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IIRC Newsletter

Posted 11 January, 2021

Our plans for 2021: Globalizing integrated reporting

If 2020 taught us anything, it is the importance of assessing what we value and how – as individuals, business and society.

We enter 2021 with a belief that integrated thinking and reporting, and our merger with the Sustainability Accounting Standard Board (SASB), can evolve the way markets approach value creation, and in turn, build resilience, drive trustworthy information and help organisations to not only face the challenges that will come our way this year, but seize on the opportunities as well.

As such, this year, our focus is clear: we will drive convergence in the corporate reporting landscape and build adoption globally of both integrated thinking and reporting. We are in no doubt that the time is now for us to achieve these goals. You can expect big things from us this year.

We ended 2020 on a high, with the publication of our 10 year anniversary celebratory report (read it here), our three day global conference and by taking the next crucial step with our partners at CDP, CDSB, GRI, and SASB towards a robust system for reporting enterprise value.

We enter 2021 with the same high-octane momentum:

The revised International <IR> Framework

On Tuesday 19 January, we will publish the revised International <IR> Framework, a result of extensive consultation throughout 2020.

Our global consultation demonstrated that the <IR> Framework is fit for purpose, but some clarifications and revisions are necessary to bring it up to date.

Join us at 12:00 GMT for our virtual launch event to find out more: register here.

You will hear from: Charles Tilley, CEO, IIRC; Michelle Edkins, Managing Director, BlackRock; Sandra Schoonhoven, Head of Sustainability, ING Group; Suresh Gooneratne, CFO, Diesel & Motor Engineering; and Lisa French, Chief Technical Officer, IIRC.

A globally aligned system

We responded to the IFRS Foundation Trustees’ consultation on sustainability reporting to encourage them to engage in this space and help deliver a comprehensive global system of corporate reporting.

We advocate an approach that unifies existing global frameworks and standards that produce sustainability information relevant to enterprise value creation, while creating linkages with standards that serve broader stakeholder needs and, importantly, the connectivity with financial reporting.

This stepping stone approach will help avoid duplication and complexity and drive simplicity and adoption to avoid the fragmentation of global capital markets. Our intent to merge with the SASB is a bold step on this path.

Our response to the EFRAG consultation has the same focus and we encourage them to drive complementarity between global developments and bold action at a European level.

The role of integrated reporting in convergence

In December, we built on September’s statement of intent, to move the dial further towards a comprehensive system for reporting with our partners at CDP, CDSB, GRI, and SASB.

Join us tomorrow, 12 January 2021, to hear from the CEOs about what this paper means for your reporting: register here.

Additionally, read our joint announcement and the paper here.

So how does this vital report support integrated reporting? The paper sets out the role the International <IR> Framework provides as a reporting framework that connects disclosure for enterprise value.

For the first time, we have together defined sustainability matters as all value drivers represented by the capitals in the <IR> Framework, with the exception of financial capital. These are natural, human, social and relationship, intellectual and manufactured.

This means that sustainability standards should, in the future, evolve to ensure businesses can provide metrics and data on all of the capitals to drive robust, trustworthy, integrated reporting.

One of the immediate priorities, as we merge with SASB, is to align their five sustainability dimensions to the <IR> Frameworks capitals.

We will continue to push for common definitions that will enable comparability and interoperability.

Dynamic materiality

A successful business must meet the needs of society through sustainable development, its stakeholders through a focus on long term viability, and its investors via a return on investments.

This is the crux of the concept of dynamic materiality, which we first presented with our colleagues in the September statement of intent and have expanded upon in this new paper. It encourages businesses to consider information across three lenses – society, enterprise value creation and financial return.

Given the urgency of tackling climate change, we developed a prototype standard for climate-related disclosure that shows how the relevant components of our frameworks and standards, along with the recommendations set out by the TCFD, could form the basis for development of a climate-related financial disclosure standard. It encourages businesses to apply the three lenses to the way they consider materiality. It is ‘dynamic’ due to the way information can move between the lenses.

This approach means data can be collected once and then reported appropriately to the different users of reports. It reduces duplication of reporting, can lead to an improvement in quality, increase comparability and enhance transparency over how sustainability matters affect enterprise value creation, preservation or erosion.

The paper is clear that the disclosure of performance on sustainability matters should, ideally, be reported along with information already reflected in the financial accounts and disclosures, with the guiding principles of the <IR> Framework used to drive this connectivity of information.

Our unified approach with CDP, CDSB, GRI, and SASB demonstrates that a global structure for reporting can be achieved to a rigour, and within a timeframe, that meets stakeholder demands.

A focus on integrated thinking

Integrated thinking is vital to what we seek to achieve this year. Its adoption will drive behavioural changes needed within business. It ensures the way businesses approach enterprise value is consistent not just in the way they report, but in the way they think, plan and act.

Our Integrated Thinking & Strategy Group will continue to publish case studies that analyse how organisations embed integrated thinking into their strategy and business model. Case studies by ABN AMRO and Solvay are available on the IIRC website, with more coming soon.

The <IR> Business Network

Our <IR> Business Network, comprised of a diverse group of leading organisations, will continue to work together to improve, learn, share and celebrate their integrated reporting journeys.

We will publish a Getting Started Guide to help businesses that plan to adopt integrated reporting for the first time.

Our ambition is to launch new groups around integrated reporting and the Sustainable Development Goals, and for integrated reporting in Asia. Contact [email protected] to find out more about getting involved with these groups.

And we will continue to engage with investors on their evolving needs from reporting through our <IR> Investor Dialogue for Pension Funds.

Working together

The IIRC – and the future Value Reporting Foundation – will always be grounded in the needs of the market and be a broad coalition for those that believe integrated thinking and reporting can deliver much needed sustainable development and financial stability.

We look forward to working with you throughout 2021. If you have any questions, ideas or comments please do get in touch with your regular IIRC contact or email [email protected].