Four ideas for improving Integrated Reporting

The International Integrated Reporting Council (IIRC) recently completed the consultation period for its draft version of the International Integrated Reporting (<IR>) framework, with <IR> ‘Version 1’ to be released in December. IGAP researchers Dr Dale Tweedie and Prof. Nonna Martinov-Bennie raised four ideas for the IIRC to consider in its revisions.

????????????????????????????????????????????????????????????????????????????????????????1. Clarifying the relationship between <IR> and other reporting systems

The IIRC’s ‘value-creation’ approach to non-financial reporting is very different from the ‘impact-assessment’ approach used by the Global Reporting Initiative (GRI). Users of <IR> would benefit from greater guidance on how <IR> and GRI4 can be complementary in a practical reporting context; for example, by clarifying differences in the materiality determination processes of <IR> and GRI4 and which – if any – takes precedence.

2. Acknowledge and address stakeholder conflicts

The IIRC’s view that the interests of providers of financial capital – the primary audience of <IR> – and other stakeholders will align over the long term overlooks potential conflicts between these groups, and so how conflicts should be reported. An example in Australia is coal seam gas (CSG) exploration, which promises significant financial benefits to mining and energy organisations, but which other stakeholders have claimed is a long-term risk (e.g. to primary production and water supply). Given this perceived conflict, what should be reported by organisations engaged in CSG exploration? Further clarity on the ‘legitimate needs, interest and expectations’ of other stakeholders that an <IR> should acknowledge would help address these kinds of issues.

3. Increase comparability through a stronger ‘core’

As our earlier blog discussed, while a principles-based framework is a useful method of avoiding boiler-plate disclosures, <IR>s need sufficient commonalities to be comparable over time and between organisations. Providing a stronger ‘core’ of reporting requirements and methods, best practice guidance (e.g. on carbon reporting) and definitions of key terms could encourage comparability without sacrificing the principles-based approach.

4. Governance as accountability

The draft <IR> framework asks each organisation to explain how its ‘governance structure support[s] its ability to create value in the short, medium and long term’. While good governance is part of value creation, the key features of governance are accountability, transparency and ethics, which are fundamental to ensuring that the value that organisations create is managed and distributed in appropriate ways. Following the King Reports in South Africa, <IR> could play a greater role in emphasising and communicating the importance of these aspects of governance. 

3 thoughts on “Four ideas for improving Integrated Reporting

  1. Interesting and excellent ideas.
    My two cents are that the critical thing to achieve is what in the draft Framework is termed ‘Integrated Thinking’. My assertion is that they key reason we lack style disclosures is in fact not a lack of quality in reporting, but rather a lack of quality in the Board room on ‘Integrated Thinking’. Without Integrated Thinking is difficult, if not impossible. With Integrated Thinking almost becomes natural to the business. It follows that the key challenge is in fact to facilitate and enable Integrated Thinking.
    On your ideas, I particularly like the focus on value-creation – it is in line with the best Integrated Reporting, and in fact the most pursuasive sustainability reporting I have seen – e.g. driven by the Intllectual Capital reporting initiative in Denmark more than a decade ago.

    • Thanks very much for your comments Leon, and I agree that it is important to emphasise the ‘Integrated Thinking’ aspect of IR. One additional issue though is that, in comparison to the reporting framework itself, it seems harder for stakeholders to determine how deeply ‘Integrated Thinking’ is occurring, and what effects it is having on an organisation’s behaviour. It would be interesting to see some further discussion on this as more organisations trial IR, from both inside the organisations and different stakeholder groups.


    • Leon, You are on the money about the importance of critical thinking at the Board and Committee level to the success of . I went to a couple of the recent sessions here in Melbourne run by the Business Reporting Leaders Forum and KPMG and I recall that both Prof. Mervyn King and John Stanhope essentially said that most good boards try to think in an integrated way anyway (and in my experience this will be evident by the robust discussions that they may have on material matters), but in my experience the reporting system (Board reporting, Management Reports and MIS, External Reporting, etc) doesn’t always align with this integrated thinking. I think the proposed model provides a great opportunity for Boards and Management to be on the the same page about their organisation’s use of the various capitals and the value created out of that. It can facilitate discussions beyond the tactical, financial and tangible. This is where a good board can really perform. Yes is oriented to the capital markets, but the principles should filter into internal reporting including Board and Committee reporting and even the way board papers for decision are drafted by management.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s