1.

0 INTEGRATED REPORTING
Integrated report is a concise communication about how an organization’s strategy,
governance, performance and prospects, in the context of its external environment, lead
to the creation of value over the short, medium and long term. An integrated report
should be prepared in accordance with the given Framework.
The purpose of this Framework is to establish Guiding Principles and Content Elements that
govern the overall content of an integrated report, and to explain the fundamental concepts
that underpin them.
The Framework:
• Identifies information to be included in an integrated report for use in assessing the
organization’s ability to create value; it does not set benchmarks for such things as the quality
of an organization’s strategy or the level of its performance
• Is written primarily in the context of private sector, for-profit companies of any size but it
can also be applied, adapted as necessary, by public sector and not-for-profit organizations.

2.0 EVOLUTION OF INTEGRATED REPORTING

<IR> is a way to exhibit a more holistic view of corporate performance in a concise and more
material way combining previously separate constituents of corporate reporting such as
annual report and sustainability report and CSR report (Rowbottom and Locke, 2013). The
necessities of financial and non-financial information in a single report for effective capital
allocation have led to the advent of integrated report. The integrated report that combines
different strands of reporting has been produced since 2002. King III report on governance
for South Africa recommended the companies to prepare an integrated report instead of the
separate annual financial report and separate sustainability report (SAICA, 2010). In 2010,
the Johannesburg Stock Exchange (JSE) placed a listing requirement which necessitated the
listed companies to issue integrated report. The International Integrated Reporting Committee
(IIRC) came into existence in 2010. <IR>discussion paper was launched in 2011 which
contained the initial proposals for the development of the International <IR> Framework. In
2013, IIRC developed the International <IR> Framework which consists of eight contents
elements and seven guiding principles.
<IR> IN BANGLADESH
The concept of <IR> in Bangladesh is elementary. Basically, the Bangladeshi companies are
adopting <IR> because of their tendency to be transparent to all the stakeholders and their
desire to legitimize their operations. The first integrated report has been produced by in 2015
in Bangladesh following the issue of an <IR> checklist by Institute of Chartered Accountants
of Bangladesh (ICAB) taking into account the content elements suggested in the <IR>
framework.

3.0 PURPOSE AND USERS OF AN INTEGRATED REPORT

The primary purpose of an integrated report is to explain to providers of financial capital
how an organization creates value over time. An integrated report benefits all stakeholders
interested in an organization’s ability to create value over time, including employees,
customers, suppliers, business partners, local communities, legislators, regulators and policy
makers.

4.0 OBJECTIVE OF THE FRAMEWORK

The purpose of this Framework is to establish Guiding Principles and Content Elements
that govern the overall content of an integrated report, and to explain the fundamental
concepts that underpin them.
This Framework is written primarily in the context of private sector, for-profit companies of
any size but it can also be applied, adapted as necessary, by public sector and not-for-profit
organizations. This Framework identifies information to be included in an integrated report
for use in assessing an organization’s ability to create value; it does not set benchmarks for
such things as the quality of an organization’s strategy or the level of its performance.

5.0 A PRINCIPLES-BASED APPROACH

This Framework is principles-based. The intent of the principles-based approach is to
strike an appropriate balance between flexibility and prescription that recognizes the
wide variation in individual circumstances of different organizations while enabling a
sufficient degree of comparability across organizations to meet relevant information
needs.
This Framework does not prescribe specific key performance indicators (KPIs), measurement
methods or the disclosure of individual matters. Those responsible for the preparation and
presentation of the integrated report therefore need to exercise judgement, given the specific
circumstances of the organization, to determine:
• Which matters are material
• How they are disclosed, including the application of generally accepted measurement and
disclosure methods as appropriate. When information in an integrated report is similar to, or
based on other information published by the organization, it is prepared on the same basis as,
or is easily reconcilable with, that other information.

