ntegrated Reporting (IR) — that is, organizational reporting for public disclosure, which includes both financial and important nonfinancial information — has been an established, though elusive goal, for at least two decades. Its emergence reflects the growing recognition that the nature of the economies of the United States of America (US) and other advanced nations has fundamentally changed, as have the factors that determine the success or failure of business enterprises in our increasingly information-based society.
Existing US corporate financial reporting standards have their basis in statutes enacted in the 1930s, and are increasingly viewed as inadequate for addressing the full spectrum of issues that affect corporate success. A partial list of these issues includes the importance of intangible assets; corporate impacts on the environment, human health, and societal conditions; and corporate influence on the political process.
The concept of IR is based on the desire to provide a framework under which companies (and other organizations) can be expected to report, at regular intervals, on their strategies, operations, results, and impacts across an array of substantive areas, spanning economic/financial, environmental, and social issues. In practice, IR is very difficult to do, and establishing a framework and a set of rules for doing so that can attract widespread support is more difficult still.
Nevertheless, a multistakeholder group called the International Integrated Reporting Council (IIRC) has been working diligently toward this end for the past several years. Information about the IIRC’s participants is included in the sidebar. In April 2013, the IIRC released the “Consultation Draft of the International IR Framework: Integrated Reporting” (IIRC, 2013).
The framework is designed to establish expectations for organizations (mainly corporations) to report important information to their stakeholders. The intended audience for such reporting is primarily “providers of financial capital,” but it also includes many other stakeholders who share an interest in the value creation potential of the firm over time (see Clause 1.7 of the framework).
This article summarizes the framework and guides readers through the document by noting the clauses that provide important insights. It also provides commentary and analysis.