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Integrated reportIng

ConsultatIon drato the InternatIonal

ramework


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ABOUT THE IIRC

The International Integrated Reporting Council (IIRC) isa global coalition o regulators, investors, companies,standard setters, the accounting proession andNGOs. Together, this coalition shares the view thatcorporate reporting needs to evolve to provide aconcise communication about how an organizationsstrategy, governance, perormance and prospects,in the context o its external environment, lead to thecreation o value over the short, medium and longterm. The International Integrated Reporting ()Framework is being developed to meet this need andprovide a oundation or the uture.

Further inormation about the IIRC can be oundon its website www.theiirc.org, including:

The background to the IIRCs creation

Its mission, vision and objectives

Its structure and membership, and the membershipo groups who have contributed to thedevelopment o this Consultation Drat

Its due process.

Copyright April 2013 by the International Integrated Reporting Council. All rights reserved. Permission is granted to make copies o this work to achievemaximum exposure and eedback provided that each copy bears the ollowing credit line: Copyright April 2013 by the International Integrated Reporting Council.All rights reserved. Used with permission of the International Integrated Reporting Council. Permission is granted to make copies of this work to achieve maximumexposure and feedback.

TABlE O CONTENTS

reQuest or Comments 1ConsultatIon QuestIons 2drat InternatIonal ramework 4

DEVElOPMENT O THIS

CONSUlTATION DRATThis Consultation Drat has been developed ollowing:

Analysis o responses to the 2011 DiscussionPaper Towards Integrated Reporting Communicating Value in the 21st Century

Publication o a drat outline in July 2012 anda Prototype Framework in November 2012

Research by Technical Collaboration Groupson key topics

Input rom the IIRC Pilot Programmes BusinessNetwork and Investor Network

Detailed consideration o successive drats bythe IIRCs Technical Task Force

Review and endorsement by the IIRCs WorkingGroup and Council.

Further details are available on the IIRCs websiteat www.theiirc.org.


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1Consultation Drat o the International Framework

The purpose o this Consultation Drat is to obtaincomment on the Drat International Framework(Drat Framework) on pages 4-37 in accordance withthe IIRCs due process.

The ocial version o this Consultation Drat is inEnglish. Approved translations are also available atwww.theiirc.org in Arabic, Chinese, French, Italian,

Japanese, Portuguese, Russian, and Spanish.

The IIRC welcomes comments on all aspects o theDrat Framework rom all stakeholders, whether toexpress agreement or to recommend changes.

A series o Consultation Questions has been included

on pages 2 and 3. Your answers to these questions,and any other comments you would like to make,will be important to the IIRC in nalizing the initialversion o the Framework. A summary o the key issuesraised in responses and how they have been dealt withwill be published with or shortly ater the initial versiono the Framework.

The IIRC plans to issue the initial version o the Frameworkin December 2013 and to update it periodically as evolves.

You can register at www.theiirc.org to be notied whenadditional inormation is published.

Integrated Reporting Businesseaders: what you need to knowThis Consultation Drat is being released at the same timeas the IIRC publication Business leaders: what you needto know. While not part o the Consultation Drat itsel, itprovides helpul context. It is available at www.theiirc.org.

Process or receiving eedback

The IIRC will be accepting comments on the DratFramework until 15 July 2013.

All comments will be a matter o public record and postedon www.theiirc.org.

Submissions are to be made in English via the IIRCswebsite at www.theiirc.org/consultationdrat2013.

It is the very strong preerence o the IIRC to receiveresponses in the ormat specied at www.theiirc.org/consultationdrat2013. However, i eedback is providedin a dierent ormat, an editable version must be submittedto enable collation and analysis o comments, and should

be reerenced to the Consultation Questions or specicparagraphs in the Drat Framework.

Emerging DatabaseThe IIRC acknowledges that is currently in a ormativestage and plans to review and update the Frameworkas urther practical experience is gained. An importantreerence point or that experience will be the database oemerging reporting practice at http://examples.theiirc.org.While the database does not provide ocial guidance,readers o this Consultation Drat may nd it helpul toconsider the practices in the database.

