But what does an effective infrastructure for sustainability transformation look like? Some key components include: Clear goals and communication from executives A governance model that has executive oversight and guidance Streamlined processes and continuous improvement Sustainability performance transparency, on both internal and external metrics Training and change management programs that engage and empower employees and other stakeholders
The world has changed due to globalization and resulting interdependencies in economies and supply chains, advances in technology, rapid population growth and increasing global consumption. This has had a significant impact on the quality, availability and price of resources, including water, food and energy. It also puts increasing pressure on ecosystems that are essential to the economy and society.
Why do We Need Integrated Reporting? Since the current business reporting model was designed, there have been major changes in the way business is conducted, how business creates value and the context in which business operates. These changes are interdependent and reflect trends such as: • globalization, • growing policy activity around the world in response to financial, governance and other crises, • heightened expectations of corporate transparency and accountability, • actual and prospective resource scarcity, • population growth, and • environmental concerns. Against this background, the type of information that is needed to assess the past and current performance of organizations and their future resilience is much wider than is provided for by the existing business reporting model. While there has been an increase in the information provided, key disclosure gaps remain. Reports are already long and are getting longer. But, because reporting has evolved in separate, disconnected strands, critical interdependencies between strategy, governance, operations and financial and non-financial performance are not made clear. To provide for the growing demand for a broad information set from markets, regulators and civil society, a framework is needed that can support the future development of reporting,
It makes visible an organization’s use of and dependence on different resources and relationships or “capitals” (financial, manufactured, human, intellectual, natural and social), and the organization’s access to and impact on them. Reporting this information is critical to: a meaningful assessment of the long-term viability of the organization’s business model and strategy; meeting the information needs of investors and other stakeholders; and ultimately, the effective allocation of scarce resources.
CorporateRegister.com database , almost 3,300 sustainability reports were published in 2010, and approximately 800 of those reports included a discussion of materiality. Seventy-one of these 800 companies presented a materiality matrix to identify matters that were important to stakeholders and to the company.
In nearly all cases, companies producing an integrated report first started out by producing a corporate social responsibility or sustainability report. The number of such reports has grown dramatically over the last 10 years. For example, data from CorporateRegister.com showed 3,287 companies publishing a sustainability report in 2010 compared to 830 companies in 2001. Similarly, the number of GRI reporters had grown from 125 in 2001, to 1,864 in 2010. While the growth in sustainability reporting is impressive, the growth in the extent to which these reports have any form of assurance on them, whether by a Big Four accounting firm or a specialist boutique, is less impressive. As shown in Table 1, in 2010, Spain had the largest percentage of companies getting an assurance opinion on their report at 44%, and the U.S. had the lowest at six percent. Providing an assurance opinion on nonfinancial information is a necessary, albeit incomplete, step towards providing an integrated assurance opinion. We believe that the full value of integrated reporting will only be realized when integrated assurance is given provided on the report. After all, how much would investors rely on financial reports if they weren’t accompanied by an audit? It is the audit that, despite the occasional shortcoming, makes financial reports reliable and comparable. Reliability comes from the fact that the user knows an objective third-party has carefully reviewed the reported figures to ensure that the report has been prepared according to the relevant accounting standards, typically International Financial Reporting Standards (IFRS) or U.S. Generally Accepted Accounting Principles (U.S. GAAP). Comparability of information across companies, at least within a country and a sector, comes from the fact that they have used the same accounting standards and that the auditor has used audit procedures that are subject to oversight and review to ensure their efficacy in ensuring the reliability of the reported information.
