Integrated reporting is a type of business reporting that attempts to communicate to stakeholders both the financial and non-financial aspects of a company. This method of reporting assumes that social, environmental, and governance issues directly affect the worth of a company. It also assumes that stakeholders have a right to information about these issues and the strategies of the company. In August 2010, the International Integrated Reporting Committee (IIRC) was formed to create international standards for integrated reporting.
Traditional business reports often exclude any information that does not directly relate to the financial status of the company. Consequently, stakeholders know how much the business made in the last year, but have no information about the strategies and policies that helped raise that money. Environmental, social, and governance issues are generally ignored as unimportant or simply too complex to measure.
Proponents of integrated reporting argue that a more holistic approach is needed. Stakeholders, they say, have a right to know how the company is being run and whether environmental and social factors are being taken into account. This type of business reporting shows the broad, long-term consequences of the decisions the company makes. It identifies both the risks and the opportunities the company is facing and explains the connection between the established strategies of the company and the company’s overall performance.
In addition to showing stakeholders the current state of the company, this type of reporting also encourages companies to create sustainable strategies. If a company has to let stakeholders see how the company is being run, the company is more likely to create strategies that are attractive to stakeholders. For example, if a logging company is making a lot of money but has no reforestation strategy, investors are not likely to support the company because the way it is making money is not sustainable. Without integrated reporting, stakeholders would have little or no information about these sorts of strategies.
The IIRC is a committee dedicated to helping the international business community adopt integrated reporting practices. Formed in 2010 by the union of the Prince’s Accounting for Sustainability Project (A4S) of London and the Global Reporting Initiative of Amsterdam, the group has no formal regulatory authority. It is formed of 25 individual corporate and civil leaders and three task forces. Its goal is to create a standardized system for integrated reporting that will be adopted by all countries. As of 2010, when the IIRC was founded, only two countries, Denmark and South Africa, had adopted integrated reporting laws.