IR Integrated Reporting - Creating Value Value to the Board #IIRC

Creating Value
Value to the board

Contents
Part 1
Introduction 3
Value to the board 4
Part 2
Building trust and reputation 6
Following the global financial crisis, the need for boards to build
trust in their businesses with all their stakeholders and demonstrate
their contribution towards long-term economic stability has become
a high priority. IR has an important part to play.
Part 3
Articulating strategy and the business model for better investor dialogue 12
Telling the company’s performance story is an important part of the
board’s responsibilities. Explaining strategy and the business model
is essential to present clearer and more complete information to
investors and other stakeholders.
Part 4
Enhancing the board’s governance role 18
The modern corporate is increasingly seen as having a wider purpose in
society beyond delivering value to shareholders. As the board’s governance
role expands accordingly, so IR is increasingly being used as a tool to
understand and communicate value creation in its broadest context.
Part 5
Supporting better decision making through integrated thinking and IR 22
Integrated thinking is increasingly seen as a necessary requirement for
delivering long-term value creation by businesses building connectivity
across organizations, breaking down internal barriers and enhancing
decision making.
References26
www.theiirc.org twitter.com/theiirc Integrated Reporting IR

Part1Introduction
Introduction
A number of forces at work in the world are combining
to highlight the power and relevance of Integrated
Reporting IR. In this publication – the first in a new
IR Creating Value series – we aim to highlight these
trends, share views of those already on the IR journey,
and inspire others yet to begin.
There is a recognized need to promote financial stability
and sustainable development. Much can be achieved
if investment decisions are made on the basis of long-
term value creation, especially if corporate behaviour
is aligned to this aim. Demonstrating the link between
investment decisions, corporate behaviour and reporting
is one aim of this Creating Value series.
We also intend to highlight the practical value of IR
in the context of today’s fast-moving markets, and the
international trends that are combining to encourage
IR adoption. We draw on recent research, articles and
case studies to demonstrate the relevance of IR as a
21st century solution for businesses seeking a means of
reporting on performance and potential from a long-term
value creation perspective.
3
Part1Introduction

Part1Introduction
Value to the board Paul Druckman, Chief Executive, IIRC
This first edition focuses on the board
– deliberately so. Corporate reporting,
and the thinking that has to accompany
it, are boardroom issues. This is
where strategy, performance and the
development and communication of
long-term value are best understood,
aligned and led. This view is endorsed
by the International Corporate
Governance Network (ICGN) whose
revised Global Governance Principles
now include the recommendation that
boards should produce an integrated
report. Reporting is firmly placed among
the responsibilities of top management.
Board members are best placed to
ensure overall organizational and
cultural alignment and to achieve
the benefits that come from effective
reporting practices. Investors may
not yet routinely request integrated
reports, but this should not be a reason
for boards to delay starting their IR
journey. Investors say they have more
confidence in management when they
gain a clear picture of the business
from reporting. As PwC research shows,
investors clearly want the benefits
associated with the broader reporting
focus of IR1
. At the same time, boards
are increasingly pursuing long-term
strategies that integrate wider sources
of value creation. This will incline them
towards an IR approach; it will be a
natural part of boardroom thinking to
report organizational performance in
relation to long-term value creation –
a need and intent that is aligned with
the International IR Framework.
There is increasing evidence too
of the benefits boards can gain
from adopting IR. The latest IIRC
research conducted by corporate
communications consultancy Black
Sun identifies both external and internal
benefits2
. Among organizations piloting
the IR Framework, 91% have seen a
positive impact on external engagement
with stakeholders, including investors;
92% have a better understanding
of value creation; and 79% report
improvements in decision making.
4

In today’s world, news travels fast.
Big data, the internet and social media
mean that hiding less favourable news
is increasingly hard to do. We live in
an age of transparency. IR is, at
one level, a strategic response to the
challenges of operating successfully
within modern society. It is also about
doing the right thing. The recent report
Tomorrow’s Business Success, poses
the question, “Why would a company
not want to be trusted?”3
It reflects in
part the need for boards to recognize
that they have a wider purpose
extending beyond delivering financial
success for shareholders. Many leading
companies already understand this,
and are embracing IR as a practical
means of telling a compelling story
about how they are creating long-term
value and so contribute to the greater
good, not only in pure business terms,
but also for society at large. Their
leading practices will inspire others
to follow.
Part1Introduction
5

Building trust
and reputation
Following the global financial crisis,
the need for boards to build trust in
their businesses with all their
stakeholders and demonstrate their
contribution towards long-term economic
stability has become a high priority.
IR has an important part to play.
Part2Buildingtrustandreputation
6

