How can business bridge financial and sustainability reporting to drive value?

Nedbank’s report has a clear emphasis on value creation and strategy. It is well laid out, easy to read and good use is made of infographics to summarise complex information in a way that is easily understandable. The introductory pages clearly outline the group’s purpose, vision, values, strategy, and targets. They set the scene for the detailed information that follows. We particularly liked the infographic that shows the value that the group strives to create for its various stakeholders. The group’s material matters are highly contextualised, detailed, forward looking and a clear link is made between these matters and strategy, risks and opportunities. The explanation of the group’s strategy is detailed and the presentation of the strategic trade-offs that have been made to create and protect value is excellent. The governance disclosures that show the key board focus areas and the way in which board oversight and strategy are linked can be considered to be best practice.  

clearly explained data which makes the value creation narrative easy to follow. We particularly liked the ‘big picture’ infographic that shows the group’s integrated approach to value creation, and which provides useful context for the detailed information that follows. Governance disclosures are both innovative and practical and show the group’s value-creating governance approach in action. The strategic overview, the integrated stakeholder engagement, and the use of capitals to explain the group’s value creation story are examples of excellent disclosures that demonstrate integrated thinking within the group. The materiality determination process is clearly explained, and the outcome of this process is presented in a way that shows how material matters have been grouped into five material themes. The way in which remuneration practices have been summarised onto one page is excellent.

Absa’s report includes a clear focus on strategy and the factors that are relevant to its future value creation. The introduction to the report makes it immediately clear as to the audience of the integrated report and in which other reports further information can be found. Key findings with respect to the quality of the group’s relationship with its stakeholders are presented together with indices that show performance relative to its peers. Material matters are explained in detail and a clear connection is made between these matters and what they mean for the group in terms of risks, opportunities, business impacts, effects on capitals, and which metrics may be affected. We particularly liked the finance director’s report and the inclusion of notable reporting items, separation of short-term and medium-term targets, peer comparisons and the infographic that showed ‘finances at a glance’. The section that deals specifically with the outlook for the group is excellent. 

Vodacom’s report is crisp, concise, attractive, and is easy to read. It makes excellent use of icons to link sections and guide the reader. It has a strong focus on both strategy and value creation and includes detailed reporting on each of the six capitals. We particularly liked the detail presented with respect to the group’s strategic ambitions that includes both short-term and medium-term priorities as well as linkages to material matters and the capitals. Targets for each strategic ambition are presented together with three years of actual performance data. The group’s risks and opportunities are clearly presented and the way in which these are linked to value creation and the strategic pillars, and the six capitals are an indication of integrated thinking within the group. The disclosures of how the group is responding to ‘hot topics’ on a macro, industry, and company level and how these topics have changed year-on-year is excellent.

Kumba’s report has an excellent strategic focus with the appropriate amount of detail being provided. The explanation of the group’s business model is comprehensive and in addition to inputs, activities, outputs, and outcomes shows useful detail about revenue and cost drivers. Further detailed information is provided on each of the capitals and in particular the actions undertaken to enhance each capital as well as the impacts of the group’s activities on these capitals. We particularly liked the explanations of the trends in the group’s operating environment and the way in which a strategic response and an explanation of the value implication for each trend is given. The report includes a comprehensive explanation of the group’s strategy together with clear disclosure of how the group has performed against each strategic initiative. The explanation of the key financial risks affecting performance and the way in which this information is linked to other areas within the report is excellent.

Netcare’s report is well laid out, with a structure that is easy to follow and navigate. The report starts with a value creation model that includes cross-references to where more detail on each aspect within the model can be found. We particularly liked the way in which the group’s material matters were tabled early-on together with a clear indication of the coverage of these matters within the group’s suite of reports. Within the governance section of the report, key Board activities and decisions relating to each material matter are presented, further enhancing the integrated nature of this report. The inclusion of ‘key takeaways’ in explaining the operating environment is innovative and helpful. The detail provided on each of the group’s capitals, especially relationship capital, is comprehensive and clearly explains how sustainable value will be created. The disclosures relating to outlook and key strategic trade-offs are excellent.

