Today I’ve been at another iteration of my gig with the road-show accountants’ professional development conference in another city (see my last blog on what my presentation has been about – Key Performance Indicators (KPIs)). I’ll try to blog later in more detail about KPIs for those who are obsessed with their technical characteristics like I am.
In the meantime, another really engrossing topic (for people like me) – Integrated Reporting Standards. I heard a presentation by Mark Hucklesby on the newly developed Integrated Reporting Standards which are currently out for consultation until July.
A quick aside on standards. One of the great things about accountants is that they’re obsessed with standard setting. They have standards for everything and technical committees meeting all the time figuring out new standards.
Standards are great because they bring about consistency, they also get the best minds in the business focused on the technical trade-offs which come up when reporting and how these are best dealt with.
In the broader area of outcomes systems – the way we identify and measure outcomes of any type in any sector – I really wish there was a parallel structure to the various official and unofficial standard setting that goes on in accounting. Instead of the order the accountants have in their world, our area of broader outcomes reporting is really like the Wild West. Of course the accountants have had about 500 years to get their area sorted while we’ve only been focusing on outcomes in the modern sense of the term for maybe 30 years or so.
The Integrated Reporting Standards are a new initiative which can be seen as a sort of reinvented Tripple Bottom Line (economic, social and environmental). More information on the initiative at http://www.theiirc.org/.
They have come up with a set of six ‘capitals’
- Financial
- Manufactured
- Intellectual
- Human
- Social and relationship
- Natural
I think that calling them ‘capitals’ is maybe a bit obscure for the average person. I would see them as ‘outcome areas’ or something. However, I can see how they ended up using the term capital. They wanted to have the concept that companies take aspects of these six capitals and add value to them. The concept is set out in the diagram below from their draft standards document.
I raised two issues with Mark in the discussion time. The first was whether their had been any consideration of distinguishing between controllable and not-necessarily controllable indicators in the integrated reporting framework. This is a crucial distinction I draw in my outcomes theory work – http://outcomescentral.org/outcomestheory.html#6.
The purpose of integrated reporting is to give investors and others a crystal clear picture of the risks and opportunities a company is involved in. Confusing controllable with not-necessarily controllable indicators lies at the heart of many of the problems arising from misunderstanding of the true underlying risk profile one is exposed to in both the private and public sector. Mark agreed with the importance of the controllability issue. My second point was whether the standards would allow for a range of reporting approaches. He said that the standards did not stipulate any one way of actually presenting an integrated report. This is good news for someone like myself who thinks that the only way of reporting these days is to use a visual approach because of its clear advantages.
Anyway, sometime when I’m wanting a little light reading I’ll delve into the standards and report back in this blog what’s interesting from the point of view of those of us interested in outcomes theory, measurement and strategy.
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