By Dato’ Mustamir Mohamad
It has been a decade since the Integrated Reporting (IR) Framework was introduced in Malaysia, and it is remarkable to witness its growth and evolution. In 2014, when the Securities Commission invited Sime Darby Berhad to participate in the pilot programme to initiate IR in Malaysia, I eagerly embraced the opportunity to embark on this transformative journey, with the vision to enhance transparency, accountability, and create value for our stakeholders.
Over the years, the IR landscape in Malaysia has undergone significant transformation, with an increasing number of companies adopting IR practices. This shift reflects a broader commitment to ensuring that stakeholders receive a holistic view of organisational performance and long-term strategy, allowing them to make informed investment decisions.
Reflecting on our journey, the adoption of IR was a significant milestone for Sime Darby. The positive feedback received from shareholders was encouraging. They particularly appreciated the strategy blueprint and business model sections, which effectively summarised our strategy, operations and performance for each year – giving a clearer picture of how we create value for our stakeholders. However, convincing contributors of the Annual Report to embrace this new approach was challenging. Breaking the silo mentality and ensuring connectivity of information required a persistent effort and a shift in mindset.
When IR was first introduced at Sime Darby, there was a sense of apprehension among the team. Many were accustomed to traditional reporting methods and were hesitant to adopt a new framework that demanded a more integrated and holistic approach. For example, where previously a writer or content owner had to write and review their own section only, with IR, the data and information might flow across multiple sections. It became more crucial for multiple functions and departments to be aligned. However, this also meant that contributors could now see clearly how each business, operations and function contribute to the bigger picture – how they create value.
One of the significant challenges faced was managing costs. With the inclusion of more metrics to report on our strategic goals, additional verification and validation from external auditors with specialised expertise were required. Furthermore, producing integrated reports often demanded more resources in terms of time and personnel. The design and layout of these reports were more complex, necessitating higher-quality production to effectively communicate the information. Balancing these rising costs while ensuring that we continue to provide the highest quality of reporting to our stakeholders was a crucial aspect of IR.
Embedding Integrated Thinking across the Organisation
IR has not only provided a comprehensive framework for disclosing financial and non-financial information but also embedded integrated thinking into the core of our organisational strategy.
The adoption of IR has been instrumental in fostering a culture of integrated thinking within the company, allowing us to view our business from a more holistic perspective. For example, if we look at how we were reporting on sustainability 10 years ago, it always sat in a standalone section and discussions on ESG-related matters were confined to reporting our targets and performance. Today, sustainability is strongly embedded into the report as a key driver of our value creation strategy. It informs how we manage our resources and guides our decision-making processes, ensuring that we consider the long-term impacts of our actions on the environment, society, and governance. This integrated approach has enabled us to align our business objectives with sustainable practices, fostering innovation and resilience. By embedding sustainability into our core operations, we are better equipped to address emerging risks and opportunities, ultimately enhancing our ability to create sustainable value for our stakeholders.
IR has also significantly improved our performance reporting on operations. Previously, our reporting was very results-oriented, focusing primarily on operational and financial performance. Today, it is more holistic, emphasising strategy and risk, which better informs our stakeholders about the future prospects of the business.
Adopting IR also meant that we had to take a step back and better understand and assess what is material to our stakeholders and how we approach those material issues in our day-to-day operations. These could include issues outside of our financial considerations. By identifying the material issues affecting the company, our Annual Report has been more focused and concise.
Improving Communication with Stakeholders
One of the most significant benefits of IR has been the improvement in our communication with stakeholders. The integrated report provides a clear and concise narrative that explains how we create value. By presenting a comprehensive view of our performance, strategy, and future outlook, we have been able to build greater trust and confidence among our stakeholders.
The transparency and clarity offered by IR have also enhanced our engagement with investors, customers, employees, and other key stakeholders. By providing a more complete picture of our business, we have been able to address their concerns more effectively and demonstrate our commitment to sustainable growth. This improved communication has not only strengthened our relationships with stakeholders but also contributed to a more positive perception of Sime Darby in the market.
Impact of New Sustainability Standards on IR
The new IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures issued by the International Sustainability Standards Board (ISSB), that are based on IR principles, are expected to significantly enhance the relevance of IR by providing a global baseline for sustainability-related disclosures, improving clarity and comparability across markets. These standards emphasise materiality, ensuring companies report both the financial impacts of sustainability risks and how their operations affect the environment and society.
With the implementation of the ISSB standards, IR will become more robust and important in linking financial and non-financial performance more effectively, reinforcing long-term value creation, and ensuring higher-quality reporting. This evolution will further reinforce IR’s role as a comprehensive tool for communicating both performance and strategy in an era of heightened focus on sustainability.
The Continued Relevance of Integrated Reporting in Modern Business
Despite the emergence of various new standards and frameworks in the corporate reporting landscape, IR remains an essential tool for organisations. Its focus on integrated thinking and value creation provides a robust foundation for addressing the complexities of modern business environments. While new standards may offer additional insights and metrics, the holistic approach of IR ensures that organisations can maintain a balanced and comprehensive view of their performance.
As we look to the future, I firmly believe that IR will continue to play a crucial role in helping organisations navigate the evolving landscape of corporate reporting. By fostering integrated thinking and enhancing stakeholder communication, IR provides a powerful framework for driving sustainable value creation and long-term success.
Sime Darby’s journey with Integrated Reporting has been marked by transformation and growth. It has enabled us to embed integrated thinking into our strategy, improve our communication with stakeholders, and build a more resilient and sustainable organisation. Our IR journey has been both rewarding and challenging, and we are committed to continuing to improve our reporting quality and transparency. As we continue to evolve, we remain committed to leveraging the principles of IR and integrated thinking to drive our future success.
This article is the view of Dato’ Mustamir Mohamad, Member of the MIA Integrated Reporting Committee. Dato’ Mustamir is also the Managing Director of UMW Division, a wholly-owned subsidiary of Sime Darby Berhad. Prior to joining UMW, Dato’ Mustamir was the Group Chief Financial Officer of Sime Darby Berhad from 21 November 2017 to 13 December 2023.
