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In tracing the origins of mandatory integrated reporting back to the period of 1990-1994, when the full consequences of the decision to end apartheid remained unknown, it becomes clear that South Africa's corporate governance journey developed from a unique set of circumstances. The emergence of mandated integrated reporting in South Africa was a small consequence of tumultuous political and social change as the country passed from apartheid to an era of social and economic inclusion. The architects of South Africa's new reality saw corporate governance as a way to rehabilitate the country's national image and attract the foreign capital that fled during the apartheid-era sanctions.103 Sustainability reporting, and then integrated reporting, were simply one component of a much larger effort to make South African companies exemplars of corporate governance.

Still, the challenges facing South African companies plague companies all over the world. Shareholders and other stakeholders are demanding that companies be more responsive to ESG issues, and integrated reporting can help them identify, manage, and communicate how they are responding to these challenges in order to create value for shareholders over the long term. South African companies are on the vanguard of this social movement. While much can be learned from their experience, however, it is necessary to place it in the broader context of global efforts to shape the meaning of integrated reporting—the subject of the next chapter.


1. A 2012 report compiled by Jess Schulschenk for Ernst & Young South Africa refers to the 2009 King Code as transitioning from a "comply or explain" to an "apply or explain" approach. Although integrated reporting is not "mandatory" in a strict legislative sense, for convenience we will use this term throughout the chapter with the understanding that it means "comply or explain," and following the 2009 King Code's appearance, "apply or explain." "Interview Summary Report." Compiled by Jess Schulschenk in collaboration with the Albert Luthuli Centre for Responsible Leadership at the University of Pretoria. Published by Ernst & Young South Africa. August 2012.1-40. In February 2010, the principles of the King Code of Governance of 2009 (King III), including those that recommend integrated reporting, were incorporated into the Johannesburg Stock Exchange's listing requirements and listed companies were obliged to apply the King III principles or explain their reasons for deviating from them (for financial years starting on and after 1 March 2010). SustainabilitySA., accessed May 2014,

2. Not all listed companies produce integrated reports. There is no accurate number of the number of companies that do.

3. Nonfinancial information refers to environmental, social, and governance (ESG) information that reflects company performance in these areas.

4. On April 16, 2013, the European Commission issued a proposal to require large EU companies to report on social and environmental issues in annual financial reports. "Proposal for a Directive of the European Parliament and of the Council amending Council Directives 78/660/EEC and 83/349/EEC as regards disclosure of nonfinancial and diversity information by certain large companies and groups." European Commission. Strasbourg, France. April 16, 2013, 0207:FIN:EN:PDF, accessed April 2014. On April 15, 2014 the plenary of the European Parliament adopted this directive by a vote of 599 to 5 5 from its 28 member states,, accessed April 16, 2014. In July of 2010, France took a step towards mandating integrated sustainability and financial reporting for large companies with a law called Crenelle II, Article 225 of which states that all listed companies on the French stock exchanges, including subsidiaries of foreign companies listed in France, and unlisted companies, must incorporate information on "the social and environmental consequences" of company activities or publish a justification for the exclusion of information if it is deemed irrelevant. Ernst & Young. "How France's new sustainability reporting law impacts US companies" 2012, www companies/$FILE/How_Frances_new_sustainability_reporting_law.pdf, accessed February 2014.

5. Brazil's BM&FB0VESPA and India's Bombay Stock Exchange have taken concrete steps to encourage listed companies to use sustainability reporting, and eight member exchanges of the World Federation of Exchanges (WFE) have joined the UN's Sustainable Stock Exchanges initiative to help research how stock exchanges can facilitate corporate transparency. In 2012, the WFE published the first "sustainability disclosure ranking" to benchmark the annual change in performance of global stock exchanges. Morrow, Doug.

"Measuring Sustainability Disclosure on the World's Stock Exchanges.", measuring-sustainability-disclosure-world%E2%80%99s-stock-exchanges, accessed February 2014.

6. Also known as social accounting, nonfinancial reporting is the process of communicating the social and environmental effects of an organization's economic actions to society at large and particular stakeholders (interest groups). PwC. Audit and Assurance Services, "What is corporate reporting?" publications/what-is-corporate-reporting.jhtml, accessed February 2014.

