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Integrated reporting (IR, or in International Integrated Reporting Council publications) in
corporate communication Corporate communication is a set of activities involved in managing and orchestrating all internal Internal may refer to: *InternalityAn internality is the long-term benefit or cost to an individual that they do not consider when making the decisio ...
is a "process that results in communication, most visibly a periodic “integrated report”, about
value creation A value proposition is a promise of value (economics), value to be delivered, communicated, and acknowledged. It is also a belief from the customer about how value (benefit) will be delivered, experienced and acquired. A value proposition can app ...
over time. An integrated report is a concise communication about how an organization's strategy, governance, performance and prospects lead to the creation of value over the short, medium and long term." It means the integrated representation of a company's
performance A performance is an act of staging or presenting a play, concert, or other form of entertainment. It is also defined as the action or process of carrying out or accomplishing an action, task, or function. Management science In the work place ...
in terms of both financial and other value relevant information. Integrated Reporting provides greater context for performance data, clarifies how valuable relevant information fits into operations or a business, and may help make company
decision making In psychology Psychology is the scientific Science () is a systematic enterprise that builds and organizes knowledge Knowledge is a familiarity or awareness, of someone or something, such as facts A fact is an occurrence in ...

decision making
more long-term. While the communications that result from IR will be of benefit to a range of stakeholders, they are principally aimed at providers of financial capital allocation decisions. IR helps to complete financial and sustainability reports. A framework has been published, but some questions remain in order to know how to apply it. Do we need a new report? Do we need one report ?Eccles, R.G., Krzus, M. (2010) One Report: Integrated Reporting for a Sustainable Strategy, Wiley, New Jersey, USA. Will this report be useful for investors, and for other stakeholders? Other questions could have been raised, such as who is really working for an integrated reporting, and who has interests in it.


The call for integrated reporting

Capitalism Capitalism is an economic system An economic system, or economic order, is a system A system is a group of interacting Interaction is a kind of action that occurs as two or more objects have an effect upon one another. The idea o ...

Capitalism
relies on the allocation of capital to deliver returns to investors over the short, medium and long term. It is the job of companies to manage the
financial capital Financial capital (also simply known as capital or equity in finance Finance is a term for the management, creation, and study of money In a 1786 James Gillray caricature, the plentiful money bags handed to King George III are contra ...
that
investor An investor is a person that allocates capital with the expectation of a future financial return (profit) or to gain an advantage (interest). Through this allocated capital most of the time the investor purchases some species of property. Type ...
s provide and also to create and preserve the value generated from other forms of non-financial data such as people,
trademark A trademark (also written trade mark or trade-mark) is a type of intellectual property Intellectual property (IP) is a category of property Property is a system of rights that gives people legal control of valuable things, and also r ...

trademark
s/
copyright Copyright is a type of intellectual property Intellectual property (IP) is a category of property Property is a system of rights that gives people legal control of valuable things, and also refers to the valuable things themselves. ...

copyright
s and
natural resource Natural resources are resource Resource refers to all the materials available in our environment which help us to satisfy our needs and wants. Resources can broadly be classified upon their availability — they are classified into renewabl ...
s or nature, the basis of all life. The western model of capitalism has been questioned following the onset of the
banking crisis A bank run (also known as a run on the bank) occurs when many clients withdraw their money from a bank, because they believe the bank may cease to function in the near future. In other words, it is when, in a fractional-reserve banking system (w ...
in 2007 because of its apparent dependence on short-term financial factors over other forms of capital and longer time scales. Corporate reporting no longer reflects the needs of the 21st century, resilient capitalism needs
financial stability Financial stability is a property of a financial system A financial system is a system that allows the exchange of funds between financial market participants There are two basic financial market participant categories, Investor vs. Specul ...
and sustainability in its exchange with nature in order to succeed – and Integrated Reporting is intended to underpin both of these problems through communicating to providers of financial capital the information that they need. Therefore, a report of financial data is no longer sufficient, but has to be extended with information about our exchanges with nature, as money is not natural, but a 7,000 year old cultural invention. Nature has never invented a means for its exchanges. At the heart of IR is the growing realization that a wide range of factors determine the value of an organization – some of these are financial or tangible in nature and are easy to account for in
financial statement Financial statements (or financial reports) are formal records of the financial activities and position of a business, person, or other entity. Relevant financial information is presented in a structured manner and in a form which is easy to un ...
s (e.g. property, cash), while many such as
intellectual capital Intellectual capital is the result of mental processes that form a set of intangible objects that can be used in economic activity and bring income to its owner (organization An organization, or organisation (Commonwealth English The u ...
,
competition Competition is a rivalry A rivalry is the state of two people or groups engaging in a lasting competitive relationship. Rivalry is the "against each other" spirit between two competing sides. The relationship itself may also be called "a ri ...
and
energy security Energy security is the association between national security and the availability of natural resources for energy consumption. Access to (relatively) cheap energy has become essential to the functioning of modern economies. However, the uneven di ...
are not. IR reflects the broad and longer-term consequences of the decisions organizations make, based on a wide range of factors, in order to create and sustain value. IR enables an organization to communicate in a clear, articulate way how it is drawing on all the resources and relationships it utilises to create and preserve value in the short, medium and long term, helping investors to and most efficiently. It is therefore necessary, to extend the reporting of only financial data with ecological data, for example about carbon dioxide emissions a company generates. When according to the 2015
Paris climate agreement The Paris Agreement (french: Accord de Paris), often referred to as the Paris Accords or the Paris Climate Accords, is an international treaty on climate change, adopted in 2015. It covers climate change mitigation, Climate change adaptation, ...
carbon dioxide emissions should be reduced, than at first a report about this is necessary to aim at saving them. Integrated Reporting therefore needs two sides, the financial balancing data as well the non-financial ecological data, it must aim at two achievements: annual financial profit per as well as profit for nature, e.g. reductions in CO2 emissions.


