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Integrated Reporting Discussion Paper

Integrated Reporting Discussion Paper

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Published by Benoit Mathieu

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Published by: Benoit Mathieu on Sep 16, 2011
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TOWARDS INTEGRATED REPORTING
Communicating Value in the 21st Century
 
Towards Integrated Reporting 1
Contents
 About this Discussion Paper 1Summary 2
What is Integrated Reporting?Why do We Need Integrated Reporting?An International FrameworkFuture DirectionYour Comments Requested
The World has Changed Reporting Must Too 4Towards Integrated Reporting 6
Integrated Reporting DenedBuilding on Developments to Date
 An International Integrated Reporting Framework 
 
8
How is Integrated Reporting Dierent?Business Model and Value CreationThe Building BlocksGuiding PrinciplesContent ElementsTowards Integrated Reporting – Innovation in Action
 What will Integrated Reporting Mean or Me? 20
Benets, Challenges and ResponsesReporting Organization PerspectiveInvestor PerspectivePolicy-maker, Regulator and Standard-setter PerspectiveOther Perspectives
Future Direction 25Summary o Consultation Questions 26 Acknowledgements and Endnotes 28
The International Integrated Reporting Committee (IIRC) hasbrought together world leaders rom the corporate, investment,accounting, securities, regulatory, academic, civil society andstandard-setting sectors to develop a new approach to reporting.This approach, Integrated Reporting, will meet the needs o the21st century. It builds on the oundations o nancial, management commentary, governance and remuneration, and sustainability reporting in a way that refects their interdependence.The IIRC aims to orge a global consensus on the direction in whichreporting needs to evolve, creating a ramework or reportingthat is better able to accommodate complexity, and, in so doing,brings together the dierent strands o reporting into a coherent,integrated whole.This Discussion Paper considers the rationale behind the movetowards Integrated Reporting, oers initial proposals or thedevelopment o an International Integrated Reporting Framework and outlines the next steps towards its creation and adoption,including the publication o an Exposure Drat in 2012. Itspurpose is to prompt input rom all those with a stake inimproved reporting, including both producers and users o reports.
 Your answers to the Consultation Questions in this Discussion Paper, and anyother comments you would like to make, will be important to us in rening theseproposals. They should be submitted to dpresponses@theiirc.org or online at  www.theiirc.org. Please identiy in your response the organization to which you belong and where it is located. All comments received will be considereda matter o public record and will be posted on www.theiirc.org.Comments should be submitted by Wednesday 14th December 2011. You can register at www.theiirc.org to be notied when additional inormationis published, when regional roundtables or webinars are held or or inormationabout the IIRC Pilot Programme. 
 www.theiirc.org
MANAGEMENT COMMENTARYGOVERNANCE AND REMUNERATION REPORTINGFINANCIAL STATEMENTSSUSTAINABILITY REPORTING
Copyright © September 2011 by the International Integrated Reporting Committee. All rights reserved. Permission is granted to make copies o this work to achievemaximum exposure and eedback provided that each copy bears the ollowing credit line: Copyright © September 2011 by the International Integrated ReportingCommittee. All rights reserved. Used with permission o the International Integrated Reporting Committee. Permission is granted to make copies o this work toachieve maximum exposure and eedback.
 ABOUT THIS DISCUSSION PAPER
 