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
organization’s strategy, and how it relates to the organization’s 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
organization’s ability to create value over time.
• Stakeholder relationships: An integrated report should provide insight into the nature and
quality of the organization’s relationships with its key stakeholders, including how and to
what extent the organization understands, takes into account and responds to their legitimate
needs and interests
Figure: Reporting Boundary

• Materiality: An integrated report should disclose information about matters that

substantively affect the organization’s 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 organization’s own ability to create
value over time.

6.0 RESPONSIBILITY FOR AN INTEGRATED REPORT

An integrated report should include a statement from those charged with governance that
includes:
• An acknowledgement of their responsibility to ensure the integrity of the integrated report
• An acknowledgement that they have applied their collective mind to the preparation and
presentation of the integrated report
• Their opinion or conclusion about whether the integrated report is presented in accordance
with this Framework or, if it does not include such a statement, it should explain:
• What role those charged with governance played in its preparation and presentation
• What steps are being taken to include such a statement in future reports
• The time frame for doing so, which should be no later than the organization’s third
integrated report that references this Framework.
An integrated report may be prepared in response to existing compliance requirements, and
may be either a standalone report or be included as a distinguishable, prominent and
accessible part of another report or communication. It should include, transitionally on a
comply or explain basis, a statement by those charged with governance accepting
responsibility for the report.

7.0 FUNDAMENTAL CONCEPTS

An integrated report aims to provide insight about the resources and relationships used
and affected by an organization – these are collectively referred to as “the capitals” in
this Framework. It also seeks to explain how the organization interacts with the
external environment and the capitals to create value over the short, medium and long
term.
The capitals are stocks of value that are increased, decreased or transformed through
the activities and outputs 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 report are not required to adopt this
categorization or to structure their report along the lines of the capitals.
The ability of an organization to create value for itself enables financial returns to the
providers of financial capital. This is interrelated with the value the organization
creates for stakeholders and society at large through a wide range of activities,
interactions and relationships. When these are material to the organization's ability to
create value for itself, they are included in the integrated report.
An integrated report explains how an organization creates value over time. Value is not
created by or within an organization alone. It is:
• Influenced by the external environment
• Created through relationships with stakeholders
• Dependent on various resources.
An integrated report therefore aims to provide insight about:
• The external environment that affects an organization
• The resources and the relationships used and affected by the organization, which are
referred to collectively in this Framework as the capitals and are categorized as financial,
manufactured, intellectual, human, social and relationship, and natural
• How the organization interacts with the external environment and the capitals to create
value over the short, medium and long term.

Value creation for the organization and for others

Value created by an organization over time manifests itself in increases, decreases or
transformations of the capitals caused by the organization’s business activities and outputs.
That value has two interrelated aspects – value created for:
• The organization itself, which enables financial returns to the providers of financial capital
• Others (i.e., stakeholders and society at large).
Providers of financial capital are interested in the value an organization creates for itself.
They are also interested in the value an organization creates for others when it affects the
ability of the organization to create value for itself, or relates to a stated objective of the
organization (e.g., an explicit social purpose) that affects their assessments.

The capitals
The stock and flow of capitals:
All organizations depend on various forms of capital for their success. In this Framework, the
capitals comprise financial, manufactured, intellectual, human, social and relationship, and
natural, organizations preparing an integrated report are not required to adopt this
categorization.
The capitals are stocks of value that are increased, decreased or transformed through the
activities and outputs of the organization. For example, an organization’s financial capital is
increased when it makes a profit, and the quality of its human capital is improved when
employees become better trained.

