To minimise future systemic risk, the corporate reporting system must evolve. If it doesn’t, financial capital will be misallocated, business decisions will suffer, and society will struggle to understand the critical contribution business has to make.
This report by PwC, Tomorrow's Company and CIMA is intended as a catalyst for a progressive debate about the future of the reporting system and how change can meet the needs of business and society in the twenty-first century.
The research is based on a global call for evidence and interviews with key global business leaders. Uniquely, the study looked at the whole reporting system (people, organisations, rules and processes), rather than just the reporting model (specific requirements) or the content of the ‘ideal’ report.
Barriers to change
The key barriers identified in today’s system include:
Stakeholders tending to see pieces of a jigsaw, rather than the whole system
A focus on data, rather than people, culture and behaviours
An acceptance that it’s easier to bolt on more disclosures to the old model, than to recast a new model on the basis of what’s material
Complexity - but there is inertia about changes that might increase liability
Roadmap for change
Central to the roadmap are a series of critical questions that need to be addressed, including:
What is the objective of corporate reporting and is global convergence a worthwhile goal?
Does anyone have oversight of the entire system?
Is the current reporting system itself a barrier to change?
What are the implications of integrated reporting for the structure and governance of standard setters, like the International Accounting Standards Board (IASB)?