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Integrated reporting

Integrated Reporting (<IR>)

Integrated reporting (’<IR>’) provides a conceptual framework for thinking about how you do business and how you communicate your long term value proposition to the market. It aims to promote trust in business, stimulating long-term investment, robust corporate governance and responsible capitalism which are at the top of business and government agendas.

An international initiative, <IR> has tended to be market-driven rather than regulated, although some jurisdictions have adopted the <IR> Framework (see below) on a ‘comply or explain’ basis.  <IR> is about empowering and encouraging businesses to explain and be transparent about how they create value.  This is important both for the reasons above and also because the quality of a business’ information affects investors’ assessments about the quality of management. 

But it’s not just about reporting. At the heart of the concept of <IR> is the notion of integrated thinking: the active consideration by an organisation of the relationships between its various operating and functional units, and the capitals (i.e. its key relationships and resources) that the organisation uses or affects. Integrated thinking leads to integrated decision-making and actions that consider the creation of value over the short, medium and long-term. 

<IR> aims to:

  • Improve the quality of information available to providers of financial capital to enable a more efficient and productive allocation of capital
  • Promote a more cohesive and efficient approach to corporate reporting that draws on different reporting strands and communicates the full range of factors that materially affect the ability of an organisation to create value over time
  • Enhance accountability and stewardship for the broad base of capitals (financial, manufactured, intellectual, human, social and relationship, and natural) and promote understanding of their interdependencies
  • Support integrated thinking, decision-making and actions that focus on the creation of value over the short, medium and long term.

There are three fundamental concepts underpinning <IR>:

  1. Value creation for the organisation and for others. An organisation’s activities, its interactions and relationships, its outputs and the outcomes for the various capitals it uses and affects influence its ability to continue to draw on these capitals in a continuous cycle.
  2. The capitals. These are the resources and the relationships used and affected by the organisation, which are identified in the <IR> Framework as financial, manufactured, intellectual, human, social and relationship, and natural capital. However, these categories of capital are not required to be adopted in preparing an entity’s integrated report, and an integrated report may not cover all capitals – the focus is on capitals that are relevant to the entity.
  3. The value creation process. At the core of the value creation process is an entity’s business model, which draws on various capitals and inputs, and by using the entity’s business activities, creates outputs (products, services, by-products, waste) and outcomes (internal and external consequences for the capitals).

The <IR> Framework

The International Integrated Reporting Council (‘IIRC’) published 'The International <IR> Framework' (<IR> Framework) in December 2013 and it explains the fundamental concepts of integrated reporting and provides principles-based guidance for entities wishing to prepare an integrated report. 

The <IR> Framework is principles-based, designed with the objective of achieving an appropriate balance between allowing flexibility to take account of the individual circumstances of different organisations and the need for comparability.  The ‘building blocks’ of an integrated report are:

  • Guiding principles – these underpin the preparation of an integrated report, informing the content of the report and how information is presented; and
  • Content elements – the key categories of information required to be included in an integrated report under the Framework, presented as a series of questions rather than a prescriptive list of disclosures.

In March 2017, the IIRC published a consultation to gauge businesses' views on the implementation of the <IR> Framework, to inform on further development. In October 2017 the feedback received was published which indicated that the Framework stands up well to the challenges of implementation. However, several opportunities to provide guidance and examples and take other actions to help report preparers and other stakeholders continue to tackle challenges were also identified. The report identifies 48 actions the IIRC currently proposes taking, based on the preliminary analysis of the feedback.

The IIRC has also published a set of frequently asked questions on integrated reporting available here.

Further information on <IR> and the <IR> Framework can be found on the dedicated page for the IIRC.

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