In the wake of the global financial crisis, huge
effort has been spent on analyzing its causes,
dissecting weaknesses in capital markets and
governance frameworks, and seeking ways to
prevent a recurrence.
Now market participants are increasingly focused
on rebuilding trust. The trust-building challenge
facing boards is particularly important in the light of
post-crisis analysis that has identified a widespread
loss of confidence in the current capitalist model as
a force for good for everyone in society.
Dominic Barton, global managing director of
McKinsey, has called on business leaders to rise to
the challenge of reforming capitalism for the long
term. However, as he outlines in the recent report
Tomorrow’s Business Success, there are three
major challenges to be faced in achieving reform:
the need for businesses to focus on the long term;
for executives to ensure their organizations serve
the interests of all major stakeholders (employees,
suppliers, customers, creditors, communities and
the environment); and for the boards of public
companies to govern like owners. He believes
IR can help business leaders meet these
challenges, stating, “IR enables companies to
set out how they create value and can provide the
shared language which enables boards, business
executives and investors to more effectively engage
to unlock future wealth.”
PwC has been considering the importance of
trust for some years. Its 2010 paper, Trust:
the overlooked asset, opened with this stark
statement: “In an era of increasing connectivity
and intensifying public scrutiny, trust is the
lifeblood of any organisation – a critical asset
in ensuring a business’s long-term survival and
success. The aftermath of the recent financial crisis
has demonstrated both the vital importance of
trust, and the severe consequences to economic
prosperity when it is undermined by perceived
untrustworthy behaviour.”4
But, as the report notes,
because trust does not appear on the balance
sheet, it is “widely overlooked”. The paper poses
some pertinent questions for businesses, such as:
• Do you focus solely on revenue growth or is it
just as important to your organization how this
wealth is created?
• To what extent do you look beyond financial
performance to measure your stakeholders’
experiences of your organization, through
metrics such as employee engagement,
customer loyalty and social responsibility?
Part2BuildingtrustandreputationIf businesses are not making,
and seen to be making, a positive
contribution to the societies of which
they are a part then they will lose
trust and value as a result.
Tomorrow’s Business Success,
Tomorrow’s Company, CIMA and the IIRC
The call for Integrated Reporting
is beginning to rise in volume. With
public trust in business undermined
by scandal after scandal, we would
do well to listen and act quickly.
Jean-Marc Huët, CFO, Unilever
In an age when intangible assets
comprise so much of a company’s
value, trust is an essential currency
of business – and yet it’s never been
more fragile or in shorter supply. The
smartest investors will demand more
transparency about non-financial
elements of a company’s business,
and the attendant risks and
opportunities.
Daniel Tisch, CEO, Argyle Communications (Canada),
and 2011-2013 Chair, Global Alliance for Public
Relations Communication Management
7

8
Building trust through IR
PwC’s Building Public Trust awards shine a spotlight on
the best reporting practices. The Netherlands-based
financial services company Aegon won the 2014
category for international companies participating in the
IIRC Pilot Programme. The judges considered Aegon’s
Integrated Report to be “concise, with a simple and
accessible depiction of the company’s value chain.
Aegon’s disclosures on its non-financial priorities and
performance are especially impressive.”
Building blocks of trust
Building and sustaining trust in their organization
is undeniably a core element of the board’s role.
Public relations consultancy Edelman believes,
“Unlike reputation, which is based on an aggregate
of past experiences with a company or brand,
trust is a forward facing metric of stakeholder
expectation.” The 2014 Edelman Trust Barometer,
based on a substantial global survey, found
that trust in business has stabilized (while trust
in government has fallen), but since 2008, the
factors seen as building trust in business have
changed. Survey participants now place greater
importance on engagement and integrity-based
attributes such as treating employees well (59%),
listening to customers (59%) and exhibiting ethical
and transparent practices (56%). These factors
now carry more importance than operational-
based attributes, including financial performance
(36%). Edelman’s research suggests that CEOs
can build trust in themselves and their companies
by communicating clearly and transparently
(82%), telling the truth regardless of how
unpopular it is (81%) and engaging regularly
with employees (80%).
One challenge in building trust concerns the
need for businesses – many of which now have
the financial power greater than some national
economies – to be held accountable. Today’s
giant corporations have more power to affect
employment, finance and society than government
bodies. As their power has grown, so has the call
for greater accountability of businesses – not just
to their shareholders, but to the communities in
which they operate and which provide their “licence
to operate”.
At the same time, however, there has been
a general loss of confidence in the ability of
corporate reporting to provide investors and wider
stakeholders with the information they need in
order to hold boards to account. A recent study,
Understanding Investors: Directions for Corporate
Reporting, by global accountancy body ACCA,
revealed that more than two-thirds of investors
have lost trust in company reports since the onset
of the global financial crisis5
.

