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25 November 2011

Integrated Reporting for a Global World

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In recent years companies have been pushed to become increasingly transparent. However, transparency, translated simply in publishing multiple data and reports that sometimes overlap and contain unrelated information is not yielding the desired results. Markets and stakeholders need to have an integrated view of organizational behavior.

At present companies provide a lot of information, but it is scattered and sometimes not very relevant “and is not useful in finding out the company’s value”, says José Luis Lizcano managing director of the Spanish Association of Accounting and Business Administration (AECA).

This argument coincides with that of many other national and international experts who have long advocated streamlining and condensing the data provided by these companies so it can be truly useful information.

In a global market investors increasingly require, more insistently, global information about the company in which not only past business performance but also a prospective view of this can be evaluated.

Thus, the dissatisfaction of many corporate users of information has resulted in the creation of an international group composed of leading companies, investors, auditors and accountants, regulators, academics and civil society representatives. The International Integrated Reporting Committee (IIRC) issued a document on September 12 that is subject to public consultation and advocates the need for a global information reporting framework for a globalized world. The authors propose addressing the problem of overload of unrelated data issued by companies, some mandatory such as annual accounts or good governance reports in the case of listed companies and others voluntary, such as corporate responsibility or sustainability reports. All such disintegrated information results in a lack of conciseness or overview of the business. The problem is the interdependence that exists in all areas of a company is not usually taken into account, from work-related to financial right through to environmental or regulatory.

Integration of financial and non-financial information

After the problem was detected, IIRC members submitted an initial paper on integrated reporting that, after collecting the comments received from interested parties, will give way to a proposal to become an international standard that allows data to be easily compared. It is, in short, having a framework for the integration of financial and non-financial information.

Conciseness, clarity, consistency, comparability and verification are some of the pillars on which to build the new integrated reporting model proposed by IIRC that does not forget the need to provide guidance for the future, and does not only refer to past business development, as is usual in conventional reports.

José Luis Lizcano summarizes the main features of the integrated report proposed by IIRC: “It must be based on principles, have some basic content and be concise. That is, to collect relevant and strategic information that is used to learn how a company creates value. And then it must be able to be compared. “The managing director of AECA also points out that the proposal claims that the information is connected, so that it does not come from sealed compartments within the company and, above all, that is relevant to stakeholders.

In terms of content, the report should provide information relating to the business model, the context in which the company operates and explain what the risks and opportunities are. It must also refer to the objectives and the strategies put in place to achieve goals.

Prospective approach

It must also include information on the company’s governance model and the remuneration of the management team and advisors. Business development and the prospective approach are also elements to be included in the new integrated report. The director of IIRC Jessica Fries explains the benefits of its proposal: “The integrated report provides a formula for companies to demonstrate their long-term strategy. It can help businesses, investors and other stakeholders to make sound decisions that will result in sustainable social and economic value in the long term”. But to achieve these objectives, it is not enough to add more information than companies already provide to the market. It aims to provide it in a clear and connected way. Excess data can hide important information.

“Nevertheless, the new integrated reporting system does not replace the good governance and corporate social responsibility financial reports that companies issue. What it does is integrate unrelated information that appears in each of them with the aim of providing an accurate picture of how the company is managed and operates and not just about the past but with a forward-looking and strategic nature”, says José Luis Lizcano.

In Spain, and although it is hoped that the IIRC document will be a generally-accepted standard, it is not yet a firm reality, some pioneering companies and organizations have already begun to take their first steps on the path of integrated reporting. BBVA is one of those entities. Last April, the organization filed its 2010 financial report for the first time that integrated information on corporate responsibility.  The bank has already expressed its wish to anticipate “the most innovative trends in global reporting sponsored by the International Integrated Reporting Committee”.

AECA also presented a paper this year integrating the financial, social, environmental and corporate governance dimensions of this organization. And the trend is growing. José Luis Lizcano states that there are already a dozen or so Spanish companies claiming to have prepared an integrated report. They are at the forefront of what will become a reality within a very short time. Internationally, companies such as Novo Nordisk, Aviva, Rabobank, Westpac, Coca -Cola and Nestle have also provided integrated information about its financial performance and sustainability.

The IIRC document, which will be submitted to comments from all those who want to make a contribution until December 14, is destined to become a new information standard in the new business world.

BBVA Corporate Responsibility

What is BBVA Corporate Responsibility?

BBVA is working for a better future for people. The commitment to sustainability is based on creating value proposals for people through providing financial services. Focusing this know-how on the challenges of sustainability makes it possible to define strategies to be capable of having a significant impact on real problems. “Banco para todos” is BBVA’s contribution to sustainability, and this term incorporates all activities that define how to address corporate responsibility in BBVA.

It is Financial inclusion

Economic and social development is one of those real problems and this, therefore, marks the first axis of BBVA’s strategy: fostering access to credit to those individuals to whom, due to social, physical or geographical barriers, it is not otherwise available. The best example of this financial inclusion strategy is dedication to microfinance through the BBVA Microfinance Foundation, serving over one million people in Latin America through its microfinance institutions.

It is Financial literacy

The soundness of all dimensions of the financial system is another issue addressed by BBVA CSR. And perhaps one of the most important dimensions of this issue is the way in which people make use of financial services. Understanding and being able to make well-founded judgements on financial products and services is a crucial factor in the development of a more transparent and sound system. This brings us to the second axis of the strategy: adequately informing current and future users of financial services so that they are aware of their options, risks and opportunities.

It is simplicity and responsibility in our daily activity

At BBVA, sustainability is not simply how the money we earn is spent, but how it is earned. This perspective leads making the central pillar of the entire strategy our responsible behavior in all stages of the financial activity value chain and for each one our stakeholders involved, from a product’s design, its advertising and marketing through to the management of its risks. 

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