7. "Statistical Release for Census 2011 (embargoed until October 30, 2012)." Published by Statistics South Africa for the South African government, Private Bag X44, Pretoria 0001. Population was 51,770,560 people as of 2011. P0301.4., accessed February 2014.

8. Empirical studies have shown that better corporate governance is highly correlated with better market valuation and operating performance, for example: Klapper, Leora F. and Inessa Love . "Corporate governance, investor protection, and performance in emerging markets." Journal of Corporate Finance 10, no. 5 (2004): 703-728.

9. King, Mervyn and Leigh Roberts. Integrate: Doing Business in the 21st Century, by Cape Town: Juta and Company, Ltd., 2013.

10. Ibid., pp. 40-44. The five forces are growing investor power supporting sustainability issues, requirements of large corporate customers for more sustainable business practices in their suppliers, increasing regulation on societal issues, pressures on companies from governments to deal with poverty and growing social inequality, and the need to reduce the waste of diminishing natural resources.

11. Ibid., pp. 5-9.

12. Ibid., pp. 16-22. The problems are: (1) too heavy for the postman, (2) yesterday's story, (3) not the whole story—the financial pictures only, (4) not the whole story—some intangibles are excluded, (5) not the whole story—some costs are excluded, (6) different reports for different users, (7) nonfinancial information is not considered mainstream by all, (8) reporting influences behavior, (9) short-termism, (10) reporting is behind the technology curve, and (11) no common system for preparing the annual report.

13. While 1994, the year of the first multiracial democratic elections, is commonly regarded as the end date of apartheid, making it a 46-year phenomenon, the process to dismantle apartheid legislation officially concluded in 1990, when the African National Congress ceased to be regarded as a terrorist organization by the South African state and was instead made a legal political party and all laws enforcing apartheid were abolished.

14. Knight, Richard. "Sanctions, Disinvestment, and U.S. Corporations in South Africa." Sanctioning Apartheid, edited by Robert Edgar, Trenton: Africa World Press, 1990.

15. Denmark, France, and Canada initiated bans on investment in and oil trade with South Africa, which Israel enacted in 1987 and Japan followed from 1986-88. To restrict loans and exports to South Africa, the United States passed its main anti-South Africa legislation, the Comprehensive Anti-Apartheid Act of 1986. Teoh, Siew Hong, Ivo Welch, and C. Paul Wazzan. "The Effect of Socially Activist Investment Policies on the Financial Markets: Evidence from the South African Boycott." The Journal of Business, Vol. 72, No. 1 (January 1999), pp. 35-89.

16. Ibid.

17. Knight, "Sanctions, Disinvestment, and U.S. Corporations in South Africa."

18. The 1973 Companies Act allowed for the establishment of private and public limited-liability companies, and most foreign firms that created South African subsidiaries capitalized on the private form. Other policies that indicated the government's keenness to attract foreign investors included the absence of a requirement for approval of foreign investors, who are subject to the same laws as domestic investors in most cases. The Close Corporation Act of 1984 (Act 69) also created a third legal form for corporations that is suited for small businesses, and no limit exists for the amount of foreign ownership or the rights of foreign owners outside of the banking sector. UNCTAD Investment Country Profiles: South Africa, pp 1-29., accessed January 2014.

19. Bjorvatn, Kjetil, Hans Jarle Kind, and Hildegunn Kyvik Nordas. "The role of FDI in economic development." The Research Council of Norway: Foundation for Research in Economic and Business Administration. Bergen, December 2001, brage_24613/l/A62_01.pdf, accessed January 2014.

20. From 1956 to 1990, FDI as a percentage of GDP decreased from 34% to 9%. Fedderke, Johannes and A.T. Romm, 2004. "Growth Impact and Determinants of Foreign Direct Investment into South Africa, 1956-2003," Working Papers 12, Economic Research Southern Africa.

