Integrated reporting

Integrated reporting in corporate communication is a “process that results in communication, most visibly a periodic “integrated report”, about value creation over time. An integrated report is a concise communication about how an organization’s strategy, governance, performance and prospects lead to the creation of value over the short, medium and long term”.

Integrated Reporting brings together material information about an organisation’s strategy, governance, performance and prospects in a way that reflects the commercial, social and environmental context within which it operates. It leads to a clear and concise articulation of your value creation story which is useful and relevant to all stakeholders.

But is not only about reporting; Integrated Reporting encompasses Integrated Thinking.  It is as much about how companies do business and how they create value over the short, medium and long term as it is about how this value story is reported.

It means the integrated representation of a company’s performance in terms of both financial and other value relevant information. Integrated Reporting provides greater context for performance data, clarifies how valuable relevant information fits into operations or a business, and may help make company decision making more long-term. While the communications that result from IR will be of benefit to a range of stakeholders, they are principally aimed at providers of financial capital allocation decisions.

IR helps to complete financial and sustainability reports. A framework has been published, but some questions remain in order to know how to apply it. Do we need a new report? Do we need one report ? Will this report be useful for investors, and for other stakeholders? Other questions could have been raised, such as who is really working for an integrated reporting, and who has interests in it.

There are a multitude of benefits associated with Integrated Reporting – both within an organisation and from an external perspective.

• Clearer articulation of strategy and business model.
• Encouraging your organisation to think in an integrated way.
• A single report that is easy to access, clear and concise.
• Linking of non-financial performance more directly to the business.
• Better identification of risk and opportunities.
• Improved internal processes leading to a better understanding of the business and improved decision-making process.
• Creating value for stakeholders through identification and measurement of non-financial factors.

Long-term benefits

Integrated reporting offers a more cohesive and efficient approach to corporate reporting across the short, medium and long-term, says Howitt. Academic and other research on adopting non-financial reporting demonstrates evidence of these benefits:

• Lower costs of raising capital
• A more stable long-term investor base
• Higher share price

Advantages:

Performance

This area of IR addresses how an organisation has performed against its strategy and what are its key outcomes. These outcomes can be internal or external for example, revenue, cash flow, customer satisfaction, brand loyalty, environmental impacts, etc.

Business model

An organisation’s business model is ‘its system of transforming inputs, through its business activities, into outputs and outcomes that aims to fulfil the organisation’s strategic purposes and create value over the short, medium and long term’ (IIRC). Many of the performance management models are particularly relevant here: for example, the value chain explicitly sets out inputs, processes and outputs and requires organisations to understand how value is added so that profits can be made. If a company does not understand where it adds value then the company is existing in a temporary state of good fortune. It is making profits now, but does not understand why, so chance of continued success must low.

Opportunities and Risks

These must cover both internal and external matters. The traditional SWOT analysis usually categorises opportunities and threats (risks) as external, but it is essential to also look internally. A weakness (for example arising from gaps in new product development) is a risk to future revenues.