International Integrated Reporting Council reporting framework released
The IIRC releases its integrated reporting framework, four years since the initiation of the concept in 2009. steph von der heyde
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he International Integrated Reporting Council (IIRC) has launched the much anticipated Integrated Reporting Framework, which has been in trail and development stages since early 2011. The framework, officially released in December 2013, was met with enthusiasm by various financial figureheads and has received overwhelmingly positive responses from corporate contributors around the world. The International Integrated Reporting Council is a global coalition of regulators, investors, companies, standard setters, accounting professionals and NGOs who together form the global authority on integrated and corporate reporting. The organisation was formed with the purpose of embedding integrated reporting into mainstream business practice and encouraging the process in corporate industries worldwide. While the concept if integrated reporting is not a new one, the newly developed Framework aims to improve the current system and increase the number of organisations who use it worldwide. This, according to the IIRC official statement, is important as it provides organisations with a platform to articulate their strategy, thereby driving performance internally, generating capital and informing investment decisions. In addition, the reporting process is widely acknowledged to influence behaviour and is beneficial to all of the organisation’s stakeholders, including employees, customers, suppliers, business partners, local communities, legislators, regulators and policy-makers. As a result of the growing importance of the integrated reporting process in corporate industry, the IIRC identified a need to inform the IR process by promoting a more cohesive and efficient approach
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to corporate reporting. The framework was created for this purpose and has been described as an important step toward a more financially stable economy and sustainable world. The IIRC has explained that the development of the new framework is aimed at establishing Guiding Principles and Content Elements that govern the overall content of an integrated report, as well as explaining the fundamental concepts that underpin them. In short, the introduction of the new Framework will outline the material that is to be included in corporate reports and determine how an organisation is assessed on its ability to create value. According to the IIRC official statement, the IR Framework will take a principles-based approach to doing this, while trying to find a balance between flexibility and allowing a sufficient degree of comparability. The Framework will also not prescribe specific key performance indicators, measurement methods, or the disclosure of individual matters, however it will include a small number of requirements that are to be applied before an integrated report can be said to be in accordance with the Framework. The process of creating the framework has been a long and thorough one, carried out with the participation of hundreds of companies from all over the globe. The first discussion paper on the framework in was released in 2011, followed by a prototype in 2012 and then a consulting draft in 2013. The final Framework, released in December last year, has been received positively by most corporate industries and the IIRC website boasts an impressive list of large companies and influential individuals offering their plaudits. The introduction of the framework is expected to strengthen and initiate the growth of corporate reporting, while broadcasting developments
in financial, governance, management commentary and sustainability reporting. It is also anticipated to allow the enabling of informed decision-making that leads to efficient capital allocation and the creation and preservation of value. Overall, the IIRC states that its long-term goal is to “create a world in which integrated thinking is embedded within mainstream business practice, facilitated by Integrated Reporting as the corporate reporting norm”. Most agree that the release of this framework is certainly a step in the right direction. The IIRC Framework is not the first in this field, however, and there has been much speculation and discussion around how it will co-exist with other more established frameworks, such as the GRI. The Global Reporting initiative (GRI) Reporting Guidelines are successfully being incorporated in sustainability and integrated reports around the world and the newly launched G4 version of the GRI Guidelines are in various ways similar in what they seek to achieve. There has however been some discussion amongst the reporting fraternity about certain incompatibilities in the application of the two Frameworks, particularly for example around the definition of materiality – a key principle of corporate sustainability reporting. The IIRC frames materiality in terms of what will influence assessments made by the primary intended users of integrated reports. In contrast, the GRI frames materiality as issues that will have a significant financial impact on the organization and issues that will influence the assessments of other stakeholders. This has been a cause for concern for some, who worry that internal inconsistencies may prevent the successful incorporation (and working together) of both Frameworks and their respective organisations.
Whilst these potential problems have not been specifically addressed by the organisations, they have both made it clear that they believe it is possible to co-exist, and insist that it does not have to be a case of ‘either/or’. The primary reason given for the potential for co-habitation is that the target audiences differ, with the IIRC placing most of its focus on investors of financial capital, while GRI takes a broader view and concentrates on organisations in general. The threat of competition between these two organisations is also minimal, despite the initial suggestions that the development of the <IR> Framework would cause integrated reporting rivalry. GRI is in fact a co-founder of the IIRC and has been fully involved in the process of developing the framework from the beginning. The organisation has also been publically supportive of the IIRC in its success and has indicated its intentions to work alongside IIRC, stating that the future of corporate reporting lies in integration. Additionally, the organisations have signed a memorandum of understanding (MoU) which seeks to formalise the principles for ongoing cooperation and put to bed any rumours of bad blood. The IIRC has been outspoken about the fact that its framework is not seeking to create new indicators, but rather to encourage organisations to make use of existing reporting standards, such as the GRI guidelines. The organisations’ intent to work side by side is a viewed as extremely positive for the future of integrated reporting worldwide, which will benefit from the additional input and extended reach. Both the GRI and IIRC are said to be excited about the new opportunities which will arise as a result of the introduction of the new framework and share the vision of an improved standards of Integrated Reporting.
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