Integrated Reporting

Transcription

1 Integrated Reporting South African Insights Into Integrated Reporting Integrated w w w.nkonk i.com JSE Accredited to Audit JSE Listed Companies Reporting Rising To The New Challenge July 2011 An analysis of the Top 40 and SRI companies listed on the JSE 2010 Integrated Reporting Answers To Frequently Asked Questions Integrated Reporting... Tone at the Top Risk Management Strategy Targets more than just reporting Company and Individual Scorecards Data Flow Paradigm Shift Stakeholder Expectations Integrated Approach To Management Continuous Benchmarking Trends for State Owned Companies In South Africa Quick Wins Towards Excellent Integrated Reporting * w w w.nkonk i.com JSE Accredited to Audit JSE Listed Companies JSE Accredited to Audit JSE Listed Companies Integrated Reporting Checklist w w w.nkonk i.com JSE Accredited to Audit JSE Listed Companies Integrated Reporting Frequently asked questions w w w.nkonk i.com JSE Accredited to Audit JSE Listed Companies JSE Accredited to Audit JSE Listed Companies * Only Major Public Entities Listed in Schedule 2 of The Public Finance Management Act 1 of 1999 June 2012

2 Index Foreword Executive Summary 8 Chapter 1 - Introduction and Purpose of the Research Chapter 2 - The Panel and the Research Methodology 24 Chapter 3 - Research Findings- Quantitative Insights Chapter 4 - Research Findings Qualitative Insights Chapter 5 - Road Map Towards Integrated Reporting Chapter 6 - Application of GRI G3 Levels Chapter 7 - Results - Integrated Reporting Ratings Annexure A - Schedule 2 State Owned Companies Analysed 47 Annexure B Glossary of Terms 49 Annexure C Bibliography

3 Foreword State Owned Companies in South Africa, together with their Shareholder Ministries, have always aspired to comply with best practice in terms of Corporate Governance, Accounting Standards and Corporate Reporting in general. This is evidenced by the fact that most State Owned Companies have voluntarily adopted implementation of International Financial Reporting Standards for their financial reporting, and, following the King II Code on Corporate Governance in 2002, the Department of Public Enterprises released a Protocol on Corporate Governance in the Public Sector in September 2002, which stated that: The Code of Corporate Practises and Conduct contained in the King Report applies inter alia to SOE s and agencies that fall under the PFMA With the evolvement of Integrated Reporting from the King III Code, its application thereof to PFMA SOCs and agencies, and the applaudable aspirational approach which State Owned Companies adopt, Nkonki Inc needed to have more insights into the extent to which State Owned Companies applied the Integrated Reporting principles in their 31 March 2011 year end reports. This was the first year in which Integrated Reports would have been expected. Nkonki s research team made it possible to analyse the Audited Annual or Integrated Reports issued by all the State owned Companies listed under Schedule 2 in terms of the PFMA. This team, led by Professor Anton du Toit, had to read through all these thick Reports and we are forever grateful to them for the effort and diligence that was required to go through the task in a short space of time. We are confident that you will find insights contained in this report useful, especially in providing guidance and support during your journey towards full compliance. 3

4 Executive Summary

5 The Nkonki Research Study on Schedule 2 State Owned Companies has been introduced in order to understand how, the State Owned Companies, have embraced the principles of Integrated Reporting in their Audited Annual or Integrated Reports for the year ending 31 March This has followed the success of the first Nkonki/FM Integrated Reporting Awards in 2011, which covered the Top 40 companies on the JSE. Nkonki utilised the services of the Research team that was led by Professor Anton du Toit of Monash University. The Schedule 2 SOCs went through a rigorous process of judging and adjudication and their audited Integrated or Annual Reports for 2011 were analysed and assessed mainly against the King III Code (2009) recommendations for disclosure in an integrated report, also taking into account the principles of the Discussion Papers on Integrated Reporting. Integrated Reports were assessed to ascertain whether minimum disclosure requirements in respect of the following were adhered to:- Ethical Leadership and Corporate Citizenship Boards, Directors and Remuneration o Board Independence o Board Reporting o Board Performance o Board Committees o Director s Remuneration Audit Committees o Finance Competence o Audit Committee Performance The Governance of Risk Compliance with Laws, Codes, Rules and Standards Internal Audit o Internal Audit Function o Internal Controls Governing Stakeholder Relationships Sustainability Reporting and Disclosure o Financial Disclosure o Sustainability Disclosure o Sustainability Assurance o Summarised Integrated Report Integrated Reporting Philosophy 5 The results indicate at a glance that on average, State Owned Companies fall below 50% of the disclosure requirements for 55% of what is expected to be disclosed. They only exceed 50% of the disclosure requirements for only 33% of the expected disclosures. In simple terms, what this means is that out of the 17 disclosures that are expected (see the graph that follows), State Owned Companies on average achieved a score that is below 50% for 9 of them. It is only on 6 of the expected disclosures, that State Owned Companies achieved an average score of more than 50%. This obviously indicates a lot of room for improvement. This is reflected on the average performance scores of all State Owned Companies assessed as reflected in the following graph:-

6 Average Performance for State Owned Companies Ethics Board independence Board reporting Board performance Board committees Directors remuneration Finance competence Audit committee performance Risk disclosure Compliance Internal controls Stakeholder relations Financial disclosure Sustainability disclosure Sustainability assurance Summarised integrated report Average performance in the specific categories fluctuated. The best level of performance is in the financial disclosure category (80%) versus sustainability assurance (10%) and summarised integrated reporting (0%) on the opposite end of the scale. This difference could be attributed to: Overall impression of substance over form the relative maturity of established financial reporting and disclosure practices in contrast to the need to adapt to new disclosure demands such as adding specific assurance to add value to existing sustainability reports; and adapting the evolving recommendations on integrated reporting and the use of a summarised integrated report. As most State Owned Companies battled to meet the minimum requirements, there were very few companies that qualified for recognition as they had to at least exceed 50% of the expected minimum disclosure requirements. State Owned Companies who made it as finalists were (in alphabetical order) Denel SOC Limited; Eskom SOC Limited; and Transnet SOC Limited.