History of integrated reporting

In 2009, the
Prince of Wales Prince of Wales ( cy, Tywysog Cymru, ) is a title traditionally and ceremonially granted to the heir apparent An heir apparent is a person who is first in an order of succession An order of succession or right of succession is the line o ...

Prince of Wales
convened a high-level meeting of investors, standard setters, companies, accounting bodies and UN representatives including The Prince's Accounting for Sustainability Project,
International Federation of Accountants The International Federation of Accountants (IFAC) is the global advocacy organization for the accountancy profession the accountancy profession; mainly for the financial accounting and auditing professions. Founded in 1977, IFAC has more than 175 ...
(IFAC), and the
Global Reporting Initiative The Global Reporting Initiative (known as GRI) is an international independent standards organization that helps businesses, governments and other organizations understand and communicate their impacts on issues such as climate change, human righ ...
(GRI), to establish the International Integrated Reporting Committee (IIRC), a body to oversee the creation of a globally accepted Integrated Reporting framework. In November 2011, the Committee was renamed the International Integrated Reporting Council.


Timeline


International Integrated Reporting Council

The International Integrated Reporting Council (IIRC), of which
Mervyn KingMervyn King may refer to: *Mervyn King, Baron King of Lothbury (born 1948), British economist, former governor of the Bank of England *Mervyn King (judge) (born 1937), former judge of the Supreme Court of South Africa and chairman of the King Commit ...
is chair, was convened in order to aid businesses and investors as they begin to adopt Integrated Reporting. Launched in 2010 by the Prince of Wales with international partners. The IIRC was formerly known as the International Integrated Reporting Committee, being renamed in 2011. The Prince's Accounting for Sustainability Project (A4S) acted as the Secretariat for the IIRC until January 2012. The IIRC calls itself 'a global coalition of regulators, investors, companies, standard setters, the accounting profession and NGOs. Together, this coalition shares the view that communication about businesses' value creation should be the next step in the evolution of corporate reporting'. It states its mission is to create the globally accepted International IR Framework that elicits from organizations material information about their strategy, governance, performance and prospects in a clear, concise and comparable format. The Framework is intended to underpin and accelerate the evolution of corporate reporting, reflecting developments in financial governance, management commentary and sustainability reporting. The IIRC produced a 'Discussion Paper' in 2011 from which the overwhelming feedback demonstrated overwhelming support for Integrated Reporting and endorsed the development of a global Framework. It also concluded that the primary audience of integrated reports is investors in order to aid their allocation of financial capital.


The IIRC Pilot Programme

The IIRC began a Pilot Programme in 2011 in order to underpin the development of the International Integrated Reporting Framework. The group of organizations participating in the Pilot Programme have the opportunity to contribute to the development of the Framework. Paul Druckman, CEO IIRC, said "We call the Pilot Programme our "innovation hub" - made up of people who want to push the boundaries just a little bit further, to challenge, or at least question orthodox thinking, and to acknowledge the importance of reporting to the way our organizations think and behave". There are over 90 businesses in the Pilot Programme Business Network include
Unilever Unilever PLC is a British multinational Multinational may refer to: * Multinational corporation, a corporate organization operating in multiple countries * Multinational force, a military body from multiple countries * Multinational state, a so ...

Unilever
,
Coca-Cola Coca-Cola, or Coke, is a carbonated Carbonation is the chemical reaction A chemical reaction is a process that leads to the chemical transformation of one set of chemical substances to another. Classically, chemical A chemical sub ...

Coca-Cola
,
Microsoft Microsoft Corporation is an American multinational corporation, multinational technology company, technology corporation which produces Software, computer software, consumer electronics, personal computers, and related services. Its best-know ...

