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Against a backdrop of declining public trust in businesses and business leaders, integrated reporting provides a tool to help businesses regain the trust of investors and other key stakeholders, from customers to employees.

ACCA has collaborated with the IIRC for the second year running to review the corporate reports prepared by organizations in the <IR> Business Network for accounting periods ended up to 31 March 2017 (2016 findings: Insights into Integrated Reporting).

Insights into Integrated Reporting 2.0: Walking the Talk highlights some significant improvements made by <IR> Business Network participants over the past year, but also suggests organizations can reap more benefits if boards and executives embed integrated thinking more firmly within internal decision-making processes.

Some of the organizations interviewed have seen concrete benefits, such as stronger customer engagement and improved credit ratings. However, in order for the reporting output to convince stakeholders, change has to be driven from within.

Commitment to Integrated Reporting Continues to Grow

Observations from a review of 45 corporate reports are supplemented with a survey of 20 <IR> Business Network participants from 12 different countries, and interviews with experienced integrated reporters from 6 organizations. Best practice examples are drawn from 10 integrated reports.

The most striking progress observed this year? Growing commitment to integrated reporting: 76% of the reports reviewed made explicit reference to the International <IR> Framework, up from 59% in 2016 (58% of the reports reviewed stated they were integrated reports, up from 51% in 2016).

Encouraging improvements were also observed in terms of the consistency and conciseness of the reports. Reports have shown a marked increase in the use of consistent performance measures from year to year, so much so that consistency, one of the lowest-rated areas in last year’s review, became one of the highest-rated this year. It’s also positive to observe reports getting shorter in length overall: while nearly half of the 2016 reports exceeded 150 pages (excluding the financial statements), half of the 2017 reports contained less than 100 pages.

Innovative approaches are emerging in as organizations measure the value that they create for their stakeholders, demonstrate their commitment the UN Sustainable Development Goals, and use technology to make reports more concise and user-friendly. Innovations may also be emerging from audit firms: significantly more integrated reports have received some form of external assurance, in addition to the statutory audit (60%, up from 46% in 2016).

While these results are promising, new challenges have also come to light. ACCA’s survey and interviews with <IR> Business Network participants show that solving these challenges would require preparers to think beyond reporting practice and process, and to consider organizational management implications. Examples of the internal changes due to integrated reporting include redefined business models, updated strategic planning processes, new mechanisms for stakeholder engagement, and revised metrics for business unit performance.

Key Challenges and Good Practice Ideas

Linking capitals to strategy and performance

Challenge: Most reports do talk about a wide range of capitals. Over four-fifths (80%) report on five or more capitals. Nonetheless, the linkage between the discussion on capitals and the organization’s strategy and performance is weak. For example, commentary on the capitals is usually given in discrete sections, with little reference to the organization’s overall strategy or performance targets.

Good practice ideas: Organizations should feel free to customize the capitals model to make it relevant to their strategy and business model – for example, only reporting on capitals that impact how the organization creates value. The alignment between the capitals and strategy can be strengthened if management considers the effects on capitals as part of investment appraisal.

Tying strategy to value creation over the short, medium and long term

Challenge: Reports scored highly in terms of explaining the organization’s strategy and the context around it. However, strategy discussions often do not sufficiently relate to the organization’s ability to create value over time. This could be the result of short-term management focus and the separation of reporting and strategy teams. Many organizations are still in the process of defining what value creation means in their specific contexts, particularly beyond financial returns created for providers of financial capital.

Good practice ideas: Starting the report with a clear mission statement, and a concise definition of value, provides important context and sets the tone for the integrated report. In order to achieve this, cross-functional collaboration is needed: a strategy and reporting steering committee composed of strategy, risk, investor relations and reporting functions may help.

Developing a more proactive approach to managing future uncertainty

Challenge: 53% of the reports reviewed covered future timeframes of four years or more. However, forward-looking discussions often lacked specificity in terms of the impact of future trends on the organization, and the organization’s response strategies. In particular, reporting on opportunities was judged to be weaker than reporting on risks. This is often driven by concerns over compromising commercially-sensitive information, or fears of being perceived to commit to future actions in an uncertain environment.

Good practice ideas: Disclaimers over forward-looking statements help to manage stakeholder expectations. Defining what short, medium and long term means provides clarity for report users and prompts management to review the strategic planning horizon. Reporting teams could challenge management concerns over sensitive information: it may be beneficial to disclose some information without compromising trade secrets.

Determining the basis for preparation

Challenge: Only 46% of the reports reviewed were found to have explained the materiality determination clearly. Many organizations did not use the value creation lens in determining materiality, but instead applied the GRI model. Preparers found it challenging to reconcile the needs of different stakeholders.

Good practice ideas: Identifying the primary audience of the integrated report from the outset would help to clarify decisions behind the selection, prioritisation and presentation of information in the report. Whatever materiality determination approach is adopted, the integrated report will be more credible if it explains how material matters are evaluated and prioritized.

Viewing materiality through the lens of value creation

Challenge: Although reports generally scored highly in terms of explaining how organizations created value, very few could be observed to have applied the value creation lens. In other words, it was often unclear whether material matters were identified, evaluated, prioritized and disclosed based on their effect on the organization’s ability to create value over time. The fact that many reports did not explain the basis for preparation contributed to this. Other factors include a lack of active board involvement in the materiality assessment process, and conceptual difficulties in applying this value creation model to externalities over which the organization has little control – for example, translating the challenges of a low-interest-rate environment into concrete issues that the organization can manage.

Good practice ideas: We encourage reporting teams to proactively involve the board in materiality decisions. The application of the value creation lens becomes more natural if the materiality assessment process can be integrated into the organization’s strategic planning cycle. The interactions between the materiality assessment process and the risk management process are particularly worth exploring.

It seems that, for many organizations, implementing integrated thinking is just as important and arduous as integrated reporting itself, if not more so. In this parallel journey, the board and the executive management plays an absolutely crucial role.

10 questions to get you on the way to integrated reporting and thinking

To benefit fully from integrated reporting and thinking, we recommend reporting colleagues to consider the following questions. We encourage them to start a wider conversation about their organization’s culture, objectives and processes.

  1. What does value mean for me and my organization?
  2. What differentiates my organization from its competitors?
  3. What is my organization’s mission?
  4. Where does my organization want to go (What is its vision)?
  5. Who are the key stakeholders we rely on to fulfil our mission and realize our vision?
  6. What key resources do we need to do this?
  7. How do we put our mission and vision into action? What is our strategy?
  8. What changes can I see coming in 1, 5, 10 and 20 years’ time, which could affect our strategy? What do we need to do differently to respond to those changes?
  9. How will I know whether my organization is fulfilling its mission and realizing its vision? How will our key stakeholders know?
  10. How can I talk to the board about these questions?


Yen-pei Chen

Corporate Reporting and Tax Manager. Professional Insights, ACCA

Yen-pei Chen is a Corporate Reporting and Tax Manager in ACCA’s Professional Insights team. An ICAS-qualified chartered accountant, Yen-pei has previously worked as a corporate reporting Subject Matter Expert at BPP Learning Media, and as a Corporate Tax Advisor at EY.