7 The winners are: 1. Eskom Holdings SOC Limited with a B rating (70 to 79%) 2. Transnet SOC Limited with a C rating (60 to 69%) and 3. Denel SOC Limited with a D rating (50 to 59%) Nkonki Congratulates these companies and believe that as worthy winners and in many instances class leaders in the sustainability and integrated reporting fields, they now have a Role Model responsibility for other State Owned Companies and listed companies can also learn a lot from their standards of reporting and disclosure. There are, however, signs that all other State Owned Companies are striving towards better reporting, and quite a number of those that are not in the top 3, actually did excel in one or more aspects of integrated reporting disclosure requirements. As a result, this has encouraged the Introduction of Acknowledgement Awards that should be given to the State Owned Companies, which, even though they did not make it as finalists, did take leadership positions on specific sections. These companies are:- South African Nuclear Energy Corporation Limited (1st on Audit Committees) and South African Post Office Limited (1st on Governing Stakeholder Relationships) Some recognition can be given to those other companies who were in the top 5 of the various sections of the Integrated Reporting Requirements together with the overall winners. These companies are all clearly shown in the Integrated Reporting Ratings in Chapter 7 of this document. Most State Owned Companies can improve by using guidance in the Road Map in Chapter 5 of this report. 7 We conclude that it is not all doom and gloom, even though only 3 Finalists emerged. There is a strong indication that many State Owned Companies need to improve by increasing their pockets of excellence in Integrated reporting, others still need to do more, thereby enhancing progress towards an overall goal of Effective Integrated Reporting in South Africa.

8 Chapter 1 Introduction and Purpose of the Research

9 Integrated Reporting is the new approach to corporate reporting that demonstrates the linkages between an organization s strategy, governance and financial performance and the social, environmental and economic context within which it operates. By reinforcing these connections, Integrated Reporting can help business to take more sustainable decisions and enable investors and other stakeholders to understand how an organization really is performing. The International Integrated Reporting Council (IIRC) was formed in July 2010 and is currently chaired by Professor Mervyn King. The mission of the IIRC is to create a globally accepted Integrated Reporting framework which brings together financial, environmental, social and governance information in a clear, concise, consistent and comparable format. The aim is to help with the development of more comprehensive and comprehensible information about organizations, prospective as well as retrospective, to meet the needs of a more sustainable, global economy. In South Africa, the King III Code on Corporate Governance that was issued in 2009, prescribed some of the disclosures that are expected in an Integrated Report. This was followed by the Discussion Paper on Integrated Reporting that was released by the Integrated Reporting Committee as the world s first Discussion Paper on Integrated Reporting in January Many Companies, in preparing for their Integrated Reports, consider the principles of Integrated Reporting as contained in the Discussion Papers both locally and internationally and the disclosure requirements as stipulated in the King III Code on Corporate Governance. Following the successful survey of the Top 40 Listed Companies in South Africa through the Nkonki FM Integrated Reporting Awards in July 2011, Nkonki Inc was eager to get more insights into Integrated Reporting Trends amongst the State Owned Companies in South Africa and to recognize those who are excelling in terms of the available guidance on Integrated Reporting. An important aspect of good corporate governance is to follow best practice and this research will prove to be beneficial to the continued effort and improvement of integrated reporting by State Owned Companies. The purpose of this research is to gain insights so as to provide guidance where necessary, and to acknowledge those top State Owned Companies that apply the true spirit of King III in corporate governance, sustainability and integrated reporting. The purpose of the survey, in addition to the Insights to be obtained therefrom, is to Recognise and Celebrate Excellence for those State Owned Companies that are taking an Applaudable Lead in Integrating Reporting in South Africa. 9

10 Chapter 2 The Panel and the Research Methodology

11 Meet the panel Nkonki appointed an independent panel of experts to conduct the research. The panel consisted of the following scholars affiliated with Monash South Africa (hereinafter MSA ), a campus of Monash University, Australia: 1. Prof Anton du Toit, CA(SA), BA, B Compt, Hons B Compt, CTA, M Com, M.Inst.D., RA, is a corporate governance expert and director of companies. He is the Director of Accountancy Studies at MSA, accredited with SAICA as a service provider. He is an extraordinary professor of the North-West University Vaal Triangle Campus and a visiting professor at the University of Zululand. He held the position of Professor in Accounting at both the University of Johannesburg North-West University for a total of 19 years, during which time he served on the senates of both universities. He is an accomplished computer auditor with research interests in business ethics, corporate governance and sustainability. He presented various seminars and conferences, both internationally and locally, on auditing concepts. He has refereed numerous articles in accredited journals and was appointed as an expert reviewer for the Association of Chartered Certified Accountants (ACCA) accreditation. Anton was an established screening judge of the Deloitte Corporate Governance Award competition. He served as member of the Audit Committee of the Gauteng Provincial Government. He serves on various committees and interest groups in the profession. He is part of the newly established Sustainability and Integrated Reporting Disciplinary Group of SAICA. He is a past alternate board member of the Independent Regulatory Board of Auditors; past President of the Southern African Accounting Association; past Vice-President of the International Association for Accounting Education and Research; and past editor of Meditari, accredited professional journal of accountancy. Anton has been involved in audit and advisory services for many clients and in association with a variety of big audit firms. The biggest current clients include Workforce, Basil Read, Honda SA, Atlas Finance, International SOS and Rand Mutual Assurance. Previous clients include Afrox, BP, the JSE, Sappi, Mondi, South-West Coop, AGN of ABSA and Sanlam Blanche Steyn, B Com, B Compt (Honours), M Com, CA(SA), ACMA, CISA and CIA. She focuses on research in accountancy education and governance. She has been an academic for 20 years and is currently a senior lecturer at MSA and the Auditing subject leader responsible for teaching auditing on 3rd year level. She presented at various conferences, symposiums and workshops on auditing and related topics internationally and locally. She is the author of various articles on governance, accountancy education, internal and computer auditing for professional magazines and academic journals. She is a referee for three academic journals and the chairperson of the Johannesburg region of the SAAA. 3. Adrian Pilley,BCompt, BCompt (Honours) MCom, CA(SA) RA. Adrian has been lecturing taxation for 7 years at Monash at third year level and financial accounting for the last 3 years. Prior to lecturing, he enjoyed a successful career in commerce and industry for over 15 years. His research interests are in the field of integrated reporting. The above members of the research panel have no conflict of interest regarding any of the companies used in this Research Study.

12 The Panel and the Research Methodology The weighting of the various King Report chapters and the Discussion Paper were allocated as follows to facilitate scoring: Chapter 1 Ethical leadership and corporate citizenship 5 marks grading Chapter 2 Boards and Directors and Remuneration 35 marks grading Chapter 3 Audit Committees 15 marks grading Chapter 4 The Governance of Risk 10 marks grading Chapter 5 The Governance of Information Technology 0 marks grading Chapter 6 Compliance with laws, codes, rules and standards 5 marks grading Chapter 7 Internal Audit 5 marks grading Chapter 8 Governing Stakeholder Relationships 5 marks grading 12 Chapter 9 Sustainability Reporting and Disclosure 50 marks grading Discussion Paper The Framework for Integrated Reporting 20 marks grading The Process The annual reports (integrated reports) of the companies listed in Annexure A were used in the research survey. The most recent annual reports were obtained from the websites of the companies (with 2 exceptions) in the latter half of 2011 and beginning of 2012, which resulted in acquiring annual reports all with financial year-ends at 31 March The panel of experts prepared a grading sheet with weighting assigned to the respective chapters of King III and criteria for awarding grades was selected. The companies were evaluated independently by two of the experts, while the third expert acted as an independent umpire, grading a representative sample of the annual reports, including the best rated companies.

