The International Integrated Reporting Council (IIRC) has published revisions to the International <IR> Framework to enable more decision-useful reporting
The revisions, the first since the <IR> Framework was originally published in 2013, are the result of extensive market consultation with 1,470 individuals in 55 jurisdictions. The consultation demonstrated that the conceptual thinking and principles of the <IR> Framework remain fit for purpose and robust, as evidenced by the 2,500 organisations in over 70 countries that use it.
However, analysis of the feedback by the IIRC’s <IR> Framework Panel identified opportunities to clarify concepts, simplify guidance for report preparers and underpin better quality integrated reports.
The revisions focus on a simplification of the required statement of responsibility for the integrated report; improved insight into the quality and integrity of the underlying reporting process; a clearer distinction between outputs and outcomes; and a greater emphasis on the balanced reporting of outcomes and value preservation and erosion scenarios.
IIRC chief technical officer Lisa French said: ‘The revised framework better distinguishes between outputs and outcomes. Outcomes should be considered in the medium and long term.
‘It has reinforced the need for balance; we wanted to encourage preparers to cover negative outcomes by referencing their effects on the capitals. We reinforced the robustness of the reporting and a reminder that disclosures are most effective if they include narrative and indicators. They provide important support to internal audit functions.
‘The framework has been updated and refined but fundamentally we did not add any new requirements. The guiding principles remain intact. It is a small percentage change.’
One of the users of integrated reporting stressed the importance of capital and people.
Sandra Schoonhoven, head of global sustainability at Dutch based international bank, ING Group, said: ‘Integrated reporting should be seen as integrated thinking and linked to the company’s strategy. It is really important to make sure it is fed back into everything you do.’
Suresh Gooneratne, CFO of DIMO, said: ‘There is more clarity on outcomes; they have been identified with positive and negative impacts, and short and long-term effects. Outcomes are the basis of integrated reporting as that is how performance is measured. The short-term outcomes create value, medium term outcomes allow us to compete for larger contracts, and long-term we can build up this side of the business.
‘We need to have a very good understanding of integrated reporting and need to understand the complexity of the organisation, the inter-plays and the interdependencies. It is important to communicate clearly, concisely and creatively; this is critical for the preparers.’
Michelle Edkins, managing director at BlackRock Investment Stewardship, said: ‘As an investor BlackRock is interested in how companies create long-term value. We are looking for this long-term perspective from an investment angle, we need information, both data and narrative about what a company is trying to do and what its long-term strategy is and how it will deliver this over time.
‘It is really important that customers are directing us towards material issues that affect long-term development of value creation. We think there needs to be a lot of discipline on the part of companies and this is where integrated reporting is important.
‘We are encouraged by how light touch and finetuned the changes were to the integrated reporting framework and the output that we are all going for is better information on capital output for investors.’
Convergence of reporting
Charles Tilley, CEO, IIRC said: ‘Throughout 2021 a very important part of our strategy will be enforcing our outreach across countries and supporting businesses to adopt integrated reporting. We are also working with the international bodies to create a single sustainable reporting framework. One of the immediate priorities when merging with SASB (Sustainability Accounting Standards Board) is to align our five principles to improve clarity and achieve common definitions, and interoperability.’
The International Integrated Reporting Council (IIRC) is a global coalition of regulators, investors, companies, standard setters, the accounting profession, academia and NGOs. Together, this coalition shares the view that communication about value creation, preservation or erosion is the next step in the evolution of corporate reporting.
For more information about the IIRC, or to download the International <IR> Framework