PwC

Perspectives on Integrated Reporting Russell Picot, Chief Accounting Officer at HSBC, reports that they were one of the first organisations to join the IIRC’s pilot programme to test integrated reporting.

What steps have you taken as a company to move towards integrated reporting? Our annual report is our main communication to the market – we don’t have a preliminary results announcement. So we’ve been experimenting with restructuring our risk document – bringing upfront what happened in the market during the year, how we responded to it, and how it’s reflected in our numbers. Then we put all our standing data and boilerplate information about our systems (which may not change) at the back of the document.

Are there a few key messages from investors about what they want from integrated reporting? If you look at the banking industry, investors said very clearly that they thought banks’ business models were quite opaque, and that in some parts of the market, they were uncertain about the viability of funding models. They said that they were exacting a heavy penalty in terms of our equity prices being marked down.

So what are the key benefits of adopting an integrated reporting approach? The major benefit of IR is clarity of communication to the market. I think that over time, we will see that this could lead to a lessening of the financial reporting burden – creating a much more relevant model of corporate reporting.

It also provides a unifying, integrating force within a company. The CEO, the major business heads and the department heads are getting into a room and discussing how they create shareholder value and how they communicate that to the market – and that’s really powerful. It has both internal and external benefits.

Extracts from a filmed PwC interview

“Integrated Reporting that shows the entirety of corporate activities makes investors and other stakeholders come to fully understand the overall value to be created by the company.”

Conclusion of the Expert Committee on Desirable Market Economy System, led by Yoshimitsu Kobayashi, President and CEO of Mitsubishi Chemical Holdings.

25

“If companies don’t get their act together, then sooner or later the regulators are going to do it for us.”

“There are enough highly-publicised examples of market failures where companies have destroyed inordinate amounts of value because investors, and in some cases, the boards, haven’t really understood the business model and been able to ask the right questions at the right time.”

“It’s important for financial stability that there is a shift away from the short term and the backward view of life, towards something that is more forward looking and longer term.”

Charles Nichols, Group Controller, Unilever. Extracts from a filmed PwC interview in 2013

Contact: Mark O'Sullivan

Director of Corporate Reporting, PwC

E: mark.j.osullivan@uk.pwc.com Tel: +44 (0)20 7804 3459