What is Integrated Reporting?
Integrated Reporting accounts for how an organization allocates capital to its key assets for value creation over a fixed period, be it short, medium, or long term. By definition, this type of reporting pertains to an act of creating a comprehensive business outline that offers greater context for performance data. It is typically done over the course of a financial or calendar year.
Integrated reporting is a way of reporting both financial and non-financial performance of the business to the stakeholders in a single report. In this report, business strategy is linked with sustainability strategy that makes it easy for the stakeholders to analyse even the non-financial aspects of the company. After knowing ‘what is integrated reporting’, it becomes important to throw light on the origin of this reporting framework.
Origin of Integrated Reporting
Just like every other reporting framework, integrated reporting has also evolved through many steps and changes over the years.
- In 2002, the Institute of Directors in Southern Africa published a report (King II Report). This report has included some codes that were to be followed by listed companies in South Africa. As per the codes, the boards of companies have to strike a balance between the financial and sustainable part of the business.
- In 2004, The Prince’s Accounting for Sustainability Project started in the United Kingdom. The aim of this project was to shift the economy from just the monetary aspect to sustainability.
- In 2009, a roundtable was hosted in St. James’s Palace where it was decided that businesses, investors and regulators must give importance to both finance and sustainability and create an integrated report.
- Finally in 2010, the International Integrated Reporting Council (IIRC) was launched by the Global Reporting Initiative and the International Federation of Accountants.
International Framework for Integrated Reporting
This framework provides certain guiding principles that explain how the content of the integrated report must be written and presented. These principles have laid the foundation for integrated report writing in Singapore. You can find many companies following these content principles to prepare their report.
There are seven principles that are included in the international framework:
- Strategic focus and future orientation.
- Connectivity of information.
- Stakeholder relationships.
- Reliability and completeness.
- Consistency and comparability.
Even IIRC has suggested eight content elements that can be incorporated in the integrated report to enhance the value of reporting.
- Organizational overview and external environment.
- Business model.
- Risks and opportunities.
- Strategy and resource allocation.
- Basis of preparation and presentation.
Importance of Integrated Reporting
Integrated Reporting allows a company to efficiently underscore both financial and sustainability aspects of its performance in one holistic report. As such, it eliminates any incongruent information present within different reporting strands in an organization due to competing objectives and goals across departments.
It takes into account the objectives set by different parts of the organization to help identify its overall goal and long-term strategic planning. At its core, it is the integrated representation of how an organization has tackled various external and internal challenges to achieve business longevity.
There are various benefits that companies get by merging financial and non-financial performance in the same report.
Let’s have a look at the integrated reporting importance:
- This report reflects that the company has a genuine interest in linking sustainability into its core business strategy.
- Integrated report helps in communicating the impact that the operations of a company have on the environment and what the company is doing to reduce them.
- The company can analyse all the risks and opportunities through this report and plan the strategy to reduce the cost of capital.
- It helps in improving the overall performance of the company. The businesses are able to determine the elements that create some value for their organization. Decision making and strategy formulation become easy with this reporting.
- Both financial and non-financial aspects can be analyzed together.
- To make this report, support from every department of the company is needed. In this process, the internal collaboration increases and an organization becomes more streamlined.
- This reporting helps the companies to increase communication and engagement with its stakeholders.
- When the company is ready to share its future plans and current business strategy with all the internal and external stakeholders, a sense of trust develops. A strong relationship is built with all the employees, investors, and other stakeholders through this integrated reporting system.
- Transparent reporting builds brand reputation and loyal customer base.
- The firm value and stock liquidity are associated with the quality of integrated report.
Six Capital of Integrated Reporting
There are various forms of capital that are mentioned in integrated reporting. Issues related to these capitals are discussed and analysed to find some solutions.
1. Intellectual Capital
Examples of such capital are patents and software. Reporting issues can include expenditure on research and development and tracking of sustainability.
2. Natural Capital
This type of capital includes forests, land, clean air, biodiversity etc. Some challenges related to this capital can be to improve water recycling, reduce carbon emission, deal with climate change, scarcity of natural resources and much more.
3. Financial Capital
The monetary aspects are included in this type of capital. Reporting issues may involve financial risks related to stock markets and government regulations.
4. Organisational Capital
All the processes that are helpful in the smooth running of operations in a company are included in this type of capital. Compliance with norms and performance of safety systems can be some of the reporting issues for such type of capital.
5. Social Capital
Customers, employees and community are some of the examples of this type of capital. Human and labor rights and community engagement programs can become the point of analysis for such capital.
It is important to note, however, that Integrated Reporting places emphasis on the processes that an organization has taken to sustain its value creation, from risk management, structural, and performance standpoints.
Thus, this particular report is concerned not only with your company’s finances but also with how your business utilizes resources and capital to create value for your shareholders and society at large.
Similarly, through Integrated Reporting, companies can map out their business trajectories from past endeavors to create a more robust strategy in the future.
This is because Integrated Reporting removes any organizational silos across managerial levels – allowing different functions in the companies to synergize and realign themselves through proper communication channels.
Putting Integrated Reporting into Perspectives
Integrated reporting is way more than just a reporting framework. The report is not only a way to communicate the details to employees, investors and customers but also helps the management to make future decisions.
Integration of both financial and non-financial aspects at one place helps in analyzing the health of the business in an easy way.
Integrated reporting in Singapore has helped a lot of companies to understand the risk and challenges and how they can overcome those issues. Integrated reporting is important and must be presented well to build trust and reputation among the stakeholders.
With social and environmental concerns being at the center stage of modern business challenges, Integrated Reporting enables companies to evaluate their performances beyond short-term impacts on profitability.
In essence, the main purpose of such a report is to help your shareholders gain an overview of all the milestones your company has reached so far from financial, social, and environmental standpoints. Therefore, a well-crafted integrated report must be able to communicate your company’s values, ideals, and overall achievements across.
Our team of incisive copywriters can help you create an integrated report that provides your stakeholders with a holistic overview of all your achievements and business impacts from both sustainability and data-oriented perspectives.
Through strong analytics and research skills, we can identify and glean trends and other crucial information from various reports and resources to build a clear, relevant report that reflects the values of your business.
We can compile and recalibrate all necessary information across your internal sectors to identify and showcase your sustainability policies and long-term strategic planning in value creation.
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FAQ – FREQUENTLY ASKED QUESTIONS
What Is The Purpose Of Integrated Reporting?
The main purpose of Integrated Reporting is to give the actual financial capital of a company to all the company stakeholders and providers.
Is Integrated Reporting Compulsory in Singapore?
An Integrated Report is quite important if seen from a business point of view. It helps in developing your future business strategy. Although it is not compulsory but many businesses have made it mandatory.
What Is The Nature Of Integrated Reporting?
The nature of integrated reporting is to being down all the desired information about a companies strategies, governance, performance in market and the way in which the company operates.