9
Darryl Button, Aegon’s CFO and a member of its management board, said,
Trust is at the heart of what Aegon does: deliver
financial promises to millions of customers across the
world. Integrated Reporting has helped us to better explain
our business and communicate how we create value for our
customers, employees, investors and other stakeholders.
The board’s response
How can boards respond? Many companies
are already adopting IR as a means to build
trust and communicate clearly with multiple
stakeholders, with relevance to wider society
as opposed to shareholders only.
As outlined in the September 2014 issue of
Strategic Finance magazine, published by the
Institute of Management Accountants (IMA),
Japan-based convenience store franchise Lawson,
Inc. produced its first integrated report in 2013,
which “illustrates how the company’s business
model is tied to possible solutions to the social
and environmental challenges of the local
communities”6
. Local issues (such as an ageing
population) and global issues (such as climate
change) “are connected to the multiple actions
that Lawson, Inc. has implemented as part of its
mission to realize a sustainable business growth
in harmony with society and the environment”.
IR is a key mechanism by which boards can
present the full picture of their company’s use of
all relevant resources (or ‘capitals’), and so help
to address weaknesses in today’s capital markets.
In their publication, A Manifesto for Sustainable
Capitalism, Al Gore and David Blood assert that
Integrated Reporting encourages companies to
integrate both their financial and environmental,
social and governance performance into one report
that includes “only the most salient or material
metrics”. They state, “This enables companies
and investors to make better resource-allocation
decisions by seeing how ESG performance
contributes to sustainable long-term value creation.”
Similarly, global insurer Aviva’s white paper, A
Roadmap for Sustainable Capital Markets, argues
that capital markets do not incorporate companies’
full social and environmental costs, and therefore
that capital is not being allocated correctly7
. The
paper states, “Integrated reporting by companies
is fundamental to the ability to execute responsible
investment strategies.” It warns that without IR,
investors cannot integrate the environmental,
social and governance performance measures of
corporate sustainability into their valuation work.
“As a result, a company’s cost of capital does not
reflect its sustainability.” Investors are not able to
take account of a company’s ability to continue as
a viable business.

10
Widespread consensus
Regulators and other bodies are thinking along similar lines. The Financial Stability Board
(FSB) and the International Organization of Securities Commissions (IOSCO), for example,
are among those taking a greater interest in IR as a route towards achieving more
cohesive reporting and financial stability.
The Brazilian National Development Bank (BNDES) has a keen interest in supporting financial
stability. Vânia Maria da Costa Borgerth, senior advisor on market transparency to the bank’s
president, sees strong benefits from encouraging IR. In the IIRC Pilot Programme Yearbook,
she said, “We understand that improving transparency will create more stable capital markets
that are better prepared to grow,” she says. “We’re involved in Integrated Reporting because we
think it is a much more transparent way to see a company as a whole, not just as a profit entity.
“As an accountant, I think financial information is no longer enough to provide the market
and investors with information they need in order to make decisions. Investors, suppliers,
clients and society will generally benefit; transparency reduces uncertainty. Having a more
transparent way of presenting a company so that the whole market understands it better
can help avoid drastic decisions and systemic risk, even during a crisis.”
The ultimate aim is that by applying IR to achieve greater transparency of material
information and present a clearer value creation story, boards can build and sustain trust
not only in their own companies, but also in the capital markets as a whole.
Whether Integrated Reporting should
happen or not is no longer a question.
We should look at how to implement it
in a manner that is not disruptive.
Mr U.K. Sinha, Chairman of the Securities and Exchange Board of India (SEBI)

11
The Securities Commission,
together with professional bodies
and other stakeholders, is exploring
avenues to enhance the quality of
information available to the capital
market. One of the options being
considered is the eventual introduction
of Integrated Reporting.
Datuk Seri Najib Tun Razak, Prime Minister of Malaysia

Articulating
strategy and the
business model
for better investor
dialogue
Telling the company’s performance
story is an important part of the board’s
responsibilities. Explaining strategy and
the business model is essential to present
clearer and more complete information to
investors and other stakeholders.
12
Part3Articulatingstrategyandthebusinessmodelforbetterinvestordialogue

