Integrated reporting is a form of corporate communication that explains how an organisation creates value over time to the organisation's providers of financial capital.
Other stakeholders, including employees, suppliers, customers, regulators and the wider community will also benefit from integrated reports, and understanding how an organisation creates value.
A holistic and forward-looking approach to creating value
In integrated reporting, value is not just about financial wealth. Traditional reports published by organisations tend to focus on financial statements and the creation of shareholder value. Integrated reports, on the other hand, consider a much wider version of "value" – for example, the value of employee skills to the organisation's business model.
Integrated reports are also forward-looking compared to financial statements, which look to the past.
The primary objective of integrated reporting is to demonstrate how an organisation creates sustainable value, hence it does not look at just the financials.
A focus on relationships and sustainability
According to the International Integrated Reporting Framework (IIRF):
"The ability of an organisation to create value for itself enables financial returns to the providers of financial capital. This is interrelated with the value the organisation creates for stakeholders and society at large through a wide range of activities, interactions and relationships."
So, relationships are fundamental to integrated reporting, as it is through relationships that value is created.
Integrated reports therefore communicate on how matters internal to the organisation, for example resource management and skills training, create value, but they also describe the relationships between an organisation and its environment and society.
These external relationships are important to report on too, as organisations are increasingly expected to show that they have a positive external impact and are not solely focused on providing a financial return to shareholders and other providers of finance.
The IIRF emphasises the importance of relationships, connectivity, cohesiveness and interdependencies for an organisation producing an integrated report, which are all related to the concept of something called integrated thinking.
This blog is an extract from Lisa Weaver’s course,Integrated Reporting.