Financial Mail Page 1 -07/07/2011 3:32:10 PM · Financial Mail Page 2 -07/07/2011 3:07:13 PM...

Financial Mail Page 1 -07/07/2011 3:32:10 PM


Healthcare

Financials

Consumer Goods

Basic Materials

congratulates the following pioneers in Integrated Reporting

Top 10 Companies Sector Leaders

Overall Winner

Time To Think Out Of The Box!

1. Pretoria Portland Cement Limited

2. Nedbank Limited

3. Barloworld Limited

4. Goldfields Limited

5. Group Five Limited

6. Aspen Pharmacare Limited

7. Foschini Group Limited

8. Discovery Limited

9. Woolworths Limited

10. BHP Billiton Limited

Industrials

Consumer Services

Telecommunications

Gold Fields Limited

SAB Miller Limited

Foschini Group Limited

Nedbank Limited

Aspen Limited

Pretoria Portland Cement Limited

Vodacom Limited

Punching above our weight!

www.nkonki .com

(011) 517-30000861 nkonki

2011

JSE Accredited to Audit JSE listed

companies

Nkonki


F I N A N C I A L M A I L J U LY 1 5 , 2 0 1 1 3

Ad j u st i n gStriking a balancebetween financeand sustainability

SA companies could become the globalfrontrunners in producing integrated re-ports. To determine which of the Top 40and socially responsible investment (SRI)companies listed on the JohannesburgStock Exchange (JSE) applied the truespirit of integrated reporting, as definedin the King 3 code of good corporategovernance, accounting and auditingfirm Nkonki conducted research to

benchmark thestandard of inte-grated reporting.

“We believe it’simportant toidentify pioneersin integrated re-

porting; those who were making sus-tainability issues mainstream — even be-fore it became a mandatory requirementfor listed companies last year,” s ay sNkonki CEO Sindi Zilwa.

SA is regarded as a leader in corporategovernance and sustainability reporting,due mainly to the standing of the King 3report as a JSE listing requirement. In2010, the JSE amended its listing re-quirements to make it compulsory for allcompanies with financial years startingon or after March 1 2010 to produce anintegrated report or explain why theywere not doing so. This year members ofthe Integrated Reporting Committee(IRC) launched the world’s first inte-grated reporting guidelines for the 400companies listed on the JSE.

“The problem was that no specificguideline or standard defining the con-tent of an integrated report for listedcompanies existed in SA or anywhereelse,” says IRC chairman Mervyn King.

SPECIAL REPORT NKONKI FM INTEGRATED REPORTING AWARDS

WHAT IT MEANS

> A truly integrateddocument needs tobe presented as onerepor t

“We believe it’s important toidentify pioneers in integratedrepor ting” — SINDI ZILWA

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4 F I N A N C I A L M A I L J U LY 1 5 , 2 0 1 1

The concept of integrated reporting —or “One Report” as defined by RobertEccles and Michael Krzusthe, the authorsof the book One Report: Integrated Re-porting for a Sustainable Strategy —means providing information on finan-cial and nonfinancial performance in asingle document. The report should at-tempt to draw relationships and con-clusions on how these interrelated per-formance dimensions are creating,preserving or destroying value for share-holders and other stakeholders.

King views integrated reporting as aholistic and integrated representation ofthe company’s performance in terms ofboth its finances and its sustainability.The emphasis is on substance over formand though an integrated report mayconsist of dual reports disclosed at thesame time, Nkonki recommends that atruly integrated document should be pre-sented in one report.

Zilwa says the benefits of integratedreporting include providing stakeholderswith a meaningful and concise overviewof the organisation. Another aspect is toincorporate material information that willenable stakeholders to evaluate an or-g a n i s at i o n ’s performance and to make aninformed assessment about its ability tocreate and sustain value.

“T here’s no doubt that integrated re-porting will encourage organisations totake into account the micro factors thatwill affect the business in the long run,such as economic, social and environ-mental effects,” she says. “It will alsorequire institutional investors to make aninformed assessment about the sustain-ability of a company’s business beforeacquiring its equity, which is not pro-vided by financial statements alone.”

But she says many businesses have feltoverwhelmed by the task of producing anintegrated report. As such, she hopes theresearch will provide some benchmarksagainst which companies can measurethemselves.

Zilwa says auditors too face new risksin auditing integrated reports. “There areno specific guidelines or standards defin-ing the content of an integrated reportfor listed companies as yet,” she says.“Auditors face the risk of signing offitems such as environmental analysis,which would have been done by thec o m p a ny ’s representatives and may notbe independent.”

Many audit firms are developings tandalone sustainability practices whichhave the skills required to audit thenonfinancial information presented by acompany. “These are different skills, es-pecially since many of the requirementsof King 2 are principle-based,” she says.“Auditors need to understand everything,from how carbon credits work to how tocalculate the economic benefits a com-pany creates to determine whether a

company is reporting accurately.”However, few companies sought as-

surance for their reports last year, a trendZilwa says is likely to change as morecompanies look for independent certi-fication of the information they present.

