The modern-day challenge for many of today’s businesses is to align the purpose of the organisation to the day-to-day work of its employees, to explain the strategy and business model, break down internal silos and cascade a clear, coherent and understandable strategy ‘from the boardroom to the shop floor’. There is an anecdote that when US President John F Kennedy visited NASA in 1962, he asked a janitor, “What’s your job here?”, and the janitor proudly replied that he was working to put a man on the moon. This statement encapsulates the end-to-end ‘integrated thinking’ within NASA at that time.

Hidden within this endearingly simple short story is a complex network of relationships, behaviours and practices that have conspired to make achieving the seemingly challenging objective of getting a man on the moon achievable. This is where the decade-long story of progress of the International Integrated Reporting Council (IIRC) begins.

The IIRC was established in the aftermath of the global financial crisis of 2008 because an increasingly large proportion of the value being created or lost by businesses was not being captured by mainstream corporate reporting. Or, more particularly, the information was being disclosed in most cases, but in a fragmented way, disconnected from the strategic thinking and decision-making of those charged with governance, typically the board. While information is the lifeblood of capital markets, information can only fulfil its function if it provides sufficient insight into decisions made and, crucially, how those decisions are made, in light of potential trade-offs.

Sustainability issues

This problem was particularly acute in sustainability reporting (remembering that the IIRC’s creation pre-dated the establishment of the International Sustainability Standards Board (ISSB) by more than a decade), where companies were releasing voluntary sustainability reports prepared by dedicated sustainability departments often several months after the annual report. Investors would spot potentially material information in these reports but would not know if the board had oversight of the disclosures or the degree to which sustainability issues were informing the company’s strategy, business model or overall financial performance.

To solve this corporate reporting challenge, the International Federation of Accountants (IFAC), the Global Reporting Initiative (GRI) and the (then) Prince’s Accounting for Sustainability Initiative (A4S) came together with global leaders in business, investment, the accounting profession, academia and non-profit organisations to assess whether a market-led solution could be found. Could a set of global corporate reporting principles and concepts dealing with both financial and non-financial data be identified? And, could this be codified in a framework to be used by boards to identify the capitals (resources and relationships) and key risks and opportunities informed by the principles of governance (oversight) and connectivity of information to end siloed reporting?

The IIRC was born into a world experiencing great change: growing policymaker interest in the financial risks posed by climate change and other sustainability issues, technological innovation increasing the share of corporate value accounted for by intangible resources such as intellectual property and human capital, and a growing focus on investor stewardship responsibilities as owners of companies. These trends made the development of an Integrated Reporting Framework more relevant and more urgent – a point reinforced by the IIRC’s regular dialogue with businesses, investors, standard-setters and policymakers.

Arrival of the Framework

The international Integrated Reporting Framework (the Framework) was released in December 2013 after its approval at a historic meeting of the IIRC’s governing council at ICAEW’s headquarters in London, Chartered Accountants’ Hall. The Framework was structured to include fundamental concepts, guiding principles and content elements – the constituents to help companies prepare an integrated report. At its heart is the concept of value creation, preservation and erosion. The discipline of preparing an integrated report triggered the process of integrated thinking, with multi-disciplinary teams established – often by the company’s CFO – to determine a strategy, understand the business model and examine how the resources and relationships (capitals) used by the business to create value over time interact. The mutually reinforcing cycle of integrated thinking and reporting provides evidence to investors of effective corporate governance and the quality of management and improves the quality of engagement between the board and investors.

The benefits to businesses were revealed in academic research and included attracting more long-term investors, a lower cost of capital and higher share price performance. If investors understand more fully the range of risks and opportunities faced by business, this provides greater insight into the management of the company and reduces information asymmetry. The accounting profession globally has been instrumental in driving awareness and adoption of the Framework, thereby helping the IIRC to reach several important milestones, including signposting of the Framework in corporate governance codes and widespread adoption in Japan, Brazil and South Africa. Today, more than 3,000 organisations are using the Framework to improve the quality of their corporate reporting.

Accountancy takes the lead

It is no surprise that the accounting profession around the world, and especially in the UK, has been such an active partner in advocating for the adoption of integrated thinking and reporting. Rigorous professional training, with its focus on objective judgement, professional scepticism, measurement and ethics are all vital aspects of ensuring integrated reports provide balanced and objective information, rooted in value creation – minimising the risk of greenwashing that has plagued some other reporting innovations in recent years. The multi-faceted role of the accountancy profession – as business advisers, audit and assurance providers and as CEOs, CFOs and broader finance teams – enables integrated reporting to be adopted in a robust way focused on value creation, providing insight into board decision-making covering the short, medium and long term rather than applying a compliance mindset.

While integrated reporting has become a global practice, the strategic report is seen by many as the UK’s version of integrated reporting – indeed, the Financial Reporting Council (FRC) states in its ‘Guidance on the Strategic Report’ that there is consistency with the Framework. It is therefore encouraging to see companies such as Shell, Marks & Spencer and United Utilities using the Framework alongside other corporate reporting standards and frameworks.

Just as the Americans did with their space programme, the IIRC proved the business case and demonstrated the value proposition of integrated thinking and reporting. It has done this by bringing together a strong coalition that has been maintained since the double consolidation, first with the Sustainability Accounting Standards Board (SASB) in 2021 and then with the IFRS Foundation in 2022. The Framework and Integrated Thinking Principles now have their permanent home at the IFRS Foundation, with strong support from the leadership of the International Accounting Standards Board (IASB) and ISSB for continued adoption.

The institutional consolidations of 2021 and 2022 have provided an opportunity for the original mission of the IIRC to be fulfilled. The IASB has described the finalisation of its Management Commentary project in 2025 as “a stepping stone to further integration in the future”, while the ISSB has used many concepts from the Framework in its inaugural IFRS Sustainability Disclosure Standards – in particular, in describing an entity’s sustainability-related risks and opportunities that “arise out of the interactions between the entity and its stakeholders, society, the economy and the natural environment throughout the entity’s value chain” (refer to paragraph 2 of IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information) and in the requirements for connected information and information about governance. Companies that are using the Framework are well positioned to adopt IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures and in so doing to showcase examples of integration in reporting. Both boards have expressed an interest in understanding this evolution in reporting. 

Having secured the future of integrated thinking and reporting, it is time to accelerate adoption. With the ongoing vital support of ICAEW and the global accounting profession, we will be one step closer to establishing a comprehensive global corporate reporting system.  

Jonathan Labrey, Chief Connectivity and Integrated Reporting Officer, IFRS Foundation