Sustainability Reporting in capital markets: A Black Box? (ZIFO nr. 30) 2019/3.2.3.1:3.2.3.1 Integrated reporting

Sustainability Reporting in capital markets: A Black Box? (ZIFO nr. 30) 2019/3.2.3.1

3.2.3.1 Integrated reporting

Documentgegevens:

A. Duarte Correia, datum 20-11-2019

Datum: 20-11-2019
Auteur: A. Duarte Correia
JCDI: JCDI:ADS169088:1
Vakgebied(en): Financieel recht / Bank- en effectenrecht
Ondernemingsrecht / Jaarrekeningenrecht

Apart from South Africa, where integrated reporting is more mature as it is a listing requirement of the Johannesburg Stock Exchange, following the King Code,1 globally integrated reporting is in an early phase.2 In Sweden, although listed companies have shown to have high quality financial and sustainability reports, the uptake of integrated reporting has been slow.3 Since 2011, only the Volvo Group, the only Swedish listed company participated in the International Integrated Reporting Council Pilot Programme.45In 2014, amongst the Swedish largest companies listed on the NASDAQ OMX Stockholmsbörsen (OMX 30), only 6 companies had declared to publish an integrated report.6 From these 6 companies, only one had specifically referred to use the International Integrated Reporting Council framework.7

In the point of view of the Swedish Enterprise Accounting Group, a representative for accountants for Swedish listed companies, the current annual corporate reporting practice, in particular the disclosure of sustainability information, is already in line with the integrated reporting framework.89The Swedish Enterprise Accounting Group believes that if the integrated reporting framework would become globally accepted there would be a more significant impact on the reporting for enterprises in other countries than in Sweden.10 The organization highlights the importance of a “sustainable organization [that] can take long-term responsibility for the [IIRC] Framework (…) to ensure the continuity of the Framework, including setting a standard for due process and how necessary resources to finance the work will be raised over the long run.11

In 2013, PwC looked at 28 Swedish companies listed on OMX 30 and their annual reports for fiscal years ending on or after 31 December 2012.12 PwC noted that the majority of the companies analyzed had a “good structure to their reporting”, in line with the integrated reporting framework.13 PwC compared the results of their study of 28 companies (included in the NASDAQ OMX index OMX30) in 2012, against a sample of companies included in similar nine European indexes. Their findings suggest that within their 28 samples, Swedish companies were placed in the 5th position when compared with their peers. Swedish companies rank below, e.g. South Africa which has more experience with integrated reporting given the Johannesburg Stock Exchange listing requirement.14

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See, “Business and Investors explore the sustainability perspective of Integrated Reporting”, the IIRC Pilot Program Yearbook 2013, pp. 35. Available at: https://integratedreporting.org/wp-content/uploads/2013/11/IIRC-PP-Yearbook- 2013.pdf.

Integrated reporting is further explained in section 2 of chapter 4.

In 2011, Eccles and Serafeim conducted a study to identify the state of the art of integrated reporting looking at 2255 companies in 23 countries, as well as the investors’ interest in Environmental, Social and Governance (ESG) information. According to this study, Sweden scored high in integrated reporting by companies but low in investors’ interest. See, Eccles, R. G., & Serafeim, G. (2011). Leading and lagging countries in contributing to a sustainable society. Harvard Business School Working Knowledge.

The IIRC Pilot Programme, was developed for 2 years for a group of companies to exchanging knowledge and sharing experiences on integrated reporting. See, https://www.iasplus.com/en/resources/sustainability/iirc It gives the opportunity to the participant companies to i) provide the International Integrated Reporting Council with structured feedback on key building blocks in the Framework to inform its development and practical application; and ii) to build business momentum for the implementation of integrated reporting. More information is available at: https://integratedreporting.org/wp-content/uploads/2013/11/IIRC-Pilot- Programme-Business-Network-backgrounder-October-2013.pdf pp. 1.

See, the participants in the International Integrated Reporting Council Pilot Programme at: https://integratedreporting.org/wp-content/uploads/2011/10/Pilot-programme-26boctober2011cmr.pdf.

The 6 companies were, AstraZeneca, Atlas Copco, Boliden, SKF, Swedbank and Tele2. See, pp. 33 available at: https://www.diva-portal.se/smash/get/ diva2:929763/FULLTEXT01.pdf.

This company was AtlasCopco. See, pp. 33 available at: https://www.diva- portal.se/smash/get/diva2:929763/FULLTEXT01.pdf.

See, the Swedish Enterprise Accounting Group (SEAG)’comments to the International Integrated Reporting Council Consultation Draft, pp. 1 here: https:// integratedreporting.org/wp-content/uploads/2013/08/062_Swedish-Enterprise-Accounting-Group.pdf.

The Swedish Enterprise Accounting Group (SEAG) represents more than 50 international industrial and commercial groups, most of them listed. The largest Swedish Enterprise Accounting Group’ companies are active through sales or production in more than 100 countries. See, https://integratedreporting.org/wp- content/uploads/2013/08/062_Swedish-Enterprise-Accounting-Group.pdf. See, also https://www.svensktnaringsliv.se/english/about-us_563030.html.

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In this survey 2013, PwC covers 28 companies included in NASDAQ OMX index OMX 30, aiming at understanding how Swedish companies have developed and will develop their corporate reporting over time. The study is available at: https://www.pwc.se/sv/bolagsstyrning/assets/a-benchmark-study-of-swedish-large- cap-companies-reporting-2013.pdf.

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PwC. (2013). A benchmark study of Swedish Large Cap companies’ reporting 2011. Retrieved from https://www.pwc.se/sv/bolagsstyrning/assets/a-benchmark- study-of-swedish-large-cap-companies-reporting-2013.pdf.

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Integrated reporting is further explained in section 2 of chapter 4.