Momentum grows for standardised integrated reportingNovember 2011
Tomorrow’s company annual report will look very different to today’s as investors increasingly demand professionally-produced, trustworthy non-financial information, Wim Bartels tells Mike Scott
KPMG, the professional services firm, has been involved in the sustainability business for 15 years and the role it plays in this field is changing all the time, according to Wim Bartels, the firm’s global head of sustainability assurance.
“We started with environmental services in the early 1990s, then moved into sustainability services in the late 1990s because a number of clients realised that they have wider responsibilities,” he says.
The logical next move – and one that the firm is embracing – is to get involved in integrated reporting, which Bartels describes as “the next step in corporate reporting”. “It might not prevent any future crisis, but there is a clear need for more and different information from companies,” he states. “We see this as an area where our clients will go.”
As a result, the firm wants to be at the forefront of this new approach to corporate reporting, which involves companies reporting on environmental, social and governance issues that go beyond the usual financial information that appears in a company’s accounts.
KPMG is taking part in a pilot project to explore the principles and practicalities of integrated reporting and to support the creation of a new global standard in the field. The project is being co-ordinated by the International Integrated Reporting Committee, an organisation set up to drive adoption of this new approach to providing information.
The firm is one of around 50 companies from across the world taking part in the pilot, which, Bartels says, it is hoped will “come up with a framework on how corporate reporting should be designed and what it should look like”.
“Rather than start with a theory and then try to implement it, we will work with integrated reporting in practice and see what issues it throws up.”
The pilot should help answer a range of questions, including what integrated reporting means for businesses, what should be part of an integrated reporting strategy and how it links with a company’s core strategy, he adds.
“Companies need to demonstrate their entire performance, account for it in an integrated way and demonstrate how they create value for society and are performing against targets.”
A number of corporations already produce sustainability reports, but these have always been separate from financial reports and company strategy.
“In future, accountants will be confronted with non-financial information that companies will have to report on and companies like KPMG need to play a role in verifying that information. In a few years, the annual report will look quite different to today’s.”
However, for integrated reports to work, investors will need a level of trust in the information they are being given. “We need to play a role in ensuring the reliability of this information,” Bartels asserts. “Ultimately, we will be the ones verifying what’s in the reports.
“Even though we are now focusing on other things, there is a feeling at the highest level that we are about to see a big step change in how companies report,” he continues. “But if we are to integrate non-financial with financial information, the systems around such information needs to ‘professionalise’ and the quality of the information must improve to make it as manageable as financial information.”
Investors are now learning what this non-financial information is about and have started to incorporate it into their analysis models. He says: “They want it standardised, comparable and reliable.”
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