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THE INTERNATIONAL

FRAMEWORK


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ABOUT THE IIRCThe International Integrated Reporting Council (IIRC) is aglobal coalition of regulators, investors, companies,standard setters, the accounting profession and NGOs.Together, this coalition shares the view thatcommunication about value creation should be the nextstep in the evolution of corporate reporting.

The International Framework has been developedto meet this need and provide a foundation for thefuture.

Further information about the IIRC can be found on itswebsitewww.theiirc.org,including:

The background to the IIRCs creation

Its mission, vision and objectives

Its structure and membership, and the membership ofgroups who have contributed to the development ofthis Framework

Its due process.

The IIRC does not accept responsibility for loss caused to any person who acts, or refrains from acting, in reliance on the material in this publication,

whether such loss is caused by negligence or otherwise.

Copyright December 2013 by the International Integrated Reporting Council (the IIRC). All rights reserved. Permission is granted to make copies

of this work, provided that such copies are for personal or educational use and are not sold or disseminated and provided that each copy bears the

following credit line: Copyright December 2013 by the International Integrated Reporting Council (the IIRC). All rights reserved. Used with

permission of the IIRC. Contact the IIRC ([email protected])for permission to reproduce, store, transmit or make other uses of this document.

Otherwise, prior written permission from the IIRC is required to reproduce, store, transmit or make other uses of this document, except as permitted

by law. Contact:[email protected].

www.theiirc.org The International Framework 1
http://www.theiirc.org/mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]://www.theiirc.org/


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ABOUT INTEGRATEDREPORTINGThe IIRCs long term vision is a world in whichintegrated thinking is embedded within mainstreambusiness practice in the public and private sectors,facilitated by Integrated Reporting () as thecorporate reporting norm. The cycle of integratedthinking and reporting, resulting in efficient andproductive capital allocation, will act as a force forfinancial stability and sustainability.

aims to:

Improve the quality of information available toproviders of financial capital to enable a moreefficient and productive allocation of capital

Promote a more cohesive and efficient approach tocorporate reporting that draws on different reportingstrands and communicates the full range of factorsthat materially affect the ability of an organization tocreate value over time

Enhance accountability and stewardship for thebroad base of capitals (financial, manufactured,intellectual, human, social and relationship, andnatural) and promote understanding of theirinterdependencies

Support integrated thinking, decision-making andactions that focus on the creation of value over theshort, medium and long term.

is consistent with numerous developments incorporate reporting taking place within national

jurisdictions across the world. It is intended that theInternational Framework, which providesprinciples-based guidance for companies and otherorganizations wishing to prepare an integrated report,

will accelerate these individual initiatives and provideimpetus to greater innovation in corporate reportingglobally to unlock the benefits of , including theincreased efficiency of the reporting process itself.

It is anticipated that, over time, will become thecorporate reporting norm. No longer will anorganization produce numerous, disconnected andstatic communications. This will be delivered by theprocess of integrated thinking, and the application ofprinciples such as connectivity of information.

is consistent with developments in financial and

other reporting, but an integrated report also differsfrom other reports and communications in a number ofways. In particular, it focuses on the ability of anorganization to create value in the short, medium andlong term, and in so doing it:

Has a combined emphasis on conciseness, strategicfocus and future orientation, the connectivity ofinformation and the capitals and theirinterdependencies

Emphasizes the importance of integrated thinkingwithin the organization.

Integrated thinking is the active consideration by anorganization of the relationships between its variousoperating and functional units and the capitals that theorganization uses or affects. Integrated thinking leadsto integrated decision-making and actions that considerthe creation of value over the short, medium and longterm.

Integrated thinking takes into account the connectivityand interdependencies between the range of factors thataffect an organizations ability to create value over time,

including: The capitals that the organization uses or affects,

and the critical interdependencies, including trade-offs, between them

The capacity of the organization to respond to keystakeholders legitimate needs and interests

How the organization tailors its business model andstrategy to respond to its external environment andthe risks and opportunities it faces

The organizations activities, performance (financialand other) and outcomes in terms of the capitals past, present and future.

The more that integrated thinking is embedded into anorganizations activities, the more naturally will theconnectivity of information flow into managementreporting, analysis and decision-making. It also leadsto better integration of the information systems thatsupport internal and external reporting andcommunication, including preparation of the integratedreport.



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CONTENTS

EXECUTIVE SUMMARY 6

PART I INTRODUCTION 6

1. USING THE FRAMEWORK 7

A Integrated report defined 7

B Objective of the Framework 7

C Purpose and users of an integrated report 7

D A principles-based approach 7

E Form of report and relationship with other information 8

F Application of the Framework 8

G Responsibility for an integrated report 92. FUNDAMENTAL CONCEPTS 10

A Introduction 10

B Value creation for the organization and for others 10

C The capitals 11

D The value creation process 13

PART II THE INTEGRATED REPORT 15

3. GUIDING PRINCIPLES 16

A Strategic focus and future orientation 16

B Connectivity of information 16

C Stakeholder relationships 17

D Materiality 18

E Conciseness 21

F Reliability and completeness 21

G Consistency and comparability 22

4. CONTENT ELEMENTS 24

A Organizational overview and external environment 24

B Governance 25

C Business model 25D Risks and opportunities 27

E Strategy and resource allocation 27

F Performance 28

G Outlook 28

H Basis of preparation and presentation 29

I General reporting guidance 30

GLOSSARY 33

APPENDIX SUMMARY OF REQUIREMENTS 34



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EXECUTIVE SUMMARY

Integrated Reporting ()promotes a more cohesive

and efficient approach to corporate reporting and aimsto improve the quality of information available toproviders of financial capital to enable a more efficientand productive allocation of capital.

The IIRCs long term vision is a world in whichintegrated thinking is embedded within mainstreambusiness practice in the public and private sectors,facilitated by as the corporate reporting norm.

AN INTEGRATED REPORT

The primary purpose of an integrated report is to

explain to providers of financial capital how anorganization creates value over time. An integratedreport benefits all stakeholders interested in anorganizations ability to create value over time,including employees, customers, suppliers, businesspartners, local communities, legislators, regulators andpolicy-makers.

The International Framework (the Framework)takes a principles-based approach. The intent is tostrike an appropriate balance between flexibility andprescription that recognizes the wide variation in

individual circumstances of different organizations whileenabling a sufficient degree of comparability acrossorganizations to meet relevant information needs. Itdoes not prescribe specific key performance indicators,measurement methods, or the disclosure of individualmatters, but does include a small number ofrequirements that are to be applied before an integratedreport can be said to be in accordance with theFramework.

An integrated report may be prepared in response toexisting compliance requirements, and may be either astandalone report or be included as a distinguishable,prominent and accessible part of another report orcommunication. It should include, transitionally on acomply or explain basis, a statement by those charged

with governance accepting responsibility for the report.

FUNDAMENTAL CONCEPTS

An integrated report aims to provide insight about theresources and relationships used and affected by anorganization these are collectively referred to as thecapitals in this Framework. It also seeks to explainhow the organization interacts with the externalenvironment and the capitals to create value over theshort, medium and long term.

The capitals are stocks of value that are increased,decreased or transformed through the activities andoutputs of the organization. They are categorized in

this Framework as financial, manufactured, intellectual,human, social and relationship, and natural capital,although organizations preparing an integrated reportare not required to adopt this categorization or tostructure their report along the lines of the capitals.

The ability of an organization to create value for itselfenables financial returns to the providers of financialcapital. This is interrelated with the value theorganization creates for stakeholders and society atlarge through a wide range of activities, interactionsand relationships. When these are material to theorganization's ability to create value for itself, they areincluded in the integrated report.

