Integrated Reporting <IR> Framework (IIRC)

The International Integrated Reporting Council (IIRC) is a global coalition of regulators, investors, companies, standard setters, the accounting profession and NGOs. It came out of a high level meeting of these stakeholders convened by The Prince of Wales in 2009.

Ambition:

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, and within the context of its external environment.

For <IR> to be accepted globally as the corporate reporting norm.

How:

The IIRC has developed an International <IR> Framework to govern the overall content of an integrated report. This comprises:

Fundamental concepts – The capitals (financial, manufactured, intellectual, human, social, and natural); business model; and the creation of value over time.

Guiding principles - Strategic focus and future orientation, Stakeholder responsiveness, Materiality and conciseness, Reliability and completeness, Consistency and comparability.

Content elements - Organizational overview and external environment; Governance; Opportunities and risks; Strategy and resource allocation: Performance; Future outlook

The framework is being tested in a global, cross sector consultation and pilot.  The pilot will continue until September 2014, it currently comprises:

  • The Business Network with over 100 businesses across the globe from multinational corporations to public sector bodies (inc Danone, HSBC, M&S, Prudential, Sainsburys, Coca Cola, Tata Steel, Unilever)

  • The Investor Network with over 35 investors organizations (inc Deutche Bank, Goldman Sachs, Hermes)

Key findings (from the ongoing pilot) include:

  1. Business model:  Some companies are identifying new business models in terms of operating structures, brands and product or service offerings; Reporting on the business model in an integrated way can provide insight into how external factors drive risks and opportunities that define markets and influence value creation.

  2. Value:  There is growing recognition that a wide range of factors create value in the short, medium and long term; Recognising value creation more comprehensively can help identify value at risk.

  3. The capitals: Many companies are initially strengthening measurements of corporate key performance indicators (KPIs) in relation to the capitals, as part of understanding their strategic significance to businesses;  Finance departments are becoming accountable for more than financial information;

  4. Connectivity:  Connecting information can facilitate more productive dialogue between employees, break down ‘silos’ and lead to stronger cross-functional communications; Integrated decision-making can contribute to more meaningful dialogue with external stakeholders.

  5. Materiality:  Several investors have called for Annual Reports to clearly identify material risks and the financial and strategic implications of all the capitals; Materiality assessments can be useful to identify and prioritise issues that could be material to the organisation’s value in the short, medium or long term; Companies can connect internal and external information on all of the capitals to identify material issues that are relevant to strategy development.

Read more on the IIRC website.