This is an interview taken from RSM Reporting - Issue 27, with RSM Reporting's editor, Marco Mongiello.

Exactly a year ago we reported on the ambitions and developments of the International Integrated Reporting Council (IIRC). The IIRC had already begun to influence the corporate world and was set to strengthen its agenda and widen its impact. A year later, and in coincidence with the announcement of the forthcoming succession of its CEO, it seems the appropriate time to look at the effects that Integrated Reporting (<IR>) thinking is having on corporate reporting.

So, I reached out to Paul Druckman (CEO, IIRC) and asked for a follow-up of our previous conversation. Being an uncompromisingly goal-oriented person, Paul wanted to share his evaluation of the progress that has happened on his watch, but the conversation reached different heights, providing a deep insight into how corporate thinking has been shifting and what this means for our profession.

MM: <IR> has received recognition the world over, from various different sources: prime ministers, regulators, standard setters, etc. This is testament to the tremendous impact that <IR> is having on the global business environment. What are the main achievements that you think are best at describing the success of <IR> since its inception? What are the goals (if any) that you would have wanted to achieve but did not (or did achieve but to a lesser extent than envisaged) prior to stepping down? 

PD: I would say that there are two elements of achievements that describe the success of IIRC well. The first is around keeping and extending the coalition, the IIRC family, which encompasses a wide diversity of key capital market players: asset owners, asset managers, companies, regulators and NGOs. Keeping all of them engaged and on side is one the biggest achievements of IIRC. Prior to the IIRC, many of these organisations were not collecting and publishing information (which is relevant to the different capitals and, therefore, to the value of these entities) in a multi-lateral format. They may have collected occasionally, creating a fragmented landscape of reports.

The second element of achievement has to do with adoption. I think that having created an awareness, not just around integrated reporting, but around the multi-capital approach and the whole idea of value creation in the short, medium and long term, is something that we (at the IIRC) should be proud of. It is this awareness that has impacted many agendas, many of which we are not necessarily aware of. This is evident in the many articles and policy statements from other organisations which are actually using the <IR> language and concepts. Associated with that, I also observe a greater than expected number and spread of integrated reports, even if often they are not called integrated reports. So, integrated reporting has gained in breadth and depth.

There are other aspects where I would have wanted to see the IIRC achieve more. For example, I find it slightly disappointing that there is not more cohesion around the numerous initiatives in the sustainability space. Another aspect that disappoints me is that there is a lot of re-inventing in corporate reporting, too. I would encourage players to pick a ‘winner’ approach and adapt it and build on it. I am not advocating a standardisation of the language of integrated reporting, I am wishing for a standardisation of the language in the corporate reporting space as a whole.

I think that one of the contributions of <IR> is to have one concept of integrated reporting, rather than many fragmented initiatives. What we have tried to do is to be inclusive of many existing good ideas, rather than generating confusion by creating new ones. This is a similar challenge right across the corporate reporting agenda; we should ask ourselves how much of this ‘competition’ of initiatives drives the public interest.

MM: Why do companies come up with new ways of reporting, if they could simply adopt <IR>?

PD: Partly, this is down to leadership at the very top. Many leaders and organisations are not willing to take on something new – particularly in a highly regulated area – unless it has the blessing and active support of the CEO. It is therefore incumbent on the leadership of organisations to drive innovation in corporate reporting and view reporting as a key strategic tool that is a critical part of driving overall performance. 

MM: Do you think that IIRC could perhaps try to create more consensus and awareness?

PD: The proliferation of too many (and fragmented) ideas is in the different capitals, more than in the direct space of the IIRC. Also, it is disappointing that there has been a lack of development of the less developed capitals, e.g. intellectual capital. There’s a lot of work in the natural and social capital space, there’s a lot of work in financial, but I would have hoped to see development in the other capitals alongside this. I haven’t been able to make this happen in my time.

With respect to core manufactured capital, i.e. infrastructure, I am not aware of guidance on how investors should understand that. I have been talking endlessly about intellectual capital (brand, IP), but I have yet to see how this is reported apart from a few exceptional cases. The World Intellectual Capital Initiative (WICI) is one that works, but there is nothing that has grabbed the attention of companies. That’s why the debate is constantly focused on the financial aspect at the expense of a discussion around the broader capitals. 