Having attained the backing of a widerrange of prominent industry and pro-fessional groups in SA — including theSA Institute of Chartered Accountants,the Chartered Secretaries of SouthernAfrica, the Banking Association SA, theAssociation for Savings & Investment SAand the Institute of Directors in South-ern Africa — integrated reporting islikely to become more mainstream.

The trend for companies to considertriple bottom line issues such as theirsocial, environmental and economic im-pact is also reflected in the growingnumber of companies that meet the re-quirements of the JSE’s index. A record74 companies met the requirements dur-ing 2010.

N ko n k i ’s research reveals that a re-markably high number of companiesadopted the King 3 recommendations onintegrated reporting last year. “Before thepublication of the King 3 report most ofthe listed companies published a separateannual report and sustainability report,”says Zilwa. “But since the publication ofKing 3, the general trend has been tointegrate these two reports into one newannual report.”

A large proportion of the annual re-ports surveyed had December 31 2009year-ends, just a few months after thepublication of King 3. “Six of these com-panies took the lead by applying King 3recommendations in their integrated re-ports, resulting in them being gradedabove average,” says Zilwa.

The six companies were Nedbank,Standard Bank, Absa, Merafe Resources,AngloGold Ashanti and Anglo Platinum.

But Zilwa says most companies per-ceived the application of King 3 to meanthe production and publication of onelengthy report, containing the annualfinancial statements, the other parts ofthe annual report as well as the sus-tainability report. “The next wave of in-tegrated reporting will be interpreted asproviding a summarised version of theirintegrated reports,” she says.

The new Companies Act, not yet ef-fective, allows for summaries of financialstatements, in place of lengthy annual

Ranking

Ranking Company Industry Top 40 SRI Index

1 Pretoria Portland Cement Industrials — High

2 Nedgroup Financials 17 —

3 Barloworld Industrials — Medium

4 Gold Fields Basic Materials 18 High

5 Group Five Industrials — High

6 Aspen Pharmacare Holdings Health Care 25 —

7 Foschini Group Consumer Services — Medium

8 Discovery Financials — Low

9 Woolworths Consumer Services — Medium

10 BHP Billiton Basic Materials 1 —

TOP 10 PERFORMANCE

SOURCE: NKONKI INTEGRATED REPORTING SURVEY

INTEGRATION PUSH

0% 10 20 30 40 50 60 70

Sep 302010

Jun 102010

Feb-Mar2010

Dec 312009

Influence of the year-end on the averageand median for integrated reporting

Median AverageA



Financial Mail Page 5 -08/07/2011 09:41:33 AM

Introducing our latest strength: transparency.Pretoria Portland Cement (PPC) has received the highest overall grading in the Nkonki Integrated Reporting survey. We see this achievement as a vote of confidence in the process we’ve embarked on to integrate sustainability into the fundamentals of our business and believe that our disclosure capabilities are something we can only improve on. We would not have realized such recognition without our employees’ and customers’ commitment and support.

TJD

R 4

67

33




financial statements, to be provided toshareholders. The act also permits theelectronic distribution of this and otherfinancial information. An integrated re-port could include the summarised fi-nancial statements required by the act,resulting in significant cost savings to thec o m p a ny.

According to King 3, a summarisedintegrated report should provide key fi-nancial information, sufficient commen-tary by the company and key performancemeasures regarding sustainability infor-mation. Only a few firms last year pro-vided summarised integrated reports.

Another area for improvement is forcompanies to include forward-looking in-formation, which is implicit in the code.This should convey both the positive andnegative impacts of the company’s op-erations and plans to improve the pos-itives and eradicate the negatives in thefinancial year ahead.

N ko n k i ’s researchreveals that aremarkably highnumber ofcompanies adoptedthe King 3re co m m e n d a t i o n son integratedreporting last year

The influence of the year-end on in-tegrated reporting showed that compa-nies’ integrated reporting improved onaverage the closer the year-ends came tothe implementation date required for theKing 3 recommendations. The King 3draft was published before the final re-port and wide consultation took place.

