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GRI and Integrated Reporting

Global Reporting Initiative (GRI), the International Integrated Reporting Council (IIRC) and the IR Framework

Burgess COMMENTARY

Peter Burgess

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The successful company of tomorrow will have an integrated strategy to achieve financial results and create lasting value for itself, its stakeholders and society. The value created by this company cannot be expressed by isolated financial and a sustainability reports, with no clear links between the ‘single bottom line’ and the sustainability impacts caused or the value created in order to generate its financial results.

GRI co-founded the International Integrated Reporting Council (IIRC) because the future of corporate reporting is the integration of financial and sustainability strategy and results. An integrated report should be the result of such an integrated reporting process.

Understanding the links between financial results and sustainability impacts is critical for business managers, and increasingly connected to long- and short-term business success. To understand these links, organizations must identify the material sustainability topics to monitor and manage to ensure the business survives and expands. This step is at the core of the sustainability reporting process provided by GRI’s Sustainability Reporting Framework.

GRI offers companies guidance on how to identify material sustainability topics to be monitored and managed, and to prepare for the integrated thinking process, which is the foundation for integrated reporting.

Integrated reporting as proposed by the IIRC is a form of corporate reporting that provides a clear and concise representation of how an organization creates value, now and in the future. An integrated report is one that could bring together material information about an organization’s strategy, governance, performance and prospects. The IIRC will propose the elements to be presented in an integrated report through the Integrated Reporting Framework they are now developing.

The process to establish this internationally accepted Integrated Reporting Framework is at its beginning with IIRC, and has already attracted important players in the corporate reporting field, such as reporting standard setters, large auditing companies, accountancy boards, large companies, financial market institutions, and NGOs.

Before the IIRC was established, pioneering companies and experts disseminated and developed the concept of integrated reporting. One of the most active integrated reporting communities is in South Africa, and its contributions have helped shape the beginning of the integrated reporting concept. In 2010, the Johannesburg Stock Exchange introduced a listing requirement that companies must produce an integrated report or explain why not.

THE INTERNATIONAL INTEGRATED REPORTING COUNCIL

The International Integrated Reporting Council (IIRC) was established in 2010 “to create a globally accepted Integrated Reporting Framework which brings together financial, environmental, social and governance information in a clear, concise, consistent and comparable format. The aim is to help with the development of more comprehensive and comprehensible information about organizations, prospective as well as retrospective, to meet the needs of a more sustainable, global economy”, as stated on IIRC website.

The IIRC aims to bring together world leaders from the corporate, investment, accounting, securities, regulatory, academic, and standard-setting sectors, as well as civil society to design its Integrated Reporting Framework. The IIRC has a Council, a Board, a Working Group, a Secretariat, and other committees and task forces with specific focuses. GRI is one of the co-founders of the IIRC and is actively participating in most parts of its organizational structure.

The IIRC is currently developing an Integrated Reporting Framework. In September 2011 the IIRC issued the Discussion Paper, Towards Integrated Reporting – Communicating Value in the 21st Century for public consultation. In June 2012 A Summary of Responses to the Discussion Paper and Next Steps was published. In October 2011 the IIRC launched a two-year Pilot Programme to encourage companies to test the principles and practicalities of integrated reporting.

In July 2012 the IIRC published A Draft Framework Outline and in October 2012 the Working Draft of Prototype International Framework to inform its stakeholders of the likely structure and general content of the Integrated Reporting Framework. The IIRC plans to publish the world’s first Integrated Reporting Framework by the end of 2013.

IIRC'S REPORTING FRAMEWORK AND GRI'S REPORTING FRAMEWORK

Isolated financial and sustainability reports do not show understanding of the links between financial results and general sustainability impacts, and can leave managers and stakeholders with a poor understanding of business activities and value creation.

According to the IIRC, “Integrated Reporting is an approach to corporate reporting that demonstrates the linkages between an organization’s strategy, governance and financial performance and the social, environmental and economic context within which it operates. By reinforcing these connections, Integrated Reporting can help business to take more sustainable decisions and enable investors and other stakeholders to understand how an organization is really performing.”

The sustainability reporting process defined by the GRI Sustainability Reporting Framework can help companies that want to produce integrated reports, in three main ways:

1. Identifying material topics – topics that express the core link between business goals and sustainability impacts
2. Stakeholder engagement – dialogue to help determine material impacts and manage risks and opportunities
3. Performance indicators – measuring, managing and reporting material issues using an internationally accepted framework

GRI is now developing the next generation of Sustainability Reporting Guidelines – G4 – which will be launched in May 2013 during GRI’s Global Conference on Sustainability and Reporting. In June 2012 GRI published an Exposure Draft of G4 for public consultation.

One of the G4 development objectives set by GRI’s Board of Directors is to offer guidance on “how to link the sustainability reporting process to the preparation of an integrated report aligned with the guidance to be developed by the International Integrated Reporting Council (IIRC)”. The G4 Exposure Draft does not include such guidance at this time, as it was not possible due to the differing timelines between the development process of G4 and that of the IIRC’s Integrated Reporting Framework. However, GRI remains committed to provide such guidance in due course.

GRI is also planning a publication for release in May 2013 discussing the existing examples of organizations that have experimented with the connection between sustainability disclosure using the GRI Sustainability Reporting Guidelines and the preparation of integrated reports.