Integrated reporting is one of the sought-after tools that helps a company design and change its base structure according to its desired future goals. It has replaced traditional sustainability reporting. The framework of integrated reporting was first launched in 2013 by International Integrated Reporting Council (IIRC).
Shortly after it was launched, the integrated reporting framework gained immense popularity and is been rapidly adopted by many small as well as big ventures. It can foresee the future goal according to the company's strategies, incentives, performance, as well as potential risks. Individuals who are keen to know more about integrated reporting should commence a career in Financial Analysis to incorporate more knowledge and skills.
Let's dive in to learn more about integrated reporting!
What is Integrated Reporting?
Integrated reporting is a framework that collects information on a company’s performance, governance, management, sustainability, and plans that shows the external contexts under which it usually works. The main external contexts are the social and commercial environments. This helps a company to create value for the stakeholders that can either be long-term or short-term which helps the stakeholders to understand the past and the present performance of a company. It also predicts the future performance of the same company.
This value is extracted by analysing the financial as well as non-financial information of the company. These pieces of information can consist of both past and present information. Integrated reporting is based on the foundation of integrated thinking this is why it can communicate the co-creation of planning and objectives. This foundation allows integrated reporting to trace the sources that assisted in the development of long-term as well as short-term values for the stakeholders and investors.
The final result of integrated reporting is a single integrated report. This report will guide a company with its requirements and will assist it to incorporate those requirements within itself.
Advantages of Integrated Reporting
Companies are rapidly adopting integrated reporting as it has several advantages and benefits. These advantages have been elucidated below:
- Integrated reporting induces an integrated thought process throughout the organisation.
- Integrated reporting allows a company to visualise and unify its business strategy to its business model.
- As an outcome, integrated reporting provides a single report that is easier to comprehend and examine.
- Integrated reporting is extremely famous among stakeholders as it is well known for creating value for them by examining the financial as well as non-financial factors.
- Integrated reporting can easily foresee future dangers and upcoming opportunities for a company.
- Integrated reporting also can link the venture to non-financial factors and performance.
- Integrated reporting allows the employee to comprehend more about the business.
- Lastly, integrated reporting enhances the procedure of decision-making.
Why does a Company need an Integrated Reporting Framework?
Integrated reporting is considered an important tool by companies as it can easily predict the future performance of a company by simply understanding and studying the relationship between several factors. The two most important factors that it takes into consideration are financial factors and non-financial factors. These factors also assist the framework to find out the substantial value of that company in the long run.
Two of the most essential business aspects are continuous development along with economic stability. These two are promoted by integrated reporting by simply interconnecting them with daily reporting, investment strategies, as well as business behaviour. After integrated reporting took over the market, the small as well as companies understood that they have to shift their focus from financial capital to value creation.
Stakeholders these days are most keen to know about the value generated by a company under external factors. The external factors that assist in determining value creation are the social factor, environmental factor, and economic factor.
International Integrated Reporting Framework
The international framework is a guideline that assists organisations to create an efficient system of guiding principles that helps structure and govern integrated reports. It also helps companies to plan their future-oriented strategies. Additionally, the international framework helps the management to strategically deal with these risks and enhance the business model.
International reports are prepared to keep in mind the following parameters:
- Good governance.
- Better allocation of resources.
- Enhancing business performance.
- Better outlook.
- The right mode of preparation and presentation of reports.
Integrated Reporting Governance and its Four Pillars
Integrated reporting and governance are closely interconnected. Efficient communication can not be established for the stakeholders by integrated reporting if there is no governance. Four main pillars of governance have been discussed down:
The first pillar of governance is responsibility. It assists an organisation to distinguish the responsibilities and jobs among the employees. It also supervises the work of each employee and tracks the value they have created for the organisation.
The second pillar of governance is translucency or transparency. It took after the translucency of the various reporting done by the company. These reports include both external and internal reports.
The third pillar of governance is integrity. It determines how good a decision a company takes and the business culture it follows.
The last and fourth pillar of governance is stewardship. This makes sure that a company creates a sustainable plan that they can achieve in the long run.
Stewardship assists a company to boost its employment, manufacturing, social as well as financial relationship.
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