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.
IIRC – History and Current Activities
A4S developed the “Connected Reporting Framework” (CRF) in 2007 and the Connected Reporting “how to” guide in 2009, which explain how all areas of organizational performance can be presented in a connected, integrated way, reflecting the organization’s strategy and the way it is managed. For more information on Connected Reporting click here.
Following the success of the work undertaken by A4S and others in driving changes to corporate reporting, at the A4S Forum event on 17th December 2009 His Royal Highness The Prince of Wales, on behalf of A4S, the GRI and IFAC, called for an ‘International Integrated Reporting Council’ (IIRC) to be established to oversee the development of an international connected and integrated approach to corporate reporting.
The IIRC was set up in 2010 comprising an international cross section of leaders from the corporate, investment, accounting, securities, regulatory, academic and standard-setting sectors as well as civil society. A4S acted as the Secretariat for the IIRC until January 2012.
How does A4S work with the IIRC?
From January 2012, the International Integrated Reporting Council (IIRC) has been supported by an independent Secretariat, although A4S still works closely with the IIRC.
The mission of the IIRC is to create a globally accepted Integrated Reporting framework which brings together financial, environmental, social and governance information in a clear, concise, consistent and comparable format.
A4S works to promote the Integrated Thinking that is required if organizations are to achieve successful Integrated Reporting. Only once organizations are thinking in an integrated way, can this be demonstrated through Integrated Reporting.
Towards Integrated Reporting – Communicating Value in the 21st Century – Discussion Paper
The IIRC has published the Discussion Paper Towards Integrated Reporting – Communicating Value in the 21st Century which considers the rationale for Integrated Reporting, offering initial proposals for the development of an International Integrated Reporting Framework and outlining the next steps towards its creation and adoption. Its purpose was to prompt input from all those with a stake in improved reporting, including producers and users of reports.
The Integrated Reporting Pilot Programme
The Integrated Reporting Pilot Programme offers a select group of companies the opportunity to demonstrate global leadership in this emerging field of corporate reporting. The Pilot Programme has underpinned the development of the Integrated Reporting Framework. Through the Pilot Programme, the principles and practicalities of Integrated Reporting will be tried and tested, to support the creation of a new global standard in Integrated Reporting. Over 80 companies from around the globe have been invited to join the Programme and companies from various sectors have secured their participation, including Microsoft Corporation (Software and Computer Services), HSBC (Banks) and Gold Fields (Mining).
International Integrated Reporting Framework
The IIRC will publish the International Integrated Reporting Framework in December 2013. Throughout 2013 the IIRC will be focused on leading up to this point through the following:
- The IIRC Pilot Programme will continuously call upon more businesses and investors to join the Pilot Programme. This will mean the Business Network and Investor Network will have even more capacity to thoroughly inform the development of the Framework and its practical application.
- From 16 April for 90 days the IIRC held a Consultation Draft Period in which they received feedback, opinions and thoughts from all stakeholders on the International Integrated Reporting Framework.
- A review and development of the IIRC’s governance structure to support the development and adoption phase of Integrated Reporting.