13
One problem with traditional
investment decisions is that they
are based on financial metrics alone.
But according to global consultancy
Interbrand’s 2013 survey of brand
values,8
Coca-Cola’s brand value
amounted to around 48% of its
market capitalization.
This is no isolated example. Research in 2010 by
US merchant bank Ocean Tomo, an intellectual
capital specialist, looking at trends over four
decades, found that net assets of SP 500
companies represented only around 19% of
market capitalization in 2009, compared to 90%
in the 1970s. In other words, intellectual capital
and other intangible assets not captured on the
balance sheet now drive market value.
Boards need to address this information gap, to
express clearly and concisely how their strategy
creates value over time, and how they generate
profits and manage risks. The process of IR
enables organizations to do this by taking into
account the relationships between different
areas of a business, its use of capitals and the
business model.
19%
90%
Net assets of
SP 500 companies
represented
only around
of market
capitalization
in 2009
in the1970s
compared to

14
Holistic reporting
According to Bob Laux, Senior Director of Financial Accounting and Reporting at Microsoft Corporation,
IR helps organizations to articulate their performance and future potential. He says, “IR provides
a holistic method for explaining how the organization is doing, and how the management team thinks it
will do in the future... It takes into account the connectivity and interdependencies between the range
of factors that have a material effect on an organization’s ability to create value over time.”
Dimitris Lois, Chief Executive Officer at Coca-Cola
HBC, also sees benefits. “Integrated Reporting
reflects how our company thinks and does business,”
he says. “This approach allows us to discuss material
issues facing our business and communities and
show how we create value, for shareholders and for
society as a whole.”
It is precisely the board’s view of how the
organization’s strategy, governance, performance
and prospects – in the context of its external
environment – lead to the creation of value in
the short, medium and long term that investors
want to know. A recent survey9
among investment
professionals by PwC found that a large majority
(87%) of respondents felt that clear links
between a company’s strategic goals, risks, key
performance indicators and financial statements
was helpful for their analysis.
Nearly two-thirds (63%) believed that the quality
of a company’s reporting – including information
about strategy, risks and other drivers of value –
could have a direct impact on its cost of capital,
according to the report – Corporate performance:
What do investors want to know? However,
substantial gaps are perceived between the
importance of these topics and the effectiveness
with which companies report on them. The PwC
report concluded, “Developing more integrated
reports could potentially better meet the needs of
investment professionals, while also encouraging
more cohesive decision-making within companies
to support longer-term value creation.”
Long-term
sustainable
business
success
Createvalue
Building trust
Building trust
Tell the story
Business environment
Business environment
Ambiguous
Volatile
Uncertain
Complex
Better
strategy
Betterdecisions
Business
model
Connectinginformation
engagement
Stakeholder
commitment
Employee
informationNon-financial
information
Financial
IR provides the necessary
framework to enable all the
relevant information about
a business to be put into
context alongside its strategy
and business model and
provide a more holistic view
of performance.
Source: Tomorrow’s Business
Success, Tomorrow’s Company,
CIMA, IIRC
IR helps a
company both to
create value and
to tell its story

15
Filling information gaps
Sonja Simon, Head of Group Accounting and
Reporting at SAP, the enterprise application
software company and a participant in the
IR Business Network, believes IR can help
investors to understand the business better,
by filling some important information gaps.
“I have heard a number of times that analysts and
investors don’t have the necessary information
and have to guess, which carries a risk premium,”
she explains. “The more transparent we are about
how we plan to meet challenges, and provide
information showing how we actively manage not
only our short-term financial numbers but also
take steps to safeguard the future, the less risk
premium there will be. Integrated Reporting can
help communicate this.”
Considerable evidence has been amassed in
recent years to indicate that traditional corporate
reporting has not been meeting the needs of
investors – it fails to provide them with the
information they need to understand future value
creation potential. For example, The KPMG Survey
of Business Reporting, published in May 2014,
looked at reporting by around 90 companies
in 10 countries over a five-year period.10
It
found that, while 56% of audit committees
(surveyed separately) name customer focus as
a top three value driver, only 7% of companies
provide performance data on customer focus or
satisfaction. The report notes that “boards have an
essential role to play in ensuring that the content
of their reports addresses what they consider to
be the most important drivers of their business”.
It finds that “at present, the weight of reported
information does not reflect the drivers of business
value, and therefore could align better with investor
perspectives of value.”
Integrated Reporting that
shows the entirety of corporate
activities makes investors and
other stakeholders come to fully
understand the overall value to be
created by the company.
The conclusion of Japan’s Expert Committee on
Desirable Market Economy System, led by high
profile business leader Yoshimitsu Kobayashi,
President and CEO of Mitsubishi Chemical Holdings
State of the art Integrated
Reporting provides us with
information on corporate
performance across the full
spectrum of financial, social,
intellectual, and natural capital
that is necessary for value creation.
This gives us a much more complete
picture of the long-term prospects
of the business, and helps us make
better investment decisions.
Euan Munro, Chief Executive Officer,
Aviva Investors

