reports reviewed by the Association of Certified Chartered Accountants (ACCA) this year explained how governance structure supports the organisation’s ability to create value over time.
In addition, while most organisations explain the risks and opportunities facing them and how they manage them, only 46% of the reviewed reports linked these risks and opportunities to value creation over time.
More companies also need to build on their strength in explaining strategy by including an explicit link between strategy and the organisation’s ability to create value over time. Again, only 46% of the reviewed reports did this.
Presenting the early results of ACCA’s review at the ICGN-IIRC conference in London on 6–7 December, Yen-Pei Chen, corporate reporting and tax manager in the Professional Insights team at ACCA, said there are good foundations to make improvements.
For example, 66% of reports that were reviewed did explain at some high level how the organisation creates value for itself and others.
Similarly, 88% of reviewed reports provided information on capitals other than financial capital, such as human, intellectual, manufactured, natural and social and relationship capital. However, only a minority explained how corporate performance links to these capitals.
Chen identified two other areas where there is potential for improvement in integrated reporting—explanations of materiality and connectivity. Only 46% of reviewed reports explained the engagement and decision-making processes behind decisions about what is material for their reporting.
Companies also need to think about connectivity in two ways, according to Chen. First, it is important to show the interrelatedness between the different capitals that the organisation uses. Second, there is a need to link and bring different parts of the report together.
Chen said: “We’re in the middle of a journey. Many companies have successfully grappled with how to apply the context of the different capitals and value creation to the unique circumstances of their businesses. If we take this one step further and link in value creation consistently throughout integrated thinking, management and reporting, then we could reap the benefits.”
For more information and guides about producing integrated reports, visit the IIRC website.
Dawn Cowie is a contributing editor to Board Agenda.