“Some of the companies made use ofthe contents already available in the draftto ready themselves for early applicationof King 3,” says Zilwa. “This is evident inthe fact that PPC, rated at the top, has aSeptember 30 2010 year-end, while Ned-bank in second place has a December 312009 year-end.” ■

INTEGRATED REPORTING RATINGS PER INDUSTRY

Ranking Company Top 40ranking

SRI indexgroup

Year end

1

3

5

13

19

35

55

2

8

11

14

17

18

26

33

38

40

41

48

49

50

57

4

10

16

20

21

22

25

27

28

29

31

32

34

36

37

43

56

7

9

12

23

42

46

51

15

30

44

45

52

C54

24

47

53

6

Gold Fields

BHP Billiton

Merafe Resources

African Rainbow Minerals

AngloGold Ashanti

Lonmin Plc

Anglo Platinum

Harmony Gold Mining

Exxaro Resources

Impala Platinum Holdings

AECI

Sappi

Anglo American Plc

Mondi

Mondi Plc

Kumba Iron Ore

ArcelorMittal SA

Foschini Group

Woolworths

Massmart Holdings

Shoprite Holdings

Truworths International

Naspers

Pick n Pay

SABMiller

Steinhoff International Holdings

Tiger Brands

Tongaat Hulett

Illovo Sugar

Compagnie Financiere Richemont AG

Vodacom Group

Allied Technologies

MTN Group

Aspen Pharmacare Holdings*

Nedbank Group

Discovery

Standard Bank Group

Absa Group

Investec

Investec Plc

FirstRand

African Bank Investment

Old Mutual Plc

Capital Shopping Centres Group Plc

Sanlam

Santam

Growthpoint Properties

RMB Holdings

Reinet Investments SCA

Pretoria Portland Cement

Barloworld

Group Five

Nampak

Aveng Group

Bidvest Group

Remgro

—

—

—

—

—

22

21

17

—

7

15

41

32

11

35

16

37

19

—

36

23

38

18

1

—

28

10

26

6

30

24

12

—

—

2

42

40

13

27

—

—

31

20

33

9

39

3

34

29

—

—

8

14

—

4

25

—

Low

Low

Low

—

—

—

—

Low

—

Low

Low

—

—

—

High

—

High

—

High

High

—

—

High

High

High

High

High

High

—

High

High

Medium

Medium

—

—

Medium

—

—

—

—

—

High

High

—

—

Medium

—

—

High

Medium

High

High

High

Low

—

Sep 30 2010

Sep 30 2010

Jun 30 2010

Sep 30 2010

Jun 30 2010

Jun 30 2010

Mar 31 2010

Jun 30 2010

Jun 30 2010

Dec 31 2009

Jun 30 2010

Dec 31 2009

Sep 30 2010

Dec 31 2009

Jun 30 2010

Dec 31 2009

Jun 30 2010

Dec 31 2009

Sep 30 2010

Dec 31 2009

Dec 31 2009

Dec 31 2009

Dec 31 2009

Dec 31 2009

Mar 31 2010

Jun 27 2010

Jun 27 2010

Jun 30 2010

Jun 27 2010

Mar 31 2010

Feb 28 2010

Mar 31 2010

Jun 30 2010

Sep 30 2010

Mar 31 2010

Mar 31 2010

Mar 31 2010

Mar 31 2010

Feb 28 2010

Dec 31 2009

Jun 30 2010

Industry: Industrials

Industry: Basic materials

Industry: Health care

Industry: Consumer services

Industry: Telecommunications

Industry: Financials

Dec 31 2009

Jun 30 2010

Dec 31 2009

Dec 31 2009

Mar 31 2010

Mar 31 2010

Jun 30 2010

Sep 30 2010

Dec 31 2009

Dec 31 2009

Dec 31 2009

Dec 31 2009

Jun 30 2010

Jun 30 2010

Mar 31 2010

* Two other companies, which are neither in the Top 40 or JSE SRI index, were reviewed and Aspen remained the sector leader





M E T H O D O LO GY

Grading and weightingsAn independent panel of experts pro-duced the Integrated Reporting Survey:An analysis of the Top 40 & SRI com-panies listed on the JSE – 2010 research.All firms on the Top 40 index and thecompanies listed on the JSE’s sociallyresponsible investment (SRI) index wereincluded in the survey. The most recentannual reports with financial year-endsranging from December 2009 to Septem-ber 2010 were included.

“By including companies in these twodistinct groups we were able to identify ifthere was a relationship between in-tegrated reporting and the size or marketcapitalisation of the Top 40 companiesversus the social responsibility companieson the SRI,” says independent researcherfrom Monash University, Anton du Toit.“The Top 40 were expected to be thecommercial leaders, while the SRI com-panies were expected to be more ethicallyand socially responsive.”

A total of 42 firms were included aspart of the Top 40 selection. Since Mondiand Investec hold dual listings on the JSEand London Stock Exchange they weretreated as one single company as only oneannual report for each was available.

The researchers prepared a gradingsheet with weightings assigned to the

with this research was to evaluate, surveyand judge the information available toany citizen in the world,” says inde-pendent researcher Blanche Steyn.

“Therefore, during thedata collecting process,we used all annual re-ports, integrated reportsand sustainability reportsopenly available on theInterne t.”

Du Toit says the studyincorporated about 30 re-quirements contained inKing 3 regarding inte-grated reporting andthese were used as a basisfor determining scores foreach company. Some re-quirements, such as IT

governance, weren’t awarded points sinceKing 3 doesn’t require companies todisclose their IT governance, but merelyto have an IT governance policy in place.