THE FRAMEWORK

The purpose of this Framework is to establish GuidingPrinciples and Content Elements that govern the overallcontent of an integrated report, and to explain thefundamental concepts that underpin them. TheFramework:

Identifies information to be included in an integratedreport for use in assessing the organizations ability

to create value; it does not set benchmarks for suchthings as the quality of an organizations strategy orthe level of its performance

Is written primarily in the context of private sector,for-profit companies of any size but it can also beapplied, adapted as necessary, by public sector andnot-for-profit organizations.



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EXECUTIVE SUMMARY CONTINUED

CONTENT ELEMENTS

An integrated report includes eight Content Elements that are fundamentally linked to each other and are not mutually

exclusive:

Organizational overview and external environment: What does the organization do and what are the

circumstances under which it operates?

Governance: How does the organizations governance structure support its ability to create value in the short,

medium and long term? Business model: What is the organizations business model?

Risks and opportunities: What are the specific risks and opportunities that affect the organizations ability to create

value over the short, medium and long term, and how is the organization dealing with them?

Strategy and resource allocation: Where does the organization want to go and how does it intend to get there?

Performance: To what extent has the organization achieved its strategic objectives for the period and what are its

outcomes in terms of effects on the capitals?

Outlook: What challenges and uncertainties is the organization likely to encounter in pursuing its strategy, and

what are the potential implications for its business model and future performance?

Basis of presentation: How does the organization determine what matters to include in the integrated report and

how are such matters quantified or evaluated?

GUIDING PRINCIPLES

The following Guiding Principles underpin the preparation of an integrated report, informing the content of the report

and how information is presented:

Strategic focus and future orientation: An integrated report should provide insight into the organizations strategy,

and how it relates to the organizations ability to create value in the short, medium and long term, and to its use of

and effects on the capitals

Connectivity of information: An integrated report should show a holistic picture of the combination, interrelatedness

and dependencies between the factors that affect the organizations ability to create value over time

Stakeholder relationships: An integrated report should provide insight into the nature and quality of the

organizations relationships with its key stakeholders, including how and to what extent the organizationunderstands, takes into account and responds to their legitimate needs and interests

Materiality: An integrated report should disclose information about matters that substantively affect the

organizations ability to create value over the short, medium and long term

Conciseness: An integrated report should be concise

Reliability and completeness: An integrated report should include all material matters, both positive and negative, in

a balanced way and without material error

Consistency and comparability: The information in an integrated report should be presented: (a) on a basis that is

consistent over time; and (b) in a way that enables comparison with other organizations to the extent it is material to

the organizations own ability to create value over time.



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PART I

INTRODUCTION


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1. USING THE FRAMEWORK

1A Integrated report defined

1.1 An integrated report is a concise communicationabout how an organizations strategy,governance, performance and prospects, in thecontext of its external environment, lead to thecreation of value over the short, medium andlong term.

1.2 An integrated report should be prepared inaccordance with this Framework.

1B Objective of the Framework

1.3 The purpose of this Framework is to establishGuiding Principles and Content Elements thatgovern the overall content of an integratedreport, and to explain the fundamental conceptsthat underpin them.

1.4 This Framework is written primarily in the contextof private sector, for-profit companies of any sizebut it can also be applied, adapted as necessary,by public sector and not-for-profit organizations.

1.5 This Framework identifies information to beincluded in an integrated report for use in

assessing an organizations ability to createvalue; it does not set benchmarks for such thingsas the quality of an organizations strategy or thelevel of its performance.

1.6 In this Framework, reference to the creation ofvalue:

Includes instances when value is preservedand when it is diminished (see paragraph2.14)

Relates to value creation over time (i.e., over

the short, medium and long term).

1C Purpose and users of an integratedreport

1.7 The primary purpose of an integrated report is toexplain to providers of financial capital how anorganization creates value over time. It thereforecontains relevant information, both financial andother.

1.8 An integrated report benefits all stakeholders

interested in an organizations ability to createvalue over time, including employees, customers,suppliers, business partners, local communities,legislators, regulators and policy-makers.

1D A principles-based approach

1.9 This Framework is principles-based. The intent ofthe principles-based approach is to strike anappropriate balance between flexibility andprescription that recognizes the wide variation inindividual circumstances of different

organizations while enabling a sufficient degreeof comparability across organizations to meetrelevant information needs.

1.10 This Framework does not prescribe specific keyperformance indicators (KPIs), measurementmethods or the disclosure of individual matters.Those responsible for the preparation andpresentation of the integrated report thereforeneed to exercise judgement, given the specificcircumstances of the organization, to determine:

Which matters are material

How they are disclosed, including theapplication of generally acceptedmeasurement and disclosure methods asappropriate. When information in anintegrated report is similar to, or based onother information published by theorganization, it is prepared on the same basisas, or is easily reconcilable with, that otherinformation.



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1. USING THE FRAMEWORK CONTINUED

Quantitative and qualitative information

1.11 Quantitative indicators, such as KPIs andmonetized metrics, and the context in which theyare provided can be very helpful in explaininghow an organization creates value and how ituses and affects various capitals. Whilequantitative indicators are included in anintegrated report whenever it is practicable andrelevant to do so:

The ability of the organization to create valuecan best be reported on through acombination of quantitative and qualitative

information (see also paragraph 3.8regarding the connectivity of quantitative andqualitative information).

It is not the purpose of an integrated report toquantify or monetize the value of theorganization at a point in time, the value itcreates over a period, or its uses of or effectson all the capitals. (See also paragraph4.53for common characteristics of suitablequantitative indicators.)

1E Form of report and relationship withother information

1.12 An integ rated rep or t should b e a d es igna ted,ident ifiab le c om munica t ion .

1.13 An integrated report is intended to be more thana summary of information in othercommunications (e.g., financial statements, asustainability report, analyst calls, or on a

website); rather, it makes explicit the connectivityof information to communicate how value iscreated over time.

1.14 An integrated report may be prepared inresponse to existing compliance requirements.For example, an organization may be requiredby local law to prepare a managementcommentary or other report that provides contextfor its financial statements. If that report is alsoprepared in accordance with this Framework itcan be considered an integrated report. If thereport is required to include specified informationbeyond that required by this Framework, thereport can still be considered an integrated report

if that other information does not obscure theconcise information required by this Framework.

1.15 An integrated report may be either a standalone

report or be included as a distinguishable,prominent and accessible part of another reportor communication. For example, it may beincluded at the front of a report that also includesthe organizations financial statements.

1.16 An integrated report can provide an entry pointto more detailed information outside thedesignated communication, to which it may belinked. The form of link will depend on the formof the integrated report (e.g., for a paper-basedreport, links may involve attaching other

information as an appendix; for a web-basedreport, it may involve hyperlinking to that otherinformation).

1F Application of the Framework

1.17 Any co mm un ica t ion c la im ing to be aninteg rated rep or t and referenc ing the

Fram ew ork should ap ply a l l the requirem ents

ident i fied in bo ld i ta l ic type unless:

The una va ilab il ity of reliab le inform ation

or spe c ific le ga l prohibit ions results in an

inabi l ity to disc lose m ater ia l informa t ion Disc losure of m ater ia l informa t ion wo uld

c ause signi fica nt co m pe t it ive ha rm . (See

pa rag raph3.51.)

1.18 In the c ase of the unava i lab i li ty o f rel iableinforma t ion or spe c i fic lega l prohib i t ions, an

integ rated rep or t should:

Indica te the na ture o f the inform at ion that

has be en om i tted

Explain the rea son why i t has be en

omi t ted

In the c ase of the una vai lab i li ty of da ta,

ident i fy the steps being ta ken to o btain

the in fo rmat ion and the exp ec ted t ime

fram e for doing so.

Guidance

1.19 Text in this Framework that is not in bold italictype provides guidance to assist in applying therequirements. It is not necessary for anintegrated report to include all matters referred toin the guidance.



