By Wayne Kolins, Global Head of Audit and Accounting at BDO

After months of consultation and hard work, this month’s announcment of a new Integrated Reporting Framework marks a game-changing milestone in the evolution of corporate reporting globally.

By focusing on a broader range of forward-looking finanical and non-financial risks and opportunities, the Framework heralds a new era in the relationship among business, society and the environment in corporate reporting. The Framework evolves business reporting beyond a review of financial performance into a concise communication about an organisation’s strategy, governance, performance and prospects in the context of its external environment – ultimately leading to the creation of value in the short, medium and long term.

So what does this Framework entail and what does it mean for businesses, investors and audit professionals?

The very fact that the Framework exists reflects the changing commercial, social and environmental context in which businesses are operating. We know from direct experience that investor demands are increasingly reaching beyond financial governance to other issues that have a material influence on the ability of a business to deliver enduring shareholder value.

As such, this Integrated Reporting Framework is a significant departure from exisiting reporting practices. It prescribes a range of reporting parameters which are generally lacking in today’s corporate reports. For me, there are three areas of particular significance:

Firstly, it illustrates connectivity of information. An integrated report should show a holistic picture of the combination, interrelatedness and dependencies among the factors that affect an organisation’s ability to create value over time. It provides an opportunity to articulate strategic aspects of an entity’s business without compromising its competitive advantage. As such, it creates a platform for demonstrating how unique business models are responding to changing stakeholder needs, threats, opportunities and the expectations in the market. Organisations successfully embracing this approach will not just have a better report, but also information that can drive short-term operational benefits and at the same time ‘future-proof’ the ability to deliver shareholder value in the medium and longer term.

Secondly, it shows strategic focus and future orientation. The priority for accountants and business advisers must be on helping organisations to future-proof their business plans. This Framework therefore includes provision for detailed insight into an organisation’s strategy and how it relates to its ability to create value – and mitigate any value destruction in the short, medium and long term.

Finally – and in my opinion, most importantly – the Framework extends beyond globally listed companies to SMEs, medium caps and private entities. We at BDO have worked closely with the IIRC over the past two years to shape the final version of the Framework, and have consistently championed the importance of a solution that works for businesses of all sizes – if integrated reporting is to be successful it must also reach SMEs, not just the largest companies listed globally.

We know from our work around the world that SMEs form the backbone of many economies. That’s why at BDO we pushed for the creation of a Framework that gives these businesses the right kind of reporting – not over-reporting, but the flexibility to tailor it to ensure it creates value for their stakeholders. And we believe that this has been achieved.

There is no doubt that the launch of the Framework marks a major milestone in the future of meaningful corproate reporting – but, there remain many issues for the IIRC to address in the coming months. Specifically: when will robust integrated reporting assurance criteria be available? Can integrated reporting lead to a reduction of the significant corporate reporting burden? Will there be sector guidance, given the different reporting requirements?

I look forward to our ongoing work with the IIRC to further this evolution in reporting so that, the entire business community we can continue to take great strides towards better and more transparent business reporting that will ultimately underping economic growth.