2 www.theiirc.orgTowards Integrated Reporting 3
SUMMARY
 What is Integrated Reporting?
Integrated Reporting brings together material inormationabout an organization’s strategy, governance, perormanceand prospects in a way that relects the commercial, socialand environmental context within which it operates. It providesa clear and concise representation o how an organizationdemonstrates stewardship and how it creates and sustains value.An Integrated Report should be an organization’s primaryreporting vehicle.
 Why do We Need Integrated Reporting?
Since the current business reporting model was designed,there have been major changes in the way business isconducted, how business creates value and the context inwhich business operates. These changes are interdependentand relect trends such as:
•
globalization,
•
growing policy activity around the world in response tonancial, governance and other crises,
•
heightened expectations o corporate transparency andaccountability,
•
actual and prospective resource scarcity,
•
population growth, and
•
environmental concerns.Against this background, the type o inormation that is neededto assess the past and current perormance o organizationsand their uture resilience is much wider than is provided orby the existing business reporting model. While there hasbeen an increase in the inormation provided, key disclosuregaps remain.Reports are already long and are getting longer. But, becausereporting has evolved in separate, disconnected strands, criticalinterdependencies between strategy, governance, operationsand inancial and non-inancial perormance are not made clear.To provide or the growing demand or a broad inormationset rom markets, regulators and civil society, a ramework isneeded that can support the uture development o reporting,relecting this growing complexity. Such a ramework needs tobring together the diverse but currently disconnected strands oreporting into a coherent, integrated whole, and demonstratean organization’s ability to create value now and in the uture.
International dierences in reporting
Reporting requirements have evolved separately, and dierently,in various jurisdictions. This has signiicantly increased thecompliance burden or the growing number o organizationsthat report in more than one jurisdiction and makes it diicult tocompare the perormance o organizations across jurisdictions.
The benets o Integrated Reporting
Research has shown that reporting inluences behaviour.Integrated Reporting results in a broader explanation operormance than traditional reporting. It makes visible anorganization’s use o and dependence on dierent resourcesand relationships or “capitals” (inancial, manuactured, human,intellectual, natural and social), and the organization’s accessto and impact on them. Reporting this inormation is critical to:
•
a meaningul assessment o the long-term viability o theorganization’s business model and strategy;
•
meeting the inormation needs o investors and otherstakeholders; and
•
ultimately, the eective allocation o scarce resources.
 An International Framework 
The IIRC is developing an International Integrated ReportingFramework that will acilitate the development o reportingover the coming decades. The core objective o the Frameworkis to guide organizations on communicating the broad set oinormation needed by investors and other stakeholders toassess the organization’s long-term prospects in a clear, concise,connected and comparable ormat. This will enable thoseorganizations, their investors and others to make better short-and long-term decisions.
Future Direction
The development o Integrated Reporting is designed to enhanceand consolidate existing reporting practices and, throughcollaboration, consultation and experimentation, to movetowards a reporting ramework that provides the inormationneeded to assess organizational value in the 21st century.The next steps that the IIRC will take in this direction arelisted below.
•
Undertake a Pilot Programme to encourage experimentationand innovation among companies and investors.
•
Develop an International Integrated Reporting FrameworkExposure Drat, refecting responses received to thisDiscussion Paper and the experience gained rom the rst year o the Pilot Programme.
•
Work with others to support the development o emergingmeasurement and reporting practices relevant toIntegrated Reporting.
•
Raise awareness among investors and other stakeholdersand encourage organizations to adopt and contribute tothe evolution o Integrated Reporting.
•
Explore opportunities or harmonizing reportingrequirements within and across jurisdictions.
•
Develop institutional arrangements or the ongoinggovernance o Integrated Reporting.
 Your Comments Requested
Please join us in this unique eort to develop an overarchingInternational Integrated Reporting Framework by providingeedback on this Discussion Paper. Your answers to theConsultation Questions in this Discussion Paper, and any othercomments you would like to make, should be submitted todpresponses@theiirc.org or online at www.theiirc.org. For thepurpose o analysis, you are asked to identiy the organizationto which you belong and where it is located. All commentsreceived will be considered a matter o public record and willbe posted on www.theiirc.org.Comments should be submitted by Wednesday 14thDecember 2011.
Te development o Integrated Reporting is designed to enhance and consolidateexisting reporting practices...to move towards a reporting ramework that providesthe inormation needed to assess organizational value in the 21st century.
 Who is the IIRC?
The International Integrated Reporting Committee (IIRC) isan international cross-section o leaders rom the corporate,investment, accounting, securities, regulatory, academic, civilsociety and standard-setting sectors. See page 28 or a listo members.The initial ocus is on reporting by larger companies and onthe needs o their investors. The Framework will help to elicitconsistent reporting by organizations, provide broad parametersor policy-makers and regulators and provide a ocus orharmonizing reporting standards.
The building blocks
Five Guiding Principles underpin the preparation o anIntegrated Report.
•
Strategic ocus
•
Connectivity o inormation
•
Future orientation
•
Responsiveness and stakeholder inclusiveness
•
Conciseness, reliability and materialityThese Principles should be applied in determining the contento an Integrated Report, based on the key Content Elementssummarized below. The presentation o the Elements shouldmake the interconnections between them apparent.
•
Organizational overview and business model
•
Operating context, including risks and opportunities
•
Strategic objectives and strategies to achieve thoseobjectives
•
Governance and remuneration
•
Perormance
•
Future outlook

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