As companies strive for efficiency and sustainability, the need for integrated reports is increasing. Integrated reports are a compilation of financial and non-financial information that provides a holistic view of a company’s performance. They allow stakeholders to assess a company’s ability to create value over time, and can help identify areas for improvement.
The need for integrated reports has been recognized by organizations such as the International Integrated Reporting Council (IIRC), which released its first global framework for integrated reporting in 2013. The framework was developed with input from business, accounting, investor, and other stakeholder groups.
- What exactly is Integrated reporting?
- What are some examples of information shared in integrated reports?
- Why are integrated reports important?
- 4 reasons why is integrated reporting increasing
- What factors have contributed to the increase in integrated reporting?
- Is Integrated Reporting required?
- What are the challenges of integrated reporting?
- How does an integrated report benefit the organization?
- How investors will benefit from integrated corporate reporting?
- In conclusion on the international integrated reporting council
What exactly is Integrated reporting?
Integrated reporting is the process of compiling all the information about a business into one report. This can include financial, economic, social and environmental data that will help investors understand how a company is creating value. While reviews may seem simple enough for executives to compile, it’s important to remember that companies have different types of stakeholders who hold diverse information and different information needs.
Integrated reporting benefits more than just investors, as it can give a birds-eye view that engages employees and helps to set company strategy for the future. In order to do this successfully, companies need to be able to measure their performance on a variety of parameters from multiple perspectives.
What are some examples of information shared in integrated reports?
Integrated reporting allows for a more holistic view of a company’s performance, and can be made up of a variety of information. Some examples include:
- Strategic direction
- Risk management
- Internal stakeholder engagement
- External stakeholder engagement
- Materiality analysis
- Social responsibility practices/cultural factors
- Governance systems and processes
- Environmental factors that have an impact on a company’s performance
Why are integrated reports important?
Integrated reports allow companies to communicate their progress on multiple levels in a consistent manner. They also give stakeholders an insight into the current state of a company, along with areas where they can focus future efforts for improvement.
The IIRC has stated that integrated reporting helps, “to build trust and confidence between companies and their investors – and between markets and society as a whole.”
Thanks to integrated reports, companies can communicate their sustainability efforts in a clear manner that is understandable for all stakeholders. In order to become more efficient and sustainable, companies need to be able to demonstrate how they are creating value from the perspectives of multiple stakeholders. This leads to greater efficiency as high-quality information can be distributed to all key parties.
Integrated reports can also give shareholders confidence in a company’s sustainability practices and help them make more informed decisions about where they invest their money.
4 reasons why is integrated reporting increasing
There has been an increase in companies using integrated reports over the last few years due to the following reasons:
1) Driving better business performance
Integrated reporting can help to create a competitive advantage by helping companies understand their true value and how they can improve. This leads to greater efficiency, a more sustainable business model and ultimately a better return on investment for shareholders.
2) Putting forth strategies for the future
Companies are becoming increasingly aware of what is expected from them on an individual and corporate level. They are recognizing that sustainability is something that needs to be part of their business strategy, not just an afterthought. Integrated reporting allows for better communication on how they plan on achieving sustainable goals moving forward.
3) Raising awareness across all types of stakeholders
As the topic of sustainability continues to gain traction, companies are recognizing that a more sustainable business model can lead to greater stakeholder engagement. This leads to trust, which is important for companies as they move forward and put sustainability strategies into action.
4) Differentiating themselves from their competitors
By creating an integrated report, companies can better demonstrate their efforts towards having a positive impact on employees and the environment. This can help them stand out from their competitors, which is important when the overall supply chain includes many companies that are not taking these same efforts.
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What factors have contributed to the increase in integrated reporting?
Financial incentives have also played a large role in encouraging companies to use integrated thinking. Initiatives such as the Equator Principles and the Global Reporting Initiative are encouraging companies to report on social and environmental factors along with their financials.
One of the main reasons companies are turning towards integrated reporting is because of large-scale investors, such as pension funds, who are becoming increasingly interested in these topics. They want to make sure that they are putting their money into ethical businesses that have a positive impact on society and the environment.
