November 2024
Chris Cain continues his series on SBL looking at the link between Integrated Reporting and Integrated Thinking.
Given the importance of Integrated Reporting (IR), the following notes have been produced by PASS-SBL to simplify your understanding of the link between IR and Integrated Thinking.
Integrated Reporting and Integrated Thinking
Primary purpose of an IR: To set out how the organisation’s strategy,
governance, performance, and prospects lead to the creation of value
over time. An integrated report benefits all stakeholders interested in a
company’s ability to create value.
The IR framework: The framework includes 7 Guiding Principles that
inform how disclosures should be prepared and presented:
- Strategic focus and future orientation: An integrated report should provide insight into the organisation’s strategy, and how that relates to its ability to create value in the short, medium and long term and to its use of and effects on the capitals.
- Connectivity of information: An integrated report should show a holistic picture of the combination, interrelatedness and dependencies between the factors that affect the organisation’s ability to create value over time.
- Stakeholder relationships: An integrated report should provide insight into the nature and quality of the organisation’s relationships with its key stakeholders, including how and to what extent the organisation understands, takes into account and responds to their legitimate needs and interests.
- Materiality: An integrated report should disclose information about matters that substantively affect the organisation’s ability to create value over the short, medium and long term.
- Conciseness: An integrated report should be concise.
- Reliability and completeness: An integrated report should include all material matters, both positive and negative, in a balanced way and without material error.
- Consistency and comparability: The information in an integrated report should be presented:
- On a basis that is consistent over time.
- In a way that enables comparison with other organisations to the
extent it is material to the organisation’s own ability to create value over time.
The seven content elements that should be in an IR:
- Organisational and external environmental overview.
- Governance structure.
- Business model.
- Risks and opportunities.
- Strategy and resource allocation.
- Performance – have strategic objectives been achieved?
- Outlook for the future performance (financial and non-financial).
Integrated Thinking
The active consideration by an organisation of the relationships between its various operating and functional units and the six capitals that the organisation uses or affects.
The six capitals of an integrated report IR: Financial; Manufacturing; Social and Relationships; Human; Intellectual; and Natural.
Integrated Thinking leads to integrated decision-making and actions that consider the creation, preservation, or erosion of value over the short, medium and long term.
Integrated Thinking supports Integrated Reporting, as it encourages connected and holistic communications that are concise and strategically focused.
- Chris Cain is an approved trainer with PwC Academy