Categories and descriptions of the capitals

i) Financial capital -- available to an organization for use in the production

of goods or the provision of services
-- obtained through financing, such as debt, equity or
grants, or generated through operations or investments
ii) Manufactured capital – -- buildings
Manufactured physical objects -- equipment
 that are available to an -- infrastructure (such as roads, ports, bridges, and
organization for use in the waste and water treatment plants)
production of goods or the
provision of services.
iii) Intellectual capital – -- intellectual property, such as patents, copyrights,
Organizational, software, rights and licences
knowledge-based intangibles -- “organizational capital” such as tacit knowledge,
systems, procedures and protocols
iv) Human capital – People’s -- alignment with and support for an organization’s
competencies, capabilities and governance framework, risk management approach, and
experience, and their ethical values
motivations to innovate -- ability to understand, develop and implement an
organization’s strategy
-- loyalties and motivations for improving processes,
goods and services, including their ability to lead,
manage and collaborate
v) Social and relationship capital -- shared norms, and common values and behaviours
– The institutions and the -- key stakeholder relationships, and the trust and
relationships within and between willingness to engage that an organization has
communities, groups of developed and strives to build and protect with external
stakeholders and other networks, stakeholders.
and the ability to share -- intangibles associated with the brand and reputation
information to enhance that an organization has developed.
individual and collective well- -- an organization’s social licence to operate
being.
vi) Natural capital – All -- air, water, land, minerals and forests.
renewable and nonrenewable -- biodiversity and eco-system health.
environmental resources and
processes that provide goods or
services that support the past,
current or future prosperity of an
organization.

The value creation process

The external environment, including economic conditions, technological change, societal
issues and environmental challenges, sets the context within which the organization operates.
The mission and vision encompass the whole organization, identifying its purpose and
intention in clear, concise terms.
Those charged with governance are responsible for creating an appropriate oversight
structure to support the ability of the organization to create value.
At the core of the organization is its business model, which draws on various capitals as
inputs and, through its business activities, converts them to outputs (products, services, by-
products and waste). The organization’s activities and its outputs lead to outcomes in terms of
effects on the capitals. The capacity of the business model to adapt to changes (e.g., in the
availability, quality and affordability of inputs) can affect the organization’s longer term
viability.
Business activities include the planning, design and manufacture of products or the
deployment of specialized skills and knowledge in the provision of services.
Encouraging a culture of innovation is often a key business activity in terms of
generating new products and services that anticipate customer demand, introducing
efficiencies and better use of technology, substituting inputs to minimize adverse social
or environmental effects, and finding alternative uses for outputs.
Outcomes are the internal and external consequences (positive and negative) for the capitals
as a result of an organization’s business activities and outputs.
Continuous monitoring and analysis of the external environment in the context of the
organization’s mission and vision identifies risks and opportunities relevant to the
organization, its strategy and its business model.
The organization’s strategy identifies how it intends to mitigate or manage risks and
maximize opportunities. It sets out strategic objectives and strategies to achieve them, which
are implemented through resource allocation plans.
The organization needs information about its performance, which involves setting up
measurement and monitoring systems to provide information for decision-making.

9.0 CONTENT ELEMENTS

The Content Elements are fundamentally linked to each other and are not mutually exclusive.
The order of the Content Elements as listed here is not the only way they could be sequenced;
accordingly, the Content Elements are not intended to serve as a standard structure for an
integrated report with information about them appearing in a set sequence or as isolated,
standalone sections.
An integrated report includes eight Content Elements that are fundamentally linked to each
other and are not mutually exclusive:

Organizational overview and external environment

• Organizational overview and external environment: What does the organization do and
what are the circumstances under which it operates?
An integrated report identifies the organization’s mission and vision, and provides essential
context by identifying matters such as:

• Key quantitative information (e.g., the number of employees, revenue and number of
countries in which the organization operates), highlighting, in particular, significant changes
from prior periods
• Significant factors affecting the external environment and the organization’s response.