13 It must be stated that none of the companies assessed entered a competition or submitted data to the panel and had no knowledge of this evaluation process. In the spirit of true transparency, so eloquently advocated in King II, the idea is to evaluate/analysed/judge the information available to any citizen in the world (either via Internet access or via access to printed annual reports from registrars). Therefore, in the data collecting process, the panel used all annual reports, integrated reports and sustainability reports openly available on the Internet. All the Schedule 2 Major Public Entities have been considered for this Research Study (total 21). However South African Express has been excluded as the annual financial statements for 31 March 2011 were withdrawn. Telkom has not been included since it is treated more as a listed company than a State Owned Company. The detailed grading sheets are not reproduced here, but contained the full recommendations regarding disclosure from both the King III Report and the King III Code (IoD, 2009a; 2009b). An additional marking section was added to allow for the recommendations of the Discussion Paper of the IRC, the Framework for Integrated Reporting and the Integrated Report 2011 (IRC 2011). Integrated reporting by itself thus has a scoring of 70/150, which is 47% of the score. This is in contrast with the previous year where this accounted for 35% of the total score. This emphasises its importance against the rest of the recommendations of King III. All aspects are important, but the main focus of this award is Integrated Reporting, resulting in a heavy weighting in the scores. Two experts awarded a score out 150 for each company and converted the scores into percentages for ease of comparison. The umpire also awarded scores for the selected companies after which the scores were further analysed. Finally, the results were used to determine the ratings for the companies. It is also unfortunate to report that no electronic or Internet-based report could be found for the Trans-Caledon Tunnel Authority and that the physical printed document had to be obtained for judging. This was allowed, being the first Integrated Award process for SOCs, despite the quest for transparency and availability to all stakeholders (including the citizens and taxpayers of South Africa). The same can be said for the annual report of the Independent Development Trust, which was made available electronically to the panel, but which was not obtainable through its website. 13

14 Chapter 3 Research Findings- Quantitative Insights

15 Quantitative Insights 1. Ethical Leadership and Corporate Citizenship This focuses on the disclosure of how the board ensures that there is adequate disclosure of the code of ethics as well as the quality of the ethical performance. As 47% of the companies scored below 50%, it is an area where disclosure practices need to be improved A Rating B Rating C Rating D Rating Below D rating A Rating B Rating C Rating D Rating Below D rating 80%- 100% 70% - 79% 60% - 69% 50% - 59% More than 68% of the SOCs analysed scored below 60% and it is disappointing to note that the average mean is below 50% of the disclosure requirements at 2.36.

16 2. Boards, Directors and Remuneration A critical element in the disclosure of good governance is around the boards of directors. It is important to show the composition of the board and board committees, the independence of directors, how their performance is measured and their remuneration, as well as the remuneration policies and full disclosure of the elements of remuneration. The elements in Chapter 2 of King III, which were individually scored, are: Board composition Reporting of individual directors Board performance Board committees Directors remuneration 16 A Rating B Rating C Rating D Rating Below D rating 80%- 100% 70% - 79% 60% - 69% 50% - 59% Although this could have been the easiest section to report, more than 90% of the SOCs analysed scored below 50%. The average mean at 12.6 is below 50% of the expected disclosure requirements.

17 3. Audit Committees The elements in Chapter 3 of King III, which were individually scored, were: The audit committee report in the integrated report Finance function expertise and resources The use of audit committees is already strongly established in South Africa and the majority of the companies scored well in the disclosure of the audit committee activities as 53% achieved scores above 60%. 17 A Rating B Rating C Rating D Rating Below D rating 80%- 100% 70% - 79% 60% - 69% 50% - 59% 68% of SOCs analysed scored below 50% of the expected disclosure requirements and the average score of 7 is slightly below the 50% level.

18 4. The Governance of Risk The elements in Chapter 4 of King III, which were individually scored, are: Risk disclosure of unexpected or current risks threatening the long-term sustainability of the company Effectiveness of the risk management processes 18 A Rating B Rating C Rating D Rating Below D rating 80%- 100% 70% - 79% 60% - 69% 50% - 59% 47% of SOCs surveyed scored below 50% and the average mean is about 50% of the expected disclosure requirements.

19 5. Compliance with Laws, Codes, Rules and Standards In general all the companies can improve their level of application of King lll in this regard. 47% of the companies scored well on compliance with scores above 60%, but 42% scored below 50%. This clearly indicates a need to improve the level of compliance and compliance disclosure. 19 A Rating B Rating C Rating D Rating Below D rating 80%- 100% 70% - 79% 60% - 69% 50% - 59% More than 50% scored below 50% of the expected disclosure requirements and the average mean is just above 50% of the expected disclosure requirements.

20 6. Internal Audit Although this chapter deals with internal audit, the disclosure recommendation is limited in terms of disclosing the effectiveness of the system of internal controls in the integrated report. In cases where the companies do not have an internal audit function, an explanation of how adequate assurance of an effective governance, risk management and internal control environment has been maintained. On average there is proper disclosure on the effectiveness of the internal control system with 63% of the companies scoring above 60%. However there are some companies that still need to improve their disclosure on the effectiveness of internal control as 32% of the companies scored below 50% A Rating B Rating C Rating D Rating Below D rating A Rating B Rating C Rating D Rating Below D rating 80%- 100% 70% - 79% 60% - 69% 50% - 59% More than 60% of SOCs exceeded 50% of the disclosure requirements expected and the average mean of 2.96 exceeds 50%.

21 7. Governing Stakeholder Relationships The recommendation in the King III Code is: The board should disclose in its integrated report the nature of its dealings with its stakeholders and the outcomes of these dealings. Disclosure on the methods used and results of other engagement with stakeholders should be improved as currently more than half of the companies achieved scores below 50% A Rating B Rating C Rating D Rating Below D rating A Rating B Rating C Rating D Rating Below D rating 80%- 100% 70% - 79% 60% - 69% 50% - 59% More than 50% of SOCs scored below 50% of the disclosure requirements expected and the average mean of 2.22 is below the expected 50%.