21. Schulschenk, "Interview Summary Report," p. 1.

22. Fedderke and Romm, "Growth Impacts and Determinants of Foreign Direct Investments into South Africa ."

23. Nxasana, Sizwe (2012b). Ibid. At the corporate level, governance was, in the words of many interviewed, "absent." Sizwe Nxasana, CEO of FirstRand Limited & FirstRand Bank, remembered his experience as an articled clerk in the early 1980s as a time of unparalleled corporate licentiousness.

24. Bjorvatn, Kjetil, Hans Jarle Kind, and Hildegunn Kyvik Nordas. "The role of FDI in economic development." The Research Council of Norway: Foundation for Research in Economic and Business Administration. Bergen, December 2001, p. 17,, accessed in January 2014.

2 5. IoDSA was founded to empower those charged with organizational governance duties with the right skills and ethics to execute on their duties based on the values of southern African society. "About the IoDSA" Institute of Directors in Southern Africa,, accessed February 2014.

26. Schulschenk, "Interview Summary Report," p. 1.

27. Published in draft version in May 1992, the "Cadbury Report," formally titled Financial Aspects of Corporate Governance, was a report produced by The Committee on the Financial Aspects of Corporate Governance in Britain, chaired by Adrian Cadbury, that set recommendations on corporate boards and accounting systems to mitigate governance risks and failures. Hailed as an international vanguard, certain recommendations of the Cadbury report were used to establish other codes in the United States, the European Union, and the World Bank, among others. "Report of the Committee on the Financial Aspects of Corporate Governance." Gee (a division of Professional Publishing Ltd.) London. 1 December 1992, documents/cadbury.pdf, accessed February 2014.

28. "King Report on Corporate Governance for South Africa 1994, Chapter 20: The Code of Corporate Practices and Conduct," Institute of Directors South Africa, p. 2,, accessed February 2014.

29. Schulschenk, "Interview Summary Report," p. 4.

30. Stout, Lynn A. "Bad and not-so-bad arguments for shareholder primacy." S. Cal. L. Rev. 75 (2001): 1189. "Milton Friedman is a Nobel Prize-winning economist, but he obviously is not a lawyer. A lawyer would know that the shareholders do not, in fact, own the corporation. Rather, they own a type of corporate security commonly called 'stock.' As owners of stock, shareholders' rights are quite limited . . . Thus, while it perhaps is excusable to loosely describe a closely held firm with a single controlling shareholder as 'owned' by that shareholder, it is misleading to use the language of ownership to describe the relationship between a public firm and its shareholders." (p. 1191)

31. Ibid. p. 14.

32. Schulschenk, "Interview Summary Report," p. 6.

33. A pro forma internal audit charter is contained in an appendix to King II, which describes the scope of an internal audit as "an independent objective assurance activity" that "brings a disciplined approach to evaluate risk management, control and governance." King II Report on Corporate Governance: Summary of Code of Corporate Practices and Conduct. Appendix 4. 2009, 343, and_IQS_docs/studytexts/corporategovernance2 / w_CorpGov_6thEd_Study Text_Appendix4.pdf, accessed February 2014.

34. "King Report on Corporate Governance for South Africa 2002," King Committee on Corporate Governance, pp. 91-92. dl/userflles/documents/Information_Resources/KingII%20Final%20doc.pdf, accessed February 2014. As an idea, "sustainability" was gleaned from the way "Our Common Future" (commonly known as the Brundtland Report) defined the term "sustainable development" in 1987 to mean "development that meets the needs of the present without compromising the ability of future generations to meet their own needs." United Nations. "Report of the World Commission on Environment and Development: Our Common Future," no page numbers in online report, .htm, accessed May 2014.

35. Schulschenk, "Interview Summary Report," p. 10.

36. "National Framework for Sustainable Development," Sustainability South Africa Website, mentsresponse/NationalFrameworksandPolicies.aspx, accessed February 2014.

