Integrated Reporting and Integrated

Thinking November 2016

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IR in SA Integrated reports since 2010 - recommendation of King III

JSE Listing Requirements

In 2014, IRC of SA endorsed the International <IR> Framework

King Codes

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The Framework’s 18 RequirementsConceptsValue creation 6 capitals

  8 Content Elements• Organisational

overview & external environment

• Governance• Business model• Risks & opportunities• Strategy & resource

allocation• Performance• Outlook• Basis of preparation

& presentation

  7 Guiding Principles• Strategic focus & future

orientation• Connectivity of

information• Stakeholder

relationships• Materiality• Conciseness• Reliability &

completeness• Consistency &

comparability

 

2 Statements• Reference <IR> Framework(Comply with all Requirements unless impracticable or competitive harm but disclosures• Board responsibility for integrity of

report (2)

 Form of the report• Designated, identifiable

communication 3

Source: International <IR> Framework, IIRC, 2013

Financial Capital

• Equity and debt funding

• Internal generation

• Subsidies

Manufact-ured Capital

• Owned physical assets

• Public infrastructure

Intellect-ual Capital

• Knowledge manage-ment

• Trademarks, copyrights, licenses

Social & Relation-ship Capital• Stakehold

ers• Social

license to operate

• Brand and reputation

Natural Capital

• Water, land, air, forests, bio-diversity, eco- systems

Human Capital

• Employee skills and experience

Integrated ThinkingManaging an organisation in accordance with its reality.An organisation is a network of resources and relationships. Effective leadership considers them all for the benefit of the longer term success of the organisation.

No guidance – in a connected world its common sense

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Embedded in the organisation at 3 levels 1. The Board 2. Executives and senior management 3. Staff

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1. The Board• Duty of care • Approve holistic strategy and risks • Approve KPIs and targets• Make decisions after being given the ‘right’ information• Mitigating actions for the negative effects on capitals• Consider stakeholder relationships and outcomes• Push management to embed Integrated Thinking

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An example – Standard Bank

“We believe our strategy represents a consistent and considered level of integrated thinking, which we continue to deepen as we implement our strategy within our organisation.”(IR 2015)

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2. Executives and senior management• Implementation of the holistic strategy• Monitoring the holistic risks• Systems • Cascade strategic objectives into departmental and

individual KPIs • Holistic decision-making

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An example - CEO of Gold Fields“The sustainability of our business is ensured by understanding the linkages between all of the inputs and outputs of our operations, enabling us to maximise the benefits for all stakeholders and reduce the risks to the business. Integrated thinking underpins this approach . . .. . . the objective (in 2016) will be to explain in greater detail how integrated thinking is factored into our business decisions. Our integrated reporting will be an output of this thinking.” (IR 2015)

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3. Staff• Personal responsibility• Remuneration incentives: performance and bonus

assessments • Mindset shift to six capitals rather than one

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The evidenced advantages CGMA Survey of 300 C-suite execs globally found those who

applied Integrated Thinking in decision-making: - Out performed their peers - More effective execution of decisions - Less delivery of flawed information to decision-makersSAICA Survey of execs/ non-exec directors (2015): - Improved decision-making at board and management - More cohesive approach to reporting - Improved understanding of the value drivers of the business - Improved risk management

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How does the Integrated Report fit with Integrated Thinking?• The report is the visible tip of the iceberg•Many companies have said their integrated report has

brought significant internal management benefits by helping to embed integrated thinking • Some stakeholders see the quality of the integrated report as

a proxy for quality of management in the organisation• The report is the voice of the governing body

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How do you know when Integrated Thinking is embedded…“When there is no longer separation between non-financial and financial performance on the company-wide acceptance that each affects the other. When all functions and divisions share in the company’s strategy and work together to achieve it. When decision-making is carried out with a longer-term view on value creation and how the decisions impact on the company’s resources and its relationships.”

Integrate: Doing Business in the 21st Century; Mervyn King and Leigh Roberts (Juta)

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