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Planetary governance
1. The world is not what it used to be. That reality is driving change. Today public and private
entities operate in a flat borderless electronic world 24/7. This is evidenced by the statistics released
by the International Assigned Names and Numbers (ICANN) that every 60 seconds of every 24 hours
there are 70 new domain names, 571 websites created, 204 million emails sent, 104 million skype
calls, 278 million tweets, etc. We live in a world of radical transparency – a reality.
2. That is just one of the realities impacting all entities. The other realities impacting on the ability to
maintain value creation in a sustainable manner are the global financial crises, climate change crisis,
greater expectations from stakeholders than ever before, the digital revolution, the net generation,
population growth and the use of natural assets faster than nature is regenerating them,.
3. We have 7.4 billion people on planet earth at present. I call the earth Planet Inn because we
expect the earth to provide us with board and lodging. Last night we had one eighth of the world’s
population went to bed hungry and/or without potable water. The latest figures released by the
United Nations indicate that by 2030 we will have 8.5 billion people, by 2050 9.1 billion and in 2100
11.3 billion people. Planet Inn cannot accommodate more people for board and lodging. There are
no vacancies – another reality.
4. The demand for product and services will increase and yet we live on a planet of finite natural
assets and we as individuals and entities public and private are using natural assets faster than
nature is regenerating them – another reality, ecological overshoot.
5. These realities or megatrends indicate that we can no longer carry on business as usual. We have
to develop our business models so that we learn to make more using a diminishing natural asset
base. Business is at the junction of the economy, society and the environment. How the company
makes its money impacts on all three aspects. A company is part of society, it is not apart from
society. Add to these realities that entities are operating in a world of accelerating climate change
and one has huge drivers for a change in corporate behaviour.
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6. These realities are driving common principles of governance around the world.
6.1 What are these common principles that are contained in governance codes and legislation
around the world?
7. Intellectual honesty
Entities are usually incapacitated, inanimate such as a company – an artificial person
They need individuals to animate them
None of us would act other than in good faith, with skill, care and diligence as the curator of a
mentally incapacitated young 18 year old as a result of a traffic accident whom we are told by the
physician/specialist could live well into his 90s.
Good faith, care, skill and diligence – curator of incapacitated young human being
7.1 Consequently quality governance starts and ends in the director’s or senior manager’s offices
and in the collective mind of the board
7.2 What legislatures, code-drafters and their participants are driving for is quality governance. It
makes no sense to have a quantitative, mindless check-list of having, for example, an audit
committee, a nominations committee, a compensation committee etc. Are they adding value to the
process in arriving at decisions in the best interests of the company?
7.3 The foundation of good governance to be found in all codes or legislation involving governance is
intellectual honesty. The honest application of the mind of the individual on behalf of the
incapacitated entity which is so dependent on it, heart, mind and soul.
7.4 If the foundation is intellectual honesty we need to set aside our present needs, our past
experiences, self interest, self concern, whispers in our ears and focus on the best interests of that
incapacitated entity. For that purpose we need to know the resources used by that entity and the
legitimate and reasonable needs, interests and expectations of its stakeholders. We need to act with
responsibility, be accountable, be fair and transparent.
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8. Responsibility connotes

Seen to be a responsible corporate citizen

Meet the legitimate and reasonable NIEs of the company’s stakeholders

Embed sustainability issues material to the business into strategy

Responsible investment – UNPRI, EU Directive, UK’s Strategic Report, Australia’s OFR