37. "King Report on Corporate Governance for South Africa 2009," King Committee on Corporate Governance, Introduction and Background, The Need for King III, p. 2, kinglllreport.pdf, accessed January 2014. When the Companies Act was revised in 2008, it fundamentally rewrote South African company law to give legal authority to some of the guidance in King II. In addition to introducing the concept of an Independent Review as a way to audit company financial statements, the Act touched upon issues like appointment of board members to the board of directors, which King III then sought to elaborate upon. For example, the Companies Act acknowledged the importance of appointing a board for company governance, but King III expanded extensively on the role and function of the board. The Companies Act clarified procedures for the appointment or election of directors, but King III went a step further to describe the qualities of people who might be appointed, also providing guidance for the appointment and duties of CEO and chairman, which were not discussed in the Companies Act. Further differences necessitating that a third King Code be published related to board committees in general, group boards, audit committees, social and ethics committees, risk committees, remuneration committees, and nomination committees. PricewaterhouseCoopers. "The board of directors and committees—a comparison between the new Companies Act and King III,"

October 2011,, accessed February 2014.

38. The UN-supported Principles for Responsible Investment initiative is an international network of investors working together to understand the implications of sustainability for investors and to support signatories to incorporate such issues into their investment decision-making and ownership practices by putting the UN's six Principles for Responsible Investment into practice. UN Principles for Responsible Investment. About the PRI Initiative,, accessed February 2014.

39. "Institutional Investors." King III Introduction and Background, Section 7., accessed February 2014.

40. Institute of Directors in Southern Africa, "King Report on Governance for South Africa 2009," p. 109, kingiiireport, accessed February 2014.

41. Ibid., p. 111. Clarity and a long-term outlook were emphasized: "Integrated reporting should be focused on substance over form and should disclose information that is complete, timely, relevant, accurate, honest, accessible, and comparable with past performance of the company. It should also contain forward-looking information." Sustainability was to be interwoven with financial reporting. In addition to reporting on the company's financial performance, the company should put its economic performance into context by discussing the environment in which it functioned and its impact on stakeholders, as well as strategies for mitigating any negative outcomes. In short, "the integrated report should describe how the company has made its money."

42. Ibid., p. 111.

43. Ibid., p. 111. Since King III was published, the interplay between the 2008 Companies Act and the King Code has begged a number of questions about the relationship between governance principles and legislation. King III was written to reflect the changes in company law, but the Companies Act did not go into effect until 2011, causing many to believe a process of refinement is necessary to bring the reports into alignment with legislation. This in itself has caused strong reactions among supporters of principles-based approach. While King III was more progressive than its predecessors by leaps and bounds, some felt it had gone too far. Amid these debates, integrated reporting gained cachet on the international and domestic stages.

44. The UN Committee on Governance and Oversight was formed to recommend improvements that affect management and the governing structures that serve the United Nations. For further information, see "Implementation of decisions contained in the 2005 World Summit Outcome for action by the Secretary-General: Comprehensive review of governance and oversight within the United Nations and its funds, programmes and specialized agencies." Report of the Secretary-General. 10 July 2006. United Nations General Assembly, .pdf, accessed in February 2014.

45. Schulschenk, "Interview Summary Report," p. 9.

46. The IRC of SA was established by the joint efforts of the Association for Savings and Investment South Africa (ASISA), Business Unity South Africa (BUSA), Institute of Directors in South Africa (IoDSA), JSE Ltd, and the South African Institute of Chartered Accountants (SAIA).

47. The South African Institute of Chartered Accountants. The Integrated Reporting Committee (IRC) of South Africa "Framework for Integrated Reporting and the Integrated Report," SustainabilityandlntegratedReporting/IRGuidance/tabid/2 3 72 /language/ en-ZA/Default.aspx, accessed April 2014.

48. Ibid.

49. Ibid., p. 9.

50. The Paper further explains that materiality needs to be defined by answering three questions: (1) Are the "right things" being reported? (2) What level of error or omission in the data would influence the assessments and decisions of stakeholders in the organization?, and (3) Is the organization being response to the legitimate interests and expectations of its key stakeholders (sometimes referred to as stakeholder inclusiveness)? Ibid.

51. Ibid., p. 17.

52. Ibid., p. 17.

53. For a list of members see "Framework for Integrated Reporting and the Integrated Report Discussion Paper," by the Integrated Reporting Committee of South Africa, January 25, 2011, p. 25.