Microsoft
,
China Light and Power CLP Group () and its holding company, CLP Holdings Ltd (), also known as China Light and Power Company, Limited (now CLP Power Hong Kong Ltd., ), is an electricity company in Hong Kong. Incorporated in 1901 as China Light & Power Company Syndi ...
,
Hyundai Hyundai is a South Korea South Korea, officially the Republic of Korea (ROK), is a country in East Asia, constituting the southern part of the Korea, Korean Peninsula and sharing a Korean Demilitarized Zone, land border with North Korea. ...
, Diesel & Motor Enigineering PLC (Dimo-Sri Lanka) and
HSBC HSBC Holdings plc is a British multinational Multinational may refer to: * Multinational corporation, a corporate organization operating in multiple countries * Multinational force, a military body from multiple countries * Multinational state ...

HSBC
. The IIRC, in collaboration with UNPRI set up an Investor Network as part of its Pilot Programme. It is made up of over 30 investor organizations in order to help shape the Framework by providing an investor's perspective on the shortfalls in current corporate reporting.


The International Integrated Reporting Framework

The IIRC was created with the remit of developing the globally accepted International IR Framework that elicits from organizations material information about their strategy, governance, performance and prospects in a clear, concise and comparable format. The Framework will underpin and accelerate the evolution of corporate reporting, reflecting developments in financial, governance, management commentary and sustainability reporting. The benefits of the Framework are purported to be the enabling of informed decision-making that leads to efficient capital allocation and the creation and preservation of value. The Framework is ultimately intended as a guidance for all businesses producing integrated reports.


National integrated reporting practices


Netherlands

The Dutch accountancy body, NBA (Koninklijke Nederlandse Beroepsorganisatie van Accountants) announced in 2015 that it would be collaborating with the IIRC "to increase the momentum towards integrated reporting by raising awareness in markets across the world".


South Africa

Corporate reporting on financial and non-financial information in a single document has grown as companies such as BlackSun have produced research which suggests that producing integrated reports will have a strong correlation to the resilience and ability of a business to create value in the short, medium and long term. For many years businesses have been producing both Annual Reports and separate sustainability reports. However, increasingly often businesses are starting to produce integrated reports. On 1 March 2010 the
Johannesburg Stock Exchange JSE Limited (previously the JSE Securities Exchange and the Johannesburg Stock Exchange) is the largest stock exchange A stock exchange, securities exchange, or bourse is an Exchange (organized market), exchange where stockbrokers and sto ...

Johannesburg Stock Exchange
(JSE) adopted the King III principles as part of its listing requirements, which require listed companies to apply King III or explain which recommendations have not been applied and publicly provide reasons therefore. King III recommends Integrated Reporting and hence the requirements for listed companies to issue integrated reports. In the King III Report (otherwise known as King Code of Governance for South Africa 2009), Integrated Reporting is referred to in this manner: "''A key challenge for leadership is to make sustainability issues mainstream. Strategy, risk, performance and sustainability have become inseparable; hence the phrase ‘integrated reporting’ which is used throughout this Report''."


See also

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Corporate social responsibility Corporate social responsibility (CSR) is a form of international private business self-regulation which aims to contribute to societal goals of a philanthropic, activist, or charitable nature by engaging in or supporting volunteering or ethically- ...
*
Environmental Social and Corporate Governance Environmental, Social, and Corporate Governance (ESG) is an evaluation of a firm’s collective conscientiousness for social and environmental factors. It is typically a score that is compiled from data collected surrounding specific metrics ...
*
EthicalQuote Covalence EthicalQuote also called EthicalQuote or simply CEQ is a market index (economics), index tracking reputation of the world's largest companies on Environmental, Social, Governance (ESG), Corporate social responsibility, Corporate dimensio ...
*
Financial statement Financial statements (or financial reports) are formal records of the financial activities and position of a business, person, or other entity. Relevant financial information is presented in a structured manner and in a form which is easy to un ...
*
Islamic Reporting Initiative The Islamic Reporting Initiative (IRI) is an independent Nonprofit organization, not-for-profit organization leading the creation of the IRI standard; the guiding Integrated reporting, integrated Corporate Sustainability and Social Responsibility ...
*
King Report on Corporate Governance The King Report on Corporate Governance is a booklet of guidelines for the governance structures and operation of companies in South Africa. It is issued by the King Committee on Corporate Governance. Three reports were issued in 1994 (King I), 20 ...
*
Social accounting Social accounting (also known as ''social accounting and auditing :''"Social auditing" Social accounting and audit is a comprehensive triple bottom line planning and measurement method. Social accounting and audit uses quantitative analysis of p ...
*
Socially responsible investing Socially responsible investing (SRI), social investment, sustainable socially conscious, "green" or ethical investing, is any investment Investment is the dedication of an asset to attain an increase in value over a period of time. Investm ...
*
Sustainability reporting Sustainability reporting enables organizations to report on environmental and social performance. It is not just report generation from collected data; instead it is a method to internalize and improve an organization’s commitment to sustainable ...
*
Triple bottom line The triple bottom line (or otherwise noted as TBL or 3BL) is an accounting Accounting or Accountancy is the measurement ' Measurement is the number, numerical quantification (science), quantification of the variable and attribute (research), ...


References

{{Reflist Corporate governance