For some areas, such as the board ofdirectors and their remuneration, dis-closure requirements are more detailed,which is why these sections carried moreweight, he says.

A number of categories were also takenfrom the King report. “We ’re hoping thiswill provide a benchmark for companiesaiming to produce integrated reports thatare useful for readers to determine thereal economic value of a company,” s ay sDu Toit. ■

grading

HOW THE GRADES FARE

Chapter of King 3 Marks

Ethical leadership and corporate citizenship 5

Board of directors and remuneration 40

Audit committees 15

The governance of risk 10

The governance of information technology 0

Compliance with laws, codes, rules and standards 5

Internal audit 5

Governing stakeholder relationships 5

Integrated reporting and disclosure 45

130


respective chapters of King 3 and criteriafor awarding grades was selected. Thecompanies were evaluated independentlyby two experts, while a third one acted asan independent umpire, grading a rep-resentative sample of the annual reports,including the best-rated companies.

Two experts awarded a score out of130 for each firm and converted thescores into percentages. The umpire alsoawarded scores for selected companies,after which the scores were further anal-ysed. Finally, the results were used todetermine the ratings for the companies.

“In the spirit of true transparencywhich is advocated by King 3, the idea

WINNER 1 — PPC

A good foundationAhead of major competitors in the min-ing and manufacturing sector, PretoriaPortland Cement (PPC) achieved thehighest overall grading in the NkonkiIntegrated Reporting Survey.

“PPC exhibited excellent integrated re-porting in most aspects,” says NkonkiCEO Sindi Zilwa. “This was achieved inan annual report of only 205 pages, halfof which was taken up by the annualfinancial statements.”

Executive responsible for corporatestrategy & communications at PPC,Kevin Odendaal, says reporting require-ments in the manufacturing and miningsectors helped formalise the company’s

sound sustainability practices establishedin its business over the years. Formal-ising the information collection processto include all sustainability measures wasthe first step towards achieving one re-por t.

“Shifting our reporting process fromone based primarily on finance to en-compass all sustainability issues requiredus to tell a story incorporating multipleviews of the company,” he says. “One ofthe biggest challenges for us was de-termining the smooth flow of informa-tion throughout the report.”

From as early as 2001, PPC started tointroduce other elements of sustainabil-

ity, such as environmental performance,into its annual report. “This process de-veloped over the past decade and hasgiven us a good foundation for integratedrepor ting,” says Odendaal.

PPC chose to focus its group sus-tainability policy on board accountability;aligning values and principles with sus-tainable development; assessing risksand opportunities; undertaking regularaudits of management systems; perfor-mance monitoring and reporting; en-gaging stakeholders; minimising its en-vironmental impact; and promotingtraining and research.

Odendaal says translating the infor-mation gathered into an easy-to-under-stand language for readers was a keyc o n s i d e rat i o n .

One of the concerns raised by manycompanies reporting in line with King 3



1 0 F I N A N C I A L M A I L J U LY 1 5 , 2 0 1 1


has been the disclosure of competitive orsensitive information. For PPC this wasan important factor to consider since it isthe only listed cement company.

“The process of converting informationfrom a raw document held within acompany obviously needs to be under-taken carefully to ensure we keep ourstakeholders adequately informed, butnot revealing any key competitive ad-va n t a ge s , ” he says. “It ’s about packagingit for a wider audience.”

Odendaal says PPC sought to complyprimarily with King 3 and its JSE listingrequirements and then considered theGlobal Reporting Initiative (GRI) guide-lines. “The GRI was also used as thebasis for reporting and nine indicatorsfor assurance were identified through thestandard risk review process as materialrisks to PPC,” he says. “Where we couldsatisfy the GRI requirements, we in-dicated this in the GRI reference pagesof the report.”

A big learning curve for the businesswas in the auditing of nonfinancial in-formation. The external assurance re-quired another step into the reportingprocess, which needed to be factored infrom a timing perspective. Though thefinance department was familiar with thedetail needed to satisfy external auditors,nonfinancial reporting teams had lessexperience. “The human resources de-partment had to establish a methodology

to show the external au-ditors how it had calculatedthe number of employees,for example,” he says.

“Though there are a num-ber of implementation prin-ciples and best practices re-quired by King 3, some ofthem require us only tochange a business or report-ing process to meet the sus-tainability requirements. Forinstance, PPC has reconsti-tuted one of its board com-mittees. The Black Eco-nomic Empowerment &Transformation Committeewill now be known as theSocial & Ethics Committeesince there was an overlapof their mandates.”