B. Governance: How does the organization’s governance structure support its ability to
create value in the short, medium and long term?
An integrated report provides insight about how such matters as the following are linked to its ability to create
value:
• The organization’s leadership structure, including the skills and diversity (e.g., range of backgrounds, gender,
competence and experience) of those charged with governance and whether regulatory requirements influence
the design of the governance structure
• Specific processes used to make strategic decisions and to establish and monitor the culture of the
organization, including its attitude to risk and mechanisms for addressing integrity and ethical issues

• Particular actions those charged with governance have taken to influence and monitor the strategic direction
of the organization and its approach to risk management
• How the organization’s culture, ethics and values are reflected in its use of and effects on the capitals,
including its relationships with key stakeholders

• Whether the organization is implementing governance practices that exceed legal requirements
• The responsibility those charged with governance take for promoting and enabling innovation
• How remuneration and incentives are linked to value creation in the short, medium and long term, including
how they are linked to the organization’s use of and effects on the capitals.

• Business model: What is the organization’s business model?

• Risks and opportunities: What are the specific risks and opportunities that affect the
organization’s 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?

The International Integrated Reporting Council (IIRC) is a global coalition of regulators,

investors, companies, standard setters, the accounting profession and NGOs. Together, this
coalition shares the view that communication about value creation should be the next step in
the evolution of corporate reporting. The International Framework has been developed to
meet this need and provide a foundation for the future.
The IIRC’s long term vision is a world in which integrated thinking is embedded within
mainstream business practice in the public and private sectors, facilitated by Integrated
Reporting (IR) as the corporate reporting norm. The cycle of integrated thinking and
reporting, resulting in efficient and productive capital allocation, will act as a force for
financial stability and sustainability.
(IR) aims to:
• Improve the quality of information available to providers of financial capital to enable a
more efficient and productive allocation of capital
• Promote a more cohesive and efficient approach to corporate reporting that draws on
different reporting strands and communicates the full range of factors that materially affect
the ability of an organization to create value over time
• Enhance accountability and stewardship for the broad base of capitals (financial,
manufactured, intellectual, human, social and relationship, and natural) and promote
understanding of their interdependencies
• Support integrated thinking, decision-making and actions that focus on the creation of value
over the short, medium and long term.

Integrated Reporting
IIRC (2013) refers to <IR> as “a process founded on integrated thinking that results in a
periodic integrated
report by an organization about value creation over time and related communications
regarding aspects of value
creation”. The aim of an integrated report is to allow a better communication of the entity’s
short, medium and
long-term value creation propositions through providing “a concise communication about
how an organization’s
strategy, governance, performance and prospects, in the context of its external environment,
lead to the creation of value over the short, medium and long-term” (IIRC, 2013). <IR>
intends to improve the quality of information by promoting a more cohesive and efficient
approach to corporate reporting which communicates the full range of factors which have the
direct influence on the ability to create value over time. Traditional public reporting has a
dominant orientation towards the analysis of the past and present results of
the organization. This type of reporting typically focuses on short-term and retrospective
performance and do not provide adequate information for investors, creditors and other
stakeholders to make informed financial decisions about current and future performance of
the entity. The concept of <IR> has arisen to address such deficiencies in recent corporate
reporting regimes (ACCA, 2011). <IR> would be a potential solution for the dearth of
forward looking information disclosures in traditional reporting. <IR> should disclose
information on the methods of value creation in the medium and long term of the company
with a perspective towards the future (Marcon and Mancin, 2016). Financial returns to the
investors depend on the organization’s ability to create value (IIRC, 2013). <IR> determines
how resources and governances will be deployed to create value (ACCA, 2011). Through
<IR>, an organization should illuminate its journey towards reaching the vision, underpinned
by its values, enacted by management, monitored by governance, and using facets of
resources relating to financial, intellectual, social and environmental capital (Abeysekera,
2013). A significant number of studies of <IR> indicate the elevated interests of the academic
researchers and professional bodies. <IR> as a new and emerging trend of corporate reporting
is still in its early development phase (Hossain et al., 2016). For being relatively new
concept, most contribution to the study of <IR> is theoretical and conceptual in nature
(Abeysekera, 2013; Adams, 2015; Flower, 2015; Dumay et al., 2016) without having a
comprehensive perception regarding the ways of preparing integrated reports by companies
(Marcon and Mancin, 2016).