IIRC Framework: 8 Key Elements & Benefits

The IIRC Framework is changing how companies report their value. Here's what you need to know:

• Helps businesses show how they create long-term value
• Looks at 6 types of capital: financial, manufactured, intellectual, human, social, and natural
• Used by over 2,500 companies in 70+ countries

8 key elements:

1. Company overview
2. Leadership structure
3. Business model
4. Risks and opportunities
5. Strategy and resource allocation
6. Performance
7. Future outlook
8. Presentation of information

Benefits:

• Better understanding of value creation (92% of companies)
• Improved internal collaboration (96%)
• Enhanced decision-making (79%)
• Stronger board alignment (78%)

Challenges:

• Needs top-level support
• Requires cross-department teamwork
• Takes time to implement correctly

The IIRC Framework isn't just a reporting tool - it's changing how companies think about and create value.

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What is the IIRC Framework?

The IIRC Framework is shaking up corporate reporting. It's not just another set of rules - it's a fresh approach to how companies show their value.

Here's the scoop:

The International Integrated Reporting Council (IIRC) rolled out this framework in December 2013. Their aim? To help businesses tell their full story, not just the financial parts.

Why does it matter?

It's gaining traction fast. Over 2,500 companies in more than 70 countries have adopted it. That's big news.

The framework does three main things:

1. Shows how a company creates value over time
2. Looks at all aspects of the business, not just finances
3. Pushes companies to think long-term

Here's the interesting part:

The IIRC Framework isn't about box-ticking. It's about shifting how companies think and communicate.

It focuses on six types of "capital":

Capital Type	Meaning
Financial	Money and investments
Manufactured	Buildings, equipment, infrastructure
Intellectual	Patents, copyrights, organizational knowledge
Human	Employee skills, experience, and motivation
Social and Relationship	Stakeholder relationships, brand reputation
Natural	Environmental resources

This approach helps companies see the whole picture. It's not just about profits - it's about using all resources to create value.

But here's the kicker:

The IIRC Framework isn't set in stone. They updated it in January 2021 to boost its decision-making usefulness.

And get this:

In June 2021, the IIRC merged with the Sustainability Accounting Standards Board (SASB) to form the Value Reporting Foundation (VRF). This move shows how crucial integrated reporting has become.

Bottom line: The IIRC Framework is changing corporate reporting. It's pushing companies to rethink how they create and communicate value.

Company Overview and Outside Factors

The IIRC Framework kicks off with a snapshot of the company and its environment. This part explains:

1. How the company is set up
2. What external stuff affects it

Let's break it down:

Company Structure

This covers:

• What the company aims to do
• Key numbers (like employee count and revenue)
• Company culture and values
• Where they fit in the bigger picture

For example, Novo Nordisk, a Danish healthcare company, talks about their mission to beat diabetes and other chronic diseases. They also mention they have 45,000 employees worldwide and made $20.4 billion in 2022.

Outside World

This looks at things that can impact the company's success:

• What's happening in the market
• Laws and rules
• Social and environmental issues
• New tech

Here's a quick look at the main parts:

Inside the Company	Outside the Company
How it's run	Social trends
Who it works with	New tech
What it can do	Environmental issues
How it handles info	Political stuff
How much risk it takes	Changes in laws

2. Leadership Structure

The leadership structure in the IIRC Framework shows how a company runs and creates value. It covers:

• Who's in charge
• How decisions happen
• How company culture impacts success

Let's break it down:

Board of Directors

The board oversees the company and selects the CEO. They:

• Set direction
• Monitor risks
• Ensure legal compliance

When American Electric Power adopted integrated reporting, their board had to weigh increased shareholder transparency against production costs.

CEO and Top Managers

The CEO and top managers handle daily operations. They:

• Execute board plans
• Manage company divisions
• Report to the board

Matteo Tonello, Director of Corporate Governance for The Conference Board, Inc., notes:

"Practicing integrated reporting will make both groups more effective, leading to a more sustainable company for a more sustainable society."

How It All Fits Together

Who	What They Do	Why It Matters
Board	Set direction, manage risks	Guides company future
CEO	Runs company, reports to board	Ensures plan execution
Other Leaders	Manage specific areas	Keep operations smooth

Good leadership links leader actions to company performance, helping create long-term value.