Truworths’ report has a clear strategic focus with an emphasis on value creation both for itself and for other stakeholders. We particularly liked the emphasis on providing information that is specific to the group rather than mere generic or boilerplate disclosures. Furthermore, the report is easy to navigate, avoids the use of jargon and is written using language that is clear and concise. The explanation of the group’s business model is sufficiently detailed to get a good understanding of how the group will create value for its stakeholders. The integrated disclosure of each material issue that incorporates performance against objectives and targets, challenges encountered, future objectives and plans, risks and opportunities as well as achieved and target key performance measures is excellent. Governance disclosures focus on value creation and appropriate detail is provided with respect to board deliberations.

Amplats’ report is forward-looking with an appropriate emphasis on strategy. We particularly liked the explanation of the group’s approach to reporting and the graphic that is used to illustrate this explanation. The sections that outline the group’s strategy, business model and the markets within which it operates are particularly helpful in setting out the context for the group’s value creation story. The group’s risks are clearly presented, appropriately integrated with strategy, and illustrated with a heat map that shows the likelihood and consequence of each risk. The inclusion of emerging risks further enhances these disclosures. The reporting is balanced and the explanation of the group’s trade-offs and the way in which they are managed is excellent. Disclosure of the group’s revenue and cost drivers as well as the group’s sensitivity to price, volume, and exchange rates enhance the presentation of the business model.

Woolworths’ report has a sensible layout which makes the value creation narrative easy to follow. The report starts with an explanation of the group’s reporting universe, together with a clear guide on how to navigate the report. Governance is introduced early-on with an appropriate and detailed focus on key governance issues and explanations of those areas on which the board has been focussed. We particularly liked the presentation of the group’s business model and the way in which sustainability issues are integrated into the explanation of how value is created. The group’s material matters and group’s response to each matter is comprehensively explained. The presentation of the group’s strategic framework and the detail provided within each strategic theme is excellent. Comprehensive and clearly defined key performance indicators to measure strategic performance are presented. 

Harmony’s report focusses on value creation and contains an appropriate mix of forward-looking information and performance disclosures. The report shows how the group’s integrated approach to sustainable mining delivers long-term value creation for all its stakeholders. There is a detailed explanation of the group’s strategy, and we particularly liked the way in which strategic performance and future focus is presented for each strategic pillar. The external operating environment within which the group operates is particularly well explained and supported by useful detail on market volatility. In addition to the risk disclosures, the group’s top strategy opportunities are discussed in detail. A useful materiality matrix is used to group material matters into material themes and to show how these matters impact on business cash flows. The overall connectivity of information within this report is excellent.  

The purpose of the survey is to encourage and benchmark standards of excellence in the quality of integrated reporting to investors and other stakeholders in South Africa’s listed company sector.

Over the years it became clear that financial statements on their own did not tell the whole story of a company’s performance. Companies therefore started reporting on their environmental impacts, employee-related issues and corporate social responsibility issues in a separate report often referred to as a sustainability report, which accompanies the financial information distributed to shareholders.

Since 2010, all companies listed on the Johannesburg Stock Exchange (JSE) have been required to produce an integrated report in line with King III. This requirement has been carried forward to King IV, effective for financial years commencing on or after 1 April 2017.

In addition, the JSE requires application and disclosure of King IV in any report lodged with them after 1 October 2017.

EY has been commissioning the Excellence in Integrated Reporting survey for the last 11 years in order to encourage excellence in the quality of integrated reporting to investors and other stakeholders by South Africa’s top companies.

The companies chosen for inclusion in the awards survey are the top 100 companies listed on the Johannesburg Stock Exchange (JSE), which are selected on the basis of their market capitalisation on the last trading day of the calendar year. This is usually the 31st December.

All companies are regarded as being eligible to be included in the survey other than pure holding companies, if there are any.The final top 100 includes the full range of listed companies on the JSE, from resources to industrials, retailers and financial institutions, as well as a number of companies with dual listings. In the case of those companies which operate through a dual listing structure, only the combined group is included in the survey.

The mark plan is developed by three adjudicators from the College of Accounting at the University of Cape Town, in conjunction with EY’s Professional Practice Group. The UCT team comprises Professors Alexandra Watson, Goolam Modack and Mark Graham. All of the adjudicators have been involved for many years in EY's "Excellence" in reporting series, and in EY’s Excellence in Integrated Reporting survey since 2011.

The mark plan is quite simple and is based on the Guiding Principles and Content Elements that appeared in the International Integrated Reporting Council’s Integrated Reporting Framework (the Framework), which was issued in December 2013 and updated in January 2021. A mark out of ten is awarded for each of the seven Guiding Principles (i.e. strategic focus and future orientation, connectivity of information, stakeholder relationships, materiality, conciseness, reliability and completeness and lastly consistency and comparability).

