Before the end of last year, the International Integrated Reporting Council (IIRC) issued its International Integrated Reporting Framework (Framework), which promotes a more cohesive and efficient approach to corporate reporting and aims to improve the quality of information available to providers of financial capital to enable a more efficient and productive allocation of capital.
With representatives in the IIRC Board, Council, and various working groups IFAC not only actively participated in the initial development of the Framework (for example, see the IFAC response to the Integrated Reporting Consultation Draft) but also continues to participate in the development of additional implementation guidance. [More information on this will be posted in the Gateway soon; check back for updates or, even better, Subscribe to receive updates in your inbox.
Has the world become a better place since the launch of the Framework? Yes and no. First and foremost, I believe the IIRC has done a tremendous job developing such a comprehensive Framework in a very short time span. And I also believe that it provides direction for how integrated reporting might look. On the other hand, the Framework now needs to find its way to the various organizations that need to wrap their minds around how to implement integrated reporting in their organization (voluntarily, of course!).
The bigger issue, however, is that integrated reporting is not, or should not be, an outcome in itself, but rather a means or a tool to achieve improved outcomes. So what are those improved outcomes? In the short term, one could argue that integrated reporting improves the quality of information available to stakeholders so they can make better decisions about and on behalf of the organization. However, the IIRC also states that “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 for integrated reporting alone this might be a bit of a stretch…
For this reason, the IIRC promoted the concept that integrated reporting is founded on “integrated thinking,” which is “the active consideration by an organization of the relationships between its various operating and functional units and the capitals that the organization uses or affects.”
All well and good, but integrated thinking in and of itself does not lead to the creation of more sustainable value. Integrated thinking should lead to integrated decision making and integrated actions (“you cannot produce first and think about health, safety, environment, and quality as an afterthought”), which actually lead to better outcomes, or the creation and preservation of more sustainable value.
In Integrating Governance for Sustainable Success, the IFAC Professional Accountants in Business Committee brought together a series of case studies demonstrating how integrated thinking, action, and reporting—together—can create sustainable organizational value. We think this makes our world a better place, and professional accountants can contribute to this by implementing integrated reporting with a broad view: not as a standalone action that is trendy to do, but as a vital link in the organization’s drivers of sustainable success.
As the IFAC guidance is a living document and will be updated and evolved in the future, we want to know your thoughts on how integrated reporting should be further leveraged.