bout The Equator Principles The Equator Principles (EPs) are a credit risk management framework for determining, assessing and managing environmental and social risk in project finance transactions. Project finance is often used to fund the development and construction of major infrastructure and industrial projects.The EPs are adopted voluntarily by financial institutions and are applied where total project capital costs exceed US$10 million. The EPs are primarily intended to provide a minimum standard for due diligence to support responsible risk decision-making. The EPs, based on the International Finance Corporation (IFC) Performance Standards on social and environmental sustainability and on the World Bank Group Environmental, Health, and Safety Guidelines (EHS Guidelines), are intended to serve as a common baseline and framework for the implementation by each adopting institution of its own internal social and environmental policies, procedures and standards related to its project financing activities. Equator Principles Financial Institutions (EPFIs) commit to not providing loans to projects where the borrower will not or is unable to comply with their respective social and environmental policies and procedures that implement the EPs. In addition, while the EPs are not intended to be applied retroactively, EPFIs will apply them to all project financings covering expansion or upgrade of an existing facility where changes in scale or scope may create significant environmental and/or social impacts, or significantly change the nature or degree of an existing impact. The EPs have become the industry standard for environmental and social risk management and financial institutions, clients/project sponsors, other financial institutions, and even some industry bodies, refer to the EPs as good practice. Currently 72 adopting financial institutions (70 EPFIs and 2 Associates) in 27 countries have officially adopted the EPs, covering over 70 percent of international project finance debt in emerging markets. The EPs has greatly increased attention and focus on social/community standards and responsibility, including robust standards for indigenous peoples, labour standards, and consultation with locally affected communities within the project finance market. They have also promoted convergence around common environmental and social standards. Multilateral development banks, including the European Bank for Reconstruction & Development (EBRD), and export credit agencies through the OECD Common Approaches are increasingly drawing on the same standards as the EPs. The EPs have also helped spur the development of other responsible environmental and social management practices in the financial sector and banking industry (for example, Carbon Principles in the US, Climate Principles worldwide) and have provided a platform for engagement with a broad range of interested stakeholders, including NGOs, clients and industry bodies.
XBRL provides more than just a definitional label for each piece of information. Related to each individual piece of information, XBRL provides a connection with related and highly relevant resources and additional concepts: Label – this is the label that the ‘machine’ or software uses… you can read it; but it is designed for the software to use. Presentation – providing a human readable label…….. This is what you would actually see…..in this case with English, French, German, Dutch, Chinese, Japan, Russian, and Ukrainian presentation alternatives for this item label. Reference – can be any other concept such as reference materials, business process guidance, a Web service or even another business rule. Calculation – provides an internal mathematical check or validation on the item. Context – provides the item with transferable context around currency, period, nature (actual, budgeted, forecasted, etc.). Formula – provides a platform for the articulation of business rules and ‘macros’ based upon the standardized nature of the individual information elements. The combination of concepts provide the information with significant standardization and validation context that can be shared across applications, platforms and entities via taxonomies.
Integrated reporting cpa ohio society sec conference presented by liv watson final
Integrated Reporting Communicating Stakeholder Value in the 21st Century Presented by: Liv Apneseth Watson, Chief Product Officer XBRL International, Inc. Concurrent Session: 3:00 – 4:00 p.m.
About XBRL International, Inc. <ul><li>XBRL International, Inc. (XII) is a global organization whose goal is to transform the efficiency and utility of business reporting through the use of Extensible Business Reporting Language (XBRL). </li></ul><ul><li>XII develops the XBRL standard and promotes its market adoption. </li></ul><ul><li>As a not-for-profit, we are committed to providing an open standard, royalty-free </li></ul>
Today’s Agenda <ul><li>Global Challenges </li></ul><ul><li>What is Integrated Reporting </li></ul><ul><li>Responsible Investors </li></ul><ul><li>Reporting - Integrated Reporting Framework </li></ul><ul><li>The Information Age </li></ul>
“ As global citizens, we face extraordinary challenges: complexity of global trade and supply networks, world population growth expected to reach 9 billion by 2050, diminishing resources, worker safety and fair treatment, human health and safety … At the core of multiple stakeholders’ interests and at the center of such challenges we find the need to more accurately quantify and communicate the sustainability of products.” The Sustainability Consortium The Challenges
The world has changed. Business reporting has become increasingly complex.