16
Importance of the business model
KPMG’s report (as referred to on p. 15) makes a strong case for the importance of describing the
business model. First, explanation of the model is the starting point for building a business-focused
picture of the business – and should encourage the more complete provision of relevant operating
performance measures. Second, the business model provides an essential context, helping readers
to begin to assess the potential impact of future events.
Providing clarity on the business model, for both
board members and external stakeholders, is one
outcome of IR. “All stakeholders will benefit from
IR because of its focus on future orientation and
ensuring a clear understanding of the story of value
creation through developing one organizational
business model,” comments Sandra Guerra, Chair,
Instituto Brasileiro de Governança Corporativa and
IIRC Council Member. “Investors alongside other
stakeholders will benefit from IR as embedded
in its Framework is a culture of transparency
and stability.”
Companies already adopting IR are seeing
improved communication with their stakeholders.
“IR enables us to better communicate how we
are executing against our strategy and in doing so
create value for our key stakeholder groups,” says
Mikkel Larsen, Managing Director and Head of Tax
Accounting Policy at DBS Bank Ltd.
IR improves
stakeholder relationships
Recent IIRC research
has been conducted by
corporate communications
specialist Black Sun.
The September 2014 report,
Realizing the benefits: The impact of
Integrated Reporting, based on the
experiences of IIRC Pilot Programme
organizations indicates that IR has
an impact on external stakeholders,
including investors.

17
Corporate reporting evolution
According to the Annual Report on Annual Reports 2014 by ReportWatch, integrated reports
represent the evolution of corporate reporting.
“Integrated Reporting is the logical consequence
of the growth of sustainability and corporate
responsibility as issues... One report out of three
in the Annual Report on Annual Reports 2014 top
50 may qualify, partly or fully, as “integrated”.”
ReportWatch also notes that a third of investment
decisions are based on non-financial attributes,
commenting, “Companies must now report to a
broader audience than shareholders – themselves
often looking beyond numbers too – and speak to
several categories of stakeholders. These expect
more than accounts, financials and business
indicators, and want to know why, where and
how companies create and add value, and how
they deal with responsibility and sustainability.”
The study also refers to a survey among buy-side
investors worldwide by US-based Rivel Research
showing “clarity of business strategy” and “growth
potential” as the two major aspects considered for
long-term investment.
Damien Walsh, Managing Director at Australia’s
bankmecu, sums up the views of many about the
communications benefits of IR. “This approach
to reporting recognizes that companies do not exist
and operate in a vacuum – but rather in a complex
interdependence between economic, social,
cultural and environmental inputs, performance
and impacts,” he says. “Ultimately it is improved
and more complete communication which will help
forge stronger connections between our bank and
its customers – and that’s good business.”
91%
of all respondents
have seen a positive
impact on external
engagement with
stakeholders,
including investors.
70%
of those that have issued an
integrated report believe that
financial capital providers
have greater confidence in
the long-term viability of
their business model.
87%
Of those that
have published
at least one
integrated report,
believe that investors
better understand
their strategy.

Part4Enhancingtheboard’sgovernancerole
18
Enhancing
theboard’s
governancerole
The modern corporate is increasingly
seen as having a wider purpose in society
beyond delivering value to shareholders.
As the board’s governance role
expands accordingly, so IR is
increasingly being used as a tool to
understand and communicate value
creation in its broadest context.

