As the Integrated Reporting US Community has come together, we’ve mostly engaged one another online or through video conference. But communities are strengthened through a variety of interactions, including in person. So when Richard Howitt, CEO of the International Integrated Reporting Council (IIRC), came to Boston on March 28, the US Community met more formally – and more personally – over a town hall lunch.
Over 25 members came by, some traveling to Boston specifically for the event. They came from organizations across the investment value chain, from ESG asset managers and audit firms, to NGOs working to improve reporting and consultants who help reporters.
Richard Howitt first gave an overview of the history of the IIRC. He stressed that the intent of integrated reporting isn’t to create a box-ticking compliance exercise. Rather, it’s to change managers’ mindsets away from short-termism, to make them think differently about how they might deploy all six capitals of the <IR> framework for long-term value creation. In the end, companies have to work out materiality on their own, and report on the six capitals the way they feel will best convey materiality to the capital markets.
The IIRC has evaluated progress of reporting annually and found that reports are getting more precise, and the <IR> framework more widely adopted. It’s already the predominant framework in Japan, for example, and the Securities and Exchange Board of India has asked the top-500 companies to voluntarily start reporting using the framework. And the framework isn’t sitting still: The IIRC is working on integrating IR with the UN’s Sustainable Development Goals (SDGs).
With all that said, adoption of the framework is lagging the most in the United States. Bob Laux, the North American lead for the IIRC, provided his own thoughts on trends in the markets. Generally speaking, he noted, the idea of focusing capital for the long-term is gaining traction and CEOs are frustrated with the short-termism of quarterly guidance. Thus, an influential group of companies and their chief executives believe they can lengthen the time horizon of their guidance. Echoing Howitt’s comments, Laux also noted that <IR> helps internal decision-making first; external reporting naturally follows. Lastly, he noted that there are many groups working on more specific metrics that can add comparability to the use of the <IR> framework.
Overall, Laux said he was pleasantly surprised with the success of the US Community. Indeed, the growing interest in, and strength of, the community became evident after the panel discussion, when community members shared their own thoughts on the development of <IR> in the US. For example, they cited recent research conducted by Mary Barth at Stanford and others which demonstrated that transparency leads to lower cost of capital. But business leaders have a hard time internalizing that research enough to break from their entrenched habits, beliefs and processes.
The momentum behind the US Community was also reinforced after the town hall, when attendees sought each other out for more dialogue. Indeed, this was perhaps the surest sign that the community is coming together and ready for takeoff.