Integrated Reporting (<IR>) is a process founded on integrated thinking that results in a periodic integrated report by an organisation about value creation over time and related communications regarding aspects of value creation.
The outcome of this process, an integrated report, is a concise communication about how an organisation’s strategy, governance, performance and future prospects, in the context of its external environment, lead to the creation of value in the short, medium and long term.
Increasingly, businesses are expected to report not just on profit but on their impact on the wider economy, society and the environment. It is imperative to look at sustainability issues and how they relate to success of business. However, there is still a huge gap in understanding how they affect business risks, business planning, and identifying growth opportunities. Companies continue to be valued on their financial health.
Creating value from a range of inputs or ‘capitals’ available to an organisation is fundamental to its success. Understanding and communicating this is a key element of corporate reporting. The companies that have started with ecological or social valuations struggle to make financial connect and integrate into the overall valuation of business.
Due to the increasing complexity of factors that a business must acknowledge, existing forms of corporate reporting are ineffective in supporting organisations to comprehend and portray an accurate nature of their operations.
Integrated Reporting is a new corporate reporting model designed to address this gap by supporting a more resilient business environment through a shift in the way organisations understand their business, and enable better decision making by providers of financial capital.
Integrated Reporting tries to link sustainability strategy to business strategy and has three fundamental key concepts.
Integrated thinking deals with value creation over short, medium and long term, and the integrated report tells the story of the journey that an organisation has embarked on to create value, in a clear and concise manner.
The primary purpose of an integrated report is to explain to providers of financial capital and stakeholders such as employees, customers, suppliers, business partners, local communities, legislators, regulators and policymakers, how an organisation creates value over time.