22 8. Sustainability Reporting and Disclosure The elements in Chapter 9 of King III, which were individually scored, were: Annual financial statements to be included in the integrated report. The board should include commentary on the company s financial results. The board must disclose whether the company is a going concern. Sustainability disclosure in the sustainability or similar report as part of the Integrated report. Assurance of the sustainability information. A summarised integrated report, including key financial information (abridged financial statements). Assurance of the summarised integrated report. Sustainability disclosure need to improve to show measures used to ensure long-term survival. Currently more than half of the companies scored below 50% on their disclosure of sustainability issues A Rating B Rating C Rating D Rating Below D rating A Rating B Rating C Rating D Rating Below D rating 80%- 100% 70% - 79% 60% - 69% 50% - 59% Only 1 SOC exceeded the expected disclosure requirements in this section and 95% of SOCs could not meet even 50% of the required disclosure levels. The average mean is far below 50% at 36%.

23 9. Integrated Reporting Philosophy The last section scored was not about any chapter in King III, but about the general impression of how the company reacted to good integrated reporting, as guided by the Framework for Integrated Reporting and the Integrated Report - Discussion Paper of the IRC (2011) A Rating B Rating C Rating D Rating Below D rating A Rating B Rating C Rating D Rating Below D rating 80%- 100% 70% - 79% 60% - 69% 50% - 59% Only 2 SOCs were above 50% of the expected disclosure requirements, the average mean of 7.27 fall far below the 50% level at 36%.

24 Chapter 4 Research Findings Qualitative Insights

25 Ethical Leadership and Corporate Citizenship On average this disclosure scored 47%. 16% of the SOCs are already well evolved in the disclosure of their Ethical leadership and Corporate Citizenship in their annual reports. Another 16% disclose their Ethical leadership and Corporate Citizenship at acceptable levels. The remaining SOCs need to improve the level of disclosure on especially ethical leadership. Very few of the companies disclosed that there was a process of ethical performance evaluation during the year, and none have disclosed exactly how ethical performance has been evaluated. The attitude of State Owned Companies towards governance is also clear when considering the establishment of Social and Ethics Committees according to the Companies Act of 2008, as amended. Although the deadline for this was 1 May 2012, only 11% of the SOC companies assessed have established such a committee a year and more in advance. Boards and Directors The elements in Chapter 2 of King III are: Board composition Reporting of individual directors Board performance Board committees Directors remuneration On average this disclosure scored 36%. This is quite low and disappointing if one takes into account that the board should be the custodians of proper governance in a company % of the SOCs had acceptable overall disclosure of information on the board, its committees, evaluation and remuneration. The remaining SOCs did not fully disclose who the independent board members are or how independence is determined, how bonuses are measured or linked to performance and how the effectiveness of the board is assessed. Very few SOCs disclosed the method used to assess whether an independent director with a tenure of 9 years are still sufficiently independent to continue as independent director. Not all the SOCs disclosed the tenure of their directors. In 58% of the annual reports no reference to the assessments, appraisals or evaluations of directors, boards or board committees was made. King III recommends that the board should evaluate its own performance and disclose whether or not such a performance evaluation did occur as well as the action plans that will be implemented to improve future performance. Overall, the composition of board committees and their terms of reference were disclosed, but not adequately or sufficiently. For example there would be no indication if the terms of reference were approved by the board or not. It is not sufficient to state the names of directors only, as was the case in 16% of the SOCs annual reports. It is against both the spirit and the recommendations of King III, when stating that the board should make full disclosure regarding individual directors to enable shareholders to make their own assessment of directors. The level of detailed disclosure on the directors should improve and should show the age, experience, qualifications, other

26 directorships as well as whether the person is an executive, non-executive or independent director. The disclosure of directors remuneration focused on disclosing the remuneration paid during the comparative periods often showing base pay and bonuses. An area for improvement is the disclosure of how the board s performance is measured and how the performance of the board is linked to the achievement of the SOCs objectives for the determination of bonuses. On average the board evaluation score was low at 20% and the remuneration disclosure of board members also showing a need for improvement at an average of 33%. Only 11% of the SOCs disclosed the salaries of the three most highly-paid employees who are not directors, as recommended by King III paragraph Audit Committees The elements in Chapter 3 of King III are: The audit committee report in the integrated report Finance function expertise and resources. On average the disclosure of the activities of the audit committees was better than the disclosure of the activities of the board s other committees. On average this disclosure scored 46% and 32% of the SOCs disclosed the contribution of the audit committee very well. 26 Of the SOCs annual reports, 16% published very weak audit committee reports, where there is often no reference to internal audit or to integrated reporting or to the full terms of reference. In general, however, the audit committee s role in terms of the external auditor has been well described by most of the SOCs. The concept of a combined assurance model is very rarely described in the annual reports. It is noteworthy that only 32% of the SOCs followed the King III recommendation to have an audit committee that is separate from the risk committee. It was disappointing that 63% of the SOCs referred to neither the competence of the financial director nor of the expertise and resources of the finance function. The Governance of Risk The elements in Chapter 4 of King III are: Risk disclosure of unexpected or current risks threatening the long-term sustainability of the company Effectiveness of the risk management processes On average this disclosure item scored 53%. 21% of SOCs followed excellent disclosure practices on the governance of risk with another 32% following acceptable disclosure practices. Taking the two elements together, the majority of companies scored well in their risk disclosure practices as 53% of them scored above 60%. The remainder did not properly disclose the board s view on the effectiveness of the risk management processes and 26% of SOCs did not disclose risks and mitigation of risks at all.

27 Compliance with Laws, Rules, Codes and Standards On average this disclosure scored 53%. 32% of the SOCs followed excellent disclosure practices on the compliance with laws, codes, rules and standards and another 16% followed acceptable disclosure practices. 26% of the companies did not really address this issue other than to state compliance to one or other specific act that is applicable to that company. King III clearly recommends that the board should disclose how it has discharged its responsibility to ensure the establishment of an effective compliance framework and processes. Internal Audit On average this disclosure scored 59% The board should report on the effectiveness of the system of internal controls in the integrated report. It is not sufficient to state that internal audit or the audit committee has assessed internal controls. 32% of the SOCs followed excellent disclosure practices for internal controls and another 32% following acceptable disclosure practices. One should notice that it is not sufficient to disclose the fact that the board is required by a law or by King III, etc., to report on the effectiveness of internal control. The board should actually still perform this action and report thereon. The board should take responsibility for this. Governing Stakeholder Relationships 27 The recommendation in the King III Code is: The board should disclose in its integrated report the nature of its dealings with its stakeholders and the outcomes of these dealings. On average the disclosure of stakeholder relationships scored 44%. In 26% of the annual reports no mention is even made of stakeholders. This is crucial as service delivery has become such a big issue in South Africa. If stakeholder relationships are not central to strategy and operations, service delivery will remain poor and the reputation of both the company and South Africa as a country is compromised. 26% of the SOCs followed excellent disclosure practices on how they govern their relations with stakeholders. The remainder have to disclose more detail on who their various stakeholders are and how they engage with them. Stakeholder engagement should be central in determining the strategy of a company. Integrated Reporting and Disclosure The elements in Chapter 9 of King III are: Annual financial statements to be included in the integrated report. The board should include commentary on the company s financial results. The board must disclose whether the company is a going concern. Sustainability disclosure in the sustainability or similar report as part of the integrated report. Assurance of the sustainability information. A summarised integrated report, including key financial information (abridged financial statements). Assurance of the summarised integrated report.

