Integrated reporting and connected information
Integrated reporting is the IIRC's framework for a concise, connected account of how an organization creates, preserves or erodes value over time. The exam tests the six capitals, content elements, guiding principles, and connectivity between financial and non-financial information.
Framework
- Six capitals: financial, manufactured, intellectual, human, social and relationship, and natural.
- Content elements: organizational overview and external environment; governance; business model; risks and opportunities; strategy and resource allocation; performance; outlook; basis of preparation and presentation.
- Guiding principles: strategic focus and future orientation; connectivity of information; stakeholder relationships; materiality; conciseness; reliability and completeness; consistency and comparability.
- Connectivity means linking strategy, governance, performance, risks, capitals and financial statements, including trade-offs and time horizons.
Worked example
A manufacturer invests in an energy-efficient plant. Financial capital falls through capex; manufactured capital rises; natural capital impacts fall through lower emissions; intellectual capital may rise through process know-how. The integrated report connects the capex to the emissions target, the climate risk, the expected cost savings, and the board's oversight. The reasoning: value creation is multi-capital and over time, not a single sustainability metric.
Traps
- Treating the integrated report as a combined sustainability report and annual report.
- Listing capitals without showing trade-offs or connectivity.
- Omitting the business model, outlook or basis of preparation.
- Claiming value creation without evidence or comparability.