Infosys, for example, highlights human capital in their integrated reporting, showing how they view their people as crucial to success.

Making It Work

To use the IIRC Framework effectively:

1. Form a team with financial and sustainability experts

This team can spearhead integrated reporting efforts.

2. Start small

Begin with an internal integrated report before going public.

3. Leverage technology

CEOs, CFOs, and CIOs should use tech to consolidate company info for better reporting.

3. How the Company Works

The IIRC Framework digs into how a company turns resources into value. It's like looking under the hood of a car.

Here's the breakdown:

• Inputs: What goes in (people, cash, materials)
• Activities: What the company does
• Outputs: What comes out
• Outcomes: The results

Let's look at Sasol, an energy and chemicals company:

Stage	Description
Inputs	Natural gas, coal, talent
Activities	Energy production, chemical manufacturing
Outputs	Fuel, chemicals, electricity
Outcomes	Profits, emissions, community impact

Sasol identified climate change as a big risk. Their plan?

1. Use low-carbon energy
2. Use renewable energy
3. Improve energy efficiency
4. Capture and store carbon

This shows stakeholders how Sasol is planning for the future.

AkzoNobel took a different approach. They linked sustainability to business results:

• Goal: 20% of revenue from resource-light products by 2020
• Strategy: Using fewer resources

The IIRC Framework looks at six types of capital:

1. Financial
2. Manufactured
3. Intellectual
4. Human
5. Social
6. Natural

This broad view helps companies see their full impact.

Take Coca-Cola. Their report might show:

• Water use (natural capital)
• Bottling process (manufactured capital)
• Brand value (intellectual capital)
• Employee training (human capital)

"This integrated reporting permits us to foster awareness of our business model, making clear the value creation process and the role the intangible capitals play in it." - CFO of Gigi Ghirotti Association

The key? Show how everything connects to create long-term value.

4. Possible Problems and Chances for Success

The IIRC Framework is like a business crystal ball. It helps companies spot risks AND opportunities. Let's break it down:

Risks:

1. Tricky to implement
2. Bad data = bad reports
3. Money vs. planet: sometimes they clash

Opportunities:

1. Smarter decisions
2. Team-up power: 96% of IIRC users say their teams work better together
3. People trust you more

Here's a real-life win:

Company	Problem	Fix	Result
Engie	Climate change	New climate strategy	Now a low-carbon energy leader

But it's not all rainbows. One study found only 10% of big companies' sustainability oopsies make it into reports. Yikes.

"The big challenge? Getting the top dogs to care about integrated reporting." - Jaspal Singh, Author

Want to crush it with IIRC?

1. Get the bosses excited
2. Think long-term
3. Teach everyone what "integrated thinking" means

Remember: Good reporting isn't just about looking good. It's about BEING good.

5. Plans and Resource Use

The IIRC Framework helps companies map out their future and use resources wisely. Here's what this part of the report covers:

• Short, medium, and long-term goals
• Resource allocation to reach those goals
• Success metrics

Let's break it down:

Goals: Companies need to be clear about what they want to achieve. Unilever, for example, aims to make all plastic packaging reusable, recyclable, or compostable by 2025.

Resource Use: This explains how a company will use its assets. Coca-Cola HBC is investing in water-saving tech to cut water use by 20% in high-risk areas.

Measuring Success: Companies must show how they'll track progress. Novo Nordisk uses a scorecard with specific financial, social, and environmental targets.

Here's a quick look at some company examples:

Company	Goal	Resource Use	Success Measure
Unilever	100% sustainable plastic packaging by 2025	R&D for new materials	% of packaging meeting criteria
Coca-Cola HBC	20% water use reduction in risk areas	Water-saving tech investment	Water use ratio
Novo Nordisk	Improve diabetes care access	Expand production	Patients reached in developing countries

This section isn't just for show. It's about proving to investors and stakeholders that the company has a solid plan.

"By aligning the Integrated Reporting Framework and SASB Standards, the Value Reporting Foundation will help businesses communicate their long-term strategy and give investors a more complete view of performance." - Janine Guillot, Value Reporting Foundation CEO

To nail this section:

1. Connect ESG goals to overall strategy
2. Involve top leaders in goal-setting
3. Choose clear, measurable targets
4. Show how plans create long-term value
5. Be upfront about challenges and solutions

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6. Results

The Results section is where companies prove their worth. It's all about hard numbers and real outcomes.

