Integrated reporting provides for an efficient approach to companies requiring corporate reports. It aims to improve the quality of information with regard to financial capital. The vision of integrated reporting aims at developing a world where integrated thinking is embedded with business practices for both the public and private sectors. It explains to people providing corporate financial capital on how the organization can create value within a set time frame. Integrated reporting takes a principal based approach that intends to develop a balance between flexibility and prescription (Ernst & Young, 2014). To this end, it recognizes the variation of different circumstances within a number of organizations and to compare the degree of these organizations with reference to meeting relevant information needs.
Integrated reporting is a form of communication that seeks to add value to communication in corporate reporting. The main aim is to provide information to providers of financial capital on how a company creates value over time. It provides valuable information and data that organizations use in decision making process. It enhances the stewardship and accountability for capitals of and organization and understand their interdependencies (Elkington, 2009). Moreover, it represents the company’s performance, strategy and other valuable data. Investors and stakeholders rely on such reports to better understand a company and their need to create a relationship or contract with.
Integrated reporting has brought enormous advantages to organizations adopting it. First, we find that there is more integrated thinking and management. In its approach, integrated reporting creates awareness on effective business management and value creation. The integrated reports that business produce is a true reflection of their integrated management and thinking. This signifies that better management will lead to better results and overall performance of the business.
Clarity on business issues and performance can be realized due to use if integrated reporting. IR has proven to provide insights to factors regarding business performance. Organizations are able to assess their capitals and thus achieve a greater clarity on underlying issues. Performance of a business will be increase when the underlying issues are identified and corrected accordingly (Eccles & Kruzus, 2010).
There is improved stakeholder relation and corporate reputation. Through integrated reporting, financial and sustainability data is brought together. Investors reading these reports will better understand a company’s reputation and make accurate decisions. They are able to identify an organizations strategy, growth and performance over time.
More efficient reporting is evident as a result of adopting integrated reporting. There is a concept of connectivity between the users and preparers of the report. It also prepares a business for future as stakeholders can access information without contacting the companies. Moreover, there is more employee engagement giving them a sense of pride. These employees will be motivated to see that their work is recognized and this will lead to growth and increased performance of a business (Elkington, 2009).
Integrated reporting encourages progress. Through constant reporting on strategy, growth and performance, an organization is able to work effectively and realize the set goals and objectives. When competing firms gets integrated reports of other companies, they are able to track their activities and progress to achieve their objectives too. This competition between firms encourages progress (UK Green Building Council, 2015).
There is a process that entails the process for preparing an integrated report. Generally, seven principles should be addressed when coming up with a report. Only two of the principles are discussed in this report (IR Framework, 2013). The report should clearly show the relationship between the factors that affect the ability of an organization to create value over time. Integrated thinking within the management in any company contributes to connectivity of information and overall creation of integrated reports. Major elements of information connectivity include between the content elements and this helps in understanding the systematic and dynamic interaction of activities in an organization. There should be sufficient information connecting the past, present and future activities. This analysis helps in determining the capability of an organization and the effectiveness of the management system.
Connectivity between financial information and other information is also a key element. It helps in understanding new technologies and policies than can reduce the cost of operation. Vital information such as customer relations, satisfaction and feedback can be obtained and when used effectively will increase revenue and profit for a business. Overall usefulness of an integrated report is enhanced when the information is well structured, presented and written in simple language (IR Framework, 2013).
Materiality refers to information on matters affecting the ability of an organization to create value over a period of time. There is a process followed to determine materiality. First there is need to identify the matters affecting value creation. Next, these matters are evaluated on basis of their importance and potential to affect value creation. Prioritizing follows and finally the information that can be disclosed is determined. Creation of a good integrated report requires that the materiality determination process is incorporated in the management system of an organization. It should also contain engagement with financial capital providers to ensure it meets its purpose (Ernst & Young, 2014)
The report can be prepared with regard to responding on compliance requirements for a standalone report. The fundamental concept of the report is based on capitals. The capitals are assessed on increase or decrease of value though the activities done by an individual organization and its output. When an organization creates value, financial returns acts as a method for providing financial capital. Through interactions and relationships, an organization creates value for both the society and stakeholders.
To achieve the main purpose of integrated reporting, a number of guiding principles are required for preparing the report and providing information on the included contents. The first concept is based on stake holder relationship. The report should provide an insight of the nature of how an organization relates with its stakeholders. This should consider how an organization understands and responds to stakeholder’s needs and interests (Eccles & Kruzus, 2010). The second guiding principle should focus on consistency and comparability of an organization. In the report, information should be provided with a context that is consistent over time. It should enable for comparison with similar or related organizations on the ability to create value over time.
