The last few years has seen the worst financial crisis since the 1930s – a crisis that was in part driven by individuals and organizations focussing on short-term profits and rewards irrespective of their long-term sustainability.
The crisis has demonstrated the need for capital market decision-making to reflect long-term considerations and has called into question the extent to which corporate reporting disclosures, as they exist today, highlight systematic risks to business sufficiently.
Integrated Reporting will provide an important step for organizations facing the challenges of the 21st century.
Current reporting standards
Current reporting standards such as International Financial Reporting Standards (IFRS) or US Generally Accepted Accounting Principles (US GAAP) require organizations to produce a fair and reasonable account of their business in audited financial reports. Often, these reports do not fully consider the social, environmental and long-term economic context within which the business operates. Some companies produce ‘Sustainability’ or ‘Environmental, Social and Governance’ (ESG) reports which consider these factors. However, these reports do not necessarily connect the risks and opportunities with the business strategy and model.
Integrated Reporting will help to bring together data that is relevant to the performance and impact of a company in a way that will create a more profound and comprehensive picture of the risks and opportunities a company faces, specifically in the context of the drive towards a more sustainable global economy.