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13
September 2011 | Adam Leach
Companies
need to change the way they report their performance to cater for increasingly
globalised supply chains, a report claims.
The
International Integrated Reporting Committee (IIRC)
has called for sweeping changes to be made to the way companies report on financial
and sustainability results.
TowardsIntegrated Reporting: Communicating Value In The 21st Century,
published yesterday, argued “globalisation and resulting interdependencies in
economies and supply chains” has left reporting standards out of date.
The
report cites the fact that in 2009, only 19 per cent of a company’s overall
market value could be attributed directly to physical and financial assets - with
factors such as potential growth and brand value contributing to the other 81
per cent - compared with 83 per cent in 1975.
In
response, it calls for a new “integrated” approach, where financial reporting
is linked to sustainability and future projections, so that suppliers,
investors and stakeholders are given a clearer picture of a company’s “overall
value”.
In
an integrated report, companies must disclose information on how financial
health, intellectual property, social responsibility and sustainability schemes
are progressing, but more importantly how they relate to each other. So if a
company launches a large-scale recycling initiative, it should indicate what
the financial impact will be.
The
IIRC said drawing together the various aspects that companies report on, such
as sustainability, financial results and forward-looking statements, it will be
quicker and easier for third parties to access the information they need while
also setting it in a suitable context.
The
organisation also said the new system would have a positive impact on supply
chains. It will increase transparency, which will in turn boost trust and
engagement throughout the supply chain. Closer ties between finance and
sustainability should also improve risk management.
The
IIRC is working with companies to trial integrated reporting from October.