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a consideration of past performance against strategy and strategic perspectives, and that companies could guard against liability by wording their future performance goals and expectations carefully.84 “This was a scary area for companies first stepping out on their integrated reporting journey,” said Roberts. “But over the years disclosure has improved, with companies realizing that it was not about giving a profit projection; rather, the focus lay in transparency regarding the significant relationships and factors with the power to affect the future value creation ability. Companies have been quite inventive, using ratios, waterfall graphs, commodity reviews, and other clever ways to show true relationships.”85

Characteristics of the Report

      Company report preparers overwhelmingly felt that it was impossible to provide the amount of detail stakeholders would want in a single integrated report if that report were to remain clear and organized. Journalists like Ann Crotty feared that the reporting structure had succumbed to a gradual “densification” in which a checklist approach led to documents of 400 pages. However, analysis by the accounting firms showed that companies were slowly learning how to balance transparency with accessibility of reporting documents.86 Although all the accounting firms conceded that overall reports were still “too long,” there was evidence that companies were trying to shorten their reports. While 35 % of companies initially surveyed by E&Y in 2011 believed that an integrated report would be less than 50 pages and 44 % were neutral, most respondents envisaged the next integrated report as being between 50 and 80 pages.87

      In the following two years, the goal shifted to producing an integrated report between 80 and 120 pages. Graham Terry, Senior Executive at The South African Institute of Chartered Accountants (SAICA), noted that, in the application of integrated reporting, some principles would necessarily conflict with each other. Further, little guidance existed for what should or should not be included in the report.88 Left to their own devices, some report preparers found that the most effective way to incorporate all of King III's requirements without producing information overload in the integrated report was to refer to other, more detailed documents with explicit links to the full IFRS financial statements and other detailed information like the sustainability report – a strategy Deloitte observed worked well when those links were clearly highlighted.89 E&Y noted that companies that appeared to have started from scratch in determining what and how to report often produced shorter and more effective reports.90

      Although nearly all companies agreed that other reports were necessary, responses varied on exactly where and how information was being distributed. One hundred percent of the top 100 JSE-listed companies disagreed that integrated reporting was merely cross-referencing between annual reports and sustainability reports. This did not mean that other reports would disappear. During the first cycle of mandatory integrated reporting, 36 % of companies reported a belief that a separate integrated report would be published alongside a sustainability report and the annual report on financial statements, 43 % disagreed, and 21 % expressed no strong belief that an integrated report should be published separately alongside the financial statements.91 Mohamed Adam, a member of the King Committee, and Jo-Anne Yawitch, CEO of National Business Initiative,92 noted that companies tended to get distracted by form (one report vs. multiple reports) when they should be focusing on the substance of the report itself.93

      All accounting firms noted an increase in the use of graphics, charts, and images in conveying overviews of information. Heat maps for materiality were especially useful, and E&Y noted the increased use of waterfall charts94 that explained the factors influencing movement in key measures such as profit over time.95

Internet Use

      Although most companies initially made little use of the Internet in their integrated reporting efforts, all members of the Big Four firms and many South African thought leaders noted ways in which a more effective use of the Internet could ease the growing pains of integrated reporting. When it came to improving the treatment of materiality, Nigel Payne, a professional Non-Executive Director, suggested that those preparing an integrated report “need to be aware about the five or six things that are cooking at the moment” and put the details of these issues on the website. That is, thoughtful use of the company's integrated reporting site and the potential incorporation of Extensible Business Reporting Language (XBRL)96 could assuage concerns about report length and content; by posting longer, more detailed documents on their website that need only be referenced in a concise integrated report, the company did not sacrifice completeness of information for clarity.

      E&Y found in 2013 that many companies had improved in their use of navigation aids, icons, and other forms of cross-referencing to connect information across the report and that they had put detailed sustainability, corporate governance, and risk disclosure information on their website. While companies offered a few “quick reading”97 options, some had begun to use XBRL98 to tag information relevant to different stakeholders.

Auditing and Assurance on Nonfinancial Information

      While companies surveyed had not sought uniform “reasonable”99 assurance on nonfinancial information by an independent auditor, many agreed that it was desirable, and an increasing number of companies were seeking independent assurance on particular KPIs. E&Y noted that although more ESG indicators had received some form of external assurance, how those indicators were chosen did not always align with the material concerns of the business. E&Y suggested that the most material KPIs should receive the greatest consideration, as they were most relevant to the long-term sustainability of the business. Whether financial or nonfinancial, these KPIs selected for assurance based on materiality makes the business case for incurring the costs attached to the independent assurance of those indicators.100 Achieving credibility of nonfinancial information was paramount and, from 2012, the topic of assurance of nonfinancial KPIs began to receive more attention from reporters.101 That same year, an international group of accounting and legal experts led by the country's Independent Regulatory Board for Auditors was formed in South Africa to address the development of an appropriate assurance process over integrated reporting.102

      Our Reflections on the South African Experience

      In tracing the origins of mandatory integrated reporting back to the period of 1990–1994, when the full consequences of the decision to end apartheid remained unknown, it becomes clear that South Africa's corporate governance journey developed from a unique set of circumstances. The emergence of mandated integrated reporting in South Africa was a small consequence of tumultuous political and social change as the country passed from apartheid to an era of social and economic inclusion. The architects of South Africa's new reality saw corporate governance as a way to rehabilitate the country's national image and attract the foreign capital that fled during the apartheid-era sanctions.103 Sustainability reporting, and then integrated reporting, were simply one component of a much larger effort to make South African companies exemplars of corporate governance.

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