Odendaal warns that therisk of integrated reportingis that companies report forthe sake of reporting, es-pecially with a plethora ofguidelines being issued. “Weneed to remember the un-derlying aim of integratedreporting — that companiesshould be demonstratingwhat they are actually do-ing, which is running a sus-tainable business,” hesays. ■

Kevin Odendaal

WINNER 2 — N E D BA N K

Setting an exampleNedbank is widely acknowledged for itssustainability efforts, from being the onlySA bank to be included in the Dow Jonesworld sustainability index and the firstlocal bank to commit itself to the Equa-tor Principles to being recognised as aleading performer in the SA carbon dis-closure leadership index.

Ranked second in Nkonki’s IntegratedReporting Survey, the group’s annual re-port was 436 pages with more than 200pages of financial statements. “We weremoving towards a process of integratedreporting anyway, so when King 3 waslaunched we felt we were ready to moveon its recommendations,” says Nedbankstakeholder engagement manager Kerri

S av i n .She says though integrating sustain-

ability is a journey, sustainability hadbecome integrated into the bank’s busi-ness processes to such an extent thatrepetition between its annual report andseparate sustainability report had in-creased to the point where “one report”made sense.

Ironically, though the company is partof the Top 40, it is not among the Top 10performers on the JSE’s socially respon-sible investment (SRI) index. This isbecause its chairman, Reuel Khoza, isnot independent.

Savin says the bank’s integrated re-porting process has enabled its senior

managers to understand how sustain-ability issues affect the business. Also,because the report must be signed off bymembers across executive and boardcommittees, there is buy-in from the top.

“In the past one board member wouldlook at sustainability issues and reportback to the rest of the board,” says Savin.“Now there is a drive to ensure sus-tainability issues are embedded acrossthe business.”

One of the challenges was convincingthe financial brains behind the businessabout the importance of disclosing non-financial information. “There is a rea-lisation that sustainability is not a bolt-on, that it is core to our business,” shes ay s .

From a business planning perspective,the bank needed to ensure that the rightmeasures were put in place in order tofeed into the reporting process.

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Though Nedbank, as a financial ser-vices company, does not have as big animpact on the environment compared toa mining company, for example, thishasn’t stopped it investing in green ini-tiatives. In July 2010 the bank becamethe first financial services group in Africato achieve carbon neutrality.

“Through our financing activities, wedo have a large indirect impact on thee nv i r o n m e n t , ” says Savin. “Our lendingpractices ensure that environmental andsocial issues are taken into account whendeciding whether to grant finance.”

The bank is now focusing on im-proving disclosure among its suppliers,working together with them to improvetheir environmental performance. “L astyear only 3% of our suppliers had anenvironmental policy in place,” s ay sSavin. “We ’re hoping to change that byenabling them to access our environ-mental policy as a guideline.”

Some suppliers, such as those in thefield of information technology, seem tobe more aware, with only 14% not havingan environmental policy in place.

“Sustainability may have started with afocus on environmental and social issuesas part of corporate social investment,

but there is increasingly realisation thatthese issues affect companies at a muchmore fundamental level,” she says. ■

Kerri Savin

On a learning cur veIndustrial giant Barloworld wasranked third for its integrated report-ing in this year’s Nkonki survey. Bar-loworld executive of strategy & sus-tainability Chris Whitaker says thecompany did not report in terms ofKing 3, though it did produce anintegrated report.

“Though the format andstructure of the reportmay change, the requiredaspects are within thescope of our managementapproach,” he says. “Wedon’t expect difficulties inaddressing any aspects ofsustainability reportingnext time around.”

Whitaker says commu-nicating the strategy forthe business was centralto its integrated report for2010 as well as forward-looking information toprovide comfort to stake-

holders of Barloworld’s ability to con-tinue to create value.

“The challenge is understanding justhow long an integrated report shouldbe,” he says. “Our approach was toprovide a comprehensive report, butwe may revise this approach and pro-

vide a more summarisedversion in future, if re-quired by stakeholders.”

But he cautions againstsummarising integratedreports too drastically. “Itwould be unfortunate forusers to have to refer to anumber of different re-ports to assess the sus-tainability of an enter-prise,” he says.

Because sustainabilityhas always been central toBarloworld’s value-basedmanagement approachand the company had in-corporated this into its

strategic planning for many years,Whitaker says it did not have to changeits business planning process for its2010 report.

The audit process that covered fi-nancial and nonfinancial aspects of thereport was constructive and efficient,though Whitaker says the audit of non-financial information is still evolving.“Nonfinancial figures are relatively easyto audit, but it’s the processes that aremore difficult to verify,” he says.

Whitaker believes the Global Report-ing Initiative and King 3 guidelinescomplement each other. “The combinedrequirements provide a good structurefor an integrated report,” he says.

He expects greater clarity aroundwhat is expected from listed companiesin terms of annual reporting, partic-ularly around the size and content ofthe integrated report in the coming year.

“This should provide greater focusfor companies around the internal pro-cesses that are required to preparesuch a report,” he says. “But it’s clearthat stakeholder guidance and expec-tations will still form an important partof this.” ■

Chris Whitaker

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We will always be The South African Breweries

Making more beer, using less water

Brewing beer is a water intensive process, an important consideration in a water scarce country

such as ours. That’s why we place a huge importance on water management. The impact of our

operations on the environment and the communities in which we operate is our responsibility.

