Organisations are increasingly producing social responsibility or sustainability reports, mostly on a voluntary basis. These vary widely in terms of relevance and quality, largely because there is no global standard for measuring and reporting on environmental, social and governance performance.
The International Integrated Reporting Committee was formed last month in response to this. Its remit is to create a globally accepted framework for accounting for sustainability. This will bring together financial, environmental, social and governance information in a clear, concise, consistent and comparable format – ie, in an ‘integrated’ format. The aim is to provide more comprehensive and comprehensible information about an organisation’s total performance.
The committee is supported by the Accounting for Sustainability Project (A4S) and the Global Reporting Initiative.
A4S was launched by the Prince of Wales in 2004 to develop decision-making and reporting systems that take into account the longer-term and broader consequences of actions. It is seeking to build international consensus on the need for an integrated reporting framework. It also develops practical guidance and tools to embed sustainability into decision-making.
The Global Reporting Initiative has pioneered the development of the world’s most widely used Sustainability Reporting Framework. This sets out principles and indicators that organisations can use to measure and report their economic, environmental and social performance.
A key task of the IIRC is to explore ways to integrate financial and non-financial information, while also making sure the result is a much more focused and concise form of reporting.
As Professor Mervyn King, chair of the Global Reporting Initiative, notes: ‘To make our economy sustainable we have to relearn everything we have learnt from the past. That means making more from less and ensuring that governance, strategy and sustainability are inseparable.’
The IIRC initiative has the support of the International Accounting Standards Board. Sir David Tweedie, chair of the board, is reported as saying: ‘The case for globally consistent financial reporting standards is well understood and accepted. It is appropriate to apply the same global approach to other aspects of corporate reporting. This initiative represents an important step on that journey.’
Other sponsors of the IIRC include the International Federation of Accountants, the US Financial Accounting Standards Board, the International Organisation of Securities Commissions, non-governmental organisations, accounting bodies and companies.
So what does this mean for public sector organisations? Well, some are already among the leaders in the field. Several government departments and local authorities use A4S’s Connected Reporting Framework. The 2009 Government Financial Reporting Manual Exposure Draft and Draft Guidance on Sustainability Reporting also draw heavily on this framework and recommends including concise sustainability reports in annual reports.
Taking things a step further, A4S’s June publication, Accounting for sustainability: practical insights gives examples of how organisations have managed to embed sustainability in their decision-making. Two of the eight case studies are public sector organisations: the Environment Agency and West Sussex County Council.
Clearly, the IIRC is just getting started and has some way to go. We don’t yet know if or when we will end up with a new international standard setting body and/or an international voluntary or mandatory standard on integrated reporting. But there is clearly growing support for finding a way to recognise and report on all of the material value drivers of an organisation, non-financial as well as financial, and to address some of the limitations of existing reporting.
John Maddocks is CIPFA’s policy and technical manager for sustainability
