Dr Andrea Coulson of the Accounting and Finance department and Chair, ACCA's Global Forum on Sustainability, has co-authored a background paper for the International Integrated Reporting Council (IIRC) which has just gone public entitled, "Application of capitals to Integrated Reporting".
The new report explains the current and future application of capitals in Integrated Reporting <IR> and was prepared for the IIRC (International Integrated Reporting Council) by a group led by ACCA (the Association of Chartered Certified Accountants) and the Netherlands Institute of Chartered Accountants (NBA).
The Background Paper for
When reported together, these capitals represent an important picture of an organisation’s value creation. All organisations depend on various forms of capital for their success, including ones they do not own, and the different capitals should be part of the organisation’s business model and strategy.
The report provides a sound basis for the role of capitals in the IR Framework, suggests new proposals for improving the categorisation and descriptions of capitals adopted by the IIRC and provides more background to what may be unfamiliar concepts to help in their practical application.
Dr Andrea Coulson said, “Exploring the concept of multiple capitals; their definition, relationships and maintenance is critical to an inclusive debate on developments in Integrated Reporting.”
Rachel Jackson, head of sustainability at ACCA and a member of the steering group for the Paper, added, “Although companies depend on the six capitals to different extents, collectively these capitals affect the long term survival of any company and influence its value creation. Reporting on them is therefore a crucial element in future corporate reporting and will be necessary to meet stakeholders’ expectations.”
Dr Carol Adams, Director at Integrated Horizons, and also a member of the project team, said, “CFOs and Boards have tended to privilege information which can be quantified, focus on the short term and ignore the impact that value creation and depletion of some of the capitals can have on long term business success. All that must change for organisations that want to be around in the long term.”
The report concluded that there is a need to place capitals in a strategic context, which is a prime need for investors who make their investment decisions based on material about a company available to them.
Richard Martin, head of corporate reporting at ACCA concluded, “The key point about IR is to communicate value, giving a broader explanation of performance than traditional reporting, and identifying and reporting on capitals, either via metrics or being part of the narrative.”