Headed by the Accounting for Sustainability Project and the Global Reporting Initiative, the International Integrated Reporting Committee (IIRC) is tasked with creating an internationally applicable reporting framework that brings financial and ethical information into one document.
It should provide a route by which companies can report financial, environmental, social and governance information “in a clear, concise, consistent and comparable format” that it hopes helps them deliver clearer information about their overall total performance, “prospective as well as retrospective, to meet the needs of the emerging, more sustainable, global economic model”, according to a statement issued by the new committee in August.
The IIRC’s working group, headed by regulatory figures from across the world, will meet in October and ambitiously expects to have a set of initial principles mapped out in time for that.
The committee is well represented by regulatory and business heavyweights. Tata CFO Ishat Hussain, EDF Energy CFO Thomas Kusterer, Nestle CFO Jim Singh and London Stock Exchange CFO Doug Webb – representing the Hundred Group of FDs in this case – lead the charge for accountants on the IIRC’s steering committee.
They are joined by Bank of England governor Mervyn King in his capacity as deputy chairman of the Global Reporting Initiative, Helen Brand and Charles Tilley, respectively chief executives at the Association of Chartered Certified Accountants and the Chartered Institute of Management Accountants, and by Robert Herz and David Tweedie, respectively chairman of the Financial Accounting Standards Board and the International Accounting Standards Board. A range of Big Four and mid-tier accounting firm CEOs are also on the committee.
In its infancy
Sustainability reporting is in its infancy as a concept and only a handful of large corporates currently provide the level of integrated reporting the IIRC is mandated to facilitate. No standard framework for integrated reporting has yet been put in place, meaning that stakeholders are not able to compare and contrast the performance of companies in one market.
Aside from the lack of comparitive information contained within the integrated reports that do currently exist, another problem around the lack of a global standard has appeared in the form of assurance of annual reports.
Alan Knight, head of standards at international accountancy institute AccountAbility, and Nelmara Arbex, director of learning services at the Global Reporting Initative, have recently stated their concerns around the level of training accountants may need to adapt any global framework. Arbex suggests that accountants need to simply retrain and that they must now “build new skills on lots of levels”.
Vital to understand
Knight, who along with Arbex sits on the IIRC committee, believes that if accountants fail to understand the reports, they will struggle to properly audit them.
“Sustainability assurance extends into areas auditors are not sure about and not comfortable with,” says Knight. “The reporting needs to be right first.”
The working group has set up three taskforces for different elements of the framework. They have the flexibility to import additional technically-minded advisors from around the organisations the IIRC comprises. The aim is to have the framework ready to be put out to consultation with businesses by November 2011 – coinciding with the next G20 meeting in Paris.
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