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French institute of directors’ publication supports integrated reporting but calls for improvement

Integrated reporting is gradually gaining a foothold in France, however, content of the reports produced is far from perfect particularly from the investor’s perspective, according to a publication by The French Institute of Directors (IFA).

To tackle the lack of consensus on the exact definition of integrated reporting, IFA has convened a working group to identify its advantages, analyse ongoing experiments and issue recommendations to its members on the involvement of directors and the board of directors in this approach. The findings of the working group were compiled in the recently published report entitled The Board of Directors and integrated reporting.

The working group is comprised of 18 members including KPMG corporate finance partner Jean-Florent Rérolle as the protractor, KPMG senior manager Annelie Vidal, PwC France capital markets partner Philippe Kubisa, and IIRC deputy CEO Philippe Peuch-Lestrade. The group will be led by IFA board member Hélène Ploix.

According to the report, 20 of the major listed companies in France have started to explore the potential of integrated reporting through the publishing of a report entitled Integrated.

The report argued that while regulators have sought for many years to supplement the regulated information given to investors, regulated information, even where supplemented is not enough for investors because it is essentially historical.

“However, investors must form an opinion on the company’s strategic plan, its ability to build and maintain competitive advantages, its ability to overcome the risks associated with its business and its environment, and the way it intends to use its financial resources,” the report read.

While IFA’s report clearly identifies integrated reporting as a solution it said current reports produced by French companies showed a need for improvement.

In particular, investors and managers surveyed by IFA said that integrated reports are still too often inspired by sustainability considerations without explanations of impact on financial value.

Surveyed managers and investors also pointed that most integrated reports were insufficiently insightful on the clear picture of company plans and strategy as the key value drivers and key performance indicators  were not highlighted. They also criticised the fact that the reports were aimed at stakeholders but the content was too general to meet investor needs.

In its report, IFA recommended that directors formally adopt the framework, take part in the thinking process conducted within the functions of the company, define the company strategy in terms of value creation for shareholders, formalise the company’s vision and long term strategy through identifying advantages, risks and the business model, identify and monitor key indicators and develop a Board of Director Strategic Report.

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