The International Integrated Reporting Council (IIRC) envisions a world in which integrated thinking is embedded within mainstream business practices in the public and private sectors.
Such thinking is to be facilitated by integrated reporting which is anticipated to become the corporate reporting norm over time. It is hoped that integrated thinking and reporting will act as a force for financial stability and sustainability. Specifically, integrated reporting aims to:
– 1) improve the quality of information available to providers of financial capital to enable a more efficient and productive allocation of capital
– 2) facilitate reporting that communicates the full range of factors that materially affect the ability of an organisation to create value over time
– 3) enhance accountability and stewardship for the broad base of capitals (financial, manufactured, intellectual, human, social and relationship and natural) and promote understanding of their interdependencies
– 4) support integrated thinking, decision-making and actions that focus on the creation of value over the short, medium and long term.
The recently published International Integrated Reporting Framework establishes guiding principles and content elements that govern the substance of an integrated report. It also explains the fundamental concepts that underpin such reporting. Therefore, the publication of the framework is a significant milestone in the development of integrated reporting.
For long-term investors, it is crucial to understand how companies create value over time and what resources and relationships are used and impacted by an organisation. As such, Hermes EOS welcomes the progress made by the IIRC and, where appropriate, encourages companies to start adopting key elements of integrated reporting.