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4 litres of water to make a litre of quality beer and looking beyond our own operations to the

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water risks such as climate change. Together with local authorities, farmers and the WWF we are

mapping out likely future scenario’s and joint action plans.

For over 116 years we’ve been a part of the fabric of South Africa. We always have, and always will,

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Sustainable Development_4_Portrait 297x210.indd 1 2011/07/05 5:04 PM




INTERNATIONAL TRENDS

SA takes the leadSpurred on by the Johannesburg StockE xc h a n ge ’s (JSE) mandatory requirementfor listed companies to produce inte-grated reports, institutional investorswrote an open letter to the CEOs of theworld’s stock exchanges and listing au-thorities earlier this year. Managing morethan US$1,6 trillion in assets, these in-vestors demanded that the CEOs changelisting rules to force companies to im-prove their sustainability reporting.

“It ’s a sign that integrated reportinghas reached a tipping point,” says Nkonki

managing partner Mitesh Patel. “SA isleading the way, but there is pressure forstock exchanges to play a crucial role inhelping to create more sustainable globalcapital markets because they have theability to influence and monitor firms.”

The group of 24 shareholders, includ-ing Aviva Investors London, said theywanted companies to make it easier forinvestors to judge the environmental,social and governance risks (ESG). A lackof information as a result of limited ornondisclosure of ESG data, they said,makes it difficult for long-term investorsto assess the wider ESG risks and op-portunities associated with a company.

But companies locally have found it achallenge to try to meet international aswell as local guidelines.

Locally the Integrated Reporting Coun-cil (IRC) was formed in May 2010 andappointed Mervyn King as its first chair-man. Meanwhile, an international move-ment headed by Prince Charles’s Ac-counting for Sustainability (A4S) and theGlobal Reporting Initiative (GRI) createdthe International Integrated ReportingCommittee (IIRC) in July last year.

The IIRC aims to issue an internationaldiscussion paper during 2011 and includeintegrated reporting on the agenda of theG20 meeting in November. Integratedreporting will also be on the agenda ofthe World Federation of Exchanges meet-ing in October. “Though there is recog-nition that integrated reporting is im-portant, there is still no global standardor framework for it,” says Patel.

King says because of the urgent needfor guidance in SA, the local committeecould not wait for the international dis-cussion paper to be issued. He says thatSA ’s IRC will liaise closely with the IIRCto ensure alignment. King also serves asthe IIRC’s deputy chairman.

Writing in Accounting SA, Kyle Am-brester and Tiffany Clay from the Har-vard Business School say the SA guide-lines will help push forward theinternational debate on integrated re-porting. “The IIRC has done much tobuild awareness about the need toachieve global consensus, but the lack ofagreement to date has threatened mo-

Mitesh Patel

Mervyn King

mentum in the movement,” say the au-thors. “The publication of the JSE’s draftguidelines restores that momentum byproviding an example of one of theworld’s leading stock exchanges takingintegrated reporting seriously.”

Patel says most SA companies have

“Though there isrecognition thati nte g ra te dreporting isimportant, thereis still no globalstandard for it”

— MITESH PATEL

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healthier and protect and enhance their lives. The way we

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Discovery’s business model ensures we create value through the

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Wellness

Our philosophy is to contribute to a healthier society by giving people

access to healthcare and encouraging healthy behaviour and lifestyles.

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ŝŶĐĞŶ��Ğ��Ž�ďĞĐŽŵĞ�ŚĞĂůŚŝĞ��Ś�Ž�ŐŚ��ŝĂůŝ��ŝĂůŝ��ŝ��Ă��Ŷŝ��Ğ�

ĚŝīĞ�ĞŶ�ĂŽ��ĂŶĚ�Ě�ŝ�Ğ��ŽĨ�ĐŽŵ�Ğ��Ğ�ĂĚ�ĂŶĂŐĞ�ĂŶĚ�ŚĂ��ďĞĞŶ�

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expenses.

�ŶĞŐ�Ă�ŽŶ

Our best-of-breed products and services enable us to use the principle of

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Ă��Ă�ŬĞ��ĂĞŐŝĐ�ĐŽŵ�ĞĞŶĐ��Đ�ĞĂĞ��ĞĸĐŝĞŶĐ��ĂŶĚ�ůŽŶŐ�Ğ�ŵ�ůŽ�Ăů��

