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The COVID crisis is a human crisis. Its impacts are far-reaching and deeply felt. And, as countries manage the simultaneous public health and economic emergencies, the pandemic is demonstrating clearly how business interruptions can cause huge social and economic impacts.
In the wake of this crisis, there will be lessons for every segment of the economy. IFAC, as the accountancy profession’s global body, must understand what we can learn now to better prepare for the future.
One area I keep coming back to is corporate reporting. After months of economic shutdown, corporate earnings season in the US is upon us – and the financial impacts of the crisis are becoming more apparent every day. With many companies unable to provide guidance for future quarters, we must ask ourselves if current corporate reporting practices are fit-for-purpose in an uncertain world.
This question should force us all to rethink value creation and protection. I see this in my own organization. As CEO, I have to consider how to protect employees and the community, while adapting the organization and finding a pathway to resilience. In making decisions, I’m taking into account our balance sheet, our strategic assets, and how we can have a positive impact on our key stakeholders and society.
As financial and non-financial factors come together to inform decision-making, so too should information come together in corporate reporting to provide a complete picture of value creation to stakeholders. This is even more important given COVID’s global impact. Accountants, in partnership with the businesses they serve, must be able to deliver reporting that provides a comprehensive view of a company’s current and future value – one that is robust in its own right and comparable on the global stage.
This is not a new conversation, but it is made all the more urgent given the uncertainty that lies ahead of us. In the last 10 years, the corporate reporting landscape has become a mosaic of mandatory and voluntary disclosures and regulatory fragmentation. It’s too complex and too costly. But it’s important to keep in mind how critical international accounting standards have been for the maturity of financial reporting and capital markets. Now, we need to evolve again to develop global, high-quality standards for information related to all aspects of value creation.
As a starting point, we need a widely agreed-upon conceptual framework for corporate reporting that covers all information related to how a company creates value and how it impacts society. I believe that the International Integrated Reporting Framework can be the basis for this, when combined with key principles of other voluntary guidance, including the TCFD Recommendations on Climate-related financial disclosures, and when complementing existing reporting standards and frameworks, including IFRS or US GAAP.
However, a framework alone will not be enough to achieve relevant, reliable and comparable corporate reporting. Relevant organizations need to come together and coalesce around best practice metrics and disclosures. We need to work to develop widely agreed-upon and high-quality standards.
Last month’s International Integrated Reporting Council (IIRC) meeting brought the conversation forward. It focused all key stakeholders in corporate reporting on alignment, harmonization, and convergence toward globally-recognized standards for environmental, social and governance information. These conversations will continue, in part, through the review of the International Integrated Reporting Framework. The review presents an opportunity to refine the IR Framework and to position it as the basis for comprehensive and international corporate reporting practices. I encourage all interested stakeholders to share their perspectives during the upcoming consultation period.
As we enter a new decade, it’s safe to say we are facing new and enduring challenges. Now more than ever, we need global corporate reporting standards that are fit for the times.
We must embrace this “new normal” and look for opportunities to be more resilient. Enhancing corporate reporting is one such opportunity.