Olivier Rey : “The World map of Integrated Reporting is growing every year”

Various organisations around the world are adopting the concept of Integrated Reporting. In Mauritius, the SEM companies are on the way to adopt this international framework. In 2018, where do we stand? Partner at PwC Mauritius (PwC) Olivier Rey, in this interview, analyses the position of Mauritius, and elaborates on the biggest challenge for companies to adopt this concept. 

Unfortunately, there are some confusion about Integrated Reporting of being just the physical integration or lumping together of an annual report and a sustainability report. In your words, what is Integrated Reporting (IR)?
IR actually arises from the Integrated Reporting Framework published by the IIRC (International Integrated Reporting Council) in December 2013; it has been with us for a number of years now. It is a better way of reporting. Historically, financial statements have been backward looking. IR actually is more forward looking and it is a set of principles that forces the company, the board, the senior management, its directors to ask themselves tough questions about their strategy, about how they run their businesses, what their risks are, their performance, their KPIs and how all these are connected. Effectively, if they have done the exercise properly, the integrated report should reflect that journey. Moreover, sustainability reporting is not Integrated Reporting, although it can be part of an integrated report. 

There is definitely a need for more transparency in annual reports and in the way organisations communicate with their stakeholders."

Why is integrated reporting becoming more important? 
It stands from the fact that stakeholders, including investors, were not getting what they expected from an annual report. Just looking at the past, in a world that is moving so quickly, is not sufficient anymore. It comes to remedy some of the apprehensions stakeholders, suppliers or customers are facing while reading annual reports, which are either too long or contain irrelevant information; whereas an integrated report will be more focused, concise and future looking, telling the story as it is. 

Where does Mauritius stand when it comes to Integrated Reporting?
It’s a big step change. The big players amongst the listed entities are playing IR. Other listed companies are continuing to improve their reports. It is very much positive. The listed GBCs have a higher adoption rate of integrated reports, probably due to their dual listing requirements. However, the rest of the SEM have a rather disappointing progression so far. Overall, IR is gaining momentum. This year, we have been receiving queries from several private businesses as well, and this is encouraging. It is a trend gathering pace worldwide and Mauritius is no exception. 

What’s the biggest implementation challenge facing Integrated Reporting?
From what we’ve seen, the biggest challenge for companies is that they don’t know where to start, although they know it is the trend and the way forward. One of the main starting steps is to get buy in from the top. Get everybody in the room and start talking about how the organisation creates value in the short, medium and long terms. Once you are done with that, you should formulate (or re-formulate) your strategy and link it to how to you will deliver that strategy. It also requires a company to talk openly about its challenges and how the management is dealing with these. This brings an impression that you are transparent, and transparency brings trust. Finally, the organisation has to realize that IR is a medium term journey. It’s not in one year that you will be able to accomplish an integrated report. The first year, you will get lots of quick wins; in the second year, you will complete with what you missed in the first year and the third year, you will be doing what we call “integrated thinking” and ideally up-running in formulating your integrated report. It’s not easy, there are going to be clashes. It does require companies to start on a blank piece of paper though.   

Do you think IR is the future of corporate reporting?
I’m sure it is. It is already part of that globally. If you look at the annual report of The IIRC, you’ll find the world map of countries where it is adopted and promoted. That map is just growing every year. At the IIRC, they are doing a very good job; and it’s even becoming a law in several countries such as Botswana more recently.  

How does IR impact the need for transparency and accountability in contemporary organizations?
There is definitely a need for more transparency in annual reports and in the way organisations communicate with their stakeholders. Actually, what the Framework does through a series of questions is that it encourages senior people in an organisation to ask themselves those tough questions. The result is that they’ll be more transparent in the way they will address the report. So far, some of these questions were being asked secretly by shareholders, and board members would never give straight answers; annual reports used to be very financial centric. So, forcing companies to focus more on the future, on the performance, on the risks, on the linkage, will compel them to adopt an “integrated thinking” approach that will allow them to be more transparent. We’ve also heard several companies say that this approach has helped them realign the way they run their business internally. The benefits are numerous.  

What role should a country’s legal system play to enhance the effectiveness of Integrated Reporting?
The new Code of Corporate Governance has compelled several listed entities and banks to go for integrated reporting. Forcing people to do it doesn’t necessarily lead to better thinking or better quality reporting. If you look at the UK, for example, they have not forced companies to do any integrated report but they have been asked to prepare a Strategic Report which covers some of the framework’s requirements. I think it depends where we are in each country. Also, companies can’t be more burdened than they already are. IR is not a burden, it’s a value-add.

What role does Integrated Reporting play in our attempts to develop a sustainable society?
IR is more about being forward looking and compels organizations to communicate in a much more stakeholder friendly way. As I said, organizations are encouraged to think about how to create value in the short, medium and long terms. This thinking process will help them to become more sustainable. ‘Sustainable’ here is not only about the environmental aspect, but also looks at other ‘capitals’ that help create value, such as employment, impact on communities, the environment and so on. 

What is the future of Integrated Reporting in Mauritius?
We will progress as time goes by. In five to ten years, I expect the majority of the SEM will have adopted the IR. The rest will follow because they will feel at odds with their competition. It’s been very encouraging to see that some family-owned companies have shown some interests in adopting IR. People think they need to hire people to do this, but actually it’s not true. It’s more a question of desiring to do it and having the drive within the organization to start the journey. It’s a question of will power.