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1. USING THE FRAMEWORK CONTINUED

1G Responsibility for an integrated report

1.20 An integ rated rep or t should inc lude astatem ent from those c harge d w ith

gove rnanc e tha t inc ludes:

An ac knowled ge me nt of the i r

respo nsibi l ity to e nsure the integ r ity o f the

integ rated rep or t

An ac know ledgem en t tha t they have

ap p l ied the i r co l lec t ive m ind to the

prep arat ion and presentat ion of the

integ rated rep or t

Their opin ion or c onc lusion a bo ut whe ther

the integrated rep or t is presented in

ac c orda nc e with th is Fram ew ork

or, if it do es not includ e such a statem ent, it

should exp la in:

What ro le those c harged wi th go vernanc e

play ed in its prep arat ion and presentat ion

What steps are b eing tak en to inc lude

suc h a statem ent in future rep orts

The t ime fra m e for do ing so, which should

be no later than the o rga nizat ions th irdintegrate d rep ort tha t referen c es this

Framework.



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2. FUNDAMENTAL CONCEPTS

2.1 The fundamental concepts in this chapter

underpin and reinforce the requirements andguidance in the Framework.

2A Introduction

2.2 An integrated report explains how anorganization creates value over time. Value isnot created by or within an organization alone.It is:

Influenced by the external environment

Created through relationships with

stakeholders Dependent on various resources.

2.3 An integrated report therefore aims to provideinsight about:

The external environment that affects anorganization

The resources and the relationships used andaffected by the organization, which arereferred to collectively in this Framework asthe capitals and are categorized inSection

2Cas financial, manufactured, intellectual,human, social and relationship, and natural

How the organization interacts with theexternal environment and the capitals tocreate value over the short, medium and longterm.

2B Value creation for the organizationand for others

2.4 Value created by an organization over timemanifests itself in increases, decreases ortransformations of the capitals caused by theorganizations business activities and outputs.That value has two interrelated aspects valuecreated for:

The organization itself, which enablesfinancial returns to the providers of financialcapital

Others (i.e., stakeholders and society atlarge).

2.5 Providers of financial capital are interested in the

value an organization creates for itself. They arealso interested in the value an organizationcreates for others when it affects the ability of theorganization to create value for itself, or relatesto a stated objective of the organization (e.g., anexplicit social purpose) that affects theirassessments.

2.6 The ability of an organization to create value foritself is linked to the value it creates for others.

As illustrated in Figure 1, this happens through awide range of activities, interactions and

relationships in addition to those, such as sales tocustomers, that are directly associated withchanges in financial capital. These include, forexample, the effects of the organizationsbusiness activities and outputs on customersatisfaction, suppliers willingness to trade withthe organization and the terms and conditionsupon which they do so, the initiatives thatbusiness partners agree to undertake with theorganization, the organizations reputation,conditions imposed on the organizations sociallicence to operate, and the imposition of supply

chain conditions or legal requirements.Figure 1: Value created for the organization and for others:

2.7 When these interactions, activities, andrelationships are material to the organizationsability to create value for itself, they are includedin the integrated report. This includes takingaccount of the extent to which effects on thecapitals have been externalized (i.e., the costs or

other effects on capitals that are not owned bythe organization).



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2. FUNDAMENTAL CONCEPTS CONTINUED

2.8 Externalities may be positive or negative (i.e.,

they may result in a net increase or decrease tothe value embodied in the capitals). Externalitiesmay ultimately increase or decrease valuecreated for the organization; therefore providersof financial capital need information aboutmaterial externalities to assess their effects andallocate resources accordingly.

2.9 Because value is created over different timehorizons and for different stakeholders throughdifferent capitals, it is unlikely to be createdthrough the maximization of one capital while

disregarding the others. For example, themaximization of financial capital (e.g., profit) atthe expense of human capital (e.g., throughinappropriate human resource policies andpractices) is unlikely to maximize value for theorganization in the longer term.

2C The capitals

The stock and flow of capitals

2.10 All organizations depend on various forms ofcapital for their success. In this Framework, thecapitals comprise financial, manufactured,intellectual, human, social and relationship, andnatural, although as discussed in paragraphs2.172.19,organizations preparing anintegrated report are not required to adopt thiscategorization.

2.11 The capitals are stocks of value that areincreased, decreased or transformed through theactivities and outputs of the organization. Forexample, an organizations financial capital isincreased when it makes a profit, and the quality

of its human capital is improved when employeesbecome better trained.

2.12 The overall stock of capitals is not fixed over time.There is a constant flow between and within thecapitals as they are increased, decreased ortransformed. For example, when anorganization improves its human capital throughemployee training, the related training costsreduce its financial capital. The effect is thatfinancial capital has been transformed intohuman capital. Although this example is simple

and presented only from the organizations

perspective1, it demonstrates the continuous

interaction and transformation between thecapitals, albeit with varying rates and outcomes.

2.13 Many activities cause increases, decreases ortransformations that are far more complex thanthe above example and involve a broader mix ofcapitals or of components within a capital (e.g.,the use of water to grow crops that are fed tofarm animals, all of which are components ofnatural capital).

2.14 Although organizations aim to create valueoverall, this can involve the diminution of value

stored in some capitals, resulting in a netdecrease to the overall stock of capitals. In manycases, whether the net effect is an increase ordecrease (or neither, i.e., when value ispreserved) will depend on the perspectivechosen; as in the above example, employees andemployers might value training differently. In thisFramework, the term value creation includesinstances when the overall stock of capitals isunchanged or decreased (i.e., when value ispreserved or diminished).

Categories and descriptions of the capitals

2.15 For the purpose of this Framework, the capitalsare categorized and described as follows:

Financial capital The pool of funds that is:

o available to an organization for use inthe production of goods or the provisionof services

o obtained through financing, such asdebt, equity or grants, or generatedthrough operations or investments

Manufactured capital Manufacturedphysical objects (as distinct from naturalphysical objects) that are available to anorganization for use in the production ofgoods or the provision of services, including:

o buildings

o equipment

1 Other perspectives include the increase to the trainers financialcapital due to the payment received from the employer, and theincrease to social capital that may occur if employees use newly

acquired skills to contribute to community organizations (see alsoparagraph4.56regarding complexity, interdependencies andtrade-offs).



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o infrastructure (such as roads, ports,

bridges, and waste and water treatmentplants)

Manufactured capital is often created by otherorganizations, but includes assetsmanufactured by the reporting organizationfor sale or when they are retained for its ownuse.

Intellectual capital Organizational,knowledge-based intangibles, including:

o intellectual property, such as patents,copyrights, software, rights and licences

o organizational capital such as tacitknowledge, systems, procedures andprotocols

Human capital Peoples competencies,capabilities and experience, and theirmotivations to innovate, including their:

o alignment with and support for anorganizations governance framework,risk management approach, and ethical

values

o ability to understand, develop andimplement an organizations strategy

o loyalties and motivations for improvingprocesses, goods and services, includingtheir ability to lead, manage andcollaborate

Social and relationship capital Theinstitutions and the relationships within andbetween communities, groups of stakeholdersand other networks, and the ability to shareinformation to enhance individual and

collective well-being. Social and relationshipcapital includes:

o shared norms, and common values andbehaviours

o key stakeholder relationships, and thetrust and willingness to engage that anorganization has developed and strivesto build and protect with externalstakeholders

o intangibles associated with the brandand reputation that an organization hasdeveloped

o an organizations social licence to

operate Natural capital All renewable and non-

renewable environmental resources andprocesses that provide goods or services thatsupport the past, current or future prosperityof an organization. It includes:

o air, water, land, minerals and forests

o biodiversity and eco-system health.

2.16 Not all capitals are equally relevant or applicableto all organizations. While most organizations

interact with all capitals to some extent, theseinteractions might be relatively minor or soindirect that they are not sufficiently important toinclude in the integrated report.

Role of the capitals in the Framework

2.17 This Framework does not require an integratedreport to adopt the categories identified above orto be structured along the lines of the capitals.Rather, the primary reasons for including thecapitals in this Framework are to serve:

As part of the theoretical underpinning for theconcept of value creation (seeSection 2B)

As a guideline for ensuring organizationsconsider all the forms of capital they use oraffect.