What's covered here?

• Financial and non-financial performance
• KPIs
• Impact on the six capitals

Let's see this in action:

Zaccair Airlines keeps it simple:

Capital	Measure	Result
Natural	Km flown per gallon of fuel	15% increase
Social & Relationship	Safety incidents in last 12 months	0 incidents
Financial	Revenue growth	8% year-over-year

Quick and clear, right?

Some companies go deeper. Novo Nordisk talks about patients reached in developing countries. It's not just numbers - it's real impact.

How to nail this section:

1. Connect results to goals

2. Use clear metrics

3. Show the good AND the bad

4. Explain what the numbers mean

It's not about looking good. It's about being honest.

"The techniques mentioned represent a step-change in integrated reporting and bring companies closer to the kind of integrated reports envisioned by the IIRC and many business and sustainability leaders."

This IIRC quote shows why getting this right matters. It's not box-ticking. It's showing real progress.

A solid Results section:

• Builds trust
• Shows goal progress
• Proves strategy value

Bottom line? This is where companies show they're not just talking. They're doing.

7. Future Plans

The Future Plans section is where companies show they're thinking ahead. It's not about making big promises. It's about showing a clear path forward.

Here's what you'll find:

• Long-term goals
• Upcoming challenges
• Strategies for growth

Let's look at some examples:

Unilever sets clear targets:

Goal	Target	Timeline
Reduce plastic use	50% reduction	By 2025
Net-zero emissions	Across operations	By 2030
Living wages	For all suppliers	By 2030

They're not just dreaming. They're planning.

Novo Nordisk focuses on their "Defeat Diabetes" strategy:

We aim to reach 40 million people with our treatments by 2025. We're also working on prevention and early detection. Our goal? No child dies from type 1 diabetes.

This shows they're thinking beyond profits. They're aiming for real impact.

How to make this section work:

1. Link to current results
2. Be specific about timelines
3. Show how plans connect to company values
4. Address potential roadblocks

The IFRS Foundation is shaping the future of integrated reporting. They're making the IIRC Framework part of their materials and positioning it as a voluntary resource for now.

A strong Future Plans section builds investor confidence, guides company strategy, and shows commitment to long-term value creation.

In short? This is where companies show they're not just reacting. They're leading.

8. How Information is Presented

The IIRC Framework wants your reports to be clear and easy to understand. It's about showing your work in a way that makes sense.

Here's what you need to do:

1. Keep it simple: Use plain language. No jargon. Make it easy for everyone to read.

2. Use visuals: Charts and graphs explain complex ideas fast. CLP's 2012 annual report had a five-minute summary for quick info.

3. Link to more: You can't fit everything in one report. CLP linked to an online sustainability report for the detail-hungry.

4. Show connections: Help readers see how your business parts work together. The IIRC calls this "connectivity of information".

5. Be consistent: Use the same terms throughout. It helps readers compare different parts of your business.

6. Explain your process: Tell readers how you chose what to include. It builds trust.

Some companies do it like this:

Company	Technique	Result
CLP	Five-minute summary	Quick overview
Patagonia	Environmental and Social Initiatives report	Clear sustainability focus
Microsoft	Detailed CSR report	In-depth look at initiatives

The goal? Help readers understand your business quickly. As April Chan from CLP Holdings Ltd says:

"The IIRC's International Integrated Reporting Framework... brings together material information about our strategy, governance, performance and prospects in a way that reflects the commercial, social and environmental context within which we operate."

Good Things About Using the IIRC Framework

The IIRC Framework packs a punch for businesses. Here's why:

1. It helps you get value creation

92% of companies in the IIRC pilot program said they understood value creation better. This means smarter business moves.

2. It breaks down walls

96% of pilot companies saw internal changes. Different departments start talking to each other. Result? A more unified business.

3. It leads to better choices

79% of companies made better decisions. Why? They looked at more than just numbers.

4. It gets the board on the same page

78% of companies saw their board working together better on goals.

5. It shakes up strategy

67% of companies changed their strategy after using the framework. Some changes were big, some small.

