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The Role Model for Capital Markets Institutions: Borsa Istanbul Releases Its First Integrated Annual Report

Posted 30 May, 2018

Social value and economic profit can be and should be realised simultaneously. Increasing concerns regarding environmental, social and governance (ESG) issues raise the need for businesses to be more involved with these challenges. Today, corporate performance is no longer evaluated only on financial criteria. It is widely accepted that companies should be the solution, not the reason for social and environmental problems.

Despite significant developments in ESG awareness in the world and in Turkey, there are still pending issues in terms of its communication. Firstly, the practice of sustainability reporting is not as widespread among small and medium enterprises. Even the largest companies have difficulty in integrating sustainability into the <IR> business strategy. The second issue is that, I believe, most of the stakeholders do not read the long reports with data overload, hence, unable to include them in the <IR> decision-making mechanisms.

At this point integrated reporting emerges as a way of enabling financial and non-financial information to converge, preventing the company from making a lot of reporting and therefore repetition, ensuring that the messages are consistent, and offering readable reports to be accounted in decision-making mechanisms.

In Turkey, the efforts to raise awareness on integrated reporting were accelerated when dedicated NGOs and companies formed a Turkish network, which I would become the Founding Chair. The establishment of Integrated Reporting Network Turkey (ERTA) was officially announced on February 15, 2017, with a bell ceremony at Borsa Istanbul.

Although being at its initial stages, 2017 was a fruitful year for ERTA. Committees and working groups were established within the network and pilot training programs were designed. Being one of the founding members of this network, Borsa Istanbul diligently contributed to the activities in an endeavor to adopt the integrated reporting practice and promote it in Turkey.

I was glad to witness Borsa Istanbul’s various steps in its sustainability journey such as cooperation with non-governmental organisations, encouraging traded companies and improving its own processes. In 2016, Borsa Istanbul had declared its medium and long-term plans and priority areas in its sustainability roadmap; two of the said actions were regarding the encouragement of not only the companies in Turkish capital markets but also Borsa Istanbul itself to adopt integrated reporting.

In November 2017, Borsa Istanbul’s bell rang for companies that had prepared integrated reports and experience sharing panels were conducted with the IIRC, Capital Markets Board of Turkey, ERTA and leading academics as panelists, talking to an audience of investors and listed companies. On the same day, Borsa Istanbul signed a collaboration agreement with the IIRC and ERTA to seek ways to encourage stronger dialogue between companies and investors through events and training or orientation programs, disseminating leading practices, research, and developments in integrated reporting in Turkey.

As a stock exchange operating multiple asset classes and providing post-trade services, Borsa Istanbul is subject to a complex array of interaction with external stakeholders. Before the reporting period, setting out to prepare an overall strategy with the participation of all the business units, senior management, and the board allowed Borsa Istanbul to reach a collective mind. As there is no one-size-fits-all in integrated reporting, Borsa Istanbul decided to put its strategic plan as a starting point in preparing the report. The strategy enabled them to refine future targets and identify material issues to be reported.

The integrated reporting process is not a magic box that solves the problems, rather it enables the organisation to understand what is missing. The process of moving from standard corporate reporting to an integrated report may take time but in the end increased transparency and high-quality reporting will facilitate the company’s access to finance by increasing investor confidence in the company. Investors are beginning to embrace integrated reports as they emerge as a clear and concise presentation of an organisation’s fundamentals, strategy and business model. In this respect, with its first annual integrated report, I believe, Borsa Istanbul will be a role model for companies in Turkish capital markets which is a real opportunity. With the transformative role of integrated reporting, I am sure that they will be an important actor to support and encourage integrated reporting practice in Turkey.