Message from Prof. Mervyn King
Chair Emeritus of the International Integrated Reporting Council (IIRC) London, the Global Reporting Initiative (GRI) Amsterdam, a member of the Private Sector Advisory Group to the World Bank on Corporate Governance, former Judge of the Supreme Court of
It’s a pleasure once again to be with all of you in Colombo and my colleague and friend Prof. Lakshman thank you very much once again for the invitation.
Sustainability and long- term value creation have become mainstream because of the work of IIRC, and others, and is becoming adopted by more and more investors and thinkers. This is not on the fringe; it is a significant element of what the world is expecting today. But we can’t do all things in one day, and clearly today climate change is our priority.
Accounting in the future is going to be structured differently. We call it the deep and the wide, the T shaped profession. At the bottom one has ethics integrity and professionalism - that must drive the professional accountant. The broader skills are very agile and continue to change with the world. The ability to be storytellers about what we’re trying to communicate, the ability to think in a systems way, and deep technical functional knowledge in some element is a significant fundamental change.
Fundamental change is even in the structure of what a management accounting function looks like, and even what a firm looks like. Traditionally, in our profession, we have been pyramid shaped with wide swaths of people at the bottom generating and accumulating information. This is narrowed down to, let’s say, the CFO or the Chief Accounting Officer who reports up into the board or the CEO. The reality is that we are going to change, and we are already seeing companies transforming their financial functions. I call it “fat middle organizations”, and these will be critical in the profession in future. Ultimately those competencies that fit in the middle are going to be what’s necessary to meet regulatory requirements, complex standards, and complex expectations of multi- stakeholders. Those skill sets in the middle are going to be people that are going to need to deliver what is required.
The concept of interoperability is difficult for people to understand. In speaking to the GRI, of which I am chair emeritus, it accepts that there is double materiality, but it also contends that the impact of the activities of a company, its outputs including waste and its products, have impacts on the three critical dimensions for sustainable development. One of the critical things is that EFRAG ( which have developed the CSRDs for the EU to fit in with its “legal straight jacket” ) is talking with the IFRS Foundation’s Technical Readiness Working Group ( TRWG) to try and align these standards.
If not aligned, we would have a parallel development on sustainability reporting which would be detrimental to the harmonization of these standards.
Approximately 2,500 companies in over 70 countries now do Integrated Reports, connecting financial and the so called non- financial information. I have never heard any complaint that they haven’t had any benefit from doing an Integrated Report and as a result are thinking on an integrated basis.
We have seen the merger of SASB and the IIRC to create the Value Reporting Foundation, the Value Reporting Foundation’s merger with the IFRS Foundation, the consolidation of the SASB and the CDSB into the ISSB; and the transfer of conditional ownership of the IR Framework into the IFRS Foundation. I say conditional because the skills of the IIRC will be in the IFRS, such as the Oversight Committee and the Framework Board, as was discussed at a recent IIRC Council Meeting to ensure that any revision or changes to the IR Framework do not harm the valuable IR Intellectual Capital which is now entrusted to the stewardship of the IFRS Foundation. How this will evolve I can speculate, but one thing is certain that there is a change of mindset of the accountant.
As I wrote in the Chief Value Officer, that title has become more appropriate than that of Chief Financial Officer as accountants today are dealing with the value creation process which has replaced the primacy of the shareholder dictate. The profession is being refreshed. Accountants are the true change makers in the C- suite, and they will play a huge role in these changes in corporate reporting.
Once again I congratulate all winners for their excellent performance and CMA Sri Lanka and my friend and colleague Lakshman for promoting Integrated Reporting in Sri Lanka with much benefit to all companies.