How companies should approach King III integrated reporting
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The
rationale behind integrated reporting was never to complicate reporting
on business operations. It was rather created to encourage integrated
corporate strategies driven toward the development of truly sustainable
businesses which are conscious of the negative impact its operations
have on communities. Ursula van Eck, audit partner at BDO South Africa
says "It is vital for companies to build sustainable business
objectives and processes into the fabric of their business strategy in
order to ensure that business not only remains viable from both a
financial and sustainability perspective in the long run but also be
able to report to their stakeholders thereon. This is why it is
imperative for companies to plan ahead and be cognisant of the multitude
of factors that relate to King III and the development of a
sustainability report."
The implementation of King III in March 2011 has transformed the
nature of corporate reporting as JSE listed companies are now required
to submit an annual integrated report that provides a reliable,
comprehensive and holistic overview of the company, from both a
financial and a non-financial perspective. In addition COP 17, the 17th
meeting of the Conference of the Parties to establish a way forward with
regards to climate change, will be hosted in South Africa this December
and has brought a renewed focus to sustainability. Therefore, business
must implement business strategies which comply with these new reporting
standards or explain why they are not.
Going forward, van Eck recommends that companies begin by identifying
key stakeholders who need to be engaged with for the sustainability
reporting process, ascertain what material aspects should be reported
and how they will be reported on, this would include the processes, both
business and IT, that need to be put in place to achieve the reporting
requirements.
van Eck says "Due to the multitude of information required for a
comprehensive integrated report we have found that many companies
outsource the information gathering aspect of the reporting to external
suppliers, as sustainability is a business imperative wherever possible I
believe this should rather be done in-house as when the reporting
aspect is outsourced often key internal intelligence is lost."
The new reporting requirements could prove to be a more complex
process for companies who have not taken into account the amount of
information required to develop such a report. van Eck says "At BDO
we are finding that it is essential to educate our clients to the fact
that compiling and capturing the information needed for a sustainability
report, and an integrated report as per King III, is more
time-consuming than many companies expect. Just as an annual financial
report is the output from a year's worth of operations and trading, so
too will an integrated or sustainability report need to disclose the
past years performance against sustainability objectives and targets. In
order to achieve the triple bottom line requirements it is essential
that companies take a hard look at their business strategy and identify
material issues that should be addressed, and which measures must be put
in place to address these issues. Appropriately focused and relevant
stakeholder engagement is also a time consuming process and It is vital
that companies who have not yet started their sustainability "journeys"
should do so without further delay in order to comply with the
requirements stipulated by King III."
For more information about how BDO can help you with your Sustainability Report...click here.