OUARTERLY REVIEW MINI FEATURE

Every year, Michael Rea, the maverick guru of sustainability and assurance in South Africa, brings together a team to review the annual and sustainability reports published by every company listed on the Johannesburg Stock Exchange (JSE). This year, after disqualifying more than 50 companies for lack of adequate information, the team reviewed 363 reports, scoring them for GRI compliance against all 127 GRI G3 Guidelines. Following this mammoth task, the report was launched on 25 July at Turbine Hall and is available for downloading from www.IRAS.co.za.

Rea believes the report demonstrates South Africa’s pre-eminent role as a laboratory in which the global corporate world is testing the value inherent in effective reporting. “With fewer than 400 companies listed on the Johannesburg Stock Exchange and 128 GRI-based reporting entities, the uptake rate of the GRI Guidelines is higher here than in any other country,” he writes.

According to IRAS’ research, South African companies’ reports have improved

significantly, though there remains the concern that company officials prefer to be reactive, seeking to comply with expectations such as industry charters, the Workplace Skills Development Act, the Employment Equity Act, the JSE’s Socially Responsible Investment (SRI) Index, the dti Codes of Good Practice and the like.

Nonetheless, the accompanying graph of high, medium and low impact companies (as categorised by the JSE SRI) shows an accelerated improvement in GRI compliance over the last two years. While high impact companies are beginning to show decreasing marginal performance against the indicators, medium impact companies, dominated by banking and financial services, have sought to formalise their approach to reporting according to the GRI, achieving a marked improvement. Low impact companies, including the likes of health, ICT and the media, have been slower to respond.

Rea believes that for companies to make the transition from GRI compliance to trusted corporate citizen in the eyes of their stakeholders, they need to take integrated reporting seriously. Rea points out “Integrated reporting is about telling your story. If you can achieve this in a well laid out, concise report, you have to deal with the issues most material to your business, for there is simply no superfluous text to hide behind. If you are mature enough to handle the truth, you are more likely to develop responses that open up value-creating opportunities for your business.”

“Integrated reporting,” concludes Rea, “has not only become a message to shareholders and potential investors, but, more importantly, an internal management tool tantamount to the tail that wags the dog.”

“ By making public every company’s compliance with the GRI Guidelines, I believe company officials will strive not only to report better, but use this information to bring the most important issues to the attention of their boards, and consequently be more responsible in their business dealings.”

Michael Rea, CEO, IRAS integrated reporting and assurance services

King III’s influence on reportingThe King Code of Corporate Governance (version 3, or King III) has established a set of principles for companies attempting to identify the future of their business in the context of an ever-changing social, economic and environmental landscape. Among many other governance recommendations, King III encourages companies to produce meaningful integrated annual reports using the guidance set out by the GRI (the GRI Guidelines). In doing so, King III has effectively set new benchmarks for a level of transparency that has long eluded conscious consumers and investors. What has not yet been adequately defined is exactly how to benchmark corporate performance on so-called non-financial matters.

Reporting by Trialogue

InteGRated RepoRtInG FINdS ITS FEETThirteen years on from the launch of the Global Reporting Initiative (GRI), Michael Rea’s King III and GRI +13 report reviews sustainability reporting in South Africa against the GRI Guidelines, finding that reporting is becoming more formalised.

Increase in GRI compliance for high, medium and low impact industries

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60%

55%

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45%

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2010GRI +12

2011GRI +13

2012

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