19
Recent business theory has been dominated by the idea that maximizing shareholder value is the only
corporate goal. New thinking is now challenging this assumption, arguing the case for a far broader
corporate role and with it the need for a broader governance perspective by the board.
Steven Pearlstein, in Social Capital, Corporate Purpose and the Revival of American Capitalism, a 2014
paper published by non-profit public policy organization the Brookings Institution, claims that there is
little basis in history or law for the idea that the sole purpose of a corporation is to maximize profits for its
shareholders.11
He argues that the idea only took hold in the 1990s – through a combination of hostile
takeovers, increased stock-based compensation for executives, and quarterly earnings guidance. In
contrast, he states, “well into the 1960s, corporations were widely viewed as owing something in return
to the community that provided them with special legal protections and the economic ecosystem in which
they would grow and thrive.”
Social capital
Pearlstein writes of the lack of emphasis on
‘social capital’ in capitalist systems, compared
with financial, human or physical capitals.
His paper states, “Social capital is the trust we
have in one another, and the sense of mutual
responsibility for one another, that gives us the
comfort to take risks, make long-term investments,
and accept the inevitable dislocations caused by
the economic gales of creative destruction.
The importance of social capital and creating value
for wider society is being embraced by businesses
implementing IR, as is the role that IR can
play in supporting associated governance needs.
Christie B. Kelly, Chief Financial Officer of Global
real estate services provider JLL, a participant in the
IR Business Network, says, “Our aim is to create
value for our clients, shareholders, employees and
the global community. At JLL, we recognize that
this value creation story also includes a focus on
environmental, social and governance issues.”
Mervyn King, Chairman IIRC and Leigh Roberts,
Project Director: Sustainability and Integrated
Reporting at The South African Institute of
Chartered Accountants (SAICA), explore
the implications of the wider corporate role
in their book, Integrate: Doing business in
the 21st Century, suggesting that IR can
help boards meet the complex governance
challenges they face. The authors state, “Good
corporate governance in the modern world is
the understanding of the inseparability of the
company’s strategy, risks, opportunities and
financial performance and the impacts it has
on society and the environment.
“This requires effective leadership by the board
with an integrated thinking approach to setting
integrated strategy, performance and reporting.
It requires an integrated and inclusive governance
approach in considering the needs of key
stakeholders. It requires that decision-making
aims at making business judgement calls that
result in the company continuing to create
value in the long term.”
19

20
Interconnected risks
Generating long-term value depends on effective risk management. As the World Economic Forum
highlights in its Global Risks Report 2014, global risks are interconnected. It notes that to manage
global risks effectively and build resilience to their impacts, “better efforts are needed to understand,
measure and foresee the evolution of interdependencies between risks, supplementing traditional
risk-measurement tools with new concepts designed for uncertain environments.”
As businesses operate in uncertain environments,
so they increasingly need to understand the
interdependencies that affect them. So do
investors, who need a full understanding of the
risks facing businesses in order to allocate capital
appropriately, However, there is a lack of capacity
within the established network of standards and
legislation to “join the dots” in a meaningful, concise
and comparable way. In this context, IR becomes
a valuable risk management tool.
Integrated reports provide a more complete picture
for investors and other stakeholders, and because
IR requires business units and functions to
communicate with each other, it challenges
internal silo mentality, so management information
becomes more cohesive. This provides an early
warning system that alerts boards to significant risks
earlier, and triggers decisions that otherwise may not
have been taken. IR therefore plays an important
role in strengthening governance frameworks.
Politicians and regulators are looking for ways
to encourage long-term, stable growth for their
economies. Increasingly, IR is being positioned
as an important building block of an effective
governance framework. For example, the July
2014 report of the UK Commission on the Future
of Management and Leadership, Management
2020: leadership to unlock long-term growth,
makes a range of recommendations designed to
enhance the quality of management. Corporate
reporting is the focus of one key recommendation
for government. The Commission’s report calls on
government to “encourage employers to expand
annual reports to include both social purpose and
broader people metrics.” It specifically refers to the
IR Framework as providing a good starting point
for many organizations.
The Singapore Stock Exchange, together with
professional bodies and other stakeholders, is
also exploring avenues to enhance the quality
of information available to the capital market.
Magnus Bocker, Chief Executive Officer of the
Singapore Stock Exchange, stated, “We support
having a continued dialogue and discussion on
Integrated Reporting as we want to participate
to help shape the future.”