28 The financial disclosure was excellent overall, as the publication of the annual financial statements is a well established area of reporting and disclosure. On average the financial disclosure scored 79%, compared with the overall average of 36% for chapter 9. It is clear from the discussion on GRI reporting (refer to the GRI reporting section) that sustainability disclosure is not receiving all the attention it should get. It is now a decade after the King II report which required companies to have proper sustainability reports. Sustainability reporting scored 51% on average, while assurance on the sustainability report scored only 6% average, as only one company had its sustainability report externally assured. The section on GRI reporting should be read in conjunction with this paragraph for a better understanding of the issues at hand. Scoring a 2% average, it is clear that SOCs are not giving any attention to a summarised integrated report. 5% of the SOCs followed excellent overall integrated disclosure. In general the disclosure of financial information is well established and mature while the disclosure of sustainability matters is gaining ground followed by sustainability assurance. With only 11% of the SOCs preparing an annual report that is called an integrated report, integrated reporting still have a long road to travel and there is a need for training, guidance and improved maturity. Results about Integrated Reporting Disclosure The content elements recommended by the Framework for Integrated Reporting and the Integrated Report - Discussion Paper of the IRC (2011) are: 28 Organisational overview and business model Operating context, including risks and opportunities Strategic objectives and strategies to achieve those objectives Governance and remuneration Performance Future Outlook This discussion paper was published towards the end of the financial year-end of all the SOCs, thus it can be expected that it did not yet receive the attention it should be getting in the future. On average this disclosure scored 36%. Of the 19 SOCs assessed, 21% did not score any marks in this section, against the highest score obtained of 70%. 5% of SOCs applied an integrated philosophy reasonably well throughout their integrated report with another 5% applying an integrated philosophy acceptably. Conclusion Only 16% of SOCs scored above 50%. This is a clear indication that integrated reporting and compliance with King III are not there yet in this SOC section of the public sector. Where does the above qualitative insights section lead us? How should one improve on integrated reporting? Some of the questions were already implicitly answered above and in the quantitative insights section. The general rule of thumb is basically to follow the King III recommendations. Having said that, the best practice in integrated reporting is not reached with good reporting only. Although King III allows explanations for not applying the principles, the foundation of proper integrated reporting remain the establishment of proper governance and sustainability structures and policies and processes. For example, if the board composition is wrong (e.g. too few non-executive directors), no reporting or words could make it better (except perhaps by providing good and valid reasons). The roadmap section that follows, will provide further guidance to proper integrated reporting for SOCs.

29 Chapter 5 A Roadmap towards Excellent Integrated Reporting

30 Based on the elements that need the most attention according to the assessment of the SOCs for 2011, the following form the low hanging fruits for the integrated reporting by SOCs. The following is thus a brief summary of what companies wishing to score well in their integrated reporting would have to take care of. 1. Summarised Integrated Report Seriously consider this key element of the King III report (2009) and the discussion paper on integrated reporting (2011) to be added to the publication of information to the general public, who is the largest single stakeholder group for SOCs. It would entail an abridged set of financial statements and a summary of the rest of the integrated report, dealing, for example, with the material sustainability issues only. This report does not need to be printed necessarily, it could be published on the website. 2. Credibility of Sustainability Information Seriously consider external assurance of the sustainability and GRI information. It can start with a few items/indicators being assured in a limited assurance report. The most important aspect is to start with this, as it would provide the foundation for the assurance of the whole integrated report and summary at a later stage. Declaring an Application level in line with the GRI guidlines is always encouraged. 3. Board Performance 30 Disclose if appraisals of the board and its committees have been conducted. Provide an overview of the results of the appraisal process, performance assessment and the action plans to be implemented. 4. Independence of Directors Disclose the process for and person responsible for the assessment of the independence of directors, including having directors independence re-assessed after serving as independent non-executive director for more than nine years. Disclose what factors are used in evaluating the independence of directors and whether the chairman performed the evaluation. 5. Financial Competence Disclose that the audit committee has considered the expertise, resources and adequacy of the whole financial function, as well as the results of the review. This is not only about the CFO s expertise. 6. The Disclosure of Directors Remuneration Disclose the remuneration of the three most highly-paid employees who are not directors. Disclose the policies guiding executive employment contracts and the benchmarks used to evaluate the remuneration. Disclose bonuses and the performance indicators on which they are based. Disclose the remuneration policies with regards to the directors.

31 7. Integrated Reporting Philosophy Consider the integrated nature of reporting as described in the Framework for Integrated Reporting and the Integrated Report Discussion Paper of the IRC (2011) and in the publication Towards Integrated Reporting Communicating Value in the 21st Century of the IIRC (2011). Focus on the guiding principles of Strategic Focus, Connectivity of Information, Future Orientation, Responsiveness and Stakeholder inclusiveness, and Conciseness, reliability and materiality. The following Content Elements should be present (and inter-connected) they should tell a story, a tale, not only in the governance and/or sustainability sections of the integrated report, but in all other sections they should be inter-linked, for example in the history or group overview of the company: Organisational overview and business model Operating context, including risks and opportunities Strategic objectives and strategies to achieve those objectives Governance and remuneration Performance Future Outlook The Discussion Paper states the following: The overarching objective of integrated reporting in general, and the integrated report in particular, is to report to stakeholders on the strategy, performance and activities of the organisation in a manner that enables stakeholders to assess the ability of the organisation to create and sustain value over the short-, medium- and long-term. Further, it is to foster appreciation, both within the organisation and among its stakeholders, of the extent to which the organisation s ability to create and sustain value is based on financial, social, economic and environmental systems and by the quality of its relationships with its stakeholders Stakeholder Relationships Ensure all internal and external stakeholders are included in detail and the interaction with each group is discussed. A good idea is to link this to the strategy of the entity. 9. Audit Committee Reporting Make sure the audit committee has accepted its responsibilities and do not merely state that they have certain responsibilities. Disclose that the audit committee has recommended the integrated report for approval to the board and whether the audit committee has reviewed the financial statement section in the integrated report. Disclose that the internal audit charter was recommended for approval to the board and disclose the exact nature of the working relationship between the audit committee and the Chief Audit Executive.

