FINAL REFLECTION

If success is defined as near-universal adoption by all listed companies, will the integrated reporting movement be successful? We are cautiously optimistic. The challenges may be great, but the necessity is even greater. While integrated reporting is not a panacea that will create a sustainable society, it is an important management practice that can contribute to this goal. We are personally dedicated to this cause and we hope that this book serves as one small contribution to it.

NOTES

1. Because social movements are an agglomeration of a variety of actors with different objectives, they necessitate trade-offs, particularly when it comes to resource allocation and mobilization. That is, a certain amount of disagreement is inevitable. McCarthy, John D., and Mayer N. Zald. "Resource mobilization and social movements: A partial theory." American Journal of Sociology (1977): 1212-1241.

2. Cary, John L. The Rise Of The Accounting Profession. Vol. 1: From technician to professional, 1896-1936. New York American Institute of Certified Public Accountants, 1970. p. 6. In 1916, the Institute of Public Accountants succeeded it. The following year, it became the American Institute of Accountants (AIA), which it remained until 195 7 when it changed to its current name of the American Institute of Certified Public Accountants (AICPA). Acting as a federation of state societies, the American Society of Certified Public Accountants was formed in 1921. Exactly who could be considered an accountant was not always clear, and from 1916 to 1936, the accounting community strove to attain a uniform standard for the CPA certificate against an opposition that considered accounting "more art than science." (quote from page 272)

3. Voluntary disclosure flattened by 1934: 100% of companies published balance sheet information, including current assets and liabilities, 93% disclosed depreciation, and 99.6% disclosed net income. Bentson, George J. "The Value of the SEC's Accounting Disclosure Requirements," The Accounting Review, Vol. 44, No. 3 (Jul., 1969), pp. 515-532.

4. The 1933 Securities Act "required that investors receive financial and other significant information concerning securities being offered for public sale; and (2) prohibited deceit, misrepresentations, and other fraud in the sale of securities" U.S. Securities and Exchange Commission. Securities Act of 1933, sec.gov/about/laws.shtml#secactl933, accessed February 2014.

5. Securities and Exchange Commission. Securities Exchange Act of 1934, sec.gov/about/laws.shtml#secexactl934, accessed February 2014.

6. The Sarbanes-Oxley Act includes the famous Section 404 requiring the CFO and CEO to personally sign off on the quality of a company's internal control systems for financial reporting. Established in 2002, the Sarbanes-Oxley Act (Sarbanes-Oxley) created the Public Company Accounting Oversight Board (PCAOB), which was given authority to set and enforce auditing standards. Prior to that, auditing standards were set by the profession as represented by the American Institute of Certified Public Accountants (AICPA), and the accounting firms, especially the Big Four, reviewed each other's work as a form of self-regulation. As a result of Sarbanes-Oxley, the Financial Accounting Standards Board (FASB) was to be funded by the SEC at a substantially increased budget, and greater restrictions were placed on the consulting and tax services a company's auditor could provide. Firms also had to rotate the lead partner on the audit every 10 years.

7. The SEC delegated the primary responsibility of setting standards, but not the authority to do so, to the private sector. Today, the SEC Office of the Chief Accountant (https://sec.gov/about/offices/oca.htm, accessed February 2014) establishes and enforces accounting and auditing policy, and the Division of Corporation Finance (https://sec.gov/divisions/corpfin/ cfabout.shtml, accessed February 2014) oversees financial reporting policies and practices.

8. There are 107 companies in the IIRC Pilot Programme Business Network as of April 29, 2014. International Integrated Reporting Council. IIRC Pilot Programme, IIRC Pilot Programme Business Network, theiirc.org/ companies-and-investors/pilot-programme-business-network/, accessed April 2014.

