Evaluating Integrated Reporting: A Case Study of MTN Group's Practices

This report examines the concept of integrated reporting, focusing on the International Integrated Reporting Council (IIRC) and its guidelines. It explores the purpose of integrated reporting, which is to promote sustainable environmental practices and address challenges related to resource consumption and climate change. The report highlights conflicts within the IIRC's framework, particularly concerning the vague boundaries between different categories of capital. A case study of MTN Group Limited's 2014 Integrated Report reveals that the company did not fully adhere to IIRC guidelines, leading to a discussion of the limitations of the company's approach. The analysis concludes by assessing the importance of reporting standards and the need for companies to apply these standards correctly, emphasizing that while frameworks are essential for comparability, their consistent application is critical for effective reporting and the integration of sustainability considerations.

FOUNDATIONS IN ACCOUNTING
INTRODUCTION
The International Integrated Reporting Council (IIRC) was incorporated in August 2010
with the sole purpose of creating a sense of awareness and responsibility amongst the
corporate managers about sustainable environment and corporate social responsibility.
IIRC’s governing body was constituted with 40 members, who were heads of the FASB,
IASB, IFAC and IOSCO, the CEOs of the ‘Big Four’, heads of some of the major
British professional accountancy bodies and some CFOs from major MNCs, including
HSBC, Nestle and Tata. As can be seen, the Governing Council had majority members
from the accountancy profession, hence it was not surprising that the two main issues of
environment and sustainability for which it was founded, took a backseat in its
operational charter, (Barkoczy, 2012).
The main role designated to IIRC was outlined by the governing council in its first
Discussion Paper published in 2011 (IIRC, 2011). (Barkoczy, 2011) says the discussion
paper provided the answer to integrated reporting by stating that, and I quote
“Integrated reporting brings together material information about an organization’s
strategy, governance, performance and prospects in a way that reflects the
commercial, social and environmental context within which it operates. It provides a
clear and concise representation of how an organization demonstrates stewardship
and how it creates and sustains value (IIRC, 2011, p. 2)”. Unquote
The IIRC justified its recommendation for a new reporting model, where companies
would be required to put forward a separate Integrated Report. This single report,
anticipated IIRC, would eventually become the company’s “Primary Report” and would
be replacing the existing reporting pattern (IIRC, 2011, p. 6).
PURPOSE
The purpose of developing this new form of reporting, to be known as Integrated
Reporting, under the overall guidance of the International Integrated Reporting Council
(IIRC), was to make the companies devote more time and attention towards sustainable

environment practice. With ever expanding networks, communication channels and role
of the corporate managers in managing the companies, the corporate world is regularly
facing greater challenges. These are connected with over-consumption of the already
limited natural resources, the consistent change in climatic conditions and the growing
need of providing healthy food, clean water and better standard of living for the
growing workers’ population, (Barkoczy, 2013).
Continuing with the purpose of IIRC, Prince of Wales, while addressing the inaugural
meet, had said, and I quote “We are at present battling to meet 21st century challenges
with, at best, 20th century decision making and reporting systems. The IIRC’s remit is
to create a globally accepted framework for accounting for sustainability. The
intention is to help with the development of more comprehensive and comprehensible
information about an organization’s total performance, prospective as well as
retrospective, to meet the needs of the emerging, more sustainable, global economic
model’’. Unquote. This address by the Prince of Wales underlined the unmistakable
signs of IIRC’s idealism: accounting has been given the task to save the planet from the
perils of financial blunders.
CONFLICT
In the viewpoint of this paper, all decisions which should be taken for tackling the
issues discussed above should be based on clear and comprehensive data available. But
in actuality, the different points raised by the Discussion Paper of IIRC have conflicting
attributes, (Barkoczy, 2012). The paper has described six categories of ‘capital’:
(a) Financial Capital
(b) Manufactured Capital
(c) Human Capital
(d) Intellectual Capital
(e) Natural Capital
(f) Social Capital
In this Discussion Paper of 2013, IIRC clarifies the concept of these categories.
Financial Capital denotes the company’s ‘funds’; Manufactured Capital describes the
material objects created by mankind; The Human and Intellectual Capital portions are
the trickiest categories and so are the Social and Natural Capital categories. Although

the basic idea of Integrated Reporting was to focus on sustainability and environment
and since welfare of mankind is the mainstay behind a well-functioning relationship
between people, this is what should have been demonstrated in the existence of an
effective governance policy, (Barkoczy et al, 2010). But the boundaries between various
categories are quite vague and this has created more confusion than offering a solution.
REASONS
The basic idea of an Integrated Report was for the management to present, through the
report, how the company, with the help of sustained activities, was able to bring about
change in the values of the notified capitals, which should be measured by the change
achieved in the values of the capitals. The companies are to adopt the Balance Sheet
approach, as has been their practice, (Cch, 2013). The IIRC also emphasises on this
method of reporting but with a difference. Apart from reporting the Financial Results,
the managements were to report the assessment of the firm’s performance of ‘assets’
other than those appearing in the conventional balance sheet. These should cover all
those resources on which the company relies not only for financial prosperity but also
for the prosperity of other values, (Marsden, 2010). These other values of the noted
‘capitals’ includes the capital of society, including the environment. In this regard, it
should be understood that most of the noted capitals reported in the integrated report
may not be owned by the firm. IIRC in its Discussion Paper had proposed that an
integrated report would be the company’s primary report and shall replace the existing
arrangements. In the later stage, IIRC dropped this proposal, although the council has
not admitted it directly, (Marsden, 2010).
CASE STUDY – MTN GROUP
Finally, what has been made clear by IIRC is that companies no longer are under the
obligation of presenting a single integrated report. This is a big and highly significant
retreat on the part of IIRC. Now, when we analyse the 2014 Integrated Report of the
MTN Group Limited, which the Group made public with this title, we find that the
company did not actually follow the guidelines of IIRC with respect to the various
‘Capitals’ notified by the Council. Since MTN Group did not lay emphasis on these
capitals, its Integrated Report has lost the status of being the Group’s primary report. In
fact, the presented report is just like the other reports which the Group has been
releasing year after year. Thus the 2014 Integrated Report of the MTN Group is just an