The report should include an overview of the organization and the external environment. It should report on what the organization does and the circumstances under which it operates. Other aspects to be included are; governance, business model, performance, and the organization’s outlook. The economic conditions within the external environment and technological change within the area where an organization operates helps to create value. The governance of an organization should create an appropriate structure which supports the ability to create value (Eccles & Kruzus, 2010)
According to Deloitte director’s report, organizations can be able to create value for their shareholders through developing successful relationships with their customers, their employees, suppliers, and the community within which they operate. It should define success measures of the relationships and influence the ability of a business to create value (Elkington, 2009). Rebuilding trust in a business and the creation of value are inseparable. An organization must be able to account for all the interests of its stakeholders. It cannot ignore its customers or employees and even the external environment under which it operates.
According to Michael Krzus, an integrated report allows a reader to better understand the cause and effect relationships. He explains that, it furnishes detailed data for financial and sustainability performance. Deloitte ensures that it takes into account all stakeholder needs and requirements. It accounts for customer satisfaction and ensures to maintain good relationship with manufacturers and suppliers. Customers are treated with respect to ensure they are satisfied with the services provided. Furthermore, feedback from customers is taken into account to allow for quality services dispensing.
Working on consistency and comparability principle, the company ensures to present information in a way that is consistent and can be compared with other organizations (Integrated Reporting, 2013) It creates value in both the short term and the long term. Key messaging is demonstrated across corporate communication. By doing this, the management and all stakeholders are able to understand all operations within the company. In their annual report, Deloitte provides detailed information on strategic focus and future orientation. An insight on the company’s ability to continue creating value in the future is outlined (IR Framework, 2013). This is demonstrated by a strategy which effectively applies use of capitals and resources.
Deloitte discloses all the information on matters that can substantially affect its operations. The board identifies the relevant matters regarding operations of the company and its ability to create value (Deloitte, 2015) Customers are considered as a priority and key players in determining how services and products are dispensed. In the report, performance is assessed to get an overview of how the company has achieved its strategic objectives. Challenges are also listed and all the problems that can affect the company while in operation. Key financial and non-financial indicators are taken into consideration. Additionally, Deloitte maintains a clear business model that enhances its ability to create value by having a wide and clear value chain.
Macquarie Group Limited is a universal investment bank that deals with financial services. The organization operates under three main annuity-style businesses. They includes; Macquarie Asset Management, Corporate and Asset Finance, and Banking and Financial Services. Additionally, it has two capital market businesses namely, Macquarie Capital and Commodities and Global Markets. In the 2017 annual report, the company provided information about their financial highlights such as net operating income and return on equity. It also highlights the business diversity and the company’s ability to continue growing in challenging market conditions. Additionally, the report elaborates on equal directors participation, risk management, workplace safety, and innovations (FY17 Report).
The selected company effectively uses the selected guiding principles. First, according to materiality principle, Macquarie assesses matters that can affect it when creating value over time. For example, risk management is discussed as a primary factor in maintaining long term strategic goals and overseeing operations by the management. This is achieved through a sound risk culture that recognizes opportunity, accountability, and integrity. Moreover, independent audits and investor reports are considered as they are important aspects in measuring how the company will create value over time. The reports aims at providing an oversight on the changes the company should make to facilitate better dispensation of services while in operation. In the report, he principle regarding stakeholder relationship has been addressed. The company aims at building strong relationship through clear dialogue with stakeholders. This helps it to maintain trust between various stakeholders such as investors, clients, government’s, corporate staff, and the community around it (FY17 Report).
In conclusion, integrated reporting has proven to be efficient and most companies are adopting it. It extends beyond traditional business reporting and focuses on long term value creation with regard to manufacturing, social relationships, capitals, human and financial factors. It adds value to a company by linking them to financial providers around the globe. A precise and accurate procedure should be followed when coming up with such reports. They act as source of valuable information to employees, investors, groups and the government.
‘A Directors’ Guide to Integrated Reporting’ (Deloitte 2015)
Eccles, R.G., Krzus, M. (2010) One Report: Integrated Reporting for a Sustainable Strategy, Wiley, New Jersey, USA.
Elkington, J.; Renaut, J.-P. (2009). “The Holy Grail of Integrated Reporting”. sustainability.com. Retrieved 28 October 2014.
FY17 Annual Report | Macquarie Group. (n.d.). Retrieved from http://static.macquarie.com/dafiles/Internet/mgl/global/shared/about/investors/reports/2017/interactive/index.html#/annualreport
The International IR Framework (International Integrated Reporting Council (IIRC) 2013 abridged version
‘Towards Integrated Reporting: Concepts, Elements and Principles’ (Integrated
‘Integrated Reporting: Elevating Value’ (Ernst & Young 2014)
‘A Directors’ Guide to Integrated Reporting’ (Deloitte 2015)
. ‘Practical how-to-guide: Implementing Integrated Reporting (UK Green Building