voices on reporting - integrated reporting...where came from - iirc the international integrated...
TRANSCRIPT
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Voices on Reporting -
10 May 2018
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KPMG.com/in
Integrated Reporting
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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
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3© 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.
Speakers for the call
Karan MarwahPartner
Capital MarketsKPMG in India
Santhosh JayaramPartner
Sustainability KPMG in India
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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
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5© 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.
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
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6© 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.
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
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7© 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.
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
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8© 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.
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
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9© 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.
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:
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10© 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.
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
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11© 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.
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
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12© 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 building blocks of
Guiding principles
CapitalsContent elements
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13© 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.
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
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14© 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.
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
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15© 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.
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
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16© 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.16
Business case for
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17© 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 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
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18© 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 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
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19© 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 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
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20© 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.
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
Integrated Annual Report
1 Report
Automobile
Integrated Sustainability
Report
1 Report
Metal and Mining
Integrated Annual Report
1 Report
IT
Integrated Annual Report
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21© 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.
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
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22© 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.22
Our perspectives
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23© 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.
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
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24© 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.
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
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25© 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.25
Thought leadership publications on
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26© 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.
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
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27© 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.
Thought leadership publications
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
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28© 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.
Thought leadership publications
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.”
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29© 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.
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
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Q&A
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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]
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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.
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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