addition to those clutter of reports which IIRC had initially condemned in its Discussion
Paper (IIRC, 2011, p. 4). Another significant result of IIRC’s retreat from the declared
policy is that the council accepts that companies may issue separate reports on the
notified capitals, including the social and environmental accounting and sustainability.
This is what the MTN Group has done with its 2014 Integrated Report. Hence, there is a
greater need for a company’s integrated report to cover the notified matters, which have
far-reaching consequences for the whole of the society, as becomes clear when the
actual contents of a report is analysed, (Nethercott, Devos & Richardson, 2010).
The basic problem which is being highlighted relates to the discrepancy coming in
between the social costs, which refer to the loss being suffered by the society as a whole
and the private costs, which are the losses being suffered only by the company. The
change being sought by IIRC was to distinguish and then report on both the Social as
well as the Private Costs, since under the conventional accounting methodology, only
private costs are recognized. The companies following the IASB standards have been
following the practice which states that all the social costs, such as pollution and
environmental maintenance, have to be reported by the companies only after these costs
have been converted to private costs, (Deutsch et al, 2011). Such costs, so far, were only
related to the state levies, such as a fine imposed on the company for polluting the
environment.
MTN SPEAKS
Below are reproduced excerpts from the 2014 Integrated Report of MTN Group
Limited.
“Our strategy is underscored by our strategic priorities. Strategic priorities are
further developed into specific initiatives, delivery of which is quantified and
evaluated against annual targets set by the Group exco at the start of the year. When
determining material matters, we consider the size and contribution of each
operation.”
“03 Our leadership, governance, reward and recognition
Who is responsible – profiles of our board of directors 34
Who is responsible – profiles of our executive committee 36
How we are governed 37

Summarised corporate governance report 37
Risk management 46
Social and ethics committee chairman’s report 50
Independent assurance report 52
How we remunerate our people 54”
“We provide supplementary information in associated reports on MTN’s website. The
sustainability and corporate governance reports, well as a full set of annual financial
statements (AFS), are available at
www.mtn.com/investors/FinancialReporting/Pages/IntegratedReports.aspx.”
CONCLUSION
My claim that the MTN’s concept of integrated reporting is founded on the capitalistic
theory of the firm is based on the following aspects of its proposals.
(a) Capital allocation.
The exco of MTN stresses the importance of efficient capital allocation; it writes:
‘Integrated Reporting promotes a more cohesive and efficient approach to corporate
reporting. . . to enable a more efficient and productive allocation of capital’ (IIRC,
2013a, p. 4).
(b) Primary focus: investors.
The exco states that ‘The primary purpose of an integrated report is to explain to
providers of financial capital how an organization creates value over time’ (IIRC,
2013a, paragraph 1.7).
(c) Neglect of other stakeholders.
The exco of MTN recognizes the existence of stakeholders other than investors and
seeks to give the impression that it takes into account their needs. But it is abundantly
clear that the company considers that reporting to stakeholders takes second place after
reporting to investors and that its interest in stakeholders (other than investors) is solely
as a means of assuring the future prosperity of the firm.
There is no mention of how the company is going to maintain and improvise upon its
Sustainability Target. In fact, all through the Chairman’s as well as the CFO’s report,
they have not outlined any concrete policy about the future of environment and
sustainability. If at all, any reference is made towards these issues, it is from the

financial angle and the effects taken into account are solely those which affect the
financial interests of the stakeholders.
Hence the GRI’s guidelines do define a report that sets out comprehensively the firm’s
sustainability performance; they fulfil the conditions partially. The significant question
is whether all conditions are met – whether firms in issuing reports which they claim
follow the GRI’s Guidelines, do in fact faithfully apply these guidelines. It is obvious
that the sustainability report of MTN is seriously defective. This raises grave doubts
about the effectiveness of the assurance process. A possible explanation is that it is
more difficult for the management to identify a matter that has been omitted than it is to
comment on the truth of an item that has been included. But this does not alter the
conclusion that in the case of MTN, the assurance process has been revealed to be
inadequate.
We cannot conclude from the above that the efforts of such public institutions as the
GRI, the general guidance notes issued by them are a waste of time. As explained in the
beginning of this paper, for the companies to publish their correct, complete and
comparable information with regard to their performances in relation to sustainability,
they must meet these two conditions: (a) An institution such as the IIRC or GRI should
issue guidelines for the reporting standards, which when applied by the companies,
would ensure that the reports published by the companies were complete and
comparable. (b) Companies, while presenting their reports, apply the required standards
correctly and consistently. It should be mandatory for the companies to meet both the
conditions. What we find in the current scenario is that the framework proposed by the
IIRC’s relates only to condition (a). Although this framework is essential for ensuring
comparability and would be helpful in assuring the completeness of the report, it is
regrettable that it is not being achieved by the companies. This then leads us to the
conclusion that still much has to be done for ensuring that condition (b) is fully
complied with, notably in the field of improving the effectiveness of the assurance
process.

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