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September 15, 2011
International Integrated Reporting Committee Proposes Integrated Reporting Framework
    by Robert Kropp

With input from investors and other key stakeholders, the IIRC publishes a discussion paper for the convergence of financial and sustainability reporting.

Despite still being in its relative infancy, integrated reporting has already become an important issue for many sustainable institutional investors. The recently published 2011 Report on Progress from the United Nations' Principles for Responsible Investment (PRI) found that almost three-quarters of respondents to its annual survey now ask companies to integrate environmental, social, and corporate governance (ESG) issues into financial reporting.

The PRI report singled out the International Integrated Reporting Committee (IIRC) for commendation, stating, "The ambitious mission of the IIRC is to create a globally accepted integrated reporting framework which brings together financial, environmental, social and governance information in a clear, concise, consistent and comparable format."

On the other hand, PRI also accounted for concerns about such integration, observing that the interests of key stakeholders other than shareowners may well require "granular information" that could be lost in integrated reporting.

On Monday, the IIRC published a discussio n paper on integrated reporting, in which it seemed to acknowledge the challenge, stating, "Integrated Reports will meet the needs of a broad range of stakeholders. Initially, however, the IIRC intends to focus the development of the Framework on the needs of investors."

Furthermore, despite the uptake of integrated reporting among sustainable investors and others, the paper observes, "Few organizations, if any, however, could claim to have achieved the ideal of Integrated Reporting."

According to the IIRC, the discussion paper includes input from "international representatives from the business, investor, accounting and regulatory communities, non-governmental organizations, standard-setting boards and sustainability experts." The paper lays out five guiding principles and six key elements for an effective integrated report.

The five principles outlined by the IIRC include strategic focus, connectivity of information, future orientation, responsiveness and stakeholder inclusiveness, and conciseness, reliability and materiality.

The six key elements to be included in an integrated report are organizational overview and business model; operating context, including risks and opportunities; strategic objectives and strategies to achieve those objectives; governance and remuneration; performance; and future outlook.

To meet the challenges of developing tools with which to analyze traditionally non-financial information, as well as encouraging a long-term outlook in the investment supply chain, IIRC invited investors to take part in its Pilot Program. The program intends to inform the evolution of reporting and investor practices, and drive convergence in international reporting guidance.

Mervyn King, Deputy Chairman of the IIRC and Chairman of the Global Reporting Initiative (GRI), stated, "Integrated Reporting builds on the practice of financial reporting, and environmental, social and governance reporting. It equips companies to manage their operations, brand and reputation strategically and to manage better any risks that may compromise the long-term sustainability of the business."


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