The International Integrated Reporting Council (IIRC) on19 January 2021, published revisions to the International <IR> Framework to enable more decision-useful reporting.

According to the IIRC press release “The revisions, the first since the <IR> Framework was originally published in 2013, are the result of extensive market consultation with 1,470 individuals in 55 jurisdictions. The consultation demonstrated that the conceptual thinking and principles of the <IR> Framework remain fit for purpose and robust, as evidenced by the 2,500 organizations in over 70 countries that use it”.

 “As business resilience is tested so severely in the wake of the global pandemic, climate change, and growing inequality, effective integrated thinking and reporting is more important than ever. We believe these revisions can help businesses deliver more robust, balanced reporting. The revisions are also aligned with our efforts to develop a global, comprehensive corporate reporting system.” as said by Charles Tilley, CEO, IIRC.

The IIRC launched the revision process in February 2020 and addressed three key themes of the revision: a) business model considerations, b) responsibility for an integrated report, and c) charting a path forward. The third theme was intended to inform the IIRC’s longer-term strategy.

An integrated report tells the overall story of the organization. It is a report to stakeholders on the strategy, performance, and activities of the organization in a manner that allows stakeholders to assess the ability of the organization to create and sustain value over the short, medium, and long term.

Salient changes in the Revised <IR> Guidelines –

1. Value Creation includes Preservation and Erosion

It is now explicit and presented at all relevant places that the value creation includes preservation and erosion. Thus, the revised guidelines (section 1.7) states that – “The primary purpose of an integrated report is to explain to providers of financial capital how an organization creates, preserves or erodes value over time. It, therefore, contains relevant information, both financial and other”.

Accordingly, Figure 1 in the guideline also has been changed to:

2. Value Creation Model elucidates Better

Similarly, the Value Creation Model is explicit in –

a. Elucidating the relationship between capitals, inputs, and outputs.

b. The outcomes are not only direct consequences of outputs but can also be the result of business activities. This illustrates how outcomes can impact the state of output capitals and in-turn the input capitals.

c. Explicit recognition of positive and negative outcomes in the short, medium, and long terms in line with value generation, preservation, and erosion.

“We continue to urge companies to adopt balanced capital plans, appropriate for their respective industries, that support strategies for long-term growth…. Generating sustainable returns over time requires a sharper focus not only on governance but also on environmental and social factors facing companies today. These issues offer both risks and opportunities, but for too long, companies have not considered them core to their business – even when the world’s political leaders are increasingly focused on them, as demonstrated by the Paris Climate Accord. Over the long-term, environmental, social and governance (ESG) issues – ranging from climate change to diversity to board effectiveness – have real and quantifiable financial impacts… letter sent by BlackRock CEO Larry Fink to the CEOs of the S&P 500”.

3. Responsibility for Integrated Report

In section 1.20, of the revised guidelines, the responsibility of the Integrated report is set on those who are charged with governance.

“An integrated report should include a statement from those charged with governance that includes: –

a. An acknowledgment of their responsibility to ensure the integrity of the integrated report, and,

b. Their opinion or conclusion about whether, or the extent to which, the integrated report is presented following the <IR> Framework”.

This is a continuation of the agenda set in 2013 guidelines, wherein an option was given till the 3rd integrated report.

In summary, the revised guidelines are explicit and clear on the definition of value creation, interlinks amongst capitals, and finally the outcomes. The responsibility of integrity if the Integrated Report and the Report is prepared as per IR framework is set on the Board in the revised guidelines.


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