MM: In your opinion, how has the global business environment changed in the past five years, regarding the global awareness of the importance of a responsible approach to business? In particular, I am referring to the examples from <IR> database, where reports keep being added, demonstrating that more and more companies espouse the <IR> values.

PD: What we have been trying to do is, not so much bring new thinking, but rather bring thinking that has already happened to the fore, ensuring that it is related to something pragmatic. This is reflected on the types of companies that are in our database (which collects the integrated reports of companies that produce and file them); I think of them as innovators and early adopters. The innovators are those who were already thinking of doing this type of reporting and we captured what they were already doing by giving best practice guidance, helping them to articulate something in a way that is coordinated and understood by a broader readership.

The early adopters are the companies that were able to start their integrated reporting, but only since <IR> has provided structure and awareness about it. This has been exciting: companies have embraced <IR> thinking and utilised the way that it suits them. There is lots of evidence, including the likes of Generali, the World Bank and EnBW, where the application of the <IR> framework has allowed businesses to articulate the message they are trying to communicate much more effectively.

In more general terms, there is more and more evidence from research of a positive correlation between companies <IR> score and their value. That evidence is demonstrating that <IR> matters more than can be measured by the number of companies adopting it(1).

I personally debated at length with our Chairman, Mervyn King, on whether the IIRC’s performance should include KPIs that measure the number of <IR> reports, but I do not think that numbers matter that much if they merely measure how many reports are called ‘integrated reports’. KPIs may be dangerous as they could drive bad behaviour, whereas it is the quality of adoption of <IR> that drives higher company value. Therefore, the value of the examples in the IIRC database is that those companies actually espouse the <IR> thinking, rather than simply comply with <IR> as a tick box.

In other terms, companies with a higher <IR> score are better reporters across the whole corporate reporting and are more valuable. <IR> is not creating something new, but enables companies to increase value from a higher quality reporting. If you refer to ‘the shifts’, the two central ones are around inclusive capital (stewardship code, corporate governance code, etc). These shifts are happening in the financial markets(2). <IR> is not driving them, but <IR> contributes to make them happen, making <IR> an essential component of these global movements.

Personally, I have always tried not to create a market, but to look for things that have happened and that I think fit into what we want to happen. Then, I pick them up and drive them forward. <IR> has the ability to harness ideas, not create them.

MM: Your successor will have a very difficult act to follow, and you will no doubt provide a comprehensive handover. If you were to summarise the handover, what would you say?

PD: It may sound nitty-gritty, but there are two structural things that I have put in place:

  • We created the new constitution with a much more independent and high profile board and a much better governance system.
  • We made sure that there is a very strong management team in place, which is capable of running and driving forward the IIRC. Although I am the face of the IIRC, I am not the heart and soul of it. The idea of the three shifts, for example, wasn’t my idea; it was the Chief Strategist’s. I probably had the innovative thinking but it is the management who made it happen.

This is the legacy. If I had something to say to the person who is appointed, it is to be careful to maintain the IIRC’s independence and empowered management team.

MM: Of all the work that accountants produce, corporate reports have probably the widest dissemination and broadest readership. Reflecting on the forces that determine how corporate reports develop, and which make the context where regulators and standard setters operate, is therefore a useful insight. Along these lines, the conversation with Paul Druckman is both humbling and uplifting. Humbling, because it makes us realise that ‘shifts’ in corporate thinking are massively powerful movements, whose effect on corporate reporting is only the most evident type. Uplifting, because we see how good values and positive energy may significantly influence our profession in such a short period of time.


(1 ) Mary Barth et al., 2015, The Economic Consequences Associated with Integrated Report Quality: Early Evidence from a Mandatory Setting. Social Science Research Network.
George Serafeim, 2014, Integrated Reporting and Investor Clientele. Social Science Research Network.
Gillian Yeo et al., 2014, Integrated Reporting and Corporate Valuation. The Singapore Accountancy Commission and The Institute of Singapore Chartered Accountants.
(2) See global initiatives like ‘Inclusive Capitalism’ and the 'Canadian pension funds’ pledge to long termism.