2.18 Organizations may categorize the capitalsdifferently. For example, relationships withexternal stakeholders and the intangiblesassociated with brand and reputation (bothidentified as part of social and relationshipcapital in paragraph2.15), might be considered

by some organizations to be separate capitals,part of other capitals or cutting across a numberof individual capitals. Similarly, someorganizations define intellectual capital ascomprising what they identify as human,structural and relational capitals.

2.19 Regardless of how an organization categorizesthe capitals for its own purposes, the categoriesidentified in paragraph2.15are to be used as aguideline to ensure the organization does notoverlook a capital that it uses or affects.



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2D The value creation process

2.20 The value creation process is depicted inFigure 2. It is explained briefly in the followingparagraphs, which also identify how thecomponents of Figure 2 (underlined in the text)align with the Content Elements inChapter 4.

2.21 The external environment, including economicconditions, technological change, societal issuesand environmental challenges, sets the context

within which the organization operates. Themission and vision encompass the wholeorganization, identifying its purpose and

intention in clear, concise terms. (See ContentElement4A Organizational overviewandexternal environment.)

2.22 Those charged with governance are responsiblefor creating an appropriate oversight structure tosupport the ability of the organization to create

value. (See Content Element4B Governance.)

2.23 At the core of the organization is its business

model, which draws on various capitals as inputsand, through its business activities, converts themto outputs (products, services, by-products and

waste). The organizations activities and itsoutputs lead to outcomes in terms of effects on thecapitals. The capacity of the business model toadapt to changes (e.g., in the availability, qualityand affordability of inputs) can affect theorganizations longer term viability. (See ContentElement4C Business model.)

2.24 Business activities include the planning, design

and manufacture of products or the deploymentof specialized skills and knowledge in theprovision of services. Encouraging a culture ofinnovation is often a key business activity in termsof generating new products and services thatanticipate customer demand, introducingefficiencies and better use of technology,substituting inputs to minimize adverse social orenvironmental effects, and finding alternativeuses for outputs.

Figure 2: The value creation process:



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2.25 Outcomes are the internal and external

consequences (positive and negative) for thecapitals as a result of an organizations businessactivities and outputs.

2.26 Continuous monitoring and analysis of theexternal environment in the context of theorganizations mission and vision identifies risksand opportunitiesrelevant to the organization, itsstrategy and its business model. (See ContentElement4D Risks and opportunities.)

2.27 The organizations strategyidentifies how itintends to mitigate or manage risks and

maximize opportunities. It sets out strategicobjectives and strategies to achieve them, whichare implemented through resource allocationplans. (See Content Element4E Strategy andresource allocation.)

2.28 The organization needs information about itsperformance, which involves setting upmeasurement and monitoring systems to provideinformation for decision-making. (See ContentElement4F Performance.)

2.29 The value creation process is not static; regular

review of each component and its interactionswith other components, and a focus on theorganizations outlook, lead to revision andrefinement to improve all the components. (SeeContent Element4G Outlook.)



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PART II

THE INTEGRATED REPORT


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3. GUIDING PRINCIPLES

3.1 The following Guiding Principles underpin the

preparation and presentation of an integratedreport, informing the content of the report andhow information is presented:

A Strategic focus and future orientation

B Connectivity of information

C Stakeholder relationships

D Materiality

E Conciseness

F Reliability and completeness

G Consistency and comparability

3.2 These Guiding Principles are applied individuallyand collectively for the purpose of preparing andpresenting an integrated report; accordingly,judgement is needed in applying them,particularly when there is an apparent tensionbetween them (e.g., between conciseness andcompleteness).

3A Strategic focus and future orientation

3.3 An integ rated rep or t should prov ide insightinto the orga nizat ion s strate gy , an d ho w itre lates to the orga nizat ions ab i li ty to c rea te

value in the shor t, m ed ium a nd long term

and to i ts use o f and ef fec ts on the c ap i ta ls.

3.4 Applying this Guiding Principle is not limited tothe Content Elements4E Strategy and resourceallocationand4G Outlook. It guides theselection and presentation of other content, andmay include, for example:

Highlighting significant risks, opportunities

and dependencies flowing from theorganizations market position and businessmodel

The views of those charged with governanceabout:

o the relationship between past and futureperformance, and the factors that canchange that relationship

o how the organization balances short,medium and long term interests

o how the organization has learned frompast experiences in determining futurestrategic directions.

3.5 Adopting a strategic focus and future orientation

(see also paragraphs3.523.53)includes clearlyarticulating how the continued availability,quality and affordability of significant capitalscontribute to the organizations ability to achieveits strategic objectives in the future and create

value.

3B Connectivity of information

3.6 An integ rated rep or t should show a hol ist icp ic ture of the c om binat ion, inter re lated ness

and de pe ndenc ies betwe en the fac tors tha t

af fec t the orga nizat ions a bi l ity to c rea teva lue ove r time.

3.7 The more that integrated thinking is embeddedinto an organizations activities, the morenaturally will the connectivity of information flowinto management reporting, analysis anddecision-making, and subsequently into theintegrated report.

3.8 The key forms of connectivity of informationinclude the connectivity between:

The Content Elements. The integrated report

connects the Content Elements into a totalpicture that reflects the dynamic and systemicinteractions of the organizations activities asa whole. For example:

o an analysis of existing resourceallocation, and how the organization willcombine resources or make furtherinvestment to achieve its targetedperformance

o information about how theorganizations strategy is tailored when,

for instance, new risks and opportunitiesare identified or past performance is notas expected

o linking the organizations strategy andbusiness model with changes in itsexternal environment, such as increasesor decreases in the pace of technologicalchange, evolving societal expectations,and resource shortages as planetarylimits are approached.



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3. GUIDING PRINCIPLES CONTINUED

The past, present and future. An analysis by

the organization of its activities in the past-to-present period can provide useful informationto assess the plausibility of what has beenreported concerning the present-to-futureperiod. The explanation of the past-to-presentperiod can also be useful in analyzing currentcapabilities and the quality of management.

The capitals. This includes theinterdependencies and trade-offs between thecapitals, and how changes in theiravailability, quality and affordability affect the

ability of the organization to create value. Financial information and other information.

For example, the implications for:

o expected revenue growth or marketshare of research and developmentpolicies, technology/know-how orinvestment in human resources

o cost reduction or new businessopportunities of environmental policies,energy efficiency, cooperation with localcommunities or technologies to tackle

social issueso revenue and profit growth of long term

customer relationships, customersatisfaction or reputation.

Quantitative and qualitative information.Both qualitative and quantitative informationare necessary for an integrated report toproperly represent the organizations abilityto create value as each provides context forthe other. Including KPIs as part of anarrative explanation can be an effective way

to connect quantitative and qualitativeinformation.

Management information, board informationand information reported externally. Forexample, as noted in paragraph4.53,it isimportant for the quantitative indicators in anintegrated report to be consistent with theindicators used internally by those charged

with governance.

Information in the integrated report,

information in the organizations othercommunications, and information from othersources. This recognizes that allcommunications from the organization needto be consistent, and that information theorganization provides is not read in isolationbut combined with information from othersources when making assessments.

3.9 The connectivity of information and the overallusefulness of an integrated report is enhanced

when it is logically structured, well presented,

written in clear, understandable and jargon-freelanguage, and includes effective navigationdevices, such as clearly delineated (but linked)sections and cross-referencing. In this context,information and communication technology canbe used to improve the ability to search, access,combine, connect, customize, re-use or analyseinformation.

3C Stakeholder relationships

3.10 An integ rated rep or t should prov ide insightinto the na ture a nd q ual i ty of the

orga niza t ions rela t ionships with its ke y

stake holde rs, inc luding how and to what

exte nt the orga niza t ion unde rstand s, tak es

into a c c ount and respond s to their legi t im ate

nee ds and interests.

