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The Integrated Report as a Trust-Building Tool

Mark Graham, an Associate Professor at the UCT Graduate School of Business, recently shared his opinions on Integrated Reporting (IR) and its ability to increase value (as a result of improved trust) for listed (and other) entities.

As the business world begins to create greater awareness on sustainability, company reports, when done well, can inspire confidence that a company has a better, stronger grip of who they are, where they are headed, and how they are going to get there – and this can often translate into better performance too.

A great share of the influence of IR lies in the fact that it is a tool for building trust. And trust, according to more than half of the CEOs surveyed by PwC in the 17th Annual Global CEO Survey, is an important factor in an organisation’s ability to grow and prosper. In short, better, more all-inclusive and trusted reporting is an integral part of rebuilding trust.

The Six Capitals

Initially developed as an immediate and direct response to the 2008 global financial crisis, integrated reports are meant to fill in gaps that exist in current reporting. According to the Integrated Reporting Committee of South Africa, “An integrated report aims to provide a holistic picture of the combination, inter-relatedness and dependencies between the factors that affect the organisation’s ability to create value over time.” To summarise, integrated reporting stresses that companies recognise and manage all the six ‘capitals’ responsibly – the financial; the manufactured; the intellectual; the human; the social and relationship and the natural – that it arranges in the creation of value.

Today, IR has the support of a global network of regulators, investors and companies under the umbrella of the International Integrated Reporting Council (IIRC).

South Africa was one of the first adopters of IR. That’s in large part thanks to the King III (2009) and IV (2016) Reports on Corporate Governance for South Africa. These sought to offer local business and investors more protection against economic headwinds that may blow the country’s way from foreign shores. And despite those conspicuous back-of-the-packers such as Steinhoff, South African companies have consistently been providing stand-out integrated reports across all sectors – from banking and retail to mining and property developers. This was highlighted again recently in a 10-country comparative study by Oxford University, in which South Africa was awarded the highest overall score – eclipsing Brazil, France, Germany, Italy, Japan, The Netherlands, South Korea, the UK and the US.

Today South Africa and Brazil are the only countries in which integrated reporting is mandatory for listed companies, although more and more countries and companies are beginning to recognise the value it adds.