Integrated Reporting Affects Market Behavior

Two research studies released Wednesday demonstrate the significant changes to behavior triggered by integrated reporting.

Integrated teporting, also known as IR, unites financial reporting with other types of reporting such as on sustainability to provide 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 in the short, medium and long term.

The studies point to evidence of positive impacts on business engagement with external stakeholders, strategic benefits including better decision-making, and the importance of Integrated Reporting in helping to meet the needs of investors.

The International Integrated Reporting Council conducted one of the research studies in partnership with corporate communications specialists Black Sun. It found that 91 percent of all respondents said they have seen a positive impact on external engagement with stakeholders, including investors. Of those that have published at least one integrated report, 87 percent of businesses believe investors better understand their strategy.

Profound impacts on strategic factors, and crucial developments in integrated thinking were revealed, with 79 percent of respondents reporting improvements in decision making, 68 percent reporting a better understanding of risks and opportunities, and 78 percent seeing better collaborative thinking by the board about goals and targets.

The study was conducted with participants of the three- year IIRC Pilot Program—a network of 140 businesses and investors from 26 countries that have helped the IIRC develop and test the International Framework, which was published in December 2013.

Further research released Wednesday by PwC shows that nearly two thirds of investment professionals (63 percent) who responded believe that the quality of a company’s reporting—including information about strategy, risks and other drivers of value—could have a direct impact on its cost of capital.

“I am delighted to see the very significant positive impact that is having on businesses that have taken a lead in making their corporate reporting and thinking fit for purpose,” said IIRC CEO Paul Druckman. “It is crystal clear from this new research that adopting is leading to important breakthroughs in organizations’ understanding and articulation of how they create (and destroy) value—a staggering 92 percent of respondents say it has improved their understanding of value creation. It is also encouraging to see that can give investment professionals more confidence and enhance their analysis.”

Separately, the Association of Chartered Certified Accountants released its own integrated report Wednesday.

“As an organization with innovation as one its core values, ACCA has a proud track record of pioneering in the accountancy profession,” said ACCA chief executive Helen Brand in an email introducing the report. “Our latest integrated report highlights some of our important firsts over the past year, alongside some of our historic firsts as a professional body.”