Voices on Reporting - Integrated Reporting...Where came from - IIRC The International Integrated...

Voices on Reporting -

10 May 2018

—

KPMG.com/in

Integrated Reporting

2© 2018 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Welcome

01 An introduction to Integrated Reporting

03

02 Business case for

04 Thought leadership publications on

Our perspectives


Speakers for the call

Karan MarwahPartner

Capital MarketsKPMG in India

Santhosh JayaramPartner

Sustainability KPMG in India

4© 2018 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.4

An introduction to Integrated Reporting


Changing investor expectations

Focus on economic growth

The externalities had little or no impact

Neither rewarded for positive externalities

nor paid for the damages

Then

Focus on economic, social and

environmental mega forces

Positive and negative externalities give an actual picture of the

impact created

Focus on value creation and estimating the

true impact

Now

17%

32%

68%

80%84%

83% 68% 32% 20% 16%

0%

20%

40%

60%

80%

100%

1975 1985 1995 2005 2015

Components of S&P 500 Market Value

Intangible Assets Tangible Assets

The intangible asset value of the S&P 500 grew to an average of 87 per cent by 1 January, 2015, higher than what the

tangible asset was valued back in 1975

Source: Intangible Asset Market Value Study, 2017Intangible assets Tangible assets


Investors’ perception on non-financial information

Investors

89% of investors agreed that reporting should beforward looking information.

84%investors disagreed or strongly disagreed that companies clearly clarify identification of material non-financial issues.

92% of investors surveyed agreed or stronglyagreed that financial and non-financialinformation should be more integrated.

76% of investors agreed or strongly agreed thatqualitative policy statements are essential.

Source: What do investors expect from non financial reporting?, ACCA, June 2013


Lacunae in current reporting

7Scattered reporting hinders decision-making

Information on websites

Annual general meetings

Annual report

Social networking sites

Brochures, newsletters

Sustainability report

Organisations Stakeholders

Lacunae in current reporting

Interconnectedness between financial and non-

financial information

Discloses historical performance and lacks

forward looking information

required for decision-making

Misses identification of externalities that affect the

business model


Filling the gaps: What is Integrated Reporting

Integrated Reporting is a new approach to business reporting that is built around the

organisation’s strategy to create and sustain value in the short, medium and long-term


What is not

Integrated Reporting is an outcome of Integrated thinking and showcasing management approach, not about one Integrated Report

A sustainability report appended to a

financial report or vice versa

A marketing, advertising or PR

initiative that obscures a more balanced view of the company’s performance

Reporting on qualitative information and emphasis

on carbon saved, trees planted, water saved, etc. – reporting for the sake

of reporting

What it is:

What it is not:


Where came from - IIRC

The International Integrated Reporting Council (IIRC) is a global coalition of regulators, investors, companies, standard setters, the accounting profession and NGOs.

ACCA CIMA IFAC

Breakthrough partners

CDP GRI IFRS

Partners

IFAC SASB WBCSD

Source: Structure of the IIRC, IIRC Website, May 2018


How does help

The investor

An Integrated Report gives:

A better link between performance information and the drivers of businessvalue

A clearer picture of management progress when implementing a strategy

Better insight into the underlying health of the business

The company

Adoption of standard data management procedures thereby ensuring importantdecisions are made on reliable data

Same management and assurance process for both financial information and sustainability issues

Clear picture of the allocation of organisation’s capitals, including natural, social and human capital

Holistic view of the organisation’s challenges, risks and opportunities

Consistent message to a variety of stakeholders, from investors to regulators to local communities


The building blocks of

Guiding principles

CapitalsContent elements


principles and elements

Stakeholder engagement

and relationships

content elements

Strategic focus and future orientation

Connectivity of information

Stakeholder relationships

Materiality

Conciseness

Reliability and completeness

Consistency and

comparability

principles


capitals and value creation

Value creation is an integral part of which talks about the process that results in increases, decreases or transformations of the stocks of value (capitals) caused by the organisation's business

activities and outputs

Human capital

Financial capital

Intellectual capital

Natural capital

`

Capability and competitive position Combined value addition processBusiness model and strategy

Inputs Activities and process Outputs Outcomes

Business Model

Socialand relationship

capital

Manufactured capital

Capitals assessed relative to


Road map towards an

Step 1Redesigning the businessmodelStep 2

Determining material issuesimpacting the ability of anorganisation to create value

Step 4Identifying KPIs for materialissues, setting short, mediumand long-term targets anddisclosing performance againsttargets

Step 3Linking material issues to businessstrategy and categorising themunder relevant capitals

Step 5Disclosing the future outlookand the organisation’s readinesstowards the same


Business case for


The internal business case

Historical financial information on its own fails to provide a

complete picture of business value

Integrated Reporting offers the opportunity to align reporting around strategy and value creation, to

demonstrate how the organisation uses capital and the extent to which it should continue to be invested in the

organisation.