9. Busch, Lawrence, standards: recipes for reality. Cambridge, MA: The MIT Press, c. 2011, p. 6.

10. Ramesh Ramananthan is the coordinator of a Bangalore citizens' movement for participatory democracy. He views an understanding of the evolution of corporate disclosure as critical to seeing the similarity between right to information issues in the private sector and the current debates on the same topic in the public sector. India Together. "Right-to-information or disclosure?" indiatogether.org/disclose-government, accessed May 2014. An excerpt from a 2009 article on the history of corporate disclosure by Ramanathan follows. "In the United States, progress on corporate disclosure followed the standards set in England, until the early 1900s. As late as the 1920s many corporations still kept sales figures secret, some did not depreciate assets, failed to treat non-operating income consistently, did not separate retained earnings from paid-in capital and did not disclose asset write-ups. It was after the Great Depression of 1929 that substantial changes were brought in. The English Companies Act of 1929 served as the foundation for Felix Frankfurter and his team in drafting the Securities Act of 1933. Importantly, the 1929 Act was the source of two major components of the current American securities regulation regime, the concept of full disclosure and the possibility of civil liabilities of the registrant, its officers, directors, and experts. Beyond the functional value of the 1929 Act is the reflection of the vision of the nation's leadership at the time. President Roosevelt's policy, which championed full disclosure as the preferable remedy to the malaise of American financial markets at the time can best be understood by Louis Brandéis's famous maxim: 'Publicity is justly commended as a remedy for social and industrial diseases. Sunlight is said to be the best of disinfectants.' Even as late as 1932, the New York Stock Exchange expressed concern about the wide variety of accounting and reporting methods used by companies whose securities it listed. A committee of the American Institute of Accountants under the chairmanship of George May was appointed to formulate improved accounting standards which could then be enforced through listing requirements. The committee's final report contained five recommendations: (1) To promote consistency, corporations listing their stock on the exchanges were asked to adhere to certain broad accounting principles, within this framework, each firm could adopt the accounting methods it preferred. (2) Each listed company would prepare a summary of accounting methods used in its statements. This summary would be formally approved by the firm's board of directors, would be filed with the exchange, and would be available on request to any stockholder. (3) The procedures listed in this summary would be consistently followed from year to year and would not be changed without prior notice to the Stock Exchange and to the company's investors. (4) Financial statements were to be the representations of management. The auditor's task was to inform stockholders whether the methods adopted by each company were actually being used, whether they were compatible with 'generally accepted' principles of accounting, and whether they were being applied consistently. (5) The committee suggested that a qualified group of accountants, lawyers, and corporate officials draw up an authoritative list of accounting principles to help corporations in preparing their own Lists of procedures. The committee had two specific tasks: to educate the public as to why a variety of accounting methods was necessary, and to suggest ways to curtail this variety and gradually make the better methods universal. In 1938 the Haskins and Sells Foundation commissioned three educators, T Ff Sanders (Harvard), H R Hatfield (Berkeley), and Underhill Moore (Yale Law School), to formulate a code of accounting principles which would be useful in the clarification and improvement of corporate accounting and of financial reports issued to the public. In preparing 'A Statement of Accounting Principles' they interviewed both makers and users of accounting data, reviewed the periodical literature, and studied laws, court decisions, and current corporate reports. A seminal document in the evolution of the universalisation of accounting principles was Paton and Littleton's An Introduction to Corporate Accounting Standards (1940), the most coherent statement of principles to emerge from this period. This document set the tone for much of the subsequent evolution of corporate financial disclosure practices in the ensuing decades. The last fifty years have seen greater flesh being added to this skeleton of financial reporting that evolved in the mid 1930s and 40s, somewhat contemporaneously in the United States as well as in Great Britain. This process of continuously raising the bar on disclosure standards is never-ending, as evidenced by the recent example being the Sarbanes-Oxley Act following the collapse of Enron. The creation of standardised financial statements is not a guaranteed safety ticket to proper institutional conduct, rather that it provides a springboard from which stakeholders can hopefully procure sufficient early warning signals about the true state of an institution. The fundamental principles behind the creation of these standards have been the guiding lights of all material and legislation: creating a level-playing field for all stakeholders by providing regular, detailed, and standardised information about the state of an institution." Ramanathan, Ramesh. "Corporate disclosure and financial statements: a brief history." livemint & The Wall Street Journal, livemint .com/Politics/L8c4xGGYD7GkpaLjEpidHM/Corporate-disclosure-and-finan-cial-statements-a-brief-histo.html, accessed April 2014.

11. For example, additional reporting requirements are established by the Ministry of Finance in China and by the Securities and Exchange Commission in the U.S. HSBC Global Connections. Home, Tools & data, Country Guides, https:// globalconnections.hsbc .com/united-kingdom/en/tools-data/country-guides, accessed April 2014.

12. "One of the key outcomes of the Rio+20 Conference was the agreement by Member States to launch a process to develop a set of Sustainable Development Goals (SDGs), which will build upon the Millennium Development Goals and converge with the post 2015 development agenda. It was decided establish an "inclusive and transparent intergovernmental process open to all stakeholders, with a view to developing global sustainable development goals to be agreed by the General Assembly." United Nations. Sustainable Development Knowledge Platform, Topics, Sustainable Development Goals, sustai-nabledevelopment.un.org/?menu=1300, accessed April 2014. The Working Document for the May 2014 Session of Open Working Group includes a reference to the adoption of integrated reporting, "by 2030 increase by x percentage points the share of companies reporting on corporate social and environmental responsibility, including integrated reporting." United Nations. Sustainable Development Knowledge Platform, Topics, Sustainable Development Goals, Working Document, Focus area 11, Sustainable Consumption and Production, Promote sustainable consumption and production patterns, (f), sustainabledevelopment.un.org/focussdgs.html, accessed April 2014. "The 30-member Open Working Group of the General Assembly is mandated by the Rio+20 Outcome document to prepare a proposal on SDGs for consideration by the Assembly at its 68th session (Sept. 2013 -Sept. 2014)." Sustainable Development Knowledge Platform. Sustainable Development Goals, Topics, Open Working Group, Post-2015 process, sustainabledevelopment.un.org/index.php?menu= 1561, accessed May 2014.

13. Aviva. "A Roadmap for Integrated Capital Markets: Aviva's proposals for how the UN Sustainable Development Goals and the UN Framework Convention on Climate Change can harness the capital markets." Unpublished paper, April 2014, p. 5.