Similarly, a mark out of 10 is awarded for each of the eight Content Elements (i.e. organisational overview and external environment, governance, business model, risks and opportunities, strategy and resource allocation, performance, outlook and finally basis of presentation and preparation). Marks are also awarded for the extent to which the integrated report incorporates the Framework’s fundamental concepts, dealing with how value is created with reference to the six ‘capitals’ where relevant.

The adjudicators believe that an explanation of how a business creates value with respect to the six capitals, is a particularly suitable way for most companies to present the content that needs to be presented within its integrated report. Furthermore, an explanation of how value is created within an organisation can sensibly be structured around how value is embodied in the capitals that it uses. Doing this should also give the report a more logical flow. Therefore, whilst the adjudicators do not expect companies to explicitly structure their report around the six capitals, or use specific terminology, they would certainly look for disclosures relating to the stock and flow of the capitals (i.e. financial, manufactured, intellectual, human, social and relationship as well as natural) and the extent to which tradeoffs between different capitals may influence the organisation’s strategy.

The document that is actually labelled as being the integrated report is reviewed and adjudicated. For the dual listed companies that do not produce an integrated report, the adjudicators evaluate the information contained in their annual report. This is generally not detrimental to those companies as many of the integrated reporting principles are included in their reports, nonetheless.The combined report is reviewed for the companies that operate through a dual listing. In all cases the online pdf or hard copy of the report is reviewed. The adjudication is only made on the basis of information presented and there is no validation of the performance or outcomes achieved.

No, the adjudicators only look at the document that is labelled as being the integrated report or the annual report in the case where companies have not produced an integrated report.

No, it’s really the ranking that matters. Where an adjudicator’s ranking differs widely from the others, this is reviewed to ensure that information has not been overlooked. Often, scores may vary widely. While the adjudicators generally agree on what is good disclosure, perception of the relative importance of items may differ. Despite this, there is a high degree of consensus among the adjudicating members’ overall perceptions and recommended rankings.

Yes, absolutely. The overriding objective in ranking the integrated report is the extent to which it complies with the spirit of integrated reporting which is defined by the <IR> Framework as being “a concise communication about how an organisation’s strategy, governance, performance and prospects, in the context of its external environment, lead to the creation of value over the short, medium and long term” and which King IV positions as the “culmination of a series of leadership responsibilities executed by the governing body.”

The adjudication process results in each of the 100 companies being ranked as “Excellent”, “Good”, “Average” or “Progress to be made”. A further evaluation then results in a ranking of the 10 best integrated reports from amongst those that are ranked as “Excellent”.

There are three specific areas which are believed to be crucial to excellence in integrated reporting. These are, the extent to which the report has a clear strategic focus, an emphasis on value creation and a high level of connectivity between the various elements presented. These three areas are then used to identify the Top 10 integrated reports from all the companies ranked as "Excellent" and to assign them a ranking within the Top 10.

From 2016 - 2021, an "Honours" award was given to those high-qaulity intergrated reports which the adjudicators believed came closest to complying with all of the requirments of the Intergrated Reporting Framework. In 2022 there were no "Honours" awarded, this is mainly due to the current changing landscape in reporting.

Each of the integrated reports of the top 100 companies is separately adjudicated by each of the three adjudicators from the College of Accounting at the University of Cape Town using the pre-agreed mark plan.

No, absolutely not. Much more emphasis is placed on the quality of information presented – the relevance, understandability, accessibility and connectedness of that information; whether users of the integrated reports would have a reasonable sense of the issues that are core to the operations of each of the companies and whether companies have dealt with the issues that users would have expected.

This implies that much more credit is given for crisply presented information that highlights relevant facts compared to the same information needing to be extracted from less relevant information. Furthermore, once the marking process is complete, the scores for the seven Guiding Principles, the eight content elements and for adherence to the fundamental concepts and individual members’ recommended rankings are collated, resulting in a final ranking being awarded.

The final ranking is therefore based on a combination of the average of these scores, overall perceptions and extensive discussions surrounding the final rankings for each company. This ranking process is particularly important as the scoring process is subjective and scores may differ, based on the adjudicators’ impressions at the time.