Megatrends drive reporting change – time to change gear?
07 February 2014
So how prepared are companies to deal with the fundamental external forces that CEOs think will have the most impact on their businesses over the next five years? This year’s PwC CEO survey identified technological advances, demographic changes and global economic shifts as the ones to watch.
These rapidly developing megatrends are at the heart of the International Integrated Reporting Council’s thinking and its new framework that aims to help business and the capital markets thrive amidst rapid change. The idea is to help companies provide investors and others with more meaningful information to inform their decisions and explain how value is created both today and in the longer term.
The framework was officially launched in December but it has been tested and developed by big business through the IIRCs Pilot Programme over the last three years. And many of the principles underlying the framework have also underpinned the emerging good practices that you will have read about in this blog for a number of years.
Research shows information is evolving, but not yet fit for purpose
Over the last year, we’ve looked at over 400 companies globally to see how far they have moved towards integrated reporting. The findings show a significant evolution in reporting, compared to our global research a few years ago, but not a revolution. As you’d expect, the breadth of information in some areas has shot up – particularly around strategy, business models, risks and KPIs. And as this information becomes more firmly embedded into companies’ reporting, we’ve seen a gradual improvement in how this information is integrated and linked to business strategy.
I see these developments – of content and integration – as evidence of the direction of travel that highlight clear opportunities for all organisations to significantly improve the quality of reporting, both internally and externally, even within existing regulatory constraints.
But that’s just the ‘low-hanging fruit’ from the existing reporting model…
Need for deeper change?
The actions we need to take, if reporting is to help us deal with these megatrends and support financial stability, are arguably more revolutionary. We need to think more broadly about what’s material to move away from the noise and clutter of less relevant information. And we need to think about how value is created and what impact our organisations have beyond their immediate legal boundaries. In short, we may need more focused adoption of the integrated reporting principles.
I’m well aware that this is easier said than done. But I am already seeing and working with management teams who are starting to factor ‘integrated thinking’ into their management information and external reporting.
So I think we’re approaching a gear change – one that will bring speedier travel towards much more effective and relevant corporate reporting. And that’s essential if we want our organisations and capital markets to weather the megatrend storms in good shape.