ŚĞ�Ğď��ĐŽŶ�ŝď��ŶŐ�Ž�ŚĞ��ŽĮĂďŝůŝ��ĂŶĚ��ĂŝŶĂďŝůŝ��ŽĨ�Ž��ď��ŝŶĞ��

�ŶŶŽ�Ă�ŽŶ�ĂŶĚ�ĮŶĂŶĐŝĂů��ĚĞŶĐĞ

Ğ��Ğ�ŝŶŶŽ�Ă�ŽŶ�Ž�Ěŝ��ŵĂ�ŬĞ��ĂŶĚ�Đ�ĞĂĞ��Ăů�Ğ��ĞŶ�Ăů�Ž�Ž��

ď��ŝŶĞ��ŵŽĚĞů�ŝ��ŚĞ�Ăďŝůŝ��Ž�ĐŽŵďŝŶĞ�ĂŶĚ�ďĂůĂŶĐĞ�ŝŶŶŽ�Ă�ŽŶ��ŝŚ�

ĮŶĂŶĐŝĂů��ĚĞŶĐĞ�ĂŶĚ�ĐŽŶ��ŵĞ��ĐĞŶ�ŝĐŝ��Ž�Đ�ĞĂĞ��ŽĚ�Đ��ĂŶĚ�

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Consumer-engagement

A focus on consumers and their needs form the basis of our approach.

Our client-centric approach aims to disrupt the markets in which we

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�ŶĐĞŶ��Ğ�ďĂ�ĞĚ�ŝŶ��ĂŶĐĞ

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ŝŶ��ĂŶĐĞ��Ś�Ž�ŐŚ�Ă�ĐŽŵďŝŶĂ�ŽŶ�ŽĨ�ĮŶĂŶĐŝĂů�ŝŶĐĞŶ��Ğ��ĂŶĚ�ŝŶĐ�ĞĂ�ĞĚ�

ĐůŝĞŶ�ŬŶŽ�ůĞĚŐĞ��ĂŶ�ŝŶĐĞŶ��Ğ�ďĂ�ĞĚ�ŝŶ��ĂŶĐĞ�ŵŽĚĞů��Đ��Ăůů��

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ĐŽŶ��ŵĞ��ĞĐĞŝ�Ğ��Śŝ��ŵŽĚĞů�Ăů�Ž�ĞŶĐŽ��ĂŐĞ��Ž�ŝ��Ğ�ďĞŚĂ�ŝŽ��

ĐŚĂŶŐĞ�ŚĂ�ŝŵ�ĂĐ��ŚĞ��Ăůŝ��ŽĨ��ĞŽ�ůĞ��ůŝ�Ğ��ŝŶ�Ă��Ž�ŝ��Ğ��Ă��

In delivering on our core purpose, we aim to play a leadership role in

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Ğ�Ăŝŵ�Ž�ď�ŝůĚ�Ă��ĂŝŶĂďůĞ�ĂŶĚ��Ğ��ŽŶ�ŝďůĞ�ď��ŝŶĞ��ŚĂ�ŚĂ��Ă��Ž�ŝ��Ğ�

ŝŵ�ĂĐ�ŽŶ��ŽĐŝĞ��Ğ�ŚĂ�Ğ�ŝĚĞŶ�ĮĞĚ�ŚĞ�ĨŽůůŽ�ŝŶŐ��ŝ��ŬĞ��Ă�ĞĂ��ŚĞ�Ğ�

�Ğ�ĐĂŶ�ŵĂŬĞ�Ă�ĚŝīĞ�ĞŶĐĞ�

1. �Ž��Ă�ŶŐ�Ž��ĞŽ�ůĞ�Ž�ĚĞ�ĞůŽ��ŚĞŝ��Ĩ�ůů��ŽĞŶ�Ăů�Ś�Ž�ŐŚ�Ă�

Đ�ů��Ğ�ŽĨ�ŝŶŶŽ�Ă�ŽŶ and performance that embraces diversity

and��ĂŶ�ĨŽ�ŵĂ�ŽŶ.

2. Working with all stakeholders in South Africa’s healthcare system

to broaden access to care, including healthcare professionals to

develop increased capacity to deliver healthcare services to more

South Africans.

3. Improving the ĮŶĂŶĐŝĂů��ĞĐ��ŝ��ĂŶĚ��ĞůůŶĞ�� for our clients through

ŝŶŶŽ�Ă��Ğ��Žů��ŽŶ��ĂŶĚ��Ă�ŶĞ��Śŝ��ĂŶĚ��Ž�ŬŝŶŐ�Ž�ŵĂŬĞ�Śŝ��

possible for more South Africans – with a focus on expanding access to

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4. Using our experience in behavioural economics to encourage people

to make positive changes – including our employees, members,

suppliers and partners.

��ŽŵŽ�ŶŐ�Ă��ĂďůĞ��ŽĐŝĞ��Ś�Ž�ŐŚ�accountable, transparent and

ĞŚŝĐĂů�ď��ŝŶĞ��ĂĐ�ĐĞ� within our value chain and stakeholder

network.

What we’ve done during the past year

1. Discovery Health provides certainty and stability to our clients. The

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ability to pay claims for its members.