21
Mutual benefits
The encouraging news for boards that embrace their broader governance role through IR is that
corporate performance and investor support should both be strengthened.
A 2014 Harvard Business School report drew from a sample of 1,066 US companies practicing degrees
of Integrated Reporting, and concluded that “more IR is associated with a more long-term investor
base” and that “IR is positively associated with percentage of shares owned by dedicated investors
and negatively with percentage of shares held by transient investors”. This suggests that “firms practicing
IR not only attract dedicated investors but also become unattractive for transient investors”.
“Integrated Reporting is far more than just the process of publishing better annual reports,” says Thomas
Kusterer, CFO of EnBW. “Besides being a powerful communication tool, Integrated Reporting can be used
as an effective governance tool for performance-oriented management.”
ICGN support for
Integrated Reporting
The importance of Integrated Reporting is acknowledged by
the International Corporate Governance Network (ICGN) in
its revised Global Governance Principles (published 2014).
These describe the responsibilities of boards and shareholders
and form the ICGN’s standard for well governed companies.
Principle 7.5 in the 2014 edition addresses the need for non-
financial information. It states, “The board should provide an
integrated report that puts historical performance into context,
and portrays the risks, opportunities and prospects for the
company in the future, helping shareholders understand
a company’s strategic objectives and its progress towards
meeting them.” The Principle calls for such disclosures to be
linked to the business model, and “appropriately integrated
with other information that enables shareholders to obtain a
picture of the whole company”. It also calls for use of KPIs that
are linked to strategy.
Corporate reporting
in Australia
The Australian Stock Exchange recently updated its
Corporate Governance Principle 4, bringing all corporate
reporting (rather than only financial reporting) within the
realm of director oversight. The July 2014 report by KPMG
in Australia, Oversight of corporate reporting by company
directors, discusses the opportunity this brings to develop
a “flagship” report at the centre of the corporate reporting
portfolio, which “explains how the company has created
value to date, and importantly how it is set to deliver value
over the short, medium and long term”. Under such a model,
this flagship report would be based on the IR Framework.
KPMG’s report says, “The integrated report will be the initial
report for investors, analysts and other key stakeholders
to use in understanding the company’s view on its value
creation story.”

Supporting better
decision making
through integrated
thinking and IR
Integrated thinking is increasingly seen
as a necessary requirement for delivering
long-term value creation by businesses
building connectivity across organizations,
breaking down internal barriers and
enhancing decision making.
22
Part5SupportingbetterdecisionmakingthroughintegratedthinkingandIR

23
The challenges facing company boards in
terms of building trust, communicating
strategy to shareholders and fulfilling their
broadened governance role are significant.
As companies grapple with these challenges,
the need for integrated thinking is increasingly
being identified.
In their book, Integrate: Doing business in the 21st
Century, Mervyn King and Leigh Roberts consider
the concept of integrated thinking. They explain
that integrated thinking by the board involves
“understanding the company’s dependency on its
various resources and relationships, along with the
associated risks and opportunities”. They state, “In
the board’s ongoing decision-making, integrated
thinking means it will assess whether a considered
action adds worth to the company, its effect on
key stakeholders and company reputation, and its
impact on the future availability and affordability
of the resources the company relies on.”
Integrated thinking can be contrasted with
“silo thinking” in that it takes into account the
connectivity and interdependencies between
the range of factors that affect an organization’s
ability to create value over time. The more that
integrated thinking is embedded into a company’s
activities, the more naturally will the connectivity
of information flow into management reporting,
analysis and decision making.
KPMG has studied the experience of applying IR
in South Africa, including the need to develop
integrated thinking. “Applying Integrated Reporting
principles to identify and assess a consensus view
of the material issues required “integrated thinking”
through involvement of all relevant disciplines in the
business,” comments Mark Hoffman, Integrated
Reporting, KPMG in South Africa.
The biggest benefits of integrated
reporting will not come from
being compliant or from attracting
investors. They will come from the
discipline of needing to think, plan,
and manage in a more integrated
way. This will help companies achieve
the agility and flexibility they need
to respond to change – and seize
opportunities – in an increasingly
transient world.
Paul Barnett, founder and CEO of the Strategic
Management Forum, writing in Corporate Finance
Review, July/August 2014
[Companies are] driving IR
because of the business performance
improvements that adopting it
brings. One of the most mentioned
benefits of IR is the opportunity
it provides to connect teams from
across an organization, breaking
down silos and leading to more
integrated thinking.
Oversight of corporate reporting by company
directors, KPMG Australia, July 2014

24
65%
see a current benefit
of better long-term
decision making
92%
believe they have
increased understanding
of value creation
79%
report improvements
in decision making
78%
see a current benefit of
more collaborative thinking
about goals and targets by
the board, executives and
strategy departments
The IIRC’s latest research conducted by Black Sun among 66 organizations
that have already started to implement IR found that:
Integrated decision making
This experience appears to be replicated elsewhere. Many companies find that, as they move towards IR,
they need to develop integrated thinking across the organization.
This leads to more integrated internal management
reporting and is also having an impact on decision
making, according to latest IIRC research conducted
by Black Sun. The September 2014 report,
Realizing the benefits: The impact of Integrated
Reporting, notes, “Decision making is changing as
organizations understand their own value creation
processes differently, and make changes to the way
that they measure and manage performance. Our
research found that a large majority of organizations
experienced improvements in decision making. In this
case, significant improvements were seen at every
stage of the reporting journey.”
SAP’s 2013 integrated report draws attention to the
connections between the financial and non-financial
performance of the business, as measured, for
example, by revenue and margin, and customer
loyalty and employee engagement. It explores
the “cause-and-effect relationships” between the
financial and non-financial indicators. Having studied
companies already implementing IR, academics
Cristiano Busco, Mark L. Frigo, Paolo Quattrone and
Angelo Riccaboni note, “Understanding integrated
cause-and-effect chains within the process of value
creation... helps the company manage processes
and activities in a more effective way and, most
importantly, build awareness of the heterogeneous
capitals, resources, and relationships used and
affected.”12
SAP’s report, supported by specific analysis, suggests
that a company culture with engaged employees
enhances the company’s employer ranking, helping
it to attract top talent, spurring innovation and
ultimately boosting revenues.
IR improves