Value – change in meaning
9. Accountability connotes
There is a common basis forming for accountability. It is based on the premise that to be
accountable you have to account in an understandable manner.
9.1 The S&P 500 – critical but not sufficient
9.2 80/20% intangible assets
9.3 Thought leaders on the north-east coast of America
9.4 Development of GRI
9.5 United Nations Committee on Governance and Oversight - 2000/2001
9.6 Geneva UN headquarter – end 2009
9.7 St James’ Palace – 2010
9.8 Birth of IIRC – 2010
9.9 Issue of IIRC Framework – 2013
9.10 Moving to a planetary form of accountability – IR a concept whose time has come
9.11 The CRD – Hugette Labelle
9.12 Mark Carney, Chairman of the Financial Stability Board, has said: “By improving reporting
requirements for organisations, Integrated Reporting can bring additional information, in particular
about the longer-term costs of climate change, to feed into markets and inform decision-making and
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policy-formulation by institutions. If achieved, it will lead to better informed and more sustainable
long-term investment, for the benefit of society.”
9.13 Bertrand Badre of the IMF has said: “Public sector entities are one of the largest, if not the
largest, reporting entities in the world, so the transparency of their financial information is of
importance to us all. Integrated Reporting would enable governments and their stakeholders to gain
a better understanding of resources available and help them to manage these more effectively.”
9.14 The B20 recommends that a review be conducted by the IIRC and the IASB in relation to making
corporate reporting more conducive to infrastructure and other long term investment and
eliminating or addressing current barriers.
9.15 The Prime Minister of Sri Lanka has endorsed Integrated Reporting. Writing in the Daily
Financial Times he said that adopting <IR> will make Sri Lanka more attractive for foreign investment
and local private investment. The Prime Minister, Hon Ranil Wickremesinghe, wrote, "Learning and
adopting Integrated Reporting will definitely benefit the corporate sector and make their reports
more meaningful to investors and stakeholders. This will make our country more attractive for
foreign direct investment and local private investment."
9.16 Board applies its mind to material matter
9.17 Material being the matters that can substantively affect an entity’s ability to create value in a
sustainable manner, short, medium and long term.
9.18 To be accountable you have to be understandable – Global acceptance can be gleaned from the
make up of IIRC members
9.19 For example the CII, the Japanese Institute of Certified Public Accountants, the AICPA, Black
Rock, Ceres, Federation of Euro-Asian Stock Exchanges, the Global Compact, the GRI, the Korean
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Productivity Centre, the Princes’ Accounting for Sustainability Project, the UNPRI, Transparency
International , UNCTAD, UNEP, the Climate Disclosure Standards Board, the World Business Council
for Sustainable Development, the WWF, etc. You will see disparate bodies but with a common
acceptance.
9.20 CPA Canada has released a corporate reporting landscape document dealing, inter alia, with IR.
10. Fairness connotes

Balancing the NIEs

Monitor inputs, outputs and outcomes

Business model – how does the company make its money

Integrated thinking – interrelationship and interconnectedness of resources and
relationships in creating value

Interconnection and interrelationship in running a business
11. Transparency connotes

Inputs, activities, outputs, outcomes

Not nakedness

Balanced reporting – positives with the negatives

State of play in the company

The octopus
12. In short, it will be difficult to imagine an international code of governance that does not contain
the principles of responsibility, accountability, fairness, transparency on a foundation of intellectual
honesty. These are principles of good governance which should be applicable in all countries, to all
entities, be they public, private, large, listed or SMEs.
13. It does not help to have sight if we have no vision. A board must have the vision that it cannot
carry on as usual. It needs to change how the company makes its money. It has to change its mindset
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from financial reporting to corporate reporting, from focusing on the financial and manufactured
assets and look at the other critical capitals, natural, social, intellectual and human together with the
ongoing relationships with the company’s stakeholders. In brief, integrated thinking.
14. We have to have different tools in our corporate toolbox when we steer entities down what has
now become the street of last opportunity into the avenue of sustainable capitalism, acknowledging
that in the world that we all share, humanity has surpassed the limits of identifiable boundaries in
areas like climate change, biodiversity, population growth, etc.
15. It is the reality of the megatrends which has driven three major shifts in the world. These shifts
are from a focus on financial capital to inclusive capital, from short term capital to sustainable capital
and from silo reporting to integrated reporting. These shifts are in turn driving global governance.
We have to live prospectively. The future must be woven by the hand of change from the plague of
short term profit to total value creation.
16. We are steering incapacitated entities down the street of last opportunity. As transient
caretakers of planet earth we have a duty to ensure that the world we leave can sustain humankind.
We have to turn these entities into the avenue of sustainable capitalism. Do we as the animators of
these incapacitated entities have to grope in the dark? No, the light is before us by qualitatively
applying the global governance principles of RAFT on an intellectually honest basis. In this regard IR
is a concept whose time has come.