What is Integrated Reporting (IR) and How It Differs from

Other Reporting?

Integrated Reporting (IR) is a way for companies to communicate how they create value over
time by showing the connections between their strategy, governance, financial performance, and
the broader social, environmental, and economic context. It differs from traditional reporting
because:
• Focus on Value Creation: While other reports focus on financial performance, IR emphasizes
how a company creates value over the short, medium, and long term for all stakeholders, not
just shareholders.
• Six Capitals Framework: IR uses six types of capitals (resources) to demonstrate the business
processes and how value is generated beyond just financial returns.
• Holistic Approach: It integrates both financial and non-financial information, giving a fuller
picture of the company's performance and impact on society.
 Guiding Principles of Integrated Reporting- (Benefits of <IR>)
IR is based on seven guiding principles that ensure the report is comprehensive, meaningful, and
useful for decision-making:
1. Strategic Focus and Future Orientation: It highlights the risks, opportunities, and business
dependencies and shows how the company balances short-term and long-term goals.
2. Connectivity of Information: It provides a holistic view by showing how different parts of the
business are interconnected and how they collectively impact value creation.
3. Stakeholder Relationships: It gives insight into how the company interacts with stakeholders
(such as shareholders, customers, and employees) and the quality of these relationships.
4. Materiality: Focuses on issues that have a significant impact on the company's ability to create
value, ensuring the most relevant matters are reported.
5. Conciseness: Ensures the report is brief and to the point, providing just enough detail for
readers to understand the business’s strategy, governance, and outlook without overloading with
irrelevant information.
6. Reliability and Completeness: Ensures the report is balanced, providing accurate and complete
information, even if it includes negative aspects of performance.
7. Consistency and Comparability: Uses a standard approach so the report can be compared
across different companies and time periods.
 Key Objectives of Integrated Reporting:

1. Improve the Quality of Information: Provides better, more reliable information

to providers of financial capital.
2. Cohesive Reporting: Offers a more integrated and efficient approach to
corporate reporting, combining various strands (financial and non-financial) into
one report.
3. Enhanced Accountability: Increases stewardship over the broad range of capitals
(financial, manufactured, intellectual, human, social, and natural).
4. Supports Integrated Thinking: Encourages decision-making and actions focused
on sustainable value creation over the short, medium, and long term.
 Six Capitals Framework
IR uses six types of capitals (resources) to demonstrate the business processes and how value is generated beyond
just financial returns.
It’s called The Six Capitals in Integrated Reporting (IR) because "capital" here means important resources that a
company uses to create value and its impact. Just like how money is called "financial capital" because it helps a
business grow, there are five other types of resources that are just as important.
1. Financial Capital
Financial capital refers to the funds a company uses to run its business operations, invest in
growth, and generate future returns. It includes money generated from its core operations,
shareholder investments, loans, or other financial sources.
Examples: Equity, Debt, Cash flow, Revenue

2. Manufactured Capital
Manufactured capital includes all the physical and technological assets that a company uses to
deliver its products or services. It’s the infrastructure that supports business operations, such as
buildings, machinery, and technology.
Examples: Buildings, Machinery & Equipment, Technology Infrastructure
3. Human Capital
Human capital refers to the people working for a company and the skills, knowledge, experience, and abilities they
bring. It also includes their motivation, well-being, and ability to innovate and improve business processes.
Examples: Employee skills and experience, Training and development, Employee engagement and motivation, Health

4. Intellectual Capital
Intellectual capital includes the intangible assets of a company that give it a competitive edge. These are the
knowledge, innovations, brand reputation, and relationships that cannot be physically touched but are crucial for
business success.
• Examples: Patents and trademarks, Software and systems, Brand and reputation, Organizational knowledge

5. Natural Capital
Natural capital refers to the environmental resources a company uses and the impact its operations have on the
environment. It includes the raw materials, energy, water, and ecosystems affected by the company’s activities.
Examples: Energy, Water and natural resources, Environmental impact

6. Social and Relationship Capital

Social and relationship capital refers to the relationships and networks a company builds with stakeholders,
including customers, suppliers, communities, and governments. It focuses on trust, loyalty, and engagement with
society.
Examples: Customer relationships, Supplier and partner networks, Community engagement, Government and
regulatory relationships
 Integrated Reporting (<IR>) provides value to various stakeholders

