By Tiani Annandale, Senior Consultant at Cortell Corporate Performance Management
While Integrated Reporting is a legal requirement for all Johannesburg Stock Exchange (JSE)-listed companies in South Africa, today’s business environment demands more transparency and good governance from all companies. Integrated Reporting combines financial and non-financial information, such as environmental, social as well as corporate governance into one consolidated report.
This is driven largely by the King III report, a globally accepted business reporting framework which states that “governance, strategy and sustainability are inseparable”. The benefits to organisations that embark on Integrated Reporting initiatives are enormous. The reports provide overall clarity where stakeholders can relate sustainability risks and choices of its certain business endeavours to the financial compromises an organisation has to make to uphold momentum in the marketplace. Intelligent decisions can then be made based on information that has been validated based on the expectations amongst stakeholders and the company as a whole.
But therein lies the rub. Any financial executive tasked with Integrated Reporting will tell you that to consolidate all the relevant information buried in emails, spreadsheets and word documents scattered across databases in an organisations’ enterprise is a mammoth task. It requires weeks of collating information, verifying, updating and auditing and continuous buy-in from key staff and top management before the final product is sent off to the printers or uploaded onto the company website.
Importantly, it also requires an unwavering passion from relevant stakeholders and top-level executives on the long-term sustainability of the company through issues relating to corporate social investment and not just the numbers.
However, despite many organisations’ best efforts, traditional methods of compiling integrated reports are fraught with challenges. Tight deadlines, stressful conditions and always under threat from human error, manual Integrated Reporting becomes time consuming and inefficient.
While the concept of integrated reporting is a relatively new one and there are no universally agreed standards yet, the South African Integrated Reporting Committee (IRC) is in the process of developing a local standard. This standard is largely based on King III and incorporates XBRL, or eXtensible Business Reporting Language, a reporting format to drive an open, global standard for business reporting and exchanging business information.
While XBRL delivers many benefits, especially improving the comparability and consistency of business information to address transparency concerns and deliver information in a universally understandable format, the creation of this language has added yet another challenge to the Integrated Reporting process. Although it is not a legal requirement in South Africa yet, it is one a matter of time and any multinational organisation operating in South Africa that is listed on the New York Stock Exchange will have to implement this type of reporting.
So how can organisations improve their business processes internally with industry standard metrics to ease the manual burden of integrated reporting while developing financial and sustainability strategies that will improve the bottom line?
Today, there are software solutions available that revolutionises the continuous process of Integrated Reporting by combining sound and legally compliant business processes, controls and technology. However, not all integrated reporting software are created equal. There are several factors to look out for to ensure reduced risk and enhanced compliance.
The solution should be squarely focussed on automation through collaboration from a central secure database repository that brings together all the data, financial and non-financial, from multiple sources across the enterprise. This methodology ensures that there is only one single version of the documents in the reporting process, which in turn guarantees greater data accuracy and compliance with relevant governance regulations.
Contributors must be able to log in and work securely in a collaborative environment and participate in the document building process with a detailed audit trail as to what and when changes were incorporated. This includes work flow and version control as well as a fully integrated XBRL tagging system that will comply with not so distant future industry regulations.
Perhaps the most important and often overlooked factor is ease of use. The reason why most Integrated Reporting tools fail is because the interface is not familiar with the average employee, and despite in-house training, a low adoption rate within an organisation still results.
In closing, while Integrated Reporting is a formidable task for any organisation, with the right financial reporting solution it is possible to automate this process. This not only reduces risk, but allows management to improve internal and external business processes, and gives stakeholders the business critical information to make better decisions through accurate data analysis that is verified and audited.