Regulators to align sustainability in company reporting
The IRRC hopes to ease company’s reporting burden through a two-year undertaking to harmonise existing reporting frameworks
As the demand for companies to disclose more non-financial information about their operations and the environments in which they work continues to increase, the International Integrated Reporting Council (IIRC) hopes to ease the burden by aligning the myriad of standards that have to be adhered to.
On Wednesday, the IIRC began a two-year undertaking to harmonise existing reporting frameworks used by companies to report non-financial information such as sustainability and environmental impact reports. The council, which is made up of regulators, standards setters, and other bodies, expects to have the initial recommendations on how the existing frameworks can be aligned in the third quarter of 2019.
At the moment, there are four main sustainability reporting frameworks that are widely used by companies: reporting emissions; environmental impact; governance; and corporate social responsibility.
“Globally, there are more than 200 different standards used by companies. In sustainability, there is no comprehensive framework like the International Financial Reporting Standards (IFRS),” said Richard Howitt, CEO of the IIRC.
SA pioneered integrated reporting when it released the first framework in 2011. Since then, more than 230 corporate sustainability standards applicable to more than 180 countries have been identified by the International Trade Centre. Many have been developed to report information that is industry-specific.
In the financial reporting space, the adoption of the IFRS has solved the challenge of dealing with multiple standards and made it easier for investors to compare companies of different sizes and in different industries.
However, the proliferation of different standards in sustainability reporting has increased companies’ reporting burden and Howitt said they find themselves having to field many requests for information from investors. The IIRC said there are already 1,600 global companies who have adopted integrated reporting and are using the different standards.
“There is a renewed urgency to drive better alignment that can combat reporting fatigue, reduce burden and enable more effective corporate reporting,” said Ian Mackintosh, chair of the Corporate Reporting Dialogue.
The two-year exercise will, however, not lead to one reporting framework. Instead, the IIRC said the different standards setters will have overlaps and differences with the aim of harmonising the way they request and expect companies to measure different elements of sustainability.
The IIRC will hold stakeholder engagement events around the world, including SA, for inputs on how to align the different standards. Howitt said once complete, the alignment project should address reporting fatigue as reporting will be more concise.