1.Value of Integrated Reporting to the Company

Telling company’s Story: <IR> allows the company to communicate its unique value creation narrative to stakeholders,
highlighting how it delivers long-term sustainable value.
• Better Understanding of Value Drivers: Helps company identify and assess the diverse drivers of value (e.g., financial, human,
social) beyond just financial performance.
• Improved Strategy Formulation: A comprehensive understanding of value creation leads to better strategic decision-making and
more effective implementation.
• Building Trust: Transparent reporting fosters trust with a wide range of stakeholders by demonstrating accountability and
openness.
• Enhanced Reputation: Demonstrates a commitment to long-term sustainability, improving relationships with stakeholders and
safeguarding company’s reputation.
• Attracting Investors: More informed investors, who appreciate the long-term value creation approach, are more likely to invest
in company.

• 2. Value of Integrated Reporting to the Stakeholders

• Based on the Six Capitals Framework it satisfies needs of each stakeholder respectively
 Dec 23 Task 3b
At the same board meeting, the CEO proposed that one way to reconcile the varied demands of
stakeholders was for NCTech to adopt the Integrated Reporting <IR> framework.

The marketing director agreed to present his recommendations on <IR> at the next board meeting. As
he needs to convince several board members of the merits of <IR>, he has asked for your assistance
preparing the presentation.

Prepare TWO slides, with accompanying notes, for presentation to the board that:
-explain the main capitals that should be included in an Integrated Report for use by NCTech's
stakeholders; and
- advise on the business benefits to NCTech of adopting Integrated Reporting. (12 marks)

Professional skills marks are available for communication by clarifying and simplifying Integrated
Reporting using an appropriate professional tone that is easily understood by the NCTech board. (4
marks)
Answer
 SEP/ DEC 22 TASK 2
The chief executive is concerned that QH focuses too much of
its external reporting towards its investors. She has proposed
that QH consider introducing integrated reporting (IR) and has
asked for your advice on whether it would be beneficial to
QH and its stakeholders.

Prepare a report for the chief executive which advises on the

role of integrated reporting and its value to both QH and its
wider stakeholders.

(12 marks)

Professional skills marks are available for demonstrating

commercial acumen skills in using appropriate professional
judgement to determine the role of IR and its value to QH and
its wider stakeholders.
(3 marks)
Answer
 Social and environmental reporting
Environmental reporting
The ‘disclosure of information on environment related issues and
performance by an entity’
It typically contains details of environmental performance in areas such as:
•measures of emissions (e.g. pollution, waste and greenhouse gases) and
•consumption (e.g. of energy, water and non-renewable mineral deposits).

Social reporting
Social reporting is generally context specific, and typical contents will vary
with industry. For example, the following issues should be included in a
company’s considerations: • human rights issues • work place, occupational
health and safety • training and employee issues • fair pay for employees and
suppliers • fair business practices minority and equity issues.
Key Content of an Environmental and Social Report
An Environmental and Social Report typically includes the following key sections:

1. Overview and Commitment

• Company’s Sustainability Vision and Goals: A statement from senior leadership (CEO, board) outlining the
company's commitment to sustainability and its long-term environmental objectives.
• Sustainability Strategy: A summary of the overall approach to sustainability and how it aligns with the company’s
business goals and mission.