6. It helps spot risks and chances

68% of companies got better at seeing what could go wrong (or right). This means they can act faster.

7. It makes you rethink your whole business

64% of companies started thinking differently about how they do business.

8. It improves relationships

The framework helps build trust. Investors, customers, and communities get a clearer picture of your business.

Here's a quick look at the numbers:

What Changed	How Many Companies Saw It
Understanding value creation	92%
Internal changes	96%
Better decision-making	79%
Board teamwork	78%
Strategy shifts	67%
Spotting risks and chances	68%
New business thinking	64%

The IIRC Framework isn't just about reports. It changes how companies think and act. As Suresh Gooneratne from DIMA, Asia Pacific, puts it:

"Previously when we did sustainability reporting we primarily talked about stakeholders from a 'licence to operate' perspective. That has changed. Now stakeholders represent something much more integral to our business – a capital stock."

In short, the IIRC Framework helps companies see the big picture and make smarter moves.

Things to Think About When Using the IIRC Framework

Using the IIRC Framework can boost your business, but it's not always easy. Here's what you need to know:

1. Get everyone on board

You need support from the top. Robert Laux, North American lead at IIRC, says:

"You need to have executive support from the top down to really make this happen."

Without it, your efforts might not go anywhere.

2. Build a strong team

Create a team from different departments. Include people from finance, sustainability, and other key areas.

3. Know your audience

Talk to your stakeholders. Find out what they want to know. This helps you focus on what matters in your report.

4. Time it right

Choose a reporting schedule that works for you. Laux advises:

"Pick and choose what works for you."

This helps manage your workload and avoids busy times.

5. Tell your story

Use the IIRC format to show how your company creates value over time. Think about new ways to describe your business.

6. Focus on what matters

Identify the key parts of your business that create long-term value. Put these in your report.

7. Be open, but smart

Don't let fear stop you from being transparent. Laux notes:

"Of course, you need to consider those [legal claims], but experience has taught him that the potential risks are far less than some companies fear, and the likely benefits are far greater than those companies may realize."

8. Use good tools

Invest in solid data management systems. This keeps your ESG data accurate and reliable.

9. Get outside help

Think about hiring experts to check your sustainability data. This makes your report more credible.

10. Keep getting better

Integrated reporting is an ongoing process. Keep improving based on feedback and results.

Wrap-up

The IIRC Framework has shaken up corporate reporting. It's not just about numbers anymore. This framework looks at how a business uses different resources to succeed.

What makes it special?

• Connects financial and non-financial info
• Focuses on long-term value
• Considers impact on various types of capital

It's catching on worldwide. In Malaysia, for example, the Securities Commission wanted 100 companies using it by 2019.

Companies using the framework are seeing results:

Benefit	% of Companies
Better grasp of value creation	98%
Improved teamwork	93%
Big benefits at Board level	30%

(Based on a survey of 43 companies)

Some companies are already using it to tackle big issues:

• Sasol (energy company): Outlined how they're dealing with climate change risks
• AkzoNobel (chemicals company): Set a goal for 20% of revenue from resource-light products by 2020

What's next? Integrated reporting is likely to grow. The IFRS Foundation now oversees the framework, which could boost adoption.

"We strongly encourage continued use of the Integrated Reporting Framework and the Integrated Thinking Principles underpinning it." - Andreas Barckow and Emmanuel Faber, IFRS Foundation

For businesses thinking about using the IIRC Framework:

• It's more than just combining reports
• It's about thinking long-term
• It can improve decision-making and operations

As reporting evolves, companies using integrated reporting will be better prepared for what's coming.

FAQs

What are the content elements of an integrated report?

An integrated report needs to cover four key areas:

1. Strategy
2. Governance
3. Performance (both financial and non-financial)
4. Outlook

These elements show how a company creates value in different ways:

• Financial
• Social
• Environmental
• Commercial

The IIRC framework uses these elements to make sure reports tell the whole story. It's about giving investors and stakeholders the full picture.

"An organization's integrated report must communicate its strategy, governance, performance – both financial and non-financial – and outlook to showcase how it is creating, financial, social, environmental, and commercial value for its stakeholders." - IR Magazine, Oct 11, 2022

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