CSR detracts from corporate reporting agenda

Sustainability is of course a very worthy and important focus, but could it be that the launch of the International Integrated Reporting Committee is in danger of distracting the powers that be away from some fundamental financial reporting issues?

The IIRC’s remit is to create a globally accepted framework for accounting for sustainability, which brings together financial, environmental, social and governance information in a clear, consistent and comparable format. The initiative is borne out of the Accounting for Sustainability (A4S) project, launched in 2004 by the Prince of Wales, with the broader remit of developing practical guidance and tools to embed sustainability into decision-making processes.

Who in the investment community wouldn’t like to see the development of more comprehensive and comprehensible information about an organisation’s total performance? Certainly a glance at the big ticket names – both individuals and organisations – that have lent their backing to the cause shows either (a) that an initiative of this nature is long overdue or that (b) Prince Charles’s name carries some serious weight in the corporate world.

From the Hundred Group of Finance Directors (a veritable coup in its own right) to Mervyn King, Robert Eccles, professor of management practice at Harvard Business School, Jim Singh, CFO of Nestle, Sir David Tweedie, chairman of the International Accounting Standards Board, it’s more of a Who’s Who of the business world than anything else.

But then you can perhaps imagine the conversations that ensued between those charged with signing up high-profile members of the steering committee, perhaps using the well-honed techniques employed by chuggers (charity muggers), along the lines of “can you spare a moment for sick children/tortured animals/sustainability and the future prosperity of UK plc (delete as appropriate).

One problem is that ‘sustainability’ is a term subject to ambiguity – from the touchy, feely, hug-a-tree end of the spectrum to a much broader long-term viability of a business sense. And while climate change and the over-consumption of the Earth’s finite natural resources should be a subject close to everyone’s heart, the launch of the something like the IIRS comes a very long way down the list in terms of initiatives likely to result in public policy effectiveness.

Good quality financial information is absolutely essential to the functioning of capital markets. The amount of interested generated in corporate reporting (and the important back- of- the- book numbers elements in the annual reports in particular) are testament enough to that. As we emerge from a recession, it is essential that we draw lessons from the financial crisis but adding sustainability to our list of corporate reporting woes before we have the fundamentals sorted may be going a step to far.