All You Need To Know About IIRC
In August 2010, the International Integrated Reporting Council (IIRC) was formed with the motive of creating a framework that is accepted globally. This process made it easy for organisations to communicate their performance to their stakeholders.
IIRC has representatives from different sectors like investment, academic, securities, corporate and other so on. It chiefly consists of a Steering Committee, three task forces related to content development, communication and governance and lastly a working group.
The very first version of the International Integrated Reporting Framework was published on 9 December 2013 that provided guidelines for communicating value creation by the companies over the years. It is considered to be a milestone in corporate reporting.
The Concept of Integrated Reporting
As per IIRC, Integrated Reporting was created to bring a change in the reporting method of organisations to the stakeholders. This reporting method supports integrated thinking and decision making. When it comes to vision, IIRC wants an integrated reporting framework as a system in which integrated thinking is amalgamated with the business practices followed in public and private sectors.
Now that you know “what is IIRC”, let’s have a look at the fundamental concepts of integrated reporting:
1. Value Creation
To ensure capital usage in a continuous manner, it is important to keep a check on the impact of the company’s activities, relationships and interaction with available capital. More value creation is a clear indication of efficient usage of resources.
Integrated reporting framework focuses on different types of capitals that are relevant to the organisation.
3. The Process of Value Creation
Every business model operates on a procedure of using the inputs, processing them with different activities and then finally producing the output. This reporting framework enables the entity to analyse the performance.
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Objectives of Integrated Reporting
IIRC integrated reporting was published with the following objectives:
- To improve the communication of information and data to the investors. This helps in more efficient capital allocation.
- To promote accountability for different types of capitals such as financial, social, human, manufactured and natural.
- To provide an efficient reporting framework containing a wide range of factors that could be communicated to the stakeholders.
- To support value-creating integrated thinking and actions.
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Requirements of Integrated Reporting
- The report should contain identifiable communication.
- Integrated reports must fulfil all the set requirements of the framework. In case the data is not available and it is not essential to disclose, it can be skipped. But all other essential information must be included in the report to maintain transparency.
- A statement from the head of governance in the entity must be included in the report. This acknowledgement of responsibility is important as that person is answerable to the internal and external stakeholders.
IIRC Framework Guiding Principles
1. Connection of All Information
Different factors are responsible for the success of any organisation. These factors are interrelated and must be synchronized with each other to ensure smooth functioning. The integrated report shows the holistic picture of the interconnection of different factors contributing to the growth of the organisation.
2. Strategic Focus and Future Orientation
Integrated report contains all the information that reflects the current strategy and future planning of any company. The opinion of investors and employees about the performance is based on this aspect of integrated reporting.
3. Stakeholder Relationships
The integrated reporting also gives clarity about the quality and nature of relationships companies have with their stakeholders.
The ability of the company to create value must be communicated through the integrated report. Organisations are supposed to disclose all the information that can be of importance for the concerned people.
The content must be relevant and short. Major points must be showcased in a way that everyone is able to analyse the data easily without wasting much time.
Any discrepancy in the conveyed information must be avoided. Be it positive or negative, there has to be transparency in the information given in the integrated report.
7. Consistency and Comparability
There should be a consistency over time in the reporting method of any organisation. In order to show the value and strength of the company, a comparison can also be done with other organisations in the industry. This has a great impact on the decision making of investors.
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Content Elements of Integrated Report
1. Overview of Organisation and External Environment
This section includes the introduction of an organisation. The nature of work and its operations are explained in short. Impact of circumstances due to the external environment is also mentioned in this part.
The structure of governance responsible for the functioning of the organisation is included in this section.
3. Business Model
This element of content contains the explanations of the model on which the business operates.
4. Risks and Opportunities
External environment has both risks and opportunities. The integrated report contains risks that challenge the growth of the business. Companies also mention the scope of improvement by pointing out the opportunities in their relevant industry.
5. Strategy and Resource Allocation
The goals and strategic planning of the company is included in this section. The utilization of resources in different activities and its impact on the environment is included in this part.
All the data that indicates the performance of the company over the years comes under the performance section.
It is an important section as it determines the future planning and strategies of the company. If the company is hopeful in overcoming the challenges, it is more preferred by the stakeholders.
8. Basis of Preparation and Presentation
This section specifies the matters that are important for the organisation and the process of their evaluation.
IIRC formed the framework of integrated reporting as it helps the businesses to think, plan and report their value creation capability to the stakeholders in a clear and concise way.
This reporting framework is now followed globally by companies. This has effectively helped the businesses in building public trust, gaining the confidence of investors and allocating the resources more efficiently. This framework by IIRC has compelled the businesses to make more sustainable decisions that can provide benefit in the long run.
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