Why is South Africa Leading The Integrated Reporting Debate?
Two weeks ago, I took some days off to go to South Africa and attend Al Gore’s Climate Reality training in Johannesburg. Aside from attending the conference, visiting the Kruger Park and enjoying tasteful wine in the wineyards, it was also the perfect time to meet the local leaders that are trying to change South Africa through Sustainability vision and best practices.
What particularly stroke me throughout the dozen of incredible meetings I had there, was that South Africa is incredibly advanced on the reporting agenda. I knew, from the KPMG CR Reporting Survey 2013, that the rate of CR reporting in South Africa scored more than 90% last year, which is more than the US or Germany for instance. However, what I didn’t know was not only do South-African big companies publish great Sustainability reports, they also appear to be the world leaders when it comes to Integrated Reporting.
The main reason, as you may have guessed, is regulations. As Paul Driwkman, CEO of the IIRC, mentioned in his Reflections on Integrated Reporting in South Africa:
Striking the balance between regulation and market-led integrated reporting is something that I believe has supported South Africa’s uptake of integrated reporting. In South Africa listed companies are required to submit an integrated report on a comply or explain basis.
Indeed, the last version of the King Series (South-African code of Corporate Governance) released in 2009 as “King III”, encourages all organizations (public, private or non-profit) to report about Governance, Strategy and Sustainability at the same time, leading the way to what is called “Integrated Reporting”. Furthermore, compliance to King III is now mandatory to all companies listed on the Johannesburg Stock Exchange (JSE), which greatly increased the number of integrated reports published in South Africa, to more than 400.
Still, as a huge debate around Integrated Reporting is taking place back in Europe, how comes the South African business case hardly shows up in the conversation? What value did the South-African companies found in Integrated-Reporting ? Was the transition from Sustainability Reporting easy? And what best-practices could we learn from South-African reporting experts? I asked these questions to the Sustainability consultants who were kind enough to share a coffee with a novice French reporter, and here are theirs answers.
What values did the South-African companies find through Integrated Reporting?
One of the CSR Reporting expert of South Africa is without a doubt Reana Rossow, who founded the consultancy Next Generation. Reana regularly publishes great presentations on Slideshare, highlighting her deep knowledge in the ESG field, such as “Sustainability vs Integrated Reporting: What’s the difference?” and “Climate Change and Stakeholders Engagement“. In one of the slides she sent me, she presents the value of Integrated Reporting she experienced with South-African organizations:
- Connecting departments: One of the most mentioned benefits of Integrated Reporting is the opportunity it provides to connect teams from across an organisation, breaking down silos and leading to more integrated thinking.
- Improved internal processes leading to a better understanding of the business: Changes to systems driven by Integrated Reporting requirements are providing greater visibility across business activities and helping to improve understanding of how organizations create value in the broadest sense.
- Increased focus and awareness of senior management: A shift to Integrated Reporting is increasing the interest and engagement of senior management in issues around the long-term Sustainability of the business, which is helping them to gain a more holistic understanding of their organizations.
- Better articulation of the strategy and business model: Better understanding of organizational activities is enabling companies to establish a holistic business model and helping to streamline communications.
- Creating value for stakeholders: Organisations are starting to identify ways to measure the value to stakeholders of managing and reporting on Sustainability issues.
What was the impact of the mandatory regulations?
“Some companies on JSE (Johannesburg Stock Exchange) resisted the move and some are still not experiencing the imbedded benefits of an integrated reporting process, however I believe that, as they embrace the principles of reporting (verb) and move away from the report (noun), they are beginning to experience returns on various objectives and investments. JSE was not overly critical of the manner and style in which companies made the change to IR – the first reporting cycle. This was good because it allowed companies the confidence to dive and learn, without the fear of failure. The standard of integration has improved and will continue to do so.”
Jaisheila Rajput, founder of TOMA (Tomorrow Matters Now), completes Lloyd’s answer by including the impact on the supply chain:
“Aside from increasing the number of companies generating integrated reports, it has meant consequent development within supply chains as these companies fulfil relevant responsible business practices. This work however, is still under development with increased focus on SME’s.”
What best-practices could you share on doing an Integrated Report ?
Jaishaila continues by explaining:
“The best part of integrated reporting is when companies realise that the report is ostensibly about “value” created, with value not being limited to pure financial development. From a strategic context, integrated reporting can help investors look beyond short term viability of companies to understand longer term potential. This in itself, makes the process of generating the report worthwhile. Done effectively, reports can help attract and reassure investors that a company has a sound strategic approach with responsible business practices. Its the latter that forms the basis of effective stakeholder management.”
Lloyd, on his side, told me:
“I believe that a ‘backwards, layered’ approach is the best method to tackle it. An integrated report is by nature not meant to be too ‘deep’ and all superfluous padding and data can begin its life in annexures or in the Index Table. Start with bullet points under material indicators, and then add information only when it is absolutely necessary to provide context or meaning. “
Besides, Reana Rossow shares great stories and best-practices about Integrated Reporting in South Africa in the following presentation:
Finally, why aren’t we talking more about what you’re doing back in Europe?
” South Africa as a developing/developed hybrid is known to have been hovering around the highest ranking in the Gini Coefficient in the world for the past years. In South Africa green/environmental awareness such as the importance of recycling can not stand alone in the face of priorities to attend extremely high levels of poverty and inequality. As much as social and environmental connections may be inextricable to middle class citizen, the world is a different place when regional governments struggle to balance the provision of basic human rights services such as water and sanitation, which make important but nice-to-have European things like advanced renewable energy quite pale in comparison. We have hands-on experience of the importance of making the connection, driving social innovation and empowering instead of creating dependency.”
Reana Rossow has another explanation :
“I don’t think anybody knows what is happening in darkest Africa and also, I think we are not asked about our experience and learning – we are never considered in case studies, similarly we don’t seek out opportunities to share our experience. South Africans just get on and do the job and spend less time promoting what we do.”
And Jaisheila Rajput to conclude:
“As South Africans, we seem to hold the work of European or other countries to a higher standard, especially as we are relatively new to this space. We don’t give ourselves enough credit and tend to be critical on locally developed practices, looking to others for benchmark standards. We don’t have any specific local sustainability recognition systems that help to showcase innovative sustainable practices. Companies such as KPMG, are however stepping into this space providing best practice reports, guidance on the integrated reporting process and sharing relevant updates to support companies in the reporting process. South African companies, for the large part, tend to be resource-based companies where risk management is of higher priority than value creation with sustainability. This makes the work reported on more in the realm of business-as-usual. With an increasing number of local support systems, recognition is starting to grow, particularly in certain sectors such as banking.”
Do you feel like you should be learning a thing or two from these amazing professionals? Don’t hesitate to follow them on Twitter and share more South-African Sustainability stories!
I encourage you to download and read EY’s Excellence in Integrated Reporting Awards 2013 (which focuses on South Africa) for more information on the topic and to read this excellent article Juanique published in “Investigative Africa”.