Telling the value creation story

Supporting a more informed assessment of

value

Efficientcommunication of

resource allocation

65% respondents in an survey have seen positive impacts

in their engagement with other stakeholders.

70% have seen more connections between different

departments, leading to a broadening of perspectives.

95% of respondents in the survey say they have a better understanding of

how their organisation creates value due to their Integrated Reporting

journey.

Source: ACCA report ‘Insights into integrated Reporting 2.0’ which highlights the results from review of 45 reports for accounting periods up to 31March 2017


The external business case

SEBI Recommendation - Applicability of the mandates

Jul 2011 Aug 2012 Nov 2015 Feb 2017

The Ministry of Corporate Affairs,

Government of India introduced NVG that focussed on principles

of social, environmental and

economic responsibilities of

business

Business Responsibility Reporting (BRR) was

mandated for top 100 listed companies for disclosures on non-

financial parameters in the annual report. BRR to be prepared in line with 9

NVG principles

Mandate extended for top 500 listed

companies in India by market

capitalisation (as on 31st March for a respective FY)

SEBI recommended top 500 listed companies in

India by market capitalisation (as on 31

March for a respective FY) to voluntarily adopt

Integrated Reporting


The SEBI circular

The information related to integrated reporting may be provided as:• In the Annual Report separately• Part of Management, Discussion & Analysis• Separate report (e.g. sustainability report)

In case the company has already provided the relevant information in anyother report prepared in accordance with national/international requirement /framework, it may provide appropriate reference to the same in itsIntegrated Report so as to avoid duplication of information.

As a green initiative, companies may host the Integrated Report on theirwebsite and provide appropriate reference to the same in their AnnualReport.

Integrated Reporting may be adopted on a voluntary basis from theFinancial Year (FY) 2017-18 by top 500 listed companies.Content and information to be presented as per International IntegratedReporting Council (IIRC) Integrated Reporting Framework.

SEBI circular no. SEBI/HO/CFD/CMD/CIR/P/20

17/10


Current reporting in India

FY 2016-17 witnessed the release of 6 Integrated Reports in the below sectors

2 Reports

Banking

Integrated Annual Report

Integrated Sustainability Report

1 Report

Oil and Gas


1 Report

Automobile

Integrated Sustainability

Report

1 Report

Metal and Mining


1 Report

IT



Global perspective on

Over 1,600 organisations in 62 countries adopting *

And over 35% say they will

2,000 participating in networksworldwide*

Over 50% of CEOs, CFOs and COOs are moving towards *

279 Japanesecompanies globally issued

in 2016 – a 27%increase from 2015**

**Source: KPMG Survey of Integrated Reports in Japan 2016*Source: AECA International Symposium, 2017


Our perspectives


Advantages of

1 Promotes integrated thinking2 Enhances access to different pools of capital3 More informed decision-making4 Clarity on allocation of the organisation’s capitals, including natural, social and human capital5 Longer term view of the organisation's challenges, risks and opportunities6 Consistent message to a variety of stakeholders, from investors to regulators to local communities


Capacity building (KPMG is an IIRC approved training partner in India)

Suggested next steps

Start small -Introduce a brief

section on as a part of the

existing annual report

Set up systems and protocols

promoting integrated thinking and management

within the organisation

Identify material issues and link

them to the organisation’s

strategic objectives

Develop a full-fledged Integrated

Report in alignment with the

requirements of the

framework


Thought leadership publications on


Thought leadership publications

Actual number of Integrated ReportsBig rises in Japan, Brazil, Mexico

and SpainReport highlights:- In 2017, 14 per cent of reporting companies in

both the G250 and N100 groups label theirreports as

- The biggest rises were in Japan, Brazil, Mexicoand Spain

The KPMG Survey of Corporate Responsibility Reporting 2017

This is the tenth survey since the first edition was published in 1993. This year, KPMGmember firm professionals reviewed corporate responsibility (CR) and sustainabilityreporting from 4,900 companies in 49 countries and regions, making this an extensivesurvey. The survey provides a detailed look at global trends in CR reporting andinsights for business leaders, company boards, and CR and sustainabilityprofessionals. It is designed to offer guidance on good practice to corporateprofessionals who assess and prepare their own organisation's CR reporting.

