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Throughout this book, we have discussed the central role of the IIRC and the supporting roles played by GRI, the Sustainability Accounting Standards Board (SASB), and CDP. Together, these four organizations are creating the institutional infrastructure necessary for integrated reporting. They are also, however, creating confusion in the marketplace as companies, investors, and stakeholders struggle to understand their missions and how they relate to each other. Are they complementary or competitive entities? Understandably, companies, investors, and stakeholders are also often confused about what exactly they are supposed to do in order to effectively respond to the entreaties each organization is making of them.

Our view can be simply expressed. The IIRC has established a high-level, principles-based framework for integrated reporting. From its inception, it was clear that it had no intention of becoming a standard setter for how specific pieces of information should be measured and reported. As that is the work of the other three organizations, their missions are clearly complementary to the IIRC. Each can provide input to a company about the nonfinancial information it decides to include in its integrated report.

Like the IIRC, SASB is focused on investors. Its standards are a baseline for consideration that, since they are currently being developed in a U.S. context only, may need to be adapted for global application. Some will come from metrics established by CDP, which we see as a "subject matter expert" in greenhouse gas (GHG) emissions and increasingly, on water and forests. SASB has signed an MOU with CDP, and SASB's "open source" approach will leverage the work done by CDP. When climate issues are material, the recommended key performance indicators from SASB will likely come from the work of CDP. Similarly, GRI can leverage the work of CDP in its guidelines on climate issues.

Finally, GRI and SASB have a complementary relationship. As the former's G4 Guidelines cover sustainability reporting from a global perspective, they include information material to many stakeholders that, although not material to all investors today, could be tomorrow as the management of social and environmental issues becomes increasingly necessary for a company to create value over the long term from both a risk and opportunity perspective. We do not believe that sustainability reporting will or should go away as a result of integrated reporting. Rather, its relevance for companies to maintain their license to operate will only increase. SASB's sector-specific standards for issues material to investors, which could include GRI indicators just as they could CDP metrics, will be supplemented by sustainability reporting to meet the needs of stakeholders.

Recommendation Number Four: CDP, GRI, IIRC, and SASB should work together to clarify for companies, investors, and other stakeholders how their missions are related to each other; they should also form collaborations which are mutually beneficial in support of the movement.


We will conclude this book by sketching one possible way the adoption of integrated reporting could unfold in the coming years. This is most definitely not intended to be a prediction. It is a thought experiment to imagine the drivers of adoption of integrated reporting in different countries.

Globally, the explicit call in 2014 for integrated reporting in the Sustainable Development Goals (SDGs)12 has become an important accelerator, since it has put the movement on the agenda of all countries that signed on to the SDGs, which were adopted in 2015. Rather than being an isolated movement, integrated reporting is now one element of a broader call by Aviva for "integrated capital markets," defined as "capital markets that finance development that meets the need of the present, without compromising the ability of future generations to meet their own needs."13 Other elements of integrated capital markets include integrated: incentives, financial regulation, stock exchanges, financial literacy, asset ownership, investment consulting, asset management, corporate brokerage, corporate governance, proxy voting, and investment legal duties.

Western Europe continues to lead the way with a new Directive in 2019 that explicitly calls for integrated reporting. Although it does not specify any particular framework or set of reporting standards, companies are increasingly using the <IR> Framework as guidance for their annual report, even if the degree and manner that they do so varies by country. Companies also begin to use SASB's standards, which have been adapted by most countries for their local circumstances, as the basis for these reports. The G4 Guidelines, which have now evolved to G5 Guidelines, serve as the basis for sustainability reporting. They are accompanied by a clearer explanation of when they are and are not relevant to integrated reporting. Active efforts are underway to harmonize the G5 Guidelines, SASB's standards, and Version 2.0 of the <IR> Framework, published in 2018. As companies, investors, and stakeholders gain clarity about the relationship between integrated reporting and sustainability reporting, the growth of each acts as an accelerator for the other.

Brazil remains a leading country in integrated reporting and Japan becomes one. In Brazil, BM&FBOVESPA takes a further step in its "Report or Explain" Cycle and calls the initiative "Report or Explain for Integrated Reports and Supplementary Sustainability Information."14 By 2020, approximately 80% of listed companies are doing so. In Japan, the Tokyo Stock Exchange has made integrated reporting a listing requirement. The seeds for this were laid in 2014 when the Financial Services Agency released its stewardship code which aims, on a comply or explain basis, to promote medium- to long-term sustainable corporate returns based on seven principles that guide investors on their stewardship responsibilities.15

China surprises the world in 2018 when, following the release of the <IR> Framework 2.0, the China Securities Regulatory Commission (CSRC) mandates integrated reporting for all listed companies. Since the Shenzhen Stock Exchange and the Shanghai Stock Exchange have been requiring sustainability reporting since 2006 and 2008, respectively, this does not come as a surprise to Chinese companies.16 Furthermore, voluntary adoption by Chinese companies has been rapidly growing since 2016 as they seek access to foreign capital markets and business partners, so this regulatory mandate by the CSRC is simply building on strong market momentum.

The U.S. remains a distinct laggard in terms of the number of companies producing self-declared integrated reports. Reporting requirements in the U.S. continue to discourage companies from paying more than cursory attention to the <IR> Framework, although sustainability reporting based on the G4 and G5 Guidelines continues to accelerate. The biggest movement in the U.S. is the adoption of SASB's standards in an increasing number of 10-Ks. The global reaction is mixed. On the positive side, some supporters of the movement recognize what a significant step it is for companies to include nonfinancial information in the carefully scripted and heavily lawyered 10-K. On the negative side, other supporters point out that this is just one more example of "American exceptionalism"—another version of the U.S. GAAP/IFRS movie. The debate shows no sign of being resolved any time soon. Many applaud this U.S. version of integrated reporting. Others belittle it as a rules-based approach that fails to implement the real principles of integrated reporting as laid out in the <IR> Framework, which itself continues to evolve as the IIRC learns from the experiences of companies, investors, and other stakeholders.

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