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��ŽĞĐ�ŽŶ�Ě��ŝŶŐ�Ă��ĞĐĞ��ŝŽŶ�

3. Discovery Insure, our short-term insurance company, uses advanced

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ŽŶ��Ž�Ś��Ĩ�ŝĐĂŶ��ŽĂĚ��Ž�ŝĚŝŶŐ�ŚĞ�ŽŽů��ĂŶĚ�ŝŶĐĞŶ��Ğ��Ž�

ĂĐŚŝĞ�Ğ�Ă��Ž�ŝ��Ğ�ĐŚĂŶŐĞ�ŝŶ�Ě�ŝ�Ğ��Ž�ĐŽŵĞ��ŝ�ĐŽ�Ğ��Ŷ��Ğ�ĂŶĚ�

�ŝĂůŝ��ŝ�ĞΡ�ŚĞů��Ž�ŝŵ�ĂĐ��ŽĐŝĞ��ŝŶ�Ă��Ž�ŝ��Ğ��Ă��

4. We have completed our second carbon footprint and are working

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5. The Healthy Company Index was developed as a joint venture between

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of Cape Town and Professor Ron Goetzel from Emory University and

Thomson Reuters. The survey aims to assess and understand the health

status of South African employees.

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ŚĞ��ďůŝĐ��ĞĐŽ��ŚĞ�Ŷ�ŵďĞ��ŽĨ��ŝ�ĐŽ�Ğ��Ž�ŶĚĂ�ŽŶ��ĞĐŝ�ŝĞŶ��

who are studying further, has increased to 146. Our investment to

date is R62 million.



When it comes to leading the way inintegrated reporting, industrial compa-nies show a clear lead, achieving averagescores of 64%. The sector is followed byconsumer services (60%); basic materials(59%); financials (57%); and consumergoods (53%).

“The performance of the different sec-tors reflects the evolution of sustain-ability reporting — born out of envi-ronmental reporting,” says Nkonkichairman Mzi Nkonki. “Those industrieswith the biggest environmental and so-cial impact were not only more heavily

regulated, but were underpressure to include othermeasures such as social andeconomic impact. As a resultthey implemented better sus-tainability reporting pro-cesses.”

But he says even compa-nies with little direct impacton environment and socialindicators, such as labour, of-ten have a much bigger in-direct impact. Sectors suchas the financial services sec-tor are therefore under in-creasing pressure to improvedisclosure of nonfinancial is-sues. “We have only to lookat the origins of the creditcrisis to see that governanceis an issue for all sectors,”says Nkonki.

Sustainability key perfor-mance indicators (KPIs) thattake into account sectoraldifferences could form thebackbone of future sustain-ability disclosure frame-works.

A report by the Initiativefor Responsible Investmenton industry-based sustain-ability reporting says com-prehensive lists of potentiallyrelevant data have been de-veloped by various organi-sations. The Global Report-ing Initiative (GRI), forexample, identifies a broad

list of more than 80 sustainability in-dicators across environmental, social andeconomic dimensions. In addition, theGRI is developing detailed, specific re-porting guidance for industry sectors thathighlight numerous indicators most rel-evant to that sector.

“KPIs work best when focused on aspecific industry because the importanceof specific environmental social gover-nance (ESG) information categoriesvaries substantially across sectors,” s ay sthe report. It points to the electronicsindustry, which faces specific challengesin supply chain management, such as theuse of toxic chemicals in manufacturingand waste disposal; while retail com-panies need to manage their employeerelations and the sustainability of theproducts they sell. The mining industrymust manage human rights and em-ployee safety as well as a host of en-vironmental issues.

“Identifying key performance indicatorsby sector captures the specific ESG issuesmost relevant to a given corporation,while at the same time enabling com-parability among peer groups,” says thereport. “It creates a tailored, usable andstandardised framework for stakeholdersthat is flexible enough to accommodatedifferent sorts of corporate activity.” ■

Special Report written by Jacqui PileAdvertising executive: Jurgen Fourie


integrated. About 12% were noncom-pliant in that they published separateannual financial statements.

“But compared with the Top 40 firms,the 30 companies listed on the SRIshowed better application of King 3 in

general in terms of integration of financialand nonfinancial information,” says Firer.

Of the SRI companies, 60% had fullyintegrated reports that included a sus-tainability report; 37% had additionalsustainability reports; and only 3% did

not comply at all. “We found that thosecompanies that recognise the importanceof adopting the King 3 recommendationson integrated reporting were also thosethat value sustainability enough to meetthe requirements of the SRI,” he says. ■

SOURCE: ???

OUTPERFORMING THE RESTIndustry averages and median for

integrated reporting

Median AverageA

SOURCE: ???SO

Consumergoods

Financials

Basicmaterials

Consumerservices

Industrial

0% 10 20 30 40 50 60 70


SECTOR COMPARISONS

Evolution of reporting

Mzi Nkonki

Jere

my

Gly

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