Surveying the task ahead of him, Howitt believes that, while much progress has been made with IR, there is still a long way to go until the IIRC achieves its aim of making it the global norm. “We’re trying to change a global practice. That’s incredibly ambitious, but it’s right. It’s about improving and reforming the existing system of reporting so that it is more streamlined, and reducing cost and burden, while making it more material and more meaningful to the business and its strategy.”
He continues: “Half of the benefit of integrated reporting is integrated thinking – getting connectivity within the company, bringing people and their perspectives together in a way that hasn’t been done before, and getting the company thinking about and understanding how it interacts with all six capitals that it affects.”
At present, IR is in what the IIRC describes as the “Breakthrough Phase” – the early adoption of IR by reporting organizations around the world. “We’re still raising awareness about integrated reporting, and getting exemplars and champions to adopt it and send messages about its importance,” says Howitt. “We hope that, in a year or so, the breakthrough will have happened and we can move toward attaining global adoption.”
According to the IIRC, around 1,500 companies are already using or referencing IR, including giant US conglomerate General Electric, which produced its first integrated report in 2016. The 40 biggest French companies, the CAC 40, are looking at producing integrated reports within the next three years, according to Howitt, and many of the world’s leading investors are clamoring for more businesses to follow suit.
“Japan and South Africa are probably the leading examples in the world for adopting integrated reports at the moment,” says Howitt. For example, in Japan, the Department for Business has a laboratory for integrated reporting and more than 300 Japanese companies are already producing integrated reports.
The international dimension is critical, which explains why Howitt is traveling so much in his first few months in the job and why he’s busy meeting C-suite executives and leaders of the accountancy and investment communities. “It’s important for me that businesses, investors and financial market actors know who I am and hear the energy, drive and enthusiasm from me directly,” he says.
While Howitt does not believe there is a single main barrier to the global adoption of IR, he does point out that there are “conflicting pressures in the world of business. We have to get enough space and visibility to make sure people really address the issue,” he says. “So, we have to demonstrate the growing body of evidence, which now exists, that this is financially beneficial to businesses in the long term. There is a strong business case for this. We need that case to be read, understood and believed by key opinion-formers in business and in capital markets. We also want more regulatory endorsement.”
Another issue is potential confusion within the market as a result of similar initiatives, such as the EU’s Non-Financial Reporting Directive and the Task Force on Climate-related Financial Disclosures set up by the Financial Stability Board (FSB), which announced its recommendations in December 2016. These call for organizations to make disclosures around the climate-related risks and opportunities their businesses face, as well as their processes for identifying, assessing and managing such risks.
The IIRC was consulted on the recommendations and Howitt describes the FSB Task Force as critically important – “not because it’s about a different methodology, but because it’s getting the world to talk, at the highest level, under a G20 framework, about material risk to the financial markets. Many of us, as individual citizens, are worried about climate change for ourselves, our children and our grandchildren, and many of us want the world to be more sustainable.”