A new approach to corporate reporting

Integrated reporting, which is referenced as <IR>, promotes a more cohesive and effective approach to corporate reporting, aiming to improve the quality of information available to key stakeholders. Part of the argument for <IR> is that while financial reporting continues to grow in complexity, it fails to fully capture the value created by an organisation’s activities. <IR> seeks to address this by bringing together diverse but currently disconnected strands of reporting into a coherent integrated whole.
The goal of <IR> is to provide a more balanced and connected explanation of an organisation’s ability to create and sustain value. It draws on a variety of sources and approaches, including existing financial reporting, narrative reporting and governance and sustainability reporting. The potential benefits include improved  effectiveness and efficiency through a more complete understanding of resource use, activities and impacts.
An important element of the <IR> approach is the organisation’s creation of ‘value’ through its use of a number of ‘capitals’ (financial, manufactured, intellectual, human, social and relationship, and natural). <IR> seeks to clarify the relationships between these ‘capitals’ (or resources), the organisation’s business model and external factors.
<IR> spans financial and non-financial information, and connects strategy and planning with governance, key drivers, risk, change, performance and outcomes. This should prove of value to a range of stakeholders interested in an organisation’s ability to create value over time, including employees, customers, suppliers, business partners, local communities, legislators, regulators and policy-makers.
The first version of the International Integrated Reporting Framework was published in December 2013. It is a principles based framework, allowing organisations to innovate and develop their reporting in the context of their own organisational model and the social and economic environment within which they operate.

A public sector perspective
The potential of <IR> in respect of clarifying the relationships between inputs, outputs and outcomes and identifying ‘value’ has particular relevance for many public service organisations facing considerable financial and service delivery challenges. It also offers a method for reviewing complex multi-service delivery and identifying outcomes across a range of activities.
In addition, public sector organisations already publish a wide range of data on their broader impacts and performance. One of the key opportunities (and challenges) for public sector organisations is to use <IR> and understand and clarify the connectivity of all of this information, with the aim of presenting a more complete and coherent picture. And with this is an opportunity to develop a more concise form of reporting.
CIPFA has undertaken a preliminary analysis of the issues involved in applying <IR> in the public sector, and explored these through roundtable events with representatives of UK public sector organisations, as part of a series run by the Consultative Committee of Accounting Bodies (CCAB). CIPFA’s conclusion is that <IR> principles can readily be applied in the public sector, although there are some sector‑specific issues to be considered in more detail to facilitate this. Examples of aspects to consider include the nature of public sector accountability, the role of taxpayers, the intergenerational financing of services and the diversity of accounting and reporting approaches. The results of this and other work on <IR> by CIPFA are available on our website.

A public sector network
The International Integrated Reporting Council (IIRC) is the global body set up to promote <IR> and it already has in place a successful <IR> Pilot Programme, involving over 100 businesses drawn from 26 countries. While there are some examples in the pilot programme of public service organisations adopting an <IR> approach, the initial focus of the IIRC has been mainly on corporate reporting and investors.
In response to this gap CIPFA and the IIRC announced last month that they are creating a new international Public Sector Pioneer Network to help identify and address key sector-specific points, and so facilitate the application of <IR> to a broader range of public sector organisations. A steering group, set to comprise a mixture of participants and external organisations, with a secretariat provided by CIPFA and the IIRC, will oversee the Public Sector Pioneer Network.
The ambition is that the Public Sector Pioneer Network will enable its members to share ideas and learning as they develop their own approach to <IR>. The network is projected to run over two years and cover two reporting cycles. Pioneer Network members are expected to benefit from engaging in network meetings, conference and seminars and webinars, as well as gaining insights from the IIRC team and its Committees on interpreting the Framework in the context of public service delivery. Network members will also benefit from the work done and resources already in place through the original <IR> Pilot Programme.
Speaking on the announcement of the new pioneer network, IIRC Technical Director, Lisa French said: “This network is a key opportunity for public sector organisations to use <IR> to understand and clarify the connectivity of the information they already publish.
“The aim of many public sector bodies to present a more complete, coherent and concise picture will be aided by the International <IR> Framework.
“The Framework was developed through the IIRC Pilot Programme, and its principles are readily applied to the public sector. This sentiment is echoed by the public sector organisations already reaping the benefits of <IR>. This network of pioneers will shape the public sector perspective of <IR> as well as serve to encourage peers in the public sector to adopt it.”
Our hope is that the public sector will be able to full utilise <IR> to help it adapt and succeed in the challenging financial environment it faces. If <IR> can help better communicate the value that public sector organisations provide to Government and to taxpayers then in the long-term it could be a massive asset to such organisations across the world.

Organisations interested in finding out more about the network and/or in exploring opportunities for participating and engaging with the network can email:ir-pioneers@cipfa.org

Further information