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The emergence and rapid uptake of the voluntary Integrated Reporting framework across the world is an unexpected manifestation of the UK’s highly influential global soft power base. And the potential of Integrated Reporting (<IR>) is perhaps more than many yet realise. Companies and public sector organisations across the world are adopting the <IR> framework as a voluntary addition to their external reporting in increasing numbers. One major consequence is that this UK-led and inspired international initiative is becoming a source of comparative advantage that other countries will struggle to match in terms of comparable global commercial influence – in particular the USA, hamstrung by its fundamentally different approach to corporate reporting. This is also one small example of Britain’s likely continuing global success post any conceivable Brexit. Indeed, with a reported ongoing review of how Britain is disbursing its enormous foreign aid budget the British government would do well to look at how it could help the International Integrated Reporting Council expand its sphere of influence.
Integrated Reporting is an idea that is right because its time has come. That it is still not just an idea but is now a snowballing success is due largely to the tireless energy and efforts of Paul Druckman, former President of the UK’s leading accounting professional body, and his relatively small international team. Together they have welded together a powerful global coalition of regulators, investors, companies, standard setters and non-government organisations. They rightly recognise that value creation is the natural evolution for meaningful reporting by companies and public sector organisations to their investors and stakeholders. Global in its scale and already local in its application in numerous countries across every continent, the IIRC’s <IR> Framework has rapidly asserted itself as the narrative content corollary of the universally respected and financially focused International Accounting Standards Board with its IFRS rules.
Of course, none of this would have been possible without the wide international respect that exists for the UK’s corporate reporting regime. The UK’s principles-based reporting framework gives companies the opportunity to communicate freely and effectively while holding their corporate feet to the fire of basic standards of compliance. So, it is no surprise that the IIRC has similarly adopted a principles-based approach with a strategy-centric framework that is already very familiar to most UK reporting companies. In this credit must remarkably go to the perseverance and perspicacity of the UK government and of its regulator the Financial Reporting Council. And that is why corporate reporting has become a very palpable source of comparative advantage to Britain. An index of ‘soft power’ published by The Economist in July 2015 ranked Britain as top among nations in the soft power league. Corporate reporting is just one and perhaps as yet unacknowledged way in which Britain is expanding that sphere of soft power influence globally.
If corporate reporting is rapidly becoming Britain’s equivalent of Hollywood and the movie industry in terms of its global influence, then the USA is still learning how to make movies. US adherence to a rules-based approach to corporate reporting, largely to satisfy its litigious culture, makes its SEC-driven reporting model unloved internationally and unsuitable to wider propagation. The Americans are not in the game, other than as adherents and supporters of the <IR> reporting framework. Perhaps as Britons we should also take some comfort that, in the possible event of Brexit, we have yet another remarkable source of soft power comparative advantage that will endure and might perhaps even shine even more brightly, unfettered by Brussels diktat.
A more recent issue of The Economist reported that Britain is reviewing how it disburses its prodigious foreign aid budget. It reports that commentators have noted a likely greater focus on supporting national interests. If this is the case the UK government would do well to explore how it could direct funds to help the International Integrated Reporting Council proliferate its Integrated Reporting framework to enhance the transparency and governance of companies, and through them the development of economies, in fragile and emergent countries. It can only amount to more soft power to Britain’s elbow and to the benefit of global commerce!