3.11 This Guiding Principle reflects the importance ofrelationships with key stakeholders because, asnoted in paragraph2.2,value is not created byor within an organization alone, but is createdthrough relationships with others. It does notmean that an integrated report should attempt to

satisfy the information needs of all stakeholders.3.12 Stakeholders provide useful insights about

matters that are important to them, includingeconomic, environmental and social issues thatalso affect the ability of the organization to create

value. These insights can assist the organizationto:

Understand how stakeholders perceive value

Identify trends that might not yet have come togeneral attention, but which are rising insignificance



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Identify material matters, including risks and

opportunities Develop and evaluate strategy

Manage risks

Implement activities, including strategic andaccountable responses to material matters.

3.13 Engagement with stakeholders occurs regularly inthe ordinary course of business (e.g., day-to-dayliaison with customers and suppliers or broaderongoing engagement as part of strategicplanning and risk assessment). It might also be

undertaken for a particular purpose (e.g.,engagement with a local community whenplanning a factory extension). The moreintegrated thinking is embedded in the business,the more likely it is that a fuller consideration ofkey stakeholders legitimate needs and interests isincorporated as an ordinary part of conductingbusiness.

3.14 An integrated report enhances transparency andaccountability, which are essential in buildingtrust and resilience, by disclosing how key

stakeholders legitimate needs and interests areunderstood, taken into account and responded tothrough decisions, actions and performance, as

well as ongoing communication.

3.15 Accountability is closely associated with theconcept of stewardship and the responsibility ofan organization to care for, or use responsibly,the capitals that its activities and outputs affect.

When the capitals are owned by theorganization, a stewardship responsibility isimposed on management and those charged withgovernance via their legal responsibilities to theorganization.

3.16 When the capitals are owned by others or notowned at all, stewardship responsibilities may beimposed by law or regulation (e.g., through acontract with the owners, or through labour lawsor environmental protection regulations). Whenthere is no legal stewardship responsibility, theorganization may have an ethical responsibilityto accept, or choose to accept stewardshipresponsibilities and be guided in doing so bystakeholder expectations.

3D Materiality

3.17 An integ rated rep or t should disc loseinform ation a bo ut m atters that sub stantively

af fec t the orga nizat ions a bi l ity to c rea te

value ove r the shor t, m ed ium a nd long term.

The materiality determination process

3.18 The materiality determination process for thepurpose of preparing and presenting anintegrated report involves:

Identifying relevant matters based on their

ability to affect value creation as discussed inSection 2B (see paragraphs3.213.23)

Evaluating the importance of relevant mattersin terms of their known or potential effect on

value creation (see paragraphs3.243.27)

Prioritizing the matters based on their relativeimportance (see paragraph3.28)

Determining the information to disclose aboutmaterial matters (see paragraph3.29).

3.19 This process applies to both positive and negative

matters, including risks and opportunities andfavourable and unfavourable performance orprospects. It also applies to both financial andother information. Such matters may have directimplications for the organization itself or mayaffect the capitals owned by or available toothers.

3.20 To be most effective, the materiality determinationprocess is integrated into the organizationsmanagement processes and includes regularengagement with providers of financial capitaland others to ensure the integrated report meetsits primary purpose as noted in paragraph1.7.

Identifying relevant matters

3.21 Relevant matters are those that have, or mayhave, an effect on the organizations ability tocreate value. This is determined by consideringtheir effect on the organizations strategy,governance, performance or prospects.



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3.22 Ordinarily, matters related to value creation that

are discussed at meetings of those charged withgovernance are considered relevant. Anunderstanding of the perspectives of keystakeholders is critical to identifying relevantmatters.

3.23 Matters that might be relatively easy to address inthe short term but which may, if left unchecked,become more damaging or difficult to address inthe medium or long term need to be included inthe population of relevant matters. Matters arenot excluded on the basis that the organization

does not wish to address them or does not knowhow to deal with them.

Evaluating importance

3.24 Not all relevant matters will be consideredmaterial. To be included in an integrated report,a matter also needs to be sufficiently important interms of its known or potential effect on valuecreation. This involves evaluating the magnitudeof the matters effect and, if it is uncertain

whether the matter will occur, its likelihood ofoccurrence.

3.25 Magnitude is evaluated by considering whetherthe matters effect on strategy, governance,performance or prospects is such that it has thepotential to substantively influence value creationover time. This requires judgement and willdepend on the nature of the matter in question.Matters may be considered material eitherindividually or in the aggregate.

3.26 Evaluating the magnitude of a matters effectdoes not imply that the effect needs to bequantified. Depending on the nature of thematter, a qualitative evaluation might be moreappropriate.

3.27 In evaluating the magnitude of effect, theorganization considers:

Quantitative and qualitative factors

Financial, operational, strategic, reputationaland regulatory perspectives

Area of the effect, be it internal or external

Time frame.

Prioritizing important matters

3.28 Once the population of important matters isidentified, they are prioritized based on theirmagnitude. This helps to focus on the mostimportant matters when determining how theyare reported.

Determining information to disclose

3.29 Judgement is applied in determining theinformation to disclose about material matters.This requires consideration from differentperspectives, both internal and external, and is

assisted by regular engagement with providers offinancial capital and others to ensure theintegrated report meets its primary purpose asnoted in paragraph1.7.(See also paragraphs4.504.52.)

Reporting boundary

3.30 Key to the materiality determination process is theconcept of the reporting boundary. Determiningthe boundary for an integrated report has twoaspects:

The financial reporting entity (i.e., theboundary used for financial reportingpurposes)

Risks, opportunities and outcomes attributableto or associated with otherentities/stakeholders beyond the financialreporting entity that have a significant effecton the ability of the financial reporting entityto create value.

3.31 The financial reporting entity is central to the

reporting boundary because: It is the financial reporting entity in which

providers of financial capital invest andtherefore need information about

Using the financial reporting entity enablesthe information in the financial statements toserve as an anchor or point of reference to

which the other information in an integratedreport can be related.



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Figure 3: Entities/stakeholders considered in determining the reporting boundary:

3.32 Figure 3 depicts the entities/stakeholders that areconsidered in determining the reportingboundary

Financial reporting entity

3.33 The financial reporting entity identifies whichsubsidiaries, joint ventures and associatestransactions and related events are included inthe organizations financial report. The financialreporting entity is determined according toapplicable financial reporting standards whichrevolve around the concepts of control orsignificant influence.

Risks, opportunities and outcomes

3.34 The second aspect of determining the reporting

boundary is to identify those risks, opportunitiesand outcomes attributable to or associated withentities/stakeholders beyond the financialreporting entity that have a significant effect onthe ability of the financial reporting entity tocreate value. These other entities/stakeholdersmight be related parties for the purpose offinancial reporting, but will ordinarily extendfurther.

3.35 The purpose of looking beyond the financialreporting boundary is to identify risks,opportunities and outcomesthat materially affectthe organizations ability to create value. Theentities/stakeholders within this portion of thereporting boundary are not related to thefinancial reporting entity by virtue of control orsignificant influence, but rather by the nature andproximity of the risks, opportunities andoutcomes. For example, if aspects of the labourpractices in the organizations industry arematerial to the ability of the organization tocreate value, then disclosure in the integratedreport might include information about thoseaspects as they relate to suppliers labourpractices.



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3E Conciseness

3.36 An integ rated rep or t should b e c onc ise.

3.37 An integrated report includes sufficient context tounderstand the organizations strategy,governance, performance and prospects withoutbeing burdened with less relevant information.

3.38 The organization seeks a balance in its integratedreport between conciseness and the otherGuiding Principles, in particular completenessand comparability. In achieving conciseness, anintegrated report:

Applies the materiality determination processdescribed inSection 3D

Follows a logical structure and includesinternal cross-references as appropriate tolimit repetition

May link to more detailed information,information that does not change frequently(e.g., a listing of subsidiaries), or externalsources (e.g., assumptions about futureeconomic conditions on a government

website)

Expresses concepts clearly and in as fewwords as possible

Favours plain language over the use of jargonor highly technical terminology

Avoids highly generic disclosures, oftenreferred to as boilerplate, that are notspecific to the organization.