2. Environmental Performance
• Carbon Emissions and Climate Change Initiatives: Data on greenhouse gas emissions, carbon footprint reduction
efforts, and energy efficiency improvements.
• Energy Usage: Breakdown of renewable vs. non-renewable energy consumption, initiatives to reduce energy use,
and transition to sustainable energy sources.
• Waste Management: Information on waste reduction, recycling programs, hazardous waste management, and
efforts to move towards a zero-waste policy.
• Water Usage: Details on water consumption, water conservation efforts, and recycling of water in operations.
• Pollution and Environmental Impact: Initiatives to reduce air, water, and land pollution
3. Social and Governance Performance
Human Rights and Labor Practices: Information on how the company ensures fair labor
practices, respect for human rights, and ethical treatment of workers, including fair wages,
working conditions, and diversity efforts.
• Employee Well-being: Data on health and safety performance, training and development
initiatives, workplace diversity, and employee engagement.
• Corporate Social Responsibility (CSR): Contributions to community development, charitable
activities, and any programs for social good (e.g., education, healthcare support in local
communities). *ESG= Environmental and
Social Governance*
4. Supply Chain Sustainability
• Ethical Sourcing and Supplier Management: Information on how the company works with
suppliers to ensure ethical practices, responsible sourcing of materials, and adherence to
sustainability standards in the supply chain.
• Supplier Audits and Compliance: Details on supplier audits to ensure adherence to
environmental and ethical standards.
5. Environmental Targets and Achievements
• Key Performance Indicators (KPIs): Quantifiable data that measures progress against sustainability goals (e.g., %of
reduction in carbon emissions, energy savings, water usage).
• Goals for Future Sustainability Initiatives: Targets for reducing environmental impacts, such as moving towards
carbon neutrality, renewable energy use, or water conservation goals.

6. Risk Management
• Environmental Risks: Identification of environmental risks and how they are managed (e.g., climate risks,
regulatory changes).
• Sustainability Challenges: Potential challenges in achieving sustainability targets and how the company plans to
overcome them.

7. External Stakeholder Engagement

• Partnerships and Collaborations: Information on partnerships with environmental NGOs, government agencies,
and community organizations.
• Stakeholder Feedback and Involvement: Summary of interactions with stakeholders (customers, suppliers,
investors) to ensure transparency and engagement in sustainability initiatives.

8. Regulatory Compliance
• Adherence to Environmental Regulations: Information on compliance with environmental laws, regulations, and
standards, such as emissions regulations or waste disposal laws.
• Voluntary Standards: Any additional voluntary environmental certifications (e.g., ISO 14001)
 Value to the Company
1. Improved Corporate Reputation and Brand Image
A well-structured environmental and sustainability report enhances the company’s reputation as a responsible and ethical
organization. This can attract customers, employees, and investors who prioritize sustainability.
2. Risk Management
Identifying and addressing environmental risks (e.g., climate change, resource scarcity) reduces exposure to operational risks
and ensures the company is better prepared to adapt to regulatory changes.
3. Cost Efficiency and Resource Savings
Reporting often uncovers inefficiencies in energy usage, waste management, and resource consumption, allowing the
company to implement cost-saving measures like energy conservation, which can improve profitability.
4. Regulatory Compliance
Transparency in reporting ensures the company complies with existing environmental regulations, reducing the risk of fines
or sanctions and staying ahead of potential regulatory shifts.
5. Investor Confidence
Investors increasingly seek out companies with strong Environmental, Social, and Governance (ESG) practices. A detailed
sustainability report can attract investment from sustainability-focused funds and investors who prioritize long-term, ethical
business practices.
6. Innovation and Competitive Advantage
Focusing on sustainability can drive innovation in processes, products, and services. A company that adopts greener
technologies or solutions can gain a competitive edge in the market by offering more sustainable products.
7. Employee Engagement and Talent Attraction
Companies committed to sustainability tend to attract and retain employees who are motivated by working for an ethical
organization. Sustainability reporting can enhance employee morale and help the company recruit talent who share the
same values.
 Value to other Stakeholders
1. Increased Transparency
Stakeholders, including customers, investors, and regulators, benefit from knowing how the company manages its
environmental and social impact, which builds trust.
2. Enhanced Decision-Making for Investors
Data from sustainability reports helps investors assess the company’s long-term sustainability and make informed decisions
about where to allocate their resources.
3. Regulatory Bodies
Clear sustainability reporting assists regulatory bodies in ensuring compliance with environmental laws and identifying areas
where more stringent regulations may be needed.
4. Customers
Customers today are more environmentally conscious and prefer buying from companies that are socially and
environmentally responsible. This builds loyalty and supports customer retention.
5. Suppliers and Partners
It allows suppliers to align themselves with the company’s sustainability practices, creating a responsible supply chain that
benefits the overall ecosystem.
6. Local Communities
Social and environmental reporting provides information on how the company is contributing to community development,
improving local engagement, and promoting environmental stewardship in the regions where they operate.