Posted: 17 February 2012
he South African corporate reporting world has been awash with uncertainty in 2011. This was caused by what is known by the rather wonderful Afrikaans saying, n sameloop van omstandighede (a coincidence of circumstances) in the regulatory environment.
A convergence of the new Companies Act, changes to the JSE Listings Requirements, King III and the dreaded integrated reporting, sent many listed companies running for their handbooks, legalese to English dictionaries, and telephones to get input from their advisors on just what to do next! The Companies Act that was implemented on 1 May 2011, is difficult enough to understand given the governance requirements and other regulations it imposes on companies. When combined with the JSE Listings Requirements, it becomes a quagmire for listed companies to gingerly find their way through and around.
And that is the challenge going forward.
However, the immediate topic that seems to be on everyone's lips is 'integrated reporting'. What is it? How does this fit in with King III? Is it King III? What will it mean to us as a company? And how exactly do we implement it?
Integrated reporting has found its as-yet-unhappy niche in the corporate reporting playing field. Until recently annual reports and sustainability reports were separate documents. But the ‘save the planet and its people’ drive has gained momentum and come increasingly to the fore – not only for activists but also for the layman. Therefore companies need to report on how they impact the world around them – returns are not just about rands and cents but the long-term value for all involved in, and affected by, the business.
This has resulted in a natural evolution towards combining the various forms of reporting – hence, integrated reporting.
South Africa has taken the lead in this field by being the first country to make integrated reporting a legal requirement for listed companies. Fortunately, it can be phased in over a number of years…
So what exactly is integrated reporting?
Firstly, integrated reporting gives an account of everything affected by a company – in essence it evaluates a system and analyses the impact of that system on its surroundings.
Secondly, once the analysis is complete, you must inform stakeholders (bearing in mind that stakeholders include everyone who is exposed to and/or affected by, the company) how the interaction with planet, people and money relates to:
Corporate governance has become more important than ever before. It seems that every year there is another corporate scandal. The markets have been in turmoil since 2008 and as a result, corporate governance and business sustainability has been put under the spotlight as never before.
While the demands of corporate governance may seem incredibly onerous, companies that adopt strict corporate governance policies are being ‘rewarded’ by institutional investors and command a higher level of investor confidence.
This is never more important than where the company concerned is a prominent brand. There is a responsibility attached to brand prominence that cannot be ignored – a responsibility beyond that of purely creating value through profitability.
The good news is that companies that have followed the principles of clear and simple communication have probably been applying integrated reporting in one form or another all along!
The current reincarnation of integrated reporting is a formalisation of what has been preached, surveyed and promoted all along as good governance and good communication.
An example of this is a survey conducted by PricewaterhouseCoopers as far back as 2006/2007. Around two hundred chief financial officers in the UK and USA felt that their share price was undervalued.
Clean, clear and simple communication impacts your share price and everything else in a companies’ life cycle – and this is at the heart of integrated reporting.
So how can your company improve its communication?
Credibility is key. The willingness to commit to goals and strategies and to discuss the extent to which these have been achieved or changed, and why, is fundamental to good communication. Consistent open communication creates trust and credibility among shareholders and future investors. And this is the basis of integrated reporting.
Apply these logical rules to your integrated system and use the various mediums that the Listings Requirements and Companies Act now make available to you and you will be implementing integrated reporting – the easy way!
Intergrated reporting is simply a conversation with people – what would you want and need to know about a company?
Profile media October 2011 - January 2012