Integrated Reporting Defined “ Integrated Reporting demonstrates the linkages between an organization’s strategy, governance and financial performance and the social, environmental and economic context within which it operates. By reinforcing these connections, Integrated Reporting can help business to take more sustainable decisions and enable investors and other stakeholders to understand how an organization is really performing.” -- Source: www.theiirc.org
What is Integrated Reporting? <ul><li>Integrated Reporting brings together material information about an organization’s strategy, governance, performance and prospects in a way that reflects the commercial, social and environmental context within which it operates. </li></ul><ul><li>It provides a clear and concise representation of how an organization demonstrates stewardship and how it creates and sustains value. </li></ul><ul><li>An Integrated Report should be an organization’s primary reporting vehicle. </li></ul>
<ul><li>A journey for developing an International Integrated Reporting Framework on the needs of their investors. </li></ul><ul><li>The core objective of the Framework is to guide organizations on communicating the broad set of information needed by investors and other stakeholders to assess the organization’s long-term prospects in a clear, concise, connected and comparable format. </li></ul><ul><li>The Framework will help to elicit consistent reporting by organizations, provide broad parameters for policy-makers and regulators and provide a focus for harmonizing reporting standards. </li></ul>
<ul><li>The mission of the IIRC (www.theiirc.org) is “To create a globally accepted integrated reporting framework which brings together financial, environmental, social and governance information in a clear, concise, consistent and comparable format” in order to “help business to take more sustainable decisions and enable investors and other stakeholders to understand how an organization is really performing. </li></ul>
Integrated Reporting Discussion Paper <ul><li>Discussion Paper considers the rationale behind the move towards Integrated Reporting, offers initial proposals for the development of an International Integrated Reporting Framework and outlines the next steps towards its creation and adoption, including the publication of an Exposure Draft in 2012. </li></ul><ul><li>Its purpose is to prompt input from all those with a stake in improved reporting, including both producers and users of reports. </li></ul><ul><li>Comments should be submitted by: </li></ul><ul><ul><li>Wednesday 14th December 2011. E-mail to: firstname.lastname@example.org </li></ul></ul><ul><li>IIRC Pilot Program </li></ul>www.theiirc.org.
International Integrated Reporting Framework - overview
How is Integrated Reporting Different? Thinking: Disconnected Integrated Stewardship: Financial capital All forms of capital Focus: Past, financial Past and future, connected, strategic Timeframe: Short term Short, medium and long term Trust: Narrow disclosures Greater transparency Adaptive: Rule bound Responsive to individual circumstances Concise: Long and complex Concise and material Technology enabled: Paper based Technology enabled
Central themes Business model & value creation
Resources and relationships or “capitals” <ul><li>Financial capital : The pool of funds available to the organization. </li></ul><ul><li>Manufactured capita l: Manufactured physical objects, as distinct from natural physical objects. </li></ul><ul><li>Human capital : People’s skills and experience, and their motivations to innovate. </li></ul><ul><li>Intellectual capital : Intangibles that provide competitive advantage. </li></ul><ul><li>Natural capital : Includes water, land, minerals, and forests; and biodiversity and eco-system health. </li></ul><ul><li>Social capital : The institutions and relationships established within and between each community, group of stakeholders and other networks to enhance individual and collective well-being. Includes an organization’s social license to operate. </li></ul>
Guiding Principles <ul><li>Strategic focus: An Integrated Report provides insight into the organization’s strategic objectives, and how those objectives relate to its ability to create and sustain value over time and the resources and relationships on which the organization depends. </li></ul><ul><li>Connectivity of information: An Integrated Report shows the connections between the different components of the organization’s business model, external factors that affect the organization, and the various resources and relationships on which the organization and its overall performance depend. </li></ul><ul><li>Future orientation: An Integrated Report includes management’s expectations about the future, as well as other information to help report users understand and assess the organization’s prospects and the uncertainties it faces. </li></ul><ul><li>Responsiveness and stakeholder inclusiveness: An Integrated Report provides insight into the organization’s relationships with its key stakeholders and how and to what extent the organization understands, takes into account and responds to their needs. </li></ul><ul><li>Conciseness, reliability and materiality: An Integrated Report provides concise, reliable information that is material to assessing the organization’s ability to create and sustain value in the short, medium and long term. </li></ul>
Content Elements <ul><li>Organizational overview and business model: What does the organization do and how does it create and sustain value in the short, medium and long term? </li></ul><ul><li>Operating context, including risks and opportunities: What are the circumstances under which the organization operates, including the key resources and relationships on which it depends and the key risks and opportunities that it faces? </li></ul><ul><li>Strategic objectives and strategies to achieve those objectives: Where does the organization want to go and how is it going to get there? </li></ul><ul><li>Governance and remuneration: What is the organization’s governance structure, and how does governance support the strategic objectives of the organization and relate to the organization’s approach to remuneration? </li></ul><ul><li>Performance: How has the organization performed against its strategic objectives and related strategies? </li></ul><ul><li>Future outlook: What opportunities, challenges and uncertainties is the organization likely to encounter in achieving its strategic objectives and what are the resulting implications for its strategies and future performance? </li></ul>
Materiality <ul><li>The IIRC refers to “the material issues” affecting the organization’s “ability to create and sustain value in the short, medium and longer term.” The concept of materiality is critical to both financial statement disclosure and the reporting of nonfinancial information. In addition, judgments about materiality influence accounting firms’ audit and assurance processes. </li></ul>
Three Major Challenges to Providing an Integrated Assurance Opinion <ul><li>(1) developing a global set of credible standards for measuring and reporting nonfinancial information which have the appropriate governmental support, just as is true for accounting standards, </li></ul><ul><li>(2) developing methodologies for providing positive assurance on nonfinancial information, and </li></ul><ul><li>(3) integrating standards and assurance methodologies for financial and nonfinancial information in a way that provide a “true and fair view of an organization’s sustainability.” </li></ul>
Source: CorporateRegister.com showed 3,287 companies publishing a sustainability report in 2010 compared to 830 companies in 2001. Similarly, the number of GRI reporters had grown from 125 in 2001, to 1,864 in 2010.
