How does the International Integrated Reporting Council (IIRC) approach ESG reporting?
The International Integrated Reporting Framework is principles-based and market-led. It is based on the three fundamental concepts of value creation, the business model and six ‘capitals’ used by the business to create value over time. Integrated reporting is an inclusive model of reporting, making the explicit connection between all the material value-creation factors – including ESG information – and financial performance through applying the principle of the connectivity of information.
How did the IIRC come to develop the methodology?
We developed the framework via extensive market testing and experimentation through an international pilot program of more than 100 firms. During the creation of our framework, emerging practice was tested by a panel of institutional investors to ensure the information was valuable to users and to support a more efficient and productive allocation of capital. The IIRC was created by the International Federation of Accountants, the Global Reporting Initiative (GRI) and the Prince of Wales’ Accounting for Sustainability Project, representing both the financial and sustainability reporting communities.
Who is the intended audience?
Information based on value creation will have a broad audience but our purpose is to influence capital-allocation decisions, so the information in an integrated report must be investment-grade, capable of being used by pension fund managers and other institutional investors to allocate financial resources in a more productive and efficient way. It is only by creating a more sustainable financial system that our capital markets will properly be able to contribute to achieving the UN’s Sustainable Development Goals and address other global resource imbalances.
How do you see the corporate secretary’s role in formulating reporting actions?
Corporate secretaries play a vital role in enhancing the quality of governance, and integrated reporting is fast becoming a valued governance tool, a signal that boards are managing key risks and opportunities. The most practical way to act is first to read the International Integrated Reporting Framework and initiate a conversation at board level about introducing integrated reporting to the business.
Corporate secretaries can also play a key role in initiating integrated thinking in the business, breaking down silos between departments and identifying the strategic drivers of value across the business, acting as a link between the information and the board. Integrated reporting takes sustainability and financial information and connects them for the board.
What suggestions do you have for corporate secretaries who want to learn more about the IIRC’s initiatives in integrated reporting?
I would recommend they take a look at the Corporate Reporting Dialogue (CRD), a group of framework providers and standard setters the IIRC convenes aimed at achieving stronger alignment within the corporate reporting system. Participants include the CDP, Climate Disclosure Standards Board, GRI and SASB. The project answers the question: how do the many disclosure requirements fit together?
The CRD’s Better Alignment Project is a direct response to the Task Force on Climate-related Financial Disclosures’ recommendations on ensuring companies explain the implications of climate risk on financial performance. The CRD website is owned and managed by the IIRC and focuses on the goal of better alignment in the corporate reporting world, helping companies create informative disclosures that integrate non-financial and financial information. The outcome of the project is expected in Q3 this year and will be published on the CRD website.
I would also highlight City Developments as a company that has made the transition from pure sustainability reporting to integrated reporting, making the strategic link between environmental and social data and financial performance.
This interview appeared in Corporate Secretary’s special report on ESG engagement, reporting and integration