54. "IFAC Sustainability Framework 2.0," International Federation of Accountants. International Federation of Accountants Website, publications-resources/ifac-sustainability-framework-20, accessed February 2014.

55. SustainabilitySA. Integrated Reporting, The Integrated Reporting Committee of South Africa, ThelntegratedReportingCommitteeofSouthAfrica.aspx, accessed April 2014.

56. Ernst & Young South Africa . "Integrated Reporting Survey Results," 2011, pp. 1-15, Integrated%20Reporting.pdf, accessed February 2014.

5 7. PricewaterhouseCoopers. "Greater disclosure but little insight under new code," PwC, Corporate Reporting, integrated-reporting/corporate-reporting-south-africa-king-iii.jhtml, accessed January 2014. Since this first evaluation, PricewaterhouseCoopers has produced an annual analysis of the Top 40 listed companies' integrated reports.

58. Nkonki-Top-lOO-Integrated-Reporting-Awards-Winners. While Nkonki produced a special report in 2011 on the Top 40 IR Award Winners, the Nkonki Top 100 Integrated Reporting Awards began in 2012.

59. Schulschenk, "Interview Summary Report," p. 3.

60. Deloitte. "Integrated Reporting: Navigating Your Way to a Truly Integrated Report: Edition 2, February 2012," p. 20, Dcom-SouthAfrica/Local%20Assets/Documents/Integrated%20Reporting% 20Publication%20II%20.pdf. The report, like Ernst & Young's "Excellence in Integrated Reporting" awards, analyzed 100 JSE-listed companies and identified top trends.

61. These included The Companies Act, No. 71 of2008, King Code on Governance Principles, International Financial Reporting Standards, Global Reporting Initiative Third Generation, International Organization for Standardization, AccountAbility, Greenhouse Gas Protocol Corporate Accounting and Reporting Standard, United Nations Principles for Responsible Investment, Code for Responsible Investing in South Africa, International Council for Mining and Metals, United Nations Global Compact, Equator Principles, Carbon Disclosure Project, Water Disclosure Project, and extensible Business Reporting Language. Deloitte, "Integrated Reporting: Navigating Your Way to a Truly Integrated Report."

62. Ernst & Young South Africa . "Integrated Reporting Survey Results," 2011. %20Reporting.pdf, accessed February 2014.

63. CA Governance is a South Africa-based independent corporate governance entity that provides assurance of ESG information in reports to companies in addition to assurance and verification as called for in Global Reporting Initiative, CDP and Institute of Directors in Southern Africa GAI submissions. "An Introduction.", accessed February 2014.

64. Ernst & Young South Africa . "Excellence in Integrated Reporting Awards 2013," Integrated_Reporting_Awards_2013/$FILE/EY%20Excellence%20in% 20Integrated%20Reporting.pdf, accessed February 2014.

65. Deloitte, "Integrated Reporting: Navigating Your Way to a Truly Integrated Report," p. 61.

66. Fifty-five percent of the companies analyzed by PwC described material capital inputs into their business models, but only 19% explained the resources and relationships relied upon to deliver the company strategy or the degree of dependence the company had on them. Fifty-five percent of companies assessed by PwC did not accomplish integration in governance because there was little linkage between company narrative and governance reporting. That is, leadership structure and the decision making process were not explained. PricewaterhouseCoopers. "The Value Creation Journey: A Survey of JSE Top-40 Companies' Integrated Reports,"2013, PwC South Africa, The value creation journey, integrated-reporting.jhtml, accessed May 2014.

67. Ernst & Young South Africa . "Excellence in Integrated Reporting Awards 2012," p. 7.

68. Ernst & Young South Africa, "Excellence in Integrated Reporting Awards 2013," p. 11.

69. "Integrated Reporting: Performance Insight Through Better Business Reporting, Issue 2: 2012." KPMG 2012. Andlnsights/ArticlesPublications/integrated-reporting/Documents/integrated-reporting-issue-2.pdf, accessed February 2014, p. 8.

