So, what exactly is an Integrated Report? The International Integrated Reporting Council (IIRC), states that:
An integrated report is a concise communication about how an organization’s strategy, governance, performance and prospects, in the context of its external environment, lead to the creation of value over the short, medium and long term.
What does that really mean?
I like to think of an integrated report as an annual report on steroids. An annual report
is a great recap of an organization’s past year, usually presenting operating and financial highlights and some pretty charts and graphs.
An integrated report is all that and more. It provides so much more information about
an organization. Not just talking about the past but looking to the future. It addresses an
organization’s governance, strategy, business model, risks and opportunities and future
outlook. The whole report is also built around the value creation, too. Not just what value the organization creates for itself, but also the value it creates for its customers and its stakeholders.
Ok, that sounds kind of cool, so how do I create an integrated report?
The IIRC developed a framework available at integratedreporting.org. One interesting thing about integrated reporting is that it is principles based, not standards based, so there is considerably more flexibility in creating an integrated report than a traditional financial report. The IIRC developed a set of guiding principles for an integrated report:
The following Guiding Principles underpin the preparation of an integrated report, informing the content of the report and how information is presented:
Strategic focus and future orientation: An integrated report should provide insight into the organization’s strategy, and how it relates to the organization’s 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 organization’s ability to create value over time.
Stakeholder relationships: An integrated report should provide insight into the nature and quality of the organization’s relationships with its key stakeholders, including how and to what extent the organization 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 organization’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: (a) on a basis that is consistent over time; and (b) in a way that enables comparison with other organizations to the extent it is material to the organization’s own ability to create value over time.
In addition, the IIRC also developed a set of content elements to explain what information should be included in an integrated report. The content elements are conveniently framed with a question to better explain the purpose of the information in the integrated report:
An integrated report includes eight Content Elements that are fundamentally linked to each other and are not mutually exclusive:
Organizational overview and external environment: What does the organization do and what are the circumstances under which it operates?
Governance: How does the organization’s governance structure support its ability to create value in the short, medium and long term?
Business model: What is the organization’s business model?
Risks and opportunities: What are the specific risks and opportunities that affect the organization’s ability to create value over the short, medium and long term, and how is the organization dealing with them?
Strategy and resource allocation: Where does the organization want to go and how does it intend to get there?
Performance: To what extent has the organization achieved its strategic objectives for the period and what are its outcomes in terms of effects on the capitals?
Outlook: What challenges and uncertainties is the organization likely to encounter in pursuing its strategy, and what are the potential implications for its business model and future performance?
Basis of presentation: How does the organization determine what matters to include in the integrated report and how are such matters quantified or evaluated?
Another element of an integrated report that is unique compared to other business reporting methods is the inclusion of capitals. The inclusion of the capitals defines the true worth of a company or organization more completely than just looking at financial capital. The IIRC has selected six capitals to be reported on within an integrated report:
1. Financial capital – including both available and obtained funds
2. Manufactured capital – physical objects available to an organization for use in the production of goods or the provision of services
3. Intellectual capital – organizational, knowledge-based intangibles (including intellectual property; “organizational capital” such as tacit knowledge, systems, procedures and protocols; intangibles associated with the brand and reputation that an organization has developed)
4. Human capital – people’s competencies, capabilities and experience and their motivation to innovate
5. Social and relationship capital – The institutions and relationships within and between communities, groups of stakeholders and other networks and the ability to share information to enhance individual and collective wellbeing
6. Natural capital – All renewable and nonrenewable environmental resources and processes that provide goods or services that support the past, current or future prosperity of an organization
What are the benefits of integrated reporting vs. other reporting?
As you have just seen, there are many more elements of integrated report than most traditional forms of business reporting. This allows for a much more comprehensive overview of a company and its business activities. Additionally, users of financial and business reports are demanding more and more transparency, and integrated reporting may be just the right solution.
Has the Indiana CPA Society created an integrated report?
Yes, the Indiana CPA Society released its fourth integrated report earlier this year. We prepared our first report in 2014 to show members an example of what a report looks like. I won’t lie, it took quite a long time to put together that first report. There weren’t a lot of example reports from companies like ours, so we basically started from scratch.
The subsequent reports have been much easier to prepare. To see ours, visit
Was it worth the effort?
Yes, believe it or not, it was. Operationally, it is a great tool to ensure that we are actually doing what we think we are doing. It’s a helpful resource for new Board of Directors members to get up to speed about everything the Indiana CPA Society does. It has also been useful to share with vendors and other external stakeholders to help them gain a better understanding of our organization. We partnered with a new vendor to help us with development of a new website. The integrated report was invaluable to them to use as a resource to help ensure that we properly prioritized content on the new site, because they had a better understanding of what was important to us and to our members from reading that report.
Where can you learn more about integrated reporting?
Visit integratedreporting.org to see content from the IIRC. Their site includes the framework, plenty of research papers on integrated reporting and on specific content elements, and a whole library of example reports.
Additionally, you can reach out to me at firstname.lastname@example.org. I’ll be glad to share my experiences in developing a report.
What else is happening with integrated reporting?
INCPAS is working with the IIRC to provide an In the Know webinar this fall about how to get started with integrated reporting. Additionally, Marian University will offer a class this fall that teaches the process of preparing an integrated report by having students create one for the University. Stay tuned for updates.