Integrated Reporting: A Process and Product Worth Rethinking
Published - 26 July, 2019
By Sarah-Jane Wilkinson
Rethink Results, Think Value!
Organisations do not exist in isolation from society and the greater environment. They are completely interconnected and rely on one another for long-lasting prosperity. It is within this context that organisations and investors have had to re-evaluate the way in which they assess organisational value and the long-term viability of a business model or investment.
In a time where business is expected to contribute to solutions for critical societal issues such as economic inclusivity and combatting climate change, financial information does not provide enough information to determine the future value and longevity of an organisation when it is isolated from an analysis of the organisation’s use of resources and their ability to sustainably satisfy stakeholder needs.
But how does an organisational leader go about analysing the push and pull between these different elements to determine a strategy for optimal long-term value creation? And how does an analyst determine the true value or the investment case of an organisation without looking further than the financial results?
Rethink Reports, Think Stories!
The International Integrated Reporting Council (“the IIRC”) with the support of the King Committee on Corporate Governance recommends that organisations produce an integrated report to replace what was previously known as an annual report.
An integrated report is a document that provides a concise, strategic overview of an organisation’s governance, strategy, activities and performance, with the purpose of providing enough information for all stakeholders to make an informed assessment of an organisation’s ability to create and sustain value, within the context of its external environment, in the short, medium and long term. It is intended to be more than just a summary of other communications (the financial statements, the sustainability report, etc.) rather, it makes explicit the connectivity of information to provide a story that explains how value is created over time.
Rethink Compliance Report, Think Valuable Tool!
Integrated reporting comes as a process as well as a product. As a process, it aims to elicit integrated thinking within organisations. This promotes a forward-looking and inter-connected approach to tailoring an organisation’s business model and managing an organisation’s strategy to create and sustain value through time, taking into account the relationship between financial, economic, environmental and social systems as well as the resources and relationships that an organisation uses and affects.
This involves a detailed analysis of the organisation’s strategy and operations that results in a clearer understanding of the organisation’s impact, risks and outlook. The resultant insights may lead to subsequent adjustments of the strategy and/or operations but will also provide the base to determine a set of key performance indicators that, when shared amongst the organisation, could provide incentive for improved performance.
As a product, an integrated report plays a vital role in an organisation’s entire stakeholder communications strategy. It provides an opportunity for an organisation to show their stakeholders what they are doing to ensure that they will continue to add value to each of their key stakeholder groups in the short, medium and long term. These reports are becoming increasingly popular especially amongst investors who use integrated reports to analyse the value and long-term viability of an investment.
Rethink Additional, Think Integrated!
The International Integrated Reporting Framework (“the IIRF”), created by the IIRC, provides a basic guideline for compiling integrated reports. However, the IIRF has been created in a way that allows organisations around the world to prepare their integrated report in accordance with any existing (local or international) compliance requirements. In South Africa, for example, the IIRF provides a reporting framework to house the reporting requirements of the JSE’s Listings Requirements, the Companies Act, the International Financial Reporting Standards, the King Code on Corporate Governance, the GRI Standards, the Carbon Disclosure Project, the Equator Principles, the Code for Responsible Investment in South Africa and various other industry-specific regulatory/compliance standards.For more information about the International Integrated Reporting Council, visit their website on https://integratedreporting.org/ For more information about the South African Integrated Reporting Council, visit their website on http://integratedreportingsa.org/
Sarah-Jane Wilkinson is the Strategy Manager at Ince