Comment: Davos initiatives can address the trust deficit23 January 2017
The official title of the World Economic Forum this year may have been 'responsive and responsible leadership'.
But all the talk was of how business can respond to the challenge from the growing loss of trust, anti-globalisation sentiment and its political consequences.
There was a stout defence of the Paris climate change agreement and against any prospect of a trade war in the main forum, in the light of some of those political consequences.
But for the International Integrated Reporting Council (IIRC), it reinforced the belief that the current corporate reporting system has to change, if the growing trust deficit is to be reversed.
This was summed up by PwC global chair Dennis Nally who said this week: "CEOs haven’t yet mastered how to measure the long-term success that comes from being a trusted company and good corporate citizen."
For the IIRC, this throws greater emphasis on the importance to business of the human, social and relationship dimensions of a multi-capital world.
Two positive initiatives emerged in Davos this week, in response to these concerns.
The first was in the final report of the Business and Sustainable Development Commission, established at Davos a year earlier, examining the business contribution to meeting the UN Sustainable Development Goals (SDGs).
Its recommendations reinforces the prevailing view that a profusion of different frameworks is an obstacle to investors properly assessing and rewarding companies who embrace a better long-term perspective.
It is a challenge to the 'Corporate Reporting Dialogue' (CRD) convened by IIRC, but bringing together eight principal global financial and non-financial standard-setters on equal terms to better align amongst each other.
If there is a truly 'integrated reporting' approach, it paves the way for the Commission's recommendation to move towards SDG benchmarks for businesses.
The IIRC will support work on this proposal amongst our partners in the CRD in the year ahead.
This week's second big event at Davos for the IIRC was the publication of a new study on how current enterprise risk management also fails to properly address wider long-term risks.
Entitled ‘First Steps to Integration’ the headline finding was that in more than one-in-three companies, none of the risks identified in sustainability reports were contained in the risks registered and addressed in their annual reports.
This is yet more compelling evidence of the cost associated with a lack of integration within the business.
But I found the corresponding finding equally notable: in eight per cent of companies, all and every one of those long-term risks were fully integrated in the company's financial filings.
Not yet the norm but, as a separate study from EY confirms, this demonstrates integrated reporting to be both possible, to be being adopted by leading companies and to being beneficial to the business overall.
I want to give credit to the World Business Council for Sustainable Development and IIRC Deputy Chair Peter Bakker for ensuring the goal of integration has been central to both of these debates.
I leave Davos reinforced in my own belief that the IIRC must be central to the action which can restore both trust, address growing risk and help business deliver on the Global Goals.
Richard Howitt is chief executive officer of the International Integrated Reporting Council