The Integrated Reporting Framework: “what’s in it for me?”
Published on 16 April 2013 0 comments
It’s a busy time in the reporting world: the International Integrated Reporting Council (IIRC) has just launched the consultation draft of its integrated reporting framework – or IR - for comment. It’s now time for businesses and investors to get stuck in, to give some feedback and help shape the future of corporate reporting!
The new framework outlines how businesses can better explain how they create, sustain and increase their value, in the short and long term. In essence, IR is designed to be a better way of communicating your performance and prospects – a job that, if done well, can have wide-reaching effects.
The draft framework is structured around clarity and relevance of information, and contains detail on fundamental concepts, guiding principles, content elements and preparation and presentation of information.
Since the global environment has become more challenging in recent years, the power of regular financial reporting to properly inform and to assuage worry has dwindled. As an external output, IR means that investors are better able to assess business risk and capital cost. The 85 global organisations testing it report significant benefits too. They say it’s encouraging joined-up thinking and improving the relevance of information about themselves to inform their decision making – clearly, this reduces the chance they’ll develop the wrong strategy, or take risky decisions.
IR is a voluntary initiative – so why should companies, already burdened with financial reporting, take on something else? Well, PwC has tried IR too – our Dutch colleagues are road-testing the principles, and here’s what they had to say:
“We like the dialogue with our own people, and we like to see that integrated thinking in our organisation is improving. We love the discussion with our clients and we like thinking about creating true value for society. As a result of integrated reporting, we have more insight into the value drivers and risks of our organisation.”
PwC also ran an experiment with investors aiming to uncover what types of information motivated their decisions. We discovered that the more quantified, relevant, non-financial information investors had, the more comfortable – and by a significant margin – they were to recommend buying a company’s stock.
We think that there are definite and lasting benefits to integrated reporting. We expect IR to become the norm and believe that, over time, it will actually lessen the reporting burden.
You can hear more about the value and importance of IR in our interviews with the IIRC CEO, Paul Druckman, and Richard Sexton – PwC global assurance leader elect.
Please do let the IIRC know what your think and share your views here - for this market-led framework to work, we'll all need to debate the issues and let the IIRC know both what's working well and what's not.