Interview with Paul Druckman, CEO of the International Integrated Reporting Council
In this series of videos Paul Druckman, CEO of the IIRC, talks with Dr Carol Adams CA, Professor of Accounting at Durham University Business School and Member of the ICAS Sustainability Committee about:
- his interest in social and environmental sustainability issues and their relevance to business and the work and training of accountants;
- his concerns about capital markets and the need for a shift in views about value creation;
- the role of corporate reporting in providing better information to investors;
- the role of Business Schools in raising awareness about changes in the business and reporting context;
- the future of corporate reporting.
Social and environmental sustainability and its relevance to the work and training of accountants
Paul’s interest in sustainability led to him taking a Diploma in Environmental Management. He explains his concern regarding the lack of social and environmental sustainability considerations in capital markets. It was at an ICAEW vent where Paul was talking about sustainability that he was asked to Chair the Executive Committee of the Prince of Wales’ Accounting for Sustainability Project.
With respect to the role of accountants in sustainability and the knowledge, Paul argues that:
- Accountants need to understand how social and environmental issues impact the business so that they can provide appropriate information for decision making.
- Those who are ignorant of sustainability issues should not be able to call themselves Chartered Accountants.
- Social and environmental sustainability needs to be embedded in the way the business operates.
The interview moves on to consider the development of integrated reporting and its link with sustainability reporting and the way in which integrated reporting is bringing social and environmental sustainability issues to the attention of the Board.
The meaning of value creation and issues with contemporary capital markets
Paul responds to criticisms by academics that the IIRC has moved away from its original commitment address sustainability issues and speaks of his commitment to changing the behaviour of capital markets, including with respect to social and environmental issues. He discusses the complexity of change given diverse stakeholder interests and provides some insight into the role of key accountants, such as Ian Ball, former CEO of IFAC, in the change process.
The role of corporate reporting in providing information to investors
Paul and Carol talk about the role of corporate reporting in providing information to investors, the role of Stewardship Codes and pension funds in creating a shift and the role of regulators in encouraging better corporate reporting. He discusses the challenges concerned with increasing the credibility of integrated reports.
Paul wants to see an encouraging rather than challenging environment and one which acknowledges the complexity of change for report preparers and encourages innovation.
The role of business schools
Paul Druckman emphasises the important role of business schools in raising awareness of changes in the business and capital markets context.
Paul discusses the role of business schools in the Global Financial Crises and how students, as future leaders, should have their eyes opened as to what needs to happen to create the change needed. He argues that business schools should be in the forefront of creating this change and developing leaders who can drive change.
The future of corporate reporting, accounting for sustainable development and capital markets
In this video Paul talks about the future of corporate reporting and accounting for sustainable development. In particular he emphasises the need for convergence of standard setting bodies and the incorporation of the Sustainable Development Goals into the thinking of capital markets.
He talks of the need for increased take up of integrated reporting and the need for convergence across the various standard and guideline setters. Whilst he sees the IIRC initiated Corporate Dialogue as a starting point, he feels that in the longer term there should not be numerous different framework and standard setting bodies. He speaks of the normalisation of integrated reporting i.e. the process of it become usual practice. He believes the Sustainable Development Goals should be embedded within the goals of capital markets. With regard to the monetisation of externalities Paul argues that we should not be extending the profit and loss account and balance sheet, that you can’t bring all the capitals into a balance sheet. He prefers the idea of a Balanced Scorecard, something he’s discussed with Professor Robert Kaplan, a key developer of the Balanced Scorecard approach.
Paul discusses the hopes he has for the values of his successor – someone who focusses on both sustainability and the capital markets – and changes in the IIRC’s governance structures.
Developments in integrated reporting: panel event and Q&A
Integrated reporting promotes long term thinking about value-creation and stewardship across a broad range of interdependent capitals - financial, manufactured, human, intellectual, natural, social and relationship.
Paul and Carol opened the debate up to a wider audience of Durham University Business School students and stakeholders at a dedicated seminar event in February 2016 to discuss integrated reporting's implications for reporters, investors, assurance providers and broader business stakeholders.