Telling the value story

A global survey of accounting professionals looking at the trends and challenges in defining, measuring, and disclosing the value that companies create has revealed a consensus (93% of those surveyed) that corporate disclosures should explain value creation.

Purpose Beyond Profit: The Value of Value — Board-Level Insights, launched this week at the joint International Corporate Governance Network–International Integrated Reporting Council (ICGN-IIRC) conference in Tokyo, points out that the integrity of the value-creation story is essential to building trust in organisations.

“In recent years, there has been such a fundamental change in our understanding and approach to value that businesses can no longer ignore it,” said Richard Howitt, CEO of the International Integrated Reporting Council (IIRC). “They cannot operate effectively without thinking seriously about their purpose, and the resources and relationships they rely on to fulfil this purpose.

“This is a world where a company’s consumer sales, brand value, and stock price built up over many years can plummet in minutes. Either a company is willing to tell its own value-creation story, or it is content to let others do it for them.”

David Hackett, research and development technical manager who is leading UK corporate governance work at the Association of International Certified Professional Accountants, said its business model framework is an important way of visualising and communicating the value-creation story.

“It can also help meet reporting requirements, particularly now that focus is on integrated ways of reporting a company’s wider value proposition,” Hackett said.

Those who took part in the survey acknowledge that a broader range of performance metrics are important. But only 11% make decisions using internally generated data beyond financial metrics.

The report identifies the factors that limit the use of nonfinancial information: a lack of appropriate quantitative environmental, social, and governance information (highlighted by 55% of respondents); a lack of comparability of data over time (50%); and questionable data quality (45%).

Thirty-eight per cent of those surveyed are working on capturing new data or creating new tools to understand broader performance.

On integrated reporting, the research found that whilst only 5% of those surveyed currently produce an integrated report, there is a clear trend towards communicating a holistic story of value creation. About 33% are already incorporating some aspects of integrated reporting in their disclosures. And 83% believe that adoption of integrated reporting could help deliver success for their company.

The report was written by UK- and Singapore-based stakeholder communications agency Black Sun, with help from the Association of International Certified Professional Accountants and the IIRC. It gathered the views of more than 400 Association members from more than 50 countries, including 41 CEOs or presidents, 177 CFOs, and other executives.

— Oliver Rowe (Oliver.Rowe@aicpa-cima.com) is external affairs content manager for FM magazine.