Responsible Investment Signatories to the Principles for Responsible Investment assets under management of approximately US$ 25 trillion……
Equator Principles <ul><li>The Equator Principles (EPs) are a credit risk management framework for determining, assessing and managing environmental and social risk in project finance transactions. </li></ul><ul><li>Equator Principles Financial Institutions (EPFIs) commit to not providing loans to projects where the borrower will not or is unable to comply with their respective social and environmental policies and procedures that implement the EPs. </li></ul>Source: www.equator-principles.com/index.php/about-the-equator-principles
XBRL – More Than Just Definitions XBRL Item XBRL Item XBRL <200> Presentation Comptant et Comptant Equivalents Presentation Geld & Geld nahe Mittel Presentation Kas en Geldmiddelen Presentation 现金与现金等价物 Presentation 現金及び現金等価物 Presentation Деньги и их эквиваленты Presentation Гроші та їх еквіваленти What does it look like? intelligent, discovery, reusable Validation Standardization Calculation Cash = Currency + Deposits Formulas Cash ≥ 0 Contexts US $ FY2004 Budgeted Label cashCashEquivalentsAndShortTermInvestments References GAAP I.2.(a) Instructions Ad Hoc disclosures Presentation Cash & Cash Equivalents
“ The adoption of eXtensible Business Reporting Language (XBRL) for financial reporting holds great promise as a source of efficiency, transparency, and comparability in the delivery of financial information.”
Accountants Attorneys Other External Advisors Other Stakeholders (e.g., Board, Investors, Regulators) Accountants Attorneys Other External Advisors Management Teams (CEO, CFO/Finance, Operations, Sales & Marketing, IR) Access Controls and Permissioning Management Teams (CEO, CFO/Finance, Operations, Sales & Marketing, IR) SUPPORT ONE REPORT ONE DATA SET DASHBOARDS & OUTPUT THE CLOUD One Integrated Reporting Process
Liv Apneseth Watson <ul><li>. </li></ul><ul><li>Liv has over 25 years of experience, in finding innovative ways to bring together technology, accounting and financial and business reporting. </li></ul><ul><li>Working globally with leading market regulators, accounting associations and institutions, Ms. Watson has traveled to over 80 countries presented XBRL to a wide range of audiences from international standards bodies to Fortune 1000 companies and speaks with authority about its benefits, potential applications, and broad adoption. </li></ul><ul><li>Liv authored one of IMA's most successful CPE courses "Accounting System Technology for the 21st Century". </li></ul><ul><li>She has also published several articles for international publications and journals including Harvard Business Review, Strategic Finance. She also writes a monthly column of financial and business reporting trends for CPA2Biz. </li></ul><ul><li>She is the co‐author and contributor author to several of books including “XBRL for Dummies” and Governance, Risk, and Compliance Handbook published by Wiley. </li></ul><ul><li>Member of the Board of Directors, MediaTenor </li></ul><ul><li>Member of the Board of Directors, Institute of Management Accountants (IMA) </li></ul><ul><li>Member of IASC Foundation XBRL Advisory Council </li></ul><ul><li>Vice Chair of the Institute of Management Accountants XBRL Working Group </li></ul><ul><li>XBRL International Steering Committee Member </li></ul><ul><li>Vice Chair of XBRL International Membership Working Group </li></ul><ul><li>Past Vice Chair of XBRL International, Inc. </li></ul><ul><li>Past Chair of the XBRL US Adoption Committee </li></ul><ul><li>Past Vice Chair of the XBRL US Jurisdiction </li></ul><ul><li>Advisory Board Member – University of Southern Indiana </li></ul><ul><li>Advisory Board Member – University of Albany, New York </li></ul><ul><li>Advisory Board Member - International Journal of Disclosure and Governance Editorial </li></ul>Chief Product Officer and Founder, XBRL International. Inc.