Building a corporate reporting system that is effective, robust and reflective of the realities of doing business in the modern day is central to the work of the International Integrated Reporting Council (IIRC).

Speaking at the IIRC’s Global Conference in London in May 2019, chair Dominic Barton said: “We are not trying to make it our system, to be the winner. We are trying to change the system.”

Our goal has always been to ensure reporting is used by organisations internationally as a tool to drive sustainable development and financial stability. We are working with partners across the corporate reporting landscape to achieve this and to change the system together.

It was this desire to create a cohesive system that was behind the creation of the Corporate Reporting Dialogue (CRD) back in 2014, an initiative the IIRC convened to bring together the largest players in the corporate reporting landscape.

Together, we are engaging with companies and investors to map a clear pathway towards long-term sustainable value creation.

Last month, participants in the Corporate Reporting Dialogue concluded a global market consultation on building better alignment between the reporting frameworks—the Better Alignment Project.

Through an online survey and a series of global roundtables held in 11 countries, around 250 stakeholders, including businesses and investors, were consulted on how to support effective disclosures, addressing the Task Force on Climate-related Financial Disclosures (TCFD) recommendations, and identifying how non-financial metrics relate to financial outcomes and how this can be integrated in mainstream reports.

Building better alignment

The consultation findings reaffirmed an urgent call from the market to unravel and solve inconsistencies in metrics for climate change reporting. Further findings included confusion over the frameworks’ differing definitions of materiality and calls for the relationships, interconnections and alignment between the reporting frameworks to be better articulated to the market.

While there was clear appreciation for the importance of the TCFD recommendations, delegates struggled to report against the recommendations, especially scenario analysis. There was general concern regarding the financial impact of environmental, social and governance (ESG) risks and opportunities, with calls for more comprehensive and financially aligned indicators, better sector-specific reporting and a greater focus on SMEs.

On the wider reporting landscape, stakeholders found the proliferation of indexes, questionnaires, surveys and frameworks for the disclosure of ESG information and data overwhelming. Voluntary frameworks and standards were also viewed by many as a temporary fix to problems that require a more comprehensive regulatory solution.

While the findings of the consultation present a number of challenges for us to solve, they also represent the start of a productive conversation with markets globally on how to better align reporting frameworks on a practical level, to help report preparers and investors to navigate the reporting landscape.

Information gathered from the consultation period will inform an initial report, due for publication in September 2019, which will present a map showing the linkages between the TCFD recommendations and the CRD frameworks involved in the Better Alignment Project, as well as the commonalities and differences between the frameworks, within the parameters of the TCFD.

The consultation findings will also inform future focus areas for the CRD Better Alignment Project participants, which include CDP, the Climate Disclosure Standards Board, the Global Reporting Initiative, the International Integrated Reporting Council and the Sustainability Accounting Standards Board.

A robust reporting system

The CRD consultation process has provided a stark reminder that the participant frameworks need the market to inform their activities if they are to solve the current confusion over sustainability reporting.

The IIRC is committed to not only playing our role in delivering a robust reporting system, but also providing insights, guidance and support for those wanting to drive connectivity in their reporting to reflect the entire value creation chain by adopting the International Integrated Reporting Framework.

It is also crucial that we do this with all of the Corporate Reporting Dialogue participants—including those on the financial side—the International Accounting Standards Board, the International Organization for Standardization and the Financial Accounting Standards Board.

The September report will present another step forward by the CRD towards mapping a clear pathway for companies to follow in order to create long term sustainable value for their stakeholders.

I would encourage companies and investors to offer further feedback to the CRD from September on our initial report and the level of clarity it offers to the market on reporting effectively on the risks and opportunities presented by climate change.

It is vital that we continue our dialogue with the global marketplace if we are to create the clear and comparable reporting guidelines needed to support a systemic shift towards a sustainable global financial system.

Jonathan Labrey is chief strategy officer at the IIRC.