32 10. Ethical Leadership & Corporate Citizenship This is perhaps the single most important aspect to consider, because strong leadership will ensure proper governance and that will lead to proper disclosure and high quality integrated reports. Disclose the values, vision, mission and the code of ethics (or code of business conduct) of the company. Disclose the ethical performance of the company, as well as the process to measure, monitor and evaluate the performance. Ensure ethics is embedded in the strategy, vision, values, mission, stakeholder engagement and risk management of the company and is disclosed as such. 11. Sustainability Disclosure Consider using the GRI guidelines in sustainability reporting to enhance comparability within the same industry/ sector. Make use of a sustainability framework and key sustainability indicators. The most difficult challenge is to ensure that sustainability is embedded in the whole integrated report, not only in one section on governance or sustainability. Include this in the various reports, for example the chairman s report and the operational reports. Remember that transparency is a critical element of effective reporting. In this regard, also refer to the section on GRI Guidelines in this report Board Reporting & Composition of Board Committees Disclose reasons for resignations or retirement of the directors. Disclose the terms of reference for the different board committees and indicate if they were approved by the board. 13. Compliance With Laws, Codes, Rules & Standards Disclose the compliance framework used to monitor and communicate compliance to all these aspects. Disclose how the board has discharged its responsibility to ensure this framework and related processes. 14. Risk Disclosure Ensure there is a report from the risk committee included. Disclose risks under various categories. Include IT governance and risk and all its various aspects. Disclose risks that could impact on the operations or performance of the company in the future. Disclose the risk management policy, risk governance structure, risk management methodology, internal controls, strategic risk and the lines of defense. Then discuss the largest individual risks. Lastly, disclose the assessment of the effectiveness of the company s risk management or the effectiveness of risk responses or interventions.

33 15. Effectiveness of Internal Controls Disclose that the board and not only the audit committee, has considered this. This is not only a responsibility of the audit committee but also of the board. Thus, disclose that the responsibility was accepted and that internal controls were evaluated as to their effectiveness. Some general points Clearly identify the registered company and its financial year-end on all covers, headers and electronic links on the Internet. Ensure the report is called an Integrated annual report or similar. Ensure the report is easily accessible on the Internet. Also consider smaller format electronic versions to facilitate download in remote areas of the country. Simplify the language and explain or avoid complex terms. Try not to overspend on the glossy printed reports the essence should be in the contents, not in the presentation and in expensive paper, art work and elaborate printing processes. 33

34 Chapter 6 Application of GRI G3 Levels

35 GRI Sustainability Reporting Guidelines The most dominant reporting framework, guidelines and principles for sustainability reporting are the Global Reporting Initiative (GRI) G3 guidelines (latest are G3.1 published in 2011) published by the GRI these standards can be considered as generally accepted (Ballou, Heitger & Landes 2006). The GRI Guidelines are used voluntarily by organisations for sustainability reporting. The process of declaration of application level of appliance of the GRI guidelines is best described by the GRI (2011): Upon finalization of their report, preparers should declare the level to which they have applied the GRI Reporting Framework via the GRI Application Levels system Declaring an Application Level results in a clear communication about which elements of the GRI Reporting Framework have been applied in the preparation of a report. To meet the needs of new beginners, advanced reporters, and those somewhere in between, there are three levels in the system. They are titled C, B, and A, The reporting criteria found in each level reflects an increasing application or coverage of the GRI Reporting Framework. An organization can self-declare a plus (+) at each level (ex., C+, B+, A+) if they have utilized external assurance. An organization self-declares a reporting level based on its own assessment of its report content against the criteria in the GRI Application Levels. The King III Code does not require any application or use of the GRI guidelines, but the King III Report (2009) does mention that the GRI guidelines have become the accepted international standard for sustainability reporting. The report is thus not prescriptive that the GRI guidelines should be used, but there are no other widely accepted guidelines, so best practice could very well indicate that these guidelines should be used. 35 The more important message coming out of both the King III Report and the King III Code in Principle 9.3, is the fact that the sustainability report should be independently assured. A company would thus be well advised to follow the route towards independent assurance of the sustainability report by starting by applying the GRI guidelines. Taking the above into account, it is a disappointment to analyse the top SOCs as was done in this research and to find that:- Only one SOC had an externally assured Sustainability Report with a declared Application Level; and Only two SOCs had self declared Application Levels. Full results are shown in the Table that follows:

36 Level of GRI disclosure and/ or application State Owned Company (SOC) Comments Level B+ 1. Eskom Holdings Ltd The only SOC with a sustainability report independently assured by an audit firm a combined reasonable assurance and limited assurance report. This company discloses that it aims for level A+. Contents are properly indexed to the GRI guidelines. Level C 1. Development Bank of Southern Africa 2. Transnet SOC Limited Both companies followed the GRI G3 guidelines for their respective sustainability reports. Conclusion They should now strive for sustainability assurance. Disclosing only a GRI Content Index 1. Denel (Pty) Ltd Denel discloses its own rating of each GRI indicator for 2009, 2010 and Progress is evident from this South African Post Office Limited (SAPO) Mentioning the GRI 1. Airports Company of South Africa Limited (ACSA) 2. Broadband Infrastructure Company (Pty) Ltd (Broadband Infraco) 3. Industrial Development Corporation of South Africa Limited (IDC) SAPO discloses the GRI indicators and an index. Conclusion Nothing should stop these companies from starting to declare an application level in the future, and to start a process of sustainability assurance. ACSA mentions the GRI and that the sustainability report will begin to follow the GRI guidelines over the years to come, with full application in five years time. Broadband Infraco states that it is busy incorporating the GRI guidelines into its Sustainability Management System. The IDC seems to want to start following the GRI guidelines (as well as integrated reporting). Conclusion At least these companies are aware of the GRI guidelines, but there is a long road to better sustainability reporting ahead for them.

37 Level of GRI disclosure and/ or application State Owned Company (SOC) Comments No mentioning of the GRI at all. 1. Air Traffic and Navigation Services Company Limited 2. Alexkor Limited 3. Armaments Corporation of South Africa Limited 4. CEF (Pty) Ltd 5. Independent Development Trust 6. Land and Agricultural Development Bank of South Africa 7. South African Airways (Pty) Limited 8. South African Broadcasting Corporation Limited 9. South African Forestry Company Limited 10. South African Nuclear Energy Corporation Limited 11. Trans-Caledon Tunnel Authority Conclusion It is indeed a sad state of affairs that 11 of our top 19 SOCs are not inclined to even think about a proper or better process of sustainability reporting. 37 In summary, there are three companies with GRI Guidelines reports and a self-declaration level, of which one sustainability report has been independently assured. They should be recognised for this progress in their reporting. Two companies do make use of the GRI Guidelines, but with no declaration of level of application. There are, however, 14 companies that should still get processes and structures in place to start disclosing proper sustainability indicators and to disclose these within some set of guidelines for sustainability reporting. They would have to invest heavily into such processes and structures and would still have a long way to go towards independent assurance. With all the news reports and often bad publicity surrounding green electricity, CO2 emissions, mining and mineral rights, corruption in the public sector, and so on, these top SOCs should take the lead in establishing better sustainability reporting in South Africa.