REQUEST OR COMMENTS


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The IIRC welcomes comments on all aspects o the DratFramework rom all stakeholders, whether to expressagreement or to recommend changes. The ollowingquestions are ocused on areas where there has beensignicant discussion during the development process.Comments on any other aspect o the Framework arealso encouraged through the questions.

Chapter 1: Overviewpici-b qiTo be in accordance with the Framework, an integratedreport should comply with the principles-basedrequirements identied throughout the Framework in bolditalic type (paragraphs 1.11-1.12).

1. Should any additional principles-based requirementsbe added or should any be eliminated or changed?I so, please explain why.

Ici i ciciThe process is intended to be applied continuously toall relevant reports and communications, in addition to thepreparation o an integrated report. The integrated reportmay include links to other reports and communications,e.g., nancial statements and sustainability reports. TheIIRC aims to complement material developed by establishedreporting standard setters and others, and does not intendto develop duplicate content (paragraph 1.18-1.20).

2. Do you agree with how paragraphs 1.18-1.20characterize the interaction with other reportsand communications?

3. I the IIRC were to create an online database oauthoritative sources o indicators or measurementmethods developed by established reportingstandard setters and others, which reerences shouldbe included?

o

4. Please provide any other comments you haveabout Chapter 1.

Chapter 2: undamenta concepts

t ci (sci 2B)The Framework describes six categories o capital(paragraph 2.17). An organization is to use thesecategories as a benchmark when preparing an integratedreport (paragraphs 2.19-2.21), and should disclose thereason i it considers any o the capitals as not material(paragraph 4.5).

5. Do you agree with this approach to the capitals?Why/why not?

6. Please provide any other comments you have aboutSection 2B?

Bi (sci 2C)A business model is dened as an organizations chosensystem o inputs, business activities, outputs and outcomesthat aims to create value over the short, medium and longterm (paragraph 2.26).

7. Do you agree with this denition? Why/why not?

Outcomes are dened as the internal and externalconsequences (positive and negative) or the capitals as aresult o an organizations business activities and outputs(paragraphs 2.35-2.36).

8. Do you agree with this denition? Why/why not?

9. Please provide any other comments you haveabout Section 2C or the disclosure requirementsand related guidance regarding business modelscontained in the Content Elements Chapter othe Framework (Section 4E).

o10. Please provide any other comments you have about

Chapter 2 that are not already addressed by yourresponses above.

Chapter 3: Guiding Principesmiiy cci (sci 3d)Materiality is determined by reerence to assessments madeby the primary intended report users (paragraphs 3.23-3.24). The primary intended report users are providerso nancial capital (paragraphs 1.6-1.8).

11. Do you agree with this approach to materiality?I not, how would you change it?

12. Please provide any other comments you have aboutSection 3D or the Materiality determination process(Section 5B).

CONSUlTATION QUESTIONS


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ribiiy c (sci 3e)Reliability is enhanced by mechanisms such as robustinternal reporting systems, appropriate stakeholderengagement, and independent, external assurance(paragraph 3.31).

13. How should the reliability o an integrated reportbe demonstrated?

14. Please provide any other comments you have aboutSection 3E.


Chapter 3 that are not already addressed by your

responses above.

Chapter 4: Content Eements16. Please provide any comments you have about

Chapter 4 that are not already addressed by yourresponses above (please include comments on theContent Element Business Model [Section 4E] in youranswer to questions 7-9 above rather than here).

Chapter 5: Preparation and presentationIvv c i vc(sci 5d)Section 5D discusses the involvement o those charged withgovernance, and paragraph 4.5 requires organizations todisclose the governance body with oversight responsibilityor .

17. Should there be a requirement or those charged withgovernance to include a statement acknowledgingtheir responsibility or the integrated report?Why/why not?

18. Please provide any other comments you have aboutinvolvement o those charged with governance(Section 5D).

Cibiiy (sci 5e)The Framework provides