*Source: The KPMG Survey of Corporate Responsibility Reporting 2017, KPMG International



KPMG survey of business reportingThe report looked at corporate responsibility information to the extent included inannual reports, on the basis that this should address those issues that the organisationconsiders to be material to shareholders and investors. Many companies also provideadditional information, aimed at a broad range of stakeholders in a separate report.

*Source: KPMG survey of business reporting 2014, KPMG International

“Many South African companies have seen Integrated Reporting as an opportunity to take a hard look at their full reporting suite in order that it was not purely additive. One company in our

survey had managed a 70+ page reduction in the size of their full financial statements.”

Integrated Reporting has not led to reporting bloat

Report highlights



The future of corporate reporting: towards a common vision

The report offers a range of views from opinion leaders in their respective fields withregard to themes, and their preferred direction for corporate reporting. The reportbegins with the premise that the current reporting model needs to be improved. But it isa matter of debate as to how – and how far – it should change. The objective inpresenting the report is to encourage a debate.

*Source: The future of corporate reporting: towards a common vision 2013, KPMG International

“…one weakness that Integrated Reporting focuses on, by telling the company’s story

comprehensively and more effectively connecting all the information that is important for understanding the long-term health of the

company.”

Report highlights

“Many of those extolling the need for Integrated Reporting

want to see a greater emphasis on Environmental, Social

and Governance (ESG) issues.”


Glossary

ACCA – Association of Chartered Certified AccountantsCIMA – Chartered Institute of Management AccountantsIFAC – International Federation of AccountantsCDP – Carbon Disclosure ProjectGRI – Global Reporting InitiativeIFRS – International Financial Reporting StandardsSASB – Sustainability Accounting Standards BoardWBCSD – World Business Council for Sustainable DevelopmentFY – Financial YearNVG – National Voluntary Guidelines

Thank youKPMG in India contacts:

Feedback/queries can be sent to: [email protected]

Karan MarwahPartner Capital MarketsE: [email protected]

Santhosh JayaramPartnerSustainability ServicesE-mail: [email protected]

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

© 2018 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

The KPMG name and logo are registered trademarks or trademarks of KPMG International.

This document is for e-communications only.

kpmg.com/socialmedia

https://in.linkedin.com/company/kpmg-indiahttps://in.linkedin.com/company/kpmg-indiahttps://www.facebook.com/KPMGIndia/https://www.facebook.com/KPMGIndia/https://www.youtube.com/channel/UC40V577Ls_EH719sA0cEI4Ahttps://www.youtube.com/channel/UC40V577Ls_EH719sA0cEI4Ahttps://twitter.com/kpmgindiahttps://twitter.com/kpmgindiahttps://plus.google.com/+kpmgindiaofficialhttps://plus.google.com/+kpmgindiaofficialhttps://www.instagram.com/explore/locations/602997494/https://www.instagram.com/explore/locations/602997494/

Voices on Reporting - �WelcomeSpeakers for the callSlide Number 4Changing investor expectationsInvestors’ perception on non-financial informationLacunae in current reportingFilling the gaps: What is Integrated ReportingWhat is notWhere came from - IIRCHow does helpThe building blocks of principles and elements capitals and value creationRoad map towards an Slide Number 16The internal business caseThe external business caseThe SEBI circularCurrent reporting in IndiaGlobal perspective on Slide Number 22Advantages of Suggested next stepsSlide Number 25 Thought leadership publications Thought leadership publications Thought leadership publications GlossaryQ&AThank youSlide Number 32

Voices on Reporting - Integrated Reporting...Where came from - IIRC The International Integrated...

Documents

Transcript of Voices on Reporting - Integrated Reporting...Where came from - IIRC The International Integrated...