70. PricewaterhouseCoopers. "The Value Creation Journey," p. 6 and p. 29.

71. PricewaterhouseCoopers. "The Value Creation Journey," p. 30.

72. Integrated Reporting: Performance Insight Through Better Business Reporting." Issue 2: 2011.

73. Ernst & Young South Africa, "Excellence in Integrated Reporting Awards 2011," p. 11.

74. Deloitte, "Integrated Reporting: Navigating Your Way to a Truly Integrated Report."

75. PricewaterhouseCoopers. "The Value Creation Journey," p. 9.

76. Ibid.

77. Ibid.

78. Deloitte, "Integrated Reporting: Navigating Your Way."

79. Ernst & Young South Africa, "Excellence in Integrated Reporting Awards 2013."

80. PricewaterhouseCoopers. "The Value Creation Journey."

81. Leigh Roberts email correspondence with Sydney Ribot, March 27, 2014.

82. Deloitte, "Integrated Reporting: Navigating Your Way to a Truly Integrated Report." In 2012, the numbers had not changed much.

83. PricewaterhouseCoopers. "The Value Creation Journey."

84. Ernst & Young South Africa, "Excellence in Integrated Reporting Awards 2012."

85. Leigh Roberts email correspondence with Sydney Ribot, March 27, 2014.

86. Schulschenk, "Interview Summary Report," p. 25.

87. Ernst & Young South Africa . "Integrated Reporting Survey Results," 2011. p. 5.

88. Schulschenk, "Interview Summary Report," p. 25.

89. Deloitte, "Integrated Reporting: Navigating Your Way to a Truly Integrated Report," p. 12.

90. Ernst & Young South Africa, "Excellence in Integrated Reporting Awards 2012."

91. Ibid.

92. Mohamed Adam is a longstanding member of the King Committee and, in 1991, he joined as legal adviser at South African state-owned utilities company Eskom. As of 2014, he serves as Eskom's Corporate Counsel and Senior General Manager of Regulatory Affairs. "Mohamed Adam." http: / / www index, php ? option=com_content&view=article&id= 335&Itemid=479, accessed February 13, 2014. National Business Initiative is a South African organization that advocates for corporate citizenship and business leadership, facilitates collective business action and social dialogue, and implements strategic projects backed by rigorous policy analysis and research in order to foster public-private partnerships to build trust in and credibility of organizations via active engagement with members and the government. "Our Purpose." National Business Initiative, nbi., accessed February 12, 2014.

93. Schulschenk, "Interview Summary Report," p. 24.

94. A waterfall chart or graph is a form of data visualization that shows the cumulative effect of sequentially introduced positive or negative values. Because its suspended columns are visually reminiscent of bricks or columns leaped over by the protagonist of the videogame Super Mario Brothers, it is also known as a "flying bricks chart" or "Mario chart." In finance, this chart is often known as a bridge chart.

95. Ernst & Young South Africa, "Excellence in Integrated Reporting Awards 2013," p. 12.

96. XBRL, or extensible Business Reporting Language, is a freely available global standard for exchanging business information, XBRL. XBRL Basics,, accessed April 2014.

97. One of the criteria used by Deloitte in their research into the quality of integrated reports was the extent to which companies were effectively communicating the context in which they operate. A key measure of effective communication was the concept of a "quick reading" summary that included key performance indicators, historical trends, and future targets. Deloitte, "Integrated Reporting: Navigating Your Way to a Truly Integrated Report," p. 31.

98. Deloitte, "Integrated Reporting: Navigating Your Way to a Truly Integrated Report," p. 93.

99. In American parlance this is the same as "positive" assurance.

100. If management questioned the need for assurance, it is perhaps indicative that management should reconsider the motive for including that factor as a material KPI. Ernst & Young South Africa, "Excellence in Integrated Reporting Awards 2013."

101. Deloitte, "Integrated Reporting: Navigating Your Way to a Truly Integrated Report," p. 21.

102. "Integrated Reporting: Performance insight through Better Business Reporting." Issue 1. 2011. KPMG. ArticlesPublications/Documents/road-to-integrated-reporting.pdf, accessed February 2014.

103. From 1956 to 1994, FDI as a percentage of GDP decreased from 35% to 10%. Fedderke and Romm, "Growth Impacts and Determinants of Foreign Direct Investments into South Africa."

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