The future of corporate reporting is Integrated! Хеннинг Драгер Relationships Manager International Integrated Reporting Council (IIRC) МИРБИС - 18 апреля 2012

Agenda What is Integrated Reporting (IR) and why do we need it? Evolving reporting trends – where are we going? About the IIRC and IR Pilot Project Russian engagement needed!

The global context is changing! Our footprint is growing! Greenhouse gas emissions keep rising The world could be running out of some resources Driving increased demand for disclosure! Environmental degradation jeopardises people’s quality of life Our footprint is growing!

Our choice… “Window dressing” Strategic accounting for & integration Business as usual reporting Strategic accounting for & integration of all impacts Strategic resource allocation

The importance of reporting Influences decisions and actions of management An essential element of corporate governance Influences decisions and actions of shareholders and other stakeholders Affects resource allocation (financial, natural and human resources) in society Critical for investor confidence Influences perceptions of the company’s customers, vendors, and employees Shapes how a company sees itself

Challenges Non-financial Financial Lack of standards Complexity Meaningful narrative information Reporting on risk, executive compensation and corporate governance Auditing for fraud Lack of standards Lack of common terminology Definition of “materiality” Underdeveloped audit methodologies Controversial role of the Global Reporting Initiative Competing standard setters

Corporate Reports: Increasing length and complexity Prudential annual report pages 1850-2008 Key point: …even though it is trying (quantity over quality) Undue focus and commitment of effort on financial aspects of model Lacking in strategic focus (wood for trees) Increasing length, complexity and clutter in reports (haphazard evolution) External reporting increasingly separate from internal management information Governance reporting (last place to look) Sustainability reporting - often a stand alone silo Uncertainty on what's audited Source: Investis research - PwC

“Corporate reporting…has got too big, too cumbersome and incomprehensible …” Source: Tomorrow’s Corporate Reporting : A Critical System at Risk – CIMA and PwC

INTEGRATED REPORTING IS...

The evolution of Reporting…

…Integrated Reporting – the Future

IR Elements

Central themes Business model & value creation

The IIRC - some of the participating organisations Chairman - Professor Mervyn King, King report on corporate governance Deputy Chairman - Christy Wood, Chairman ICGN Chief Executive Officer - Paul Druckman Chairman of the working group - Ian Ball, CEO IFAC Corporate networks UN Global Compact BSR CERES Global Alliance WEF Companies RosAtom Rosneft Microsoft GE Natura 100 Group Novo Nordisk China Light & Power Nestlé HSBC EnBw

The IIRC – more stakeholders Regulators, Standards Setters IASB FASB GRI CDSB Stock Exchanges IOSCO Tokyo Stock Exchange London Stock Exchange/100 Group Financial Stability Board (observer) Investor networks UN PRI UNEP-FI ICGN INCR Investors Aviva Investors APG EFFAS Hermes EOS General Commissioner, France Railpen IGOs UNCTAD World Bank IFAC ACCA JICPA SAICA Accounting ICAEW PwC, E&Y, GT Deloitte, KPMG, BDO Civil Society Transparency International WWF WRI A4S Academia Harvard University University Sao Paolo University New South Wales Volans

About stakeholder expectations (1) On reading a corporate report users should be able to tell that: The company has not profited at the expense of the environment, human rights, a lack of integrity or society; There are adequate controls in place to monitor and manage material risks and opportunities;

About stakeholder expectations (2) Remuneration is linked to overall performance which includes social, environmental and financial aspects; There is an interactive communication with the stakeholders who are strategic to the company’s business; and The company is conducting a sustainable business

82 international companies have joined the Integrated Reporting Pilot Programme which launched in October 2011 Pilots will explore <IR> in the context of their organisations and be critical to the development of an Integrated Reporting Framework Leading companies and investors developing and exchange good practice in this two year programme

Current reporting - what is an IR? We didn't define what IR is, we come back to this in the technical update. 30% think they will publish one - understanding what this is will help development of Framework.

Actual and expected benefits of <IR> so far Two primary benefits identified: reporting against KPIs which align to the corporate strategy cooperation and collaboration across the business Numerous other benefits include: telling the story about what the core business does risk assessment focused on material risks wider knowledge of non-financial business drivers discussing the future considering finance and sustainability knowledge across the business and sharing best practice Overwhelming comments on the 2 primary benefits There were also other benefits, this is just the main ones

Our Future Direction Continue developing the IR Framework draw on Pilot Programme experiences Exposure Draft in 2012 Work with others on measurement and reporting relevant to IR Explore with regulators etc opportunities to harmonise reporting requirements within and across jurisdictions Conduct regional roundtables and other engagement and communications activities + public consultation regarding ongoing governance of Integrated Reporting G20 Moscow 2013 – support for mandatory, global standard development

IR Framework needs Russian input to be truly global! RosAtom and Rosneft are leading the way – will other corporates follow? Corporate Governance and transparency issues can be covered by adopting IR MIRBIS demonstrating the importance of academia and educational involvement – development of future skill sets We welcome you to join the IR Pilot Programme, IIRC working groups and get the word out about IR!

@: henning.drager@theiirc.org Please contact us: Henning Dräger @: henning.drager@theiirc.org Mobile: +38 050 452 20 37 Work: +38 044 393 26 87 www: theiirc.org