14. On April 11, 2014, the Brazilian Stock Exchange BM&FB0VESPA announced that "BM&FB0VESPA begins the 2014 'Report or Explain' Cycle with a new development: in an evolutionary process aligned to the international trend of integrating financial and non-financial information in annual corporate reports, the initiative is now named 'Report or Explain for Sustainability or Integrated Reports' (the previous description was Report or Explain for Sustainability Reports or Similar). In this way, BM&FB0VESPA expresses support for the International Integrated Reporting Council (IIRC), whose mission is to create a globally-accepted model for integrated reporting. This support dates back to the start of the movement, when BM&FB0VESPA hosted a visit of the IRRC board to Brazil, in November 2011." The "Report or Explain for Sustainability or Integrated Reports" information can be accessed on the BM&FBOVESPA website at the following link: (bmfbovespa.com .br/en-us/markets/equities/companies/sustainability-report.aspx?Idioma=en-us). Sonia Aparecida Consiglio Favaretto, Sustainability Director, BM&FBOVESPA, email on April 16, 2014.

15. The Japan Stewardship Code is applicable to investors on a comply or explain basis. The Seven Principles of the Code are: (1) Institutional investors should have a clear and publicly disclosed policy on how they fulfill their stewardship responsibilities, (2) Institutional investors should have a clear and publicly disclosed policy on how they manage conflicts of interest in fulfilling their stewardship responsibilities, (3) Institutional investors should monitor investee companies so that they can appropriately fulfill their stewardship responsibilities and support the sustainable growth of the companies, (4) Institutional investors should seek to arrive at an understanding in common with investee companies and work to solve problems through constructive engagement with investee companies, (5) Institutional investors should have a clear policy on voting and disclosure of voting activity. The policy on voting should not be comprised only of a mechanical checklist; it should be designed to contribute to the sustainable growth of investee companies, (6) Institutional investors should in principle report periodically on how they fulfill their stewardship responsibilities, including their voting responsibilities, to their clients and beneficiaries, and (7) To contribute positively to the sustainable growth of investee companies, institutional investors should have in-depth knowledge on the investee companies and their business environment and capabilities to appropriately engage with the companies and make proper judgments in fulfilling their stewardship activities. Financial Services Agency. News, Publication of the draft of the "Principles for Responsible Institutional Investors," fsa.go.jp/en/news/pub.html, accessed April 2014. 16. The Shenzhen Stock Exchange issued the "CSR Guidelines for Listed Companies" in September 2006. The exchange's "sustainable profitability" requirements follow. "Requirement on sustainable profitability. The issuer may not fall under any of the following circumstances that would have a significant adverse impact on its sustainable profitability: a. Its business model or its mix of products or services has undergone or will undergo a material change which has or would have a significant adverse impact on its sustainable profitability; b. Its position in the industry or the business environment for its industry has undergone or will undergo a material change which has or would have a significant adverse impact on its sustainable profitability; c. Its revenues or net profits in the most recent financial year are heavily reliant on a related party or any client susceptible to great uncertainty; d. Its net profits in the most recent year have been primarily derived from investment returns off its consolidated financial statements; e. There is a risk of material adverse change in respect of the availability or use of any important assets or technologies being used by the issuer, such as trademarks, patents, proprietary technology and franchise rights. Other circumstances that would have a significant adverse impact on its sustainable profitability." Shenzhen Stock Exchange. Listing Requirements, szse.cn/main/en/ListingatSZSE/ListingRequirements/, accessed April 2014. The Shanghai Stock Exchange issued the "Notice on Strengthening Listed Companies' Assumption of Social Responsibilities" and the "Guidelines on Listed Companies' Environmental Information Disclosure" in May

2008. "According to the two documents, Shanghai Exchange-Listed companies should fulfill social responsibilities, address interests of stakeholders, and commit themselves to promoting sustainable economic and social development. These two initiatives are based on the philosophy that the SSE's listed companies are pillars of the national economy and should be encouraged to assume a leadership role in promoting sustainable development. For listed companies that promote CSR, the SSE sometimes offers incentives such as priority election into the Shanghai Corporate Governance Sector, which may benefit a company's public image, or simplified requirements for examination and verification of temporary announcements. The Shanghai notice encourages all listed companies to enhance their own CSR awareness and develop a strategic CSR plan for their operations. Listed companies may disclose the goals and achievements of their CSR activities and annual social responsibility reports through announcements posted temporarily on the SSE website. To assist with this, the SSE has also developed the concept of social contribution value per share (SCVPS) - a new method of measuring companies' value creation. SCVPS is calculated by adding the tax revenues paid to the state, salaries paid to employees, loan interest paid to creditors (including banks), and donations to - and other value for stakeholders, minus any social costs that arise from environmental pollution and other negative factors. SCVPS is intended to allow the public to understand the value companies create for their shareholders, employees, customers, creditors, communities, and society as a whole. Companies may choose to disclose their SCVPS calculation in their annual CSR reports." World Federation of Exchanges. Exchanges and Sustainable Investment, Shanghai Stock Exchange, world-exchanges .org/sustainability/m-6-7-l.php, accessed April 2014.