25
82%
have made changes
in performance
information
Among organizations that have already
issued an integrated report:
Given the impact that IR can have on decision
making, the benefits of its adoption clearly extend
beyond pure reporting. This is certainly the view
of Bertrand Badré, Managing Director and World
Bank Group Chief Financial Officer. “Integrated
Reporting does more for an organization than just
facilitate the creation of a holistic report of overall
performance,” he says. “It fosters and embeds
integrated thinking – everyone has a common
understanding and speaks the same language.
“At the World Bank Group, in addition to being
a global development institution we are also a
financial institution, and see the International
IR Framework as a tremendous tool to help
us align our performance with our strategic
developmental objectives.”
IR has helped us make better decisions.
We had found that with stand-alone sustainability
reporting there was a push for more reporting from
some areas of the business. With an integrated
approach, it is easier to stay focused on what is
related to value creation.
Emma Sweet, CPA Australia
Our financial people are learning how non-
financial issues impact financial performance.
We are really learning from each other.
Carla Neefs, EY Netherlands
Source: Realizing the benefits: The impact of Integrated Reporting,
Black Sun, September 2014
84%
have experienced
benefits in collaboration
between the board
and executives
84%
believe the process
has had benefits
for their board
decision making

26
References
1 PwC, Corporate performance: What do investors want to know?, September 2014
2 IIRC and Black Sun, Realizing the benefits: The impact of Integrated Reporting, September
2014
3 Tomorrow’s Company, CIMA and IIRC, Tomorrow’s business success: Using Integrated
Reporting to help create value and effectively tell the full story, July 2014
4 PwC, Trust: The overlooked asset, September 2010
5 ACCA, Understanding investors: Directions for corporate reporting, June 2013
6 Busco C., Frigo M., Quattrone P., and Riccaboni A., Leading practices in Integrated
Reporting, Strategic Finance, September 2014
7 Aviva, A roadmap for sustainable capital markets: How can the UN Sustainable
Development Goals harness the global capital markets?
8 Interbrand’s, Best Global Brands 2013 http://interbrand.com/assets/uploads/
Interbrand-Best-Global-Brands-2013.pdf
9 ReportWatch, Annual Report on Annual Reports 2014
10 KPMG, The KPMG Survey of Business Reporting, May 2014
11 Pearlstein, S., Social capital, corporate purpose and the revival of American capitalism,
January 2014
12 Serafeim G., Integrated Reporting and investor clientele, 2014
References

27
The International Integrated Reporting Council (IIRC) is a global
coalition of regulators, investors, companies, standard setters, the
accounting profession and NGOs. Together, this coalition shares the view
that communication about value creation should be the next step in the
evolution of corporate reporting.
The International IR Framework has been developed to meet this
need and provide a foundation for the future.
Further information about the IIRC can be found on its website www.theiirc.org
This publication was published by the International Integrated Reporting Council (‘the IIRC’). It may be downloaded free of
charge for personal use only from the IIRC website: www.theiirc.org. The IIRC does not accept responsibility for loss caused to any
person who acts, or refrains from acting, in reliance on the material in this publication, whether such loss is caused by negligence
or otherwise. Copyright © November 2014 by the International Integrated Reporting Council (‘the IIRC’). All rights reserved.
Permission is granted to make copies of this work, provided that such copies are for personal or educational use and are not sold
or disseminated and provided that each copy bears the following credit line: “Copyright © November 2014 by the International
Integrated Reporting Council (‘the IIRC’). All rights reserved. Used with permission of the IIRC. Contact the IIRC (info@theiirc.org)
for permission to reproduce, store, transmit or make other uses of this document.” Otherwise, prior written permission from
the IIRC is required to reproduce, store, transmit or make other uses of this document, except as permitted by law.
Contact: info@theiirc.org.
References
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