IIRC revises integrated reporting framework for greater clarity

The International Integrated Reporting Council (IIRC) announced Tuesday revisions to its integrated reporting (IR) framework with fine-tuned details to clarify concepts, simplify guidance for report preparers, highlight greater emphasis on outcomes, and include the language “value preservation” and “value erosion”.

A coalition of regulators, investors, companies, standard-setters, and the accounting profession, the IIRC first launched the IR framework in 2013 to encourage organisations to take a more holistic approach in producing their corporate reports and to include nonfinancial information in addition to traditional financial metrics.

“As business resilience is tested so severely in the wake of the global pandemic, climate change, and growing inequality, effective integrated thinking and reporting is more important than ever,” Charles Tilley, FCMA, CGMA, the CEO of the IIRC and former chief executive of The Chartered Institute of Management Accountants, said in a news release. “We believe these revisions can help businesses deliver more robust, balanced reporting. The revisions are also aligned with our efforts to develop a global, comprehensive corporate reporting system.”

The revisions include:

• Simplification of the required statement of responsibility for the integrated report;
• Improved insight into the quality and integrity of the underlying reporting process;
• A clearer distinction between outputs and outcomes; and
• A greater emphasis on the balanced reporting of outcomes, and value preservation and erosion scenarios.

Throughout 2020, as the pandemic ravaged economies globally and climate-related risks heightened, a steady momentum gathered among global organisations to progress toward a corporate reporting system that would enable investors to compare financial and nonfinancial disclosures of organisations across different industries, especially information related to the long-term sustainability of businesses.

“We see sustainability risk, climate risk in particular, as investment risk, and it’s risk that we believe is not fully priced into asset values right now,” Michelle Edkins, managing director for BlackRock’s Investment Stewardship team, said in a webinar Tuesday that launched the revisions to the IR framework. “The reason is there isn’t comparable and comprehensive data available to investors to make more accurate assessments of a company’s long-term value-creation opportunities.”

In the same webinar, Tilley commented that with the recently announced merger between the Sustainability Accounting Standards Board (SASB) and the IIRC, one of the immediate priorities will be to align the SASB’s sustainability dimensions with the IR framework’s capitals.

“That’s a very important part of our work for 2021, which is the overall alignment agenda to achieve common definitions that will enable comparability and interoperability,” he said. “So, our work is very much about supporting more comprehensive reporting to build a universal system and approach to that reporting. The output is a better report, and that leads to, we would hope, a much better outcome in capital allocation.”

— Alexis See Tho (Alexis.SeeTho@aicpa-cima.com) is an FM magazine associate editor.

Resources

Report

Sustainability and Business. The Call to Action: Build Back Better. This AICPA and CIMA report is an introduction to the area of sustainability, explaining key concepts such as ESG and presenting a call to action to finance professionals to take the lead in integrating sustainability into decision-making.

Podcast episode

 “Integrated Thinking and How to Develop It”, FM magazine, 26 February 2020