38 Chapter 7 Results - Integrated Reporting Ratings

39 Overall Results Ranking State Owned Company 1 Eskom Holdings Ltd 2 Transnet SOC Limited 3 Denel (Pty) Ltd Below D Rating 4 South African Post Office Limited 5 South African Nuclear Energy Corporation Limited 6 Trans-Caledon Tunnel Authority 7 Development Bank of Southern Africa 8 South African Forestry Company Limited 9 Airports Company of South Africa Limited Land and Agricultural Development Bank of South Africa 11 South African Airways (Pty) Limited 12 Broadband Infrastructure Company (Pty) Ltd 13 Independent Development Trust 13 South African Broadcasting Corporation Limited 13 Industrial Development Corporation of South Africa Limited 14 Alexkor Limited 15 Armaments Corporation of South Africa Limited 16 Air Traffic and Navigation Services Company Limited 17 CEF (Pty) Ltd

40 Individual Section Results Ethical leadership and corporate citizenship Ranking SOC 40 1 Eskom 1 Transnet Limited 2 Denel (Pty) Ltd 3 Alexkor Limited 4 Broadband Infrastructure Company (Pty) Ltd 4 South African Nuclear Energy Corporation Ltd 5 South African Forestry Company Ltd 6 Trans-Caledon Tunnel Authority (Physical Document) 7 Development Bank of Southern Africa 7 South African Airways (Pty) Ltd Below D Rating 8 South African Post Office Ltd 9 Airports Company of South Africa Limited 9 Armaments Corporation of South Africa Limited 10 CEF (Pty) Ltd 10 Industrial Development Corporation of South Africa Ltd 11 Air Traffic and Navigation Services Company Ltd 11 Independent Development Trust 11 Land and Agricultural Development Bank of South Africa 11 South African Broadcasting Corporation Limited Boards and Directors and Remuneration Ranking SOC 1 Denel (Pty) Ltd 2 Eskom Below D Rating 3 Land and Agricultural Development Bank of South Africa 3 Transnet Limited 4 South African Post Office Limited 5 South African Forestry Company Limited 6 Trans-Caledon Tunnel Authority (Physical Document) 7 Industrial Development Corporation of South Africa Ltd 8 South African Airways (Pty) Limited 9 Development Bank of Southern Africa 10 Broadband Infrastructure Company (Pty) Ltd 11 Independent Development Trust 12 South African Broadcasting Corporation Limited 13 South African Nuclear Energy Corporation Limited 13 Air Traffic and Navigation Services Company Limited 14 Airports Company of South Africa Limited 15 Alexkor Limited 16 Armaments Corporation of South Africa Limited 17 CEF (Pty) Ltd

41 Compliance with laws, codes, rules and standards Ranking SOC 1 ESKOM 2 Airports Company of South Africa Limited 3 Transnet Limited 4 DENEL (Pty) Ltd 5 Broadband Infrastructure Company (Pty) Ltd 5 Development Bank of Southern Africa 6 Land and Agricultural Development Bank of South Africa 6 South African Nuclear Energy Corporation Limited 6 Trans-Caledon Tunnel Authority (Physical Document) 7 South African Airways (Pty) Limited 8 South African Post Office Limited Below D Rating 9 Industrial Development Corporation of South Africa Ltd 10 South African Broadcasting Corporation Limited 11 CEF (Pty) Ltd 11 South African Forestry Company Limited 12 Air Traffic and Navigation Services Company Limited 13 Alexkor Limited 13 Armaments Corporation of South Africa Limited 13 Independent Development Trust Internal Audit 41 Ranking SOC 1 ESKOM 2 Transnet Limited 3 Development Bank of Southern Africa 3 South African Post Office Limited 4 DENEL (Pty) Ltd 5 Industrial Development Corporation of South Africa Ltd 6 Independent Development Trust 7 Alexkor Limited 7 Broadband Infrastructure Company (Pty) Ltd 7 Land and Agricultural Development Bank of South Africa 7 South African Airways (Pty) Limited 7 South African Nuclear Energy Corporation Limited 8 Trans-Caledon Tunnel Authority (Physical Document) Below D Rating 9 Airports Company of South Africa Limited 10 South African Broadcasting Corporation Limited 10 South African Forestry Company Limited 11 Armaments Corporation of South Africa Limited 12 CEF (Pty) Ltd 13 Air Traffic and Navigation Services Company Limited

42 Audit Committees Ranking SOC 42 1 South African Nuclear Energy Corporation Limited 1 Transnet Limited 2 Trans-Caledon Tunnel Authority (Physical Document) 3 South African Forestry Company Limited 4 South African Post Office Limited 5 ESKOM Below D Rating 6 Independent Development Trust 7 DENEL (Pty) Ltd 8 Development Bank of Southern Africa 8 South African Airways (Pty) Limited 9 Land and Agricultural Development Bank of South Africa 10 Alexkor Limited 10 Broadband Infrastructure Company (Pty) Ltd 11 Airports Company of South Africa Limited 11 Industrial Development Corporation of South Africa Ltd 12 Armaments Corporation of South Africa Limited 12 CEF (Pty) Ltd 13 South African Broadcasting Corporation Limited 14 Air Traffic and Navigation Services Company Limited The Governance of Risk Ranking SOC 1 ESKOM 2 Transnet Limited 3 DENEL (Pty) Ltd 4 Development Bank of Southern Africa 5 South African Nuclear Energy Corporation Limited 5 South African Post Office Limited 5 Airports Company of South Africa Limited 6 Trans-Caledon Tunnel Authority (Physical Document) 7 Land and Agricultural Development Bank of South Africa 7 South African Airways (Pty) Limited 8 South African Broadcasting Corporation Limited Below D Rating 9 Broadband Infrastructure Company (Pty) Ltd 10 Industrial Development Corporation of South Africa Ltd 10 South African Forestry Company Limited 11 Air Traffic and Navigation Services Company Limited 11 Alexkor Limited 11 CEF (Pty) Ltd 12 Armaments Corporation of South Africa Limited 12 Independent Development Trust

