Crossing the Atlantic: the E.U. Directive Part III
The final blog in this series turns to South Africa, where listed companies are required to publish an annual report that outlines their performance both in financial terms and in terms of CSR—a so-called integrated report.
The Johannesburg Stock Exchange
Since 2010, more than 450 companies listed on the Johannesburg Stock Exchange (JSE) have been required to publish an integrated report or explain publicly why they choose not to comply.
A number of studies have been conducted by large accounting firms to identify trends and best practices in South African integrated reports. Overall, these studies reveal that companies that do not embrace integrated reporting tend to become isolated, in particular as their competitors improve the quality and level of transparency of their reports and incorporate sustainability practices into their business models.
A 2014 study also showed that many companies initially struggled on how to determine which material issues were the most relevant and should be discussed in the integrated report, with 80 percent of the analyzed companies scoring below 50 percent on content of integrated reports in 2013.
That said, integrated reporting was overwhelmingly credited with enabling the senior management team to adjust its strategy in order to leverage sustainability as one of its growth drivers. A survey conducted by Ernst & Young discusses these benefits, which include "a more complete picture of strategy, business model, governance and performance—and how they link together," as well as sharing information on a broader range of metrics that contribute to long-term value.
Join the call to embrace integrated reporting
The benefits and challenges South African companies experience are common to companies all over the world that embrace integrated reporting. In order to create an effective integrated report, companies must begin "integrated thinking"—requiring some companies to make difficult changes to their culture.
Stakeholders, including investors and shareholders, are demanding that companies be more responsive to CSR issues. The process of integrated reporting can help companies identify, manage, and communicate how they are dealing with these challenges, and in doing so, create value for the company and its stakeholders alike. If companies can also make the necessary changes to their culture and process for long-term value creation, they can create a more complete picture of how strategy, the business model, governance, and performance tie together.