Issues such as climate change and the over-consumption of the Earth’s finite natural resources are likely to lead to major changes in our economic model.
In the face of this challenges it is increasingly important for organizations to understand how such issues will impact on their continuity and success in the short, medium and long-term, and to be able to communicate clearly both the impacts and the company’s response to investors and other stakeholders. It is only through the integration of environmental and social factors into business and management reporting that the fundamental connection between strategic direction, financial performance and sustainability impacts will be made clear.
External corporate reporting has evolved from the simple financial reporting of profits and losses, assets and liabilities, to give more information about how organizations are managed and conduct their business. This change has embraced information on governance as well as non-financial information on environmental and social performance.
In parallel, a separate strand of reporting has emerged under the “Corporate Social Responsibility” (CSR) or “sustainability” banner, which, as well as environmental impacts, can cover corporate relationships with employees, their health and wellbeing, relations with local communities, working conditions in the supply chain, transparency of business dealings, and anti-fraud and anti-corruption behaviour.
The challenge is to ensure that sustainability information is included in mainstream reporting and is strategically important so that it forms part of the decision-making process of the business. This differs from much of the current corporate responsibility reporting which is not connected with the business and its strategic thinking.
What is Integrated Reporting?
Integrated Reporting demonstrates the linkages between an organization’s strategy, governance and financial performance and the social, environmental and economic context within which it operates. By reinforcing these connections, Integrated Reporting can help business to take more sustainable decisions and enable investors and other stakeholders to understand how an organization is really performing.
An Integrated Report should be a single report which is the organization’s primary report – in most jurisdictions the Annual Report or equivalent. Central to Integrated Reporting is the challenge facing organizations to create and sustain value in the short, medium and longer term. Each element of an Integrated Report should provide insights into an organization’s current and future performance.
By addressing the material issues for an organization, an Integrated Report should demonstrate in a clear and concise manner an organization’s ability to create and sustain value in the short, medium and longer term.