43 Governing Stakeholder Relationships Ranking SOC 1 South African Post Office Limited 2 ESKOM 3 Transnet Limited 4 Airports Company of South Africa Limited 5 DENEL (Pty) Ltd 6 Development Bank of Southern Africa 7 Armaments Corporation of South Africa Limited 7 South African Broadcasting Corporation Limited Below D Rating 8 South African Nuclear Energy Corporation Limited 9 Independent Development Trust 9 Industrial Development Corporation of South Africa Ltd 9 South African Forestry Company Limited 10 Alexkor Limited 11 Broadband Infrastructure Company (Pty) Ltd 11 South African Airways (Pty) Limited 12 Air Traffic and Navigation Services Company Limited 13 Land and Agricultural Development Bank of South Africa 14 CEF (Pty) Ltd 14 Trans-Caledon Tunnel Authority (Physical Document) Integrated Reporting and Disclosure 43 Ranking SOC 1 ESKOM Below D Rating 2 Transnet Limited 3 South African Nuclear Energy Corporation Limited 4 DENEL (Pty) Ltd 5 South African Post Office Limited 6 Development Bank of Southern Africa 7 Airports Company of South Africa Limited 8 Independent Development Trust 9 Trans-Caledon Tunnel Authority (Physical Document) 10 Alexkor Limited 11 South African Broadcasting Corporation Limited 11 South African Forestry Company Limited 12 Armaments Corporation of South Africa Limited 13 Land and Agricultural Development Bank of South Africa 14 Air Traffic and Navigation Services Company Limited 14 South African Airways (Pty) Limited 15 Broadband Infrastructure Company (Pty) Ltd 15 CEF (Pty) Ltd 16 Industrial Development Corporation of South Africa Ltd

44 Discussion Paper The Framework for Integrated Reporting Ranking SOC 44 1 ESKOM 2 Transnet Limited 3 DENEL (Pty) Ltd Below D Rating 4 Armaments Corporation of South Africa Limited 5 Alexkor Limited 5 South African Forestry Company Limited 5 Trans-Caledon Tunnel Authority (Physical Document) 6 Air Traffic and Navigation Services Company Limited 7 South African Broadcasting Corporation Limited 7 South African Nuclear Energy Corporation Limited 8 Airports Company of South Africa Limited 8 Broadband Infrastructure Company (Pty) Ltd 9 South African Post Office Limited 10 South African Airways (Pty) Limited 11 Development Bank of Southern Africa 11 Land and Agricultural Development Bank of South Africa 12 CEF (Pty) Ltd 12 Independent Development Trust 12 Industrial Development Corporation of South Africa Ltd

45 Annexure A Schedule 2 State Owned Companies Analysed 45

46 Air Traffic and Navigation Services Company Limited Airports Company of South Africa Limited Alexkor Limited Armaments Corporation of South Africa Limited Broadband Infrastructure Company (Pty) Ltd CEF (Pty) Ltd Denel (Pty) Ltd Development Bank of Southern Africa Eskom Holdings Ltd Independent Development Trust 46 Industrial Development Corporation of South Africa Limited Land and Agricultural Development Bank of South Africa South African Airways (Pty) Limited South African Broadcasting Corporation Limited South African Forestry Company Limited South African Nuclear Energy Corporation Limited South African Post Office Limited Trans-Caledon Tunnel Authority Transnet SOC Limited

47 Annexure B Glossary of Terms 47

48 GRI: The Global Reporting Initiative (GRI) is a network-based organization that pioneered the world s most widely used sustainability reporting framework. GRI is committed to the Framework s continuous improvement and application worldwide. GRI s core goals include the mainstreaming of disclosure on environmental, social and governance performance. ( accessed on 15 March 2012) GRI application levels: To indicate that a report is GRI-based, report makers should declare the level to which they have applied the GRI Reporting Framework via the Application Levels system. To meet the needs of beginners, advanced reporters, and those somewhere in between, there are three levels in the system. These are titled C, B, and A. The reporting criteria at each level reflect a measure of the extent of application or coverage of the GRI Reporting Framework. A plus (+) is available at each level (ex., C+, B+, A+) if external assurance was utilized for the report. (GRI, 2011). G3: The G3 Guidelines is part of the GRI s Reporting Framework, which was developed through a consensus-seeking, multi-stakeholder process. Participants are drawn from global business, civil society, labour, academic and professional institutions. The Reporting Framework sets out the principles and Performance Indicators that organizations can use to measure and report their economic, environmental, and social performance. The cornerstone of the Framework is the Sustainability Reporting Guidelines. The third version of the Guidelines known as the G3 Guidelines - was published in (GRI, 2011). Integrated Reporting: Means a holistic and integrated representation of the company s performance in terms of both its finance and its sustainability (IoD; 2009b) 48 JSE: Johannesburg Securities Exchange. The JSE Ltd ( JSE ) is licensed as an exchange under the Securities Services Act, 2004 and is Africa s premier exchange. King III: The King Report on Governance for South Africa 2009 and the King Code of Governance for South Africa Parktown, South Africa: The Institute of Directors (IoD) in Southern Africa. The previous report is known as King II (IoD; 2002). PFMA: The Public Finance and Management Act that regulate the accountability of public entities (RSA, 1999) RSA: Republic of South Africa Sustainability: Sustainability of a company means conducting operations in a manner that meets existing needs without compromising the ability of future generations to meet their needs. It means having regard to the impact that the business operations have on the economic life of the community in which it operates. Sustainability includes environmental, social and governance issues (IoD; 2009b) SOC: A business organization owned wholly or partly by the state and run by a public authority. Also called a public enterprise, government owned corporation, and government business enterprise. ( accessed 15 March 2012)

49 Annexure C Bibliography 49

50 Ballou, B, Heitger, DL & Landes, CE 2006: The future of corporate sustainability reporting, a rapidly growing assurance opportunity. Journal of Accountancy, 202, 6: Department of Pubic Enterprises, Protocol On Corporate Governance In The Public Sector. Pretoria: RSA Government printer GRI, 2011: Sustainability Reporting Guidelines, version 3.1. Amsterdam, The Netherlands. Global Reporting Initiative (GRI). IoD, 2002: King Report on Governance for South Africa Parktown, South Africa: The Institute of Directors in Southern Africa. IoD, 2009a: The King Report on Governance for South Africa Parktown, South Africa: The Institute of Directors in Southern Africa. IoD, 2009b: The King Code of Governance for South Africa Parktown, South Africa: The Institute of Directors in Southern Africa. IIRC, Towards Integrated Reporting Communicating Value in the 21st Century. Discussion paper. Available at: [Accessed 31 March 2012]. IRC, Framework for Integrated Reporting and the Integrated Report. Discussion Paper. 25 January. Available at: [Accessed 31 March 2012]. 50 JSE, JSE Limited Listing Requirements, Service Issue 13. JSE, Johannesburg. RSA, Public Finance and Management Act, No1 of Pretoria: Government printer. RSA, Companies Act no 71 of Pretoria: Government printer. Temkin, S.: SA leads world in integrated reporting, says King Business Day, 3 August Accessed online at on 8 March 2011.

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