The benefits of integrated thinking are also supported by initiatives such as the United Nations’ Sustainable Development Goals, which were put into place to ensure companies follow a sustainable business model moving forward. These goals have increased support for sustainability efforts across all types of stakeholders.
Is Integrated Reporting required?
Currently, there are no requirements that companies submit integrated reports. However, according to the Global Reporting Initiative’s website, in 2014 over 1000 companies joined in on initiatives related to Integrated Reporting including setting targets in relation to environmental and social issues. This has increased every year since.
Many countries have legislation regarding corporate social responsibility reporting. If a company decides they want to follow these guidelines, then it’s possible they will include the information in their integrated report.
Since there are no official regulations surrounding integrated reporting, companies who decide to follow these guidelines have flexibility when deciding what information to include.
What are the challenges of integrated reporting?
Companies that don’t decide to use an integrated report will usually present their information in a stand-alone report, which is a traditional financial statement. The information presented will follow the regulations set out by their country or region.
Integrated reporting can be time consuming and costly to implement for companies that have not done it before. If they don’t feel as though it would benefit them, or if they are unsure of how to put it into action, then they may choose to use a stand-alone report instead.
The integrated reports that companies create can become quite lengthy if all of the information is included in one document. This can make them difficult to navigate and translate for any stakeholders who aren’t familiar with the industry terminology used. If a company feels as though it would be beneficial to break their report into two or more different documents, then they may prefer this option.
How does an integrated report benefit the organization?
Having an integrated report provides companies with the opportunity to better communicate with their stakeholders. This can help them stay competitive, while increasing their reputation as a sustainable company.
Integrated thinking also allows companies to make more informed decisions moving forward. They can use the information they obtain from these reports to create better business strategies that will increase their revenue and improve their public image.
Integrated reports are beneficial to companies who want to show that they are making progress towards improving their social and environmental impact, as well as the financial aspect of the business. They also provide valuable insight into these factors so businesses can engage with stakeholders, which can help them make significant changes within their organization.
How investors will benefit from integrated corporate reporting?
Integrated reports provide investors with a more in-depth look at the companies they are investing in. With traditional financial statements, much of this information is omitted or presented as a footnote within the document.
However, when this same information is included within an integrated report, investors can gain a better understanding for how sustainable their investments are. This can help them make more informed decisions about where to put their money.
Integrated reports also provide investors with a single document that can be easily read and understood. This makes it much simpler for investors to compare the information across different companies, without having to sift through multiple documents or read through complicated language.
By reading more into the factors that are included within the integrated report, investors can better understand the performance of a company’s business. This allows them to more accurately measure their return on investment and make changes as necessary.
In conclusion on the international integrated reporting council
In conclusion, companies are currently adopting integrated reporting and non financial data about their governance, social and environmental impact within their reports, due to the pandemic and the potential global financial crisis it has created. Relevant data from sustainability reporting has several benefits for business and other stakeholders by providing a specific focus on the external environment, and value creation, as well as helping investors make better investment decisions across industries. Since the advent of increasing billion-dollar weather events, clients are seeking the disclosure of material information from every organisation regarding their management of accounts. Even focussing on ESG and other issues from smaller companies. For investors, it is a matter of creating better relationships with businesses to not only understand finance and accounting actions (Double Declining Balance Method), but also for the process of building longer term relationships. Despite some challenges that come with these reports, they can be beneficial to companies who want to show transparency with their stakeholders, while also gaining a competitive edge in the market.
For more astute insights…
Dean Emerick is a curator on sustainability issues with ESG The Report, an online resource for SMEs and Investment professionals focusing on ESG principles. Their primary goal is to help middle-market companies automate Impact Reporting with ESG Software. Leveraging the power of AI, machine learning, and AWS to transition to a sustainable business model. Serving clients in the United States, Canada, UK, Europe, and the global community. If you want to get started, don’t forget to Get the Checklist! ✅