3F Reliability and completeness

3.39 An integrated rep or t should inc lude al lm ater ia l ma t ters, both p os it ive a nd neg at ive,

in a b a lance d wa y and w i thout m ateria l

error.

Reliability

3.40 The reliability of information is affected by itsbalance and freedom from material error.Reliability (which is often referred to as faithfulrepresentation) is enhanced by mechanisms such

as robust internal control and reporting systems,stakeholder engagement, internal audit or similarfunctions, and independent, external assurance.

3.41 Those charged with governance have ultimateresponsibility for how the organizations strategy,governance, performance and prospects lead to

value creation over time. They are responsiblefor ensuring that there is effective leadership anddecision-making regarding the preparation andpresentation of an integrated report, includingthe identification and oversight of the employeesactively involved in the process.

3.42 Maintaining an audit trail when preparing anintegrated report helps senior management andthose charged with governance review the reportand exercise judgement in deciding whetherinformation is sufficiently reliable to be included.It might be appropriate in some cases (e.g., withrespect to future-oriented information) for anintegrated report to describe the mechanismsemployed to ensure reliability.

3.43 Paragraph1.18identifies relevant disclosureswhen material information is omitted because ofthe unavailability of reliable data.

Balance

3.44 A balanced integrated report has no bias in theselection or presentation of information.Information in the report is not slanted, weighted,emphasized, de-emphasized, combined, offset orotherwise manipulated to change the probabilitythat it will be received either favourably orunfavourably.



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3.45 Important methods to ensure balance include:

Selection of presentation formats that are notlikely to unduly or inappropriately influenceassessments made on the basis of theintegrated report

Giving equal consideration to both increasesand decreases in the capitals, both strengthsand weaknesses of the organization, bothpositive and negative performance, etc.

Reporting against previously reported targets,forecasts, projections and expectations.

Freedom from material error

3.46 Freedom from material error does not imply thatthe information is perfectly accurate in allrespects. It does imply that:

Processes and controls have been applied toreduce to an acceptably low level the risk thatreported information contains a materialmisstatement

When information includes estimates, this isclearly communicated, and the nature and

limitations of the estimation process areexplained.

Completeness

3.47 A complete integrated report includes all materialinformation, both positive and negative. To helpensure that all material information has beenidentified, consideration is given to whatorganizations in the same industry are reportingon because certain matters within an industry are

likely to be material to all organizations in thatindustry.

3.48 Determining completeness includes consideringthe extent of information disclosed and its level ofspecificity or preciseness. This might involveconsidering potential concerns regardingcost/benefit, competitive advantage and future-oriented information, each of which is discussedbelow.

Cost/benefit

3.49 Information included in an integrated report is,by nature, central to managing the business.Accordingly, if a matter is important to managing

the business, cost should not be a factor in failing

to obtain critical information to appropriatelyassess and manage the matter.

3.50 An organization may evaluate cost and benefitswhen determining the extent, level of specificity,and preciseness of information necessary for anintegrated report to meet its primary purpose, butmay not refrain entirely from making anydisclosure about a material matter on the basis ofcost.

Competitive advantage

3.51 In including information about material mattersdealing with competitive advantage (e.g., criticalstrategies), an organization considers how todescribe the essence of the matter withoutidentifying specific information that might cause asignificant loss of competitive advantage.

Accordingly, the organization considers whatadvantage a competitor could actually gain frominformation in an integrated report, and balancesthis against the need for the integrated report toachieve its primary purpose as noted inparagraph1.7.

Future-oriented information

3.52 Legal or regulatory requirements may apply tocertain future-oriented information in somejurisdictions, covering for example:

The types of disclosures that may be made

Whether cautionary statements may berequired or permitted to highlight uncertainty

regarding achievability An obligation to publicly update such

information.

3.53 Future-oriented information is by nature moreuncertain than historical information. Uncertaintyis not, however, a reason in itself to exclude suchinformation. (See also paragraph4.50regarding disclosures about uncertainty.)



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3G Consistency and comparability

3.54 The informa tion in a n integ ra ted rep ort shou ldbe p resented:

On a ba sis that is c onsistent ov er t ime

In a w ay that ena bles c om pa rison with

othe r organ izat ion s to the ex tent it is

m ater ia l to the orga nizat ions own a bi l ity

to c rea te va lue o ver time.

Consistency

3.55 Reporting policies are followed consistently from

one period to the next unless a change is neededto improve the quality of information reported.This includes reporting the same KPIs if theycontinue to be material across reporting periods.

When a significant change has been made, theorganization explains the reason for the change,describing (and quantifying if practicable andmaterial) its effect.

Comparability

3.56 The specific information in an integrated reportwill, necessarily, vary from one organization toanother because each organization creates valuein its own unique way. Nonetheless, addressingthe questions relating to the Content Elements,

which apply to all organizations, helps ensure asuitable level of comparability betweenorganizations.

3.57 Other powerful tools for enhancing comparability(in both an integrated report itself and any

detailed information that it links to) can include: Using benchmark data, such as industry or

regional benchmarks

Presenting information in the form of ratios(e.g., research expenditure as a percentage ofsales, or carbon intensity measures such asemissions per unit of output)

Reporting quantitative indicators commonlyused by other organizations with similaractivities, particularly when standardizeddefinitions are stipulated by an independent

organization (e.g., an industry body). Suchindicators are not, however, included in anintegrated report unless they are relevant tothe individual circumstances of, and are usedinternally by, the organization.



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4. CONTENT ELEMENTS

4.1 An integrated report includes the following eight

Content Elements, answering the question posedbelow for each:

A Organizational overview and externalenvironment

B Governance

C Business model

D Risks and opportunities

E Strategy and resource allocation

F Performance

G Outlook

H Basis of preparation and presentation

and in doing so, takes account of:

I General reporting guidance

4.2 The Content Elements are fundamentally linked toeach other and are not mutually exclusive. Theorder of the Content Elements as listed here is notthe only way they could be sequenced;accordingly, the Content Elements are not

intended to serve as a standard structure for anintegrated report with information about themappearing in a set sequence or as isolated,standalone sections. Rather, information in anintegrated report is presented in a way thatmakes the connections between the ContentElements apparent (seeSection 3B).

4.3 The content of an organizations integratedreport will depend on the individualcircumstances of the organization. The ContentElements are therefore stated in the form ofquestions rather than as checklists of specific

disclosures. Accordingly, judgement needs to beexercised in applying the Guiding Principles todetermine what information is reported, as wellas how it is reported, as discussed below.

4A Organizational overview and externalenvironment

4.4 An integrated rep or t should answer theque st ion: What d oe s the orga nizat ion do a nd

wha t are the c irc um stanc es unde r whic h i t

operates?

4.5 An integrated report identifies the organizations

mission and vision, and provides essential contextby identifying matters such as:

The organizations:

o culture, ethics and values

o ownership and operating structure

o principal activities and markets

o competitive landscape and marketpositioning (considering factors such asthe threat of new competition andsubstitute products or services, the

bargaining power of customers andsuppliers, and the intensity of competitiverivalry)

o position within the value chain

Key quantitative information (e.g., the numberof employees, revenue and number ofcountries in which the organization operates),highlighting, in particular, significant changesfrom prior periods

Significant factors affecting the externalenvironment and the organizations response.

External environment

4.6 Significant factors affecting the externalenvironment include aspects of the legal,commercial, social, environmental and politicalcontext that affect the organizations ability tocreate value in the short, medium or long term.They can affect the organization directly orindirectly (e.g., by influencing the availability,quality and affordability of a capital that theorganization uses or affects).

