The International Integrated Reporting Framework creates the foundations for a new reporting model, which combines sustainability and financial data to provide a holistic view of the company and its ability to sustain value over the short, medium and long term. The first official version is expected for release later this year.
Integrated reporting differs from the current reporting landscape in a number of ways, including the concept of six capitals, a prism through which organizations should assess, and then report, the degree to which they are creating and destroying value over time. The capitals are: financial, manufactured, intellectual, human, social and relationship, and natural.
Integrated Reporting responds directly to the challenge faced by providers of financial capital, including investors, that intangible factors, such as intellectual property, brand, talent and environmental resource use are insufficiently integrated into the strategic decision-making and reporting by businesses, leading to the potential for a misallocation of resources and a higher cost of capital.
The IIRC was established in 2010 and today has a presence in 25 countries globally. Businesses involved in its work include: The Coca-Cola Company, China Light and Power, The Clorox Company, National Australia Bank, Unilever and Hyundai. The more than 50 institutional investors that have been involved in shaping and testing the Framework include: Deutsche Bank, Goldman Sachs, Natixis, APG and Norges Bank.
A better dialogue between company boards and their investors can lead to higher quality disclosures and a more informed capital market, according to a January roundtable hosted by the International Integrated Reporting Council and corporate communications agency Black Sun.
Tom Rotherham, director of Hermes Equity Ownership Services, said that investors and businesses need to be “on the same page” in order to achieve a commitment to long-termism, and that integrated reporting could help provide a better basis for discussion than current corporate reports.