Integrated Thinking – The Next Step In Integrated Reporting

This briefing explores how Integrated Reporting can help drive competitive advantage. Traditional reporting has not kept pace with the seismic shifts across today’s complex economic environment, in which 80% of an organisation’s value is in intangible assets. An integrated report tells the story of an organisation, based on information which is much broader, more interconnected and more forward-looking.

Globalisation, technological development and rapid population growth are causing fundamental change to the business world. Traditional financial reporting has not kept pace with the seismic shift in macro-economic value experienced over the last 30 years, and this is reflected in balance sheets.


The value of intangible assets has now grown to over 80% of total market value for S&P 500 companies. That is a massive proportion of an organisation’s true value not being recognised by current financial accounting standards (see figure 1). At a time when many of the practices and processes that account for a company’s assets do not adequately capture value, we urgently require a reality check for business reporting.


Reporting must evolve to address the information needs of business decision makers within this changed business dynamic. Reporting plays a fundamental role in determining both corporate and investor behaviour. Both the American Institute of Certified Public Accountants (AICPA) and the Chartered Institute of Management Accountants (CIMA) advocate a new corporate reporting initiative, Integrated Reporting, which is championed by the International Integrated Reporting Council (IIRC).


Integrated reporting () brings together material information about an organisation’s strategy, governance, performance and prospects in a way that reflects the commercial, social and environmental context within which it operates. It provides a clear, concise representation of how an organisation demonstrates sustainability and creates value. The International Integrated Reporting Framework2 sets out the guiding principles and content elements of an integrated report.


Effective integrated reporting requires integrated thinking and decision making based on an information set that is much broader, more interconnected and more forward-looking than traditional financial analysis. The IIRC’s goal is for integrated thinking to become a fundamental business practice in both the public and private sectors, facilitated by as the reporting norm.


What is an integrated report?


An integrated report should:

  • Make the allocation of capital more efficient and productive through improvements in the quality of information available to providers of financial capital.
  • Identify and communicate the full range of financial and non-financial factors that materially affect the ability of an organisation to create value over the short, medium and long term.
  • Recognise the importance of a broad range of capitals (financial, manufactured, intellectual, human, social and relationship and natural) to a thorough understanding of the organisation’s business model.
  • Focus on the core concept of the business model to support integrated thinking and decision making with a view to sustainable value creation.


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