4.7 These factors occur in the context of the particularorganization, in the context of its industry orregion, and in the wider social or planetarycontext. They may include, for example:

The legitimate needs and interests of keystakeholders

Macro and micro economic conditions, suchas economic stability, globalization, andindustry trends

Market forces, such as the relative strengths

and weaknesses of competitors and customerdemand



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4. CONTENT ELEMENTS CONTINUED

The speed and effect of technological change

Societal issues, such as population anddemographic changes, human rights, health,poverty, collective values and educationalsystems

Environmental challenges, such as climatechange, the loss of ecosystems, and resourceshortages as planetary limits are approached

The legislative and regulatory environment inwhich the organization operates

The political environment in countries where

the organization operates and other countriesthat may affect the ability of the organizationto implement its strategy.

4B Governance

4.8 An integrated rep or t should answer thequ estion: How do es the o rgan izat ion s

go ve rnanc e structure sup po rt its ab il ity to

c rea te va lue in the short , m ed ium and long

term?

4.9 An integrated report provides insight about how

such matters as the following are linked to itsability to create value:

The organizations leadership structure,including the skills and diversity (e.g., rangeof backgrounds, gender, competence andexperience) of those charged with governanceand whether regulatory requirementsinfluence the design of the governancestructure

Specific processes used to make strategicdecisions and to establish and monitor theculture of the organization, including itsattitude to risk and mechanisms foraddressing integrity and ethical issues

Particular actions those charged withgovernance have taken to influence andmonitor the strategic direction of theorganization and its approach to riskmanagement

How the organizations culture, ethics andvalues are reflected in its use of and effects on

the capitals, including its relationships withkey stakeholders

Whether the organization is implementing

governance practices that exceed legalrequirements

The responsibility those charged withgovernance take for promoting and enablinginnovation

How remuneration and incentives are linkedto value creation in the short, medium andlong term, including how they are linked tothe organizations use of and effects on thecapitals.

4C Business model4.10 An integrated rep or t should answer the

qu estion : What is the orga nizat ion s business

mode l ?

4.11 An organizations business model is its system oftransforming inputs, through its businessactivities, into outputs and outcomes that aims tofulfil the organizations strategic purposes andcreate value over the short, medium and longterm.

4.12 An integrated report describes the businessmodel, including key:

Inputs (see paragraphs4.144.15)

Business activities (see paragraphs4.164.17)

Outputs (see paragraph4.18)

Outcomes (see paragraphs4.194.20).

4.13 Features that can enhance the effectiveness andreadability of the description of the businessmodel include:

Explicit identification of the key elements ofthe business model

A simple diagram highlighting key elements,supported by a clear explanation of therelevance of those elements to theorganization

Narrative flow that is logical given theparticular circumstances of the organization

Identification of critical stakeholder and other

(e.g., raw material) dependencies andimportant factors affecting the externalenvironment



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Connection to information covered by other

Content Elements, such as strategy, risks andopportunities, and performance (includingKPIs and financial considerations, like costcontainment and revenues).

Inputs

4.14 An integrated report shows how key inputs relateto the capitals on which the organizationdepends, or that provide a source ofdifferentiation for the organization, to the extentthey are material to understanding the robustness

and resilience of the business model.4.15 An integrated report does not attempt to provide

an exhaustive list of all inputs. Rather, the focusis on those that have a material bearing on theability to create value in the short, medium andlong term, whether or not the capitals from whichthey are derived are owned by the organization.It may also include a discussion of the nature andmagnitude of the significant trade-offs thatinfluence the selection of inputs (see paragraph4.56).

Business activities

4.16 An integrated report describes key businessactivities. This can include:

How the organization differentiates itself in themarket place (e.g., through productdifferentiation, market segmentation, deliverychannels and marketing)

The extent to which the business model relieson revenue generation after the initial point ofsale (e.g., extended warranty arrangements or

network usage charges) How the organization approaches the need to

innovate

How the business model has been designed toadapt to change.

4.17 When material, an integrated report discussesthe contribution made to the organizations longterm success by initiatives such as processimprovement, employee training andrelationships management.

Outputs

4.18 An integrated report identifies an organizationskey products and services. There might be otheroutputs, such as by-products and waste(including emissions), that need to be discussed

within the business model disclosure dependingon their materiality.

Outcomes

4.19 An integrated report describes key outcomes,including:

Both internal outcomes (e.g., employeemorale, organizational reputation, revenue

and cash flows) and external outcomes (e.g.,customer satisfaction, tax payments, brandloyalty, and social and environmental effects)

Both positive outcomes (i.e., those that resultin a net increase in the capitals and therebycreate value) and negative outcomes (i.e.,those that result in a net decrease in thecapitals and thereby diminish value).

4.20 Identifying and describing outcomes, particularly

external outcomes, requires an organization toconsider the capitals more broadly than thosethat are owned or controlled by the organization.For example, it may require disclosure of theeffects on capitals up and down the value chain(e.g., carbon emissions caused by products theorganization manufactures and labour practicesof key suppliers). (See also paragraphs3.303.35regarding determination of the reportingboundary.)

Organizations with multiple business models

4.21 Some organizations employ more than onebusiness model (e.g., when operating in differentmarket segments). Disaggregating theorganization into its material constituentoperations and associated business models isimportant to an effective explanation of how theorganization operates. This requires a distinctconsideration of each material business model as

well as commentary on the extent of connectivitybetween the business models (such as theexistence of synergistic benefits) unless the

organization is run as an investmentmanagement business (in which case, it may be



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appropriate to focus on the investment

management business model, rather than thebusiness models of individual investments).

4.22 The integrated report of an organization withmultiple businesses often needs to balancedisclosure with the need to reduce complexity;however, material information should not beomitted. Aligning external reporting with internalreporting by considering the top level ofinformation that is regularly reported to thosecharged with governance is ordinarilyappropriate.

4D Risks and opportunities

4.23 An integrated rep or t should answer thequ estion: What a re the sp ec ific r isks and

op p ortunities that affec t the orga nizat ion s

ab i li ty to c rea te va lue ove r the short ,

me d ium a nd long term , and how is the

organizat ion d ea l ing w ith them?

4.24 An integrated report identifies the key risks andopportunities that are specific to theorganization, including those that relate to the

organizations effects on, and the continuedavailability, quality and affordability of, relevantcapitals in the short, medium and long term.

4.25 This can include identifying:

The specific source of risks and opportunities,which can be internal, external or, commonly,a mix of the two. External sources includethose stemming from the externalenvironment, as discussed in paragraphs4.64.7. Internal sources include thosestemming from the organizations business

activities, as discussed in paragraphs4.164.17.

The organizations assessment of thelikelihood that the risk or opportunity willcome to fruition and the magnitude of itseffect if it does. This includes consideration ofthe specific circumstances that would causethe risk or opportunity to come to fruition.Such disclosure will invariably involve adegree of uncertainty. (See also paragraph4.50regarding disclosures about uncertainty.)

The specific steps being taken to mitigate or

manage key risks or to create value from keyopportunities, including the identification ofthe associated strategic objectives, strategies,policies, targets and KPIs.

4.26 Considering the Guiding Principle,Materiality,the organizations approach to any real risks(whether they be in the short, medium or longterm) that are fundamental to the ongoing abilityof the organization to create value and that couldhave extreme consequences is ordinarily includedin an integrated report, even when the

probability of their occurrence might beconsidered quite small.

4E Strategy and resource allocation

4.27 An integrated rep or t should answer theque st ion: Where d oe s the o rga nizat ion w ant

to go and how do es it in tend to ge t there?

4.28 An integrated report ordinarily identifies:

The organizations short, medium and longterm strategic objectives

The strategies it has in place, or intends toimplement, to achieve those strategicobjectives

The resource allocation plans it has toimplement its strategy

How it will measure achievements and targetoutcomes for the short, medium and longterm.

4.29 This can include describing:

The linkage between the organizations

strategy and resource allocation plans, andthe information covered by other ContentElements, including how its strategy andresource allocation plans:

o relate to the organizations businessmodel, and what changes to thatbusiness model might be necessary toimplement chosen strategies to providean understanding of the organizationsability to adapt to change

o are influenced by/respond to the

external environment and the identifiedrisks and opportunities



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o affect the capitals, and the risk

management arrangements related tothose capitals

What differentiates the organization to give itcompetitive advantage and enable it to create

value, such as:

o the role of innovation

o how the organization develops andexploits intellectual capital

o the extent to which environmental andsocial considerations have beenembedded into the organizationsstrategy to give it a competitiveadvantage

Key features and findings of stakeholderengagement that were used in formulating itsstrategy and resource allocation plans.

4F Performance

4.30 An integrated rep or t should answer thequ estion: To w ha t extent ha s the o rg an iza t ion

ac hieved i ts strateg ic o bjec t ives for the

pe riod a nd w hat a re i ts outc om es in term s ofef fec ts on the c ap i ta ls?

4.31 An integrated report contains qualitative andquantitative information about performance thatmay include matters such as:

Quantitative indicators with respect to targetsand risks and opportunities, explaining theirsignificance, their implications, and themethods and assumptions used in compilingthem

The organizations effects (both positive andnegative) on the capitals, including materialeffects on capitals up and down the valuechain

The state of key stakeholder relationships andhow the organization has responded to keystakeholders legitimate needs and interests

The linkages between past and currentperformance, and between currentperformance and the organizations outlook.

4.32 KPIs that combine financial measures with other

components (e.g., the ratio of greenhouse gasemissions to sales) or narrative that explains the

financial implications of significant effects on

other capitals and other causal relationships(e.g., expected revenue growth resulting fromefforts to enhance human capital) may be used todemonstrate the connectivity of financialperformance with performance regarding othercapitals. In some cases, this may also includemonetizing certain effects on the capitals (e.g.,carbon emissions and water use).

4.33 It may be relevant for the discussion ofperformance to include instances whereregulations have a significant effect on

performance (e.g., a constraint on revenues as aresult of regulatory rate setting) or theorganizations non-compliance with laws orregulations may significantly affect its operations.

4G Outlook

4.34 An integrated rep or t should answer theque st ion: What c hal lenge s and unc er ta int ies

is the o rga nizat ion l ikely to enc ounter in

pu rsuing its strate g y, and wha t are the

po tential imp lica t ions for its b usiness m od el

and future per fo rmanc e?

4.35 An integrated report ordinarily highlightsanticipated changes over time and providesinformation, built on sound and transparentanalysis, about:

The organizations expectations about theexternal environment the organization is likelyto face in the short, medium and long term

How that will affect the organization

How the organization is currently equipped torespond to the critical challenges anduncertainties that are likely to arise.

4.36 Care is needed to ensure the organizationsstated expectations, aspirations and intentionsare grounded in reality. They need to becommensurate with the ability of the organizationto deliver on the opportunities available to it(including the availability, quality andaffordability of appropriate capitals), and arealistic appraisal of the organizationscompetitive landscape and market positioning,and the risks it faces.



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4.37 The discussion of the potential implications,

including implications for future financialperformance, ordinarily includes discussion of:

The external environment, and risks andopportunities, with an analysis of how thesecould affect the achievement of strategicobjectives

The availability, quality and affordability ofcapitals the organization uses or affects (e.g.,the continued availability of skilled labour ornatural resources), including how keyrelationships are managed and why they are

important to the organizations ability tocreate value over time.

4.38 An integrated report may also provide leadindicators, KPIs or objectives, relevantinformation from recognized external sources,and sensitivity analyses. If forecasts orprojections are included in reporting theorganizations outlook, a summary of relatedassumptions is useful. Comparisons of actualperformance to previously identified targetsfurther enables evaluation of the current outlook.

4.39 Disclosures about an organizations outlook in anintegrated report are made taking into accountthe legal or regulatory requirements to which theorganization is subject.

4H Basis of preparation and presentation

4.40 An integrated rep or t should answer theque st ion: How do es the orga nizat ion

de term ine wha t ma tters to inc lude in the

integ rated rep or t and how are suc h m atters

qua nt if ied o r eva luated ?

4.41 An integrated report describes its basis ofpreparation and presentation, including:

A summary of the organizations materialitydetermination process (see paragraph4.42)

A description of the reporting boundary andhow it has been determined (see paragraphs4.434.46)

A summary of the significant frameworks andmethods used to quantify or evaluate materialmatters (see paragraphs4.474.48).

Summary of materiality determination process

4.42 An integrated report includes a summary of theorganizations materiality determination processand key judgements (see paragraphs3.183.20). This may include:

Brief description of the process used toidentify relevant matters, evaluate theirimportance and narrow them down tomaterial matters

Identification of the role of those charged withgovernance and key personnel in the

identification and prioritization of materialmatters.

A link to where a more detailed description of themateriality determination process can be foundmay also be included.

Reporting boundary

4.43 An integrated report identifies its reportingboundary and explains how it has beendetermined (see paragraphs3.303.35).

4.44 Material risks, opportunities and outcomesattributable to or associated with entities that areincluded in the financial reporting entity, arereported on in the organizations integratedreport.

4.45 Risks, opportunities and outcomes attributable toor associated with other entities/stakeholders arereported on in an integrated report to the extentthey materially affect the ability of the financialreporting entity to create value.

4.46 Practical issues might limit the nature and extentof information that can be presented in anintegrated report. For example:

The availability of reliable data with respect toentities the financial reporting entity does notcontrol

The inherent inability to identify all risks,opportunities and outcomes that willmaterially affect the ability of the financialreporting entity to create value, particularly inthe long term.

It may be appropriate to disclose such limitations,

and actions being taken to overcome them, in anintegrated report.



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Summary of significant frameworks and

methods4.47 An integrated report includes a summary of the

significant frameworks and methods used toquantify or evaluate material matters included inthe report (e.g., the applicable financial reportingstandards used for compiling financialinformation, a company-defined formula formeasuring customer satisfaction, or an industry-based framework for evaluating risks). Moredetailed explanations might be provided in othercommunications.

4.48 As noted in paragraph1.10,when informationin an integrated report is similar to or based onother information published by the organization,it is prepared on the same basis as, or is easilyreconcilable with, that other information. Forexample, when a KPI covers a similar topic to, oris based on information published in theorganizations financial statements orsustainability report, it is prepared on the samebasis, and for the same period, as that otherinformation.

4I General reporting guidance

4.49 The following general reporting matters arerelevant to various Content Elements:

Disclosure of material matters(see paragraphs4.504.53)

Disclosures about the capitals(see paragraphs4.544.55)

Time frames for short, medium and long term(see paragraphs4.574.59)

Aggregation and disaggregation(see paragraphs4.604.62).

Disclosure of material matters

4.50 Taking the nature of a material matter intoconsideration, the organization considersproviding:

Key information, such as:

o an explanation of the matter and itseffect on the organizations strategy,

business model or the capitals

o relevant interactions and

interdependencies providing anunderstanding of causes and effects

o the organizations view on the matter

o actions to manage the matter and howeffective they have been

o the extent of the organizations controlover the matter

o quantitative and qualitative disclosures,including comparative information forprior periods and targets for futureperiods

If there is uncertainty surrounding a matter,disclosures about the uncertainty, such as:

o an explanation of the uncertainty

o the range of possible outcomes,associated assumptions, and how theinformation could change if theassumptions do not occur as described

o the volatility, certainty range orconfidence interval associated with theinformation provided

If key information about the matter isconsidered indeterminable, disclosure of thatfact and the reason for it

If significant loss of competitive advantagewould result, disclosures of a general natureabout the matter, rather than specific details(see paragraph3.51).

4.51 Depending on the nature of a matter, it may beappropriate to present it on its own in theintegrated report or throughout in conjunction

with different Content Elements.

4.52 Care is needed to avoid generic disclosures.Informat

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