Throughout its relatively short life the concept of integrated reporting has been up against the idea that it is somehow a fad, a fashion, potentially short-lived, and somehow its time will pass. But the latest meeting of the UK <IR> Business Network emphatically put this to bed. And strong support came from both the business end, the companies involved, and investors. Behind the anonymity of Chatham House rules they said that integrated reporting is here to stay and that it was an irreversible process. And in his speech to open the meeting of the International Integrated Reporting Council Stephen Haddrill, CEO at the UK’s Financial Reporting Council, reminded his audience that only a few years ago there had been doubt and scepticism and while it had not disappeared entirely, ‘amongst investors and many others the story is changing’.

This is the narrative behind the growth and credibility of integrated reporting. As Haddrill pointed out positive change is being created. Investor stewardship is stronger. Companies are responding with a strong narrative which in turn helps create a strong investor base and companies see the need to look to the future in their reporting. Integrated reporting created an environment, in Haddrill’s words: ‘in which cynicism about reporting could give way to innovation’.

As speaker after speaker made plain integrated reporting helps companies demonstrate the authenticity and agility that investors want. Investors want to feel what is being communicated is authentic so that they can trust management and information included in the annual report. They want to see clear targets and if targets are not met or mistakes are made, then companies can admit them and change, explaining what they have done as a result. Investors want to see the agility that means that the business model can respond to change

Chairing the business network meeting, Veronica Poole, Deloitte’s UK National Head of Accounting and Corporate Reporting, likened the annual report to the facade of a building. The business itself is behind the façade. It is not enough to just tell a nicely connected story. That story needs to represent what happens in that building itself. And what needs to happen there is integrated thinking. That is what differentiates integrated reporting. In a truly integrated world integrated reporting is an output of integrated thinking and behaviour.

And this theme came across strongly from business participants. They talked about how the process of bringing people together from all the different parts and disciplines within a business and enabling them to challenge each other brought about a much greater internal understanding of the realities and possibilities which go into forming a corporate strategy. It allowed questions of how the business creates value to be debated and answered right across their particular business spectrum. And this created a forum in which mistakes could be admitted and change instituted. All this in turn was seen to benefit the organisation through thinking differently, thinking in a connected way: better information, better understanding, and greater coherence of strategy.

Participants talked of how conversations could flow through the organisations. Integrated reporting improved data for management and board decisions. But it worked right across an organisation. If the conversation created by integrated reporting moves from executives to the board and is then transferred into public statements it becomes a powerful tool to communicate. For example, there was better employee understanding of how they contribute to achieving the business strategy. But once again the benefits were not just communication.  There was huge value in having CFOs and CEOs looking at broader non-financial data. Bringing non-financial data and information onto the board’s agenda helps them understand how agile and sustainable their business is in the long-term.

It was later pointed out how important the chairman of the organisation was in this process. With CEOs and CFOs having a life expectancy in post of between three and four years the engagement of the chairman in active support of integrated reporting was seen as vital to the embedding of the process. It was back to the old mantra of tone from the top.

The question of assurance and the credibility of information created under integrated reporting was also raised. There was a natural desire for assurance but companies were holding back. Integrated reporting is still at a point in its development where no one wanted a hard and fast regulatory process to stifle development. The feeling was that for integrated reporting to be successful the process should be market-led, more innovation rather than standardisation.

Participants felt that many challenges remained. There was the question of materiality and how to address the clutter in financial statements, the current lack of rigour around the definition of non-financial KPIs, and the danger of inconsistency of definition year-on-year leading to data becoming meaningless and, of course, the nervousness around forward-looking information.

But overall the message was one of enthusiasm and momentum.