The International Integrated Reporting Council (IIRC) has launched its much heralded Integrated Reporting Framework. This follows a three-month global consultation earlier this year, which elicited over 350 responses from every region in the world, the overwhelming majority of which expressed support for <IR>.
The IIRC’s aim is clear "… a concise communication about how an organization’s strategy, governance, performance and prospects, in the context of its external environment, lead to the creation of value in the short, medium and long-term".
<IR> applies principles and concepts that are focused on bringing greater cohesion and efficiency to the reporting process, and adopting “integrated thinking” as a way of breaking down internal silos and reducing duplication. It improves the quality of information available to providers of financial capital to enable a more efficient and productive allocation of capital. Its focus on value creation, and the ‘capitals’ used by the business to create value over time, contributes towards a more financially stable global economy and is a force for sustainability.
The Framework is currently being piloted in over 25 countries, by more than 100 organisations including PepsiCo, Microsoft, Gold Fields, Natura, National Australia Bank and the UK Crown Estate. I’m also proud to say that CIMA is a pilot programme participant, see our first step towards integrated reporting in the CIMA 2012 Annual Review.
The <IR> framework provides a combined emphasis on conciseness, future orientation and a firm focus on strategy and the business model. The connectivity of information and the capitals, and their interdependencies, will help to improve the information available to enable a more efficient and productive allocation of capital both between businesses and within businesses.
I am an advocate of integrated reporting but although a good integrated report should be of value to investors and other stakeholders I believe the greater value is to be derived by organisations adopting the more integrated thinking and decision making needed to be able to report internally in a meaningfully integrated way, the 'top-slice' of which is then reported externally.
Integrated reporting needs to and can be the catalyst to drive forward more integrated thinking and decision making by helping to centre the boardroom conversation on the key factors that influence value creation over the short, medium and importantly the long term.
The challenge for me is how to recognise and describe good integrated thinking and make decision making in practice and how to make the link to better performance especially when that better performance needs to be sustainable over the longer term to be of persuasive force to short-term thinking sceptics.