The recent inclusion of Integrated Reporting (IR) in the Australian Governance Code is expected to provide further impetus to Australian organizations to embed integrated reporting elements. Integrated Reporting is a strategic and future-oriented communication about how organizations draw on the different resources and relationships available to them how they use their capitals to create value over time. It is more than just a combination of the disclosure of financial information and non-financial information into one report.
Instead of just money-making, an entity should see a business as a means that utilizes various capitals, namely financial, intellectual, human, social and natural capitals to create financial, social and environmental values. Also, companies are recommended to adopt ‘integrated thinking’ which depends upon a holistic view of a company’s short, medium and long-term value and redefine both financial and non-financial goals. The board and management need to consider the relationships between various operating and functional units and the socio-environmental impacts and underlying business performance.
Six Framework of Integrated Reporting [www.theiirc.org]
The International Integrated Reporting Council (IIRC) embodies the shared, common interest of a global coalition of parties in the adoption of Integrated Reporting on an international basis. The Council firmly believes that an integrated strategy to maximize financial results and public benefits should be reflected in an integrated report.
According to the companies who participated in the IR pilot programme, the benefits they reaped from implementing integrated reporting are as follows:
- Connecting departments. One of the most mentioned benefits of integrated reporting is the opportunity it provides to connect teams from across an organization, breaking down silos and leading to more integrated thinking.
- Improved internal processes leading to a better understanding of the business. Changes to systems driven by integrated reporting requirements are providing greater visibility across business activities and helping to improve understanding of how organizations create value in the broadest sense.
- Increased focus and awareness of senior management. A shift to integrated reporting raises the levels of interest and engagement of senior management in issues around the long-term sustainability of the business, helping them to gain a more holistic understanding of their organization.
- Better articulation of the strategy and business model. Better understanding of organizational activities enables companies to establish a holistic business model and helping to streamline communications.
- Creating value for stakeholders. Organizations start to identify ways to measure the value to stakeholders when managing and reporting on sustainability issues.