City Matters: It’s time for financial results to reflect the new face of post-crisis business

Fiona Woolf
Follow Fiona
ONE OF the charges that has often been laid against the City in recent years is that it has been too focused on short-term value. Many things have changed as a result of the crash, and one of them has been an increased awareness that the way companies currently report results is not fit for purpose, and can lead companies to adopt a short-term, quarterly mind-set.

The current reporting method is best explained like this: using a scale to weigh yourself every month for a year, and then predicting your future health based on these numbers. However, weight is just one metric in any overall picture of health. Far more accurate would be a series of in-depth meetings with specialist doctors, who can spot any problems, suggest remedial action, and plan to keep you healthy in the future.

This picture is what the newly launched International Integrated Reporting Framework aims to provide for the business community. It will turn financial facts into useful, analytical information – a holistic approach that transforms the way in which a company thinks about what it is doing and why it is doing it. It also helps a business think about how it can maximise value for itself, for its stakeholders, for society and for the environment over the long-term, so that it stays in business. The framework’s aim is to help articulate how a company is meeting the challenges of today – and to ensure that it is best-placed to meet the challenges of tomorrow as well.

This is a new approach to company accounts. But more than that, it is part of the new approach to business, and of a more responsible and inclusive capitalism that has developed over the past six years.

Over 100 companies have already signed up to the International Integrated Reporting Council (IFRC), including PepsiCo, Unilever, HSBC and Deutsche Bank, and it is currently being trialled in over 25 countries, including 16 of the G20 countries. This is a phenomenal result, and a testament to the hard work and talent of professor Mervyn King, whose “lightbulb-moment” idea this was, and who admits to being taken aback by the degree to which the framework has been adopted by the business community.

Having worked in energy law for most of my career, I am passionate about long-term thinking, and I have seen the difference it can make to a project. As the business community continues to adapt to the New Normal, I agree with IIRC chief executive Paul Druckman, who said at the launch at Mansion House on Tuesday night: “It is the right time to participate in the journey towards a better, more cohesive reporting landscape that makes sense to both businesses and to the decisions of providers of financial capital, in this interconnected, complex and resource-constrained world.” I hope that the IIRC framework will create nothing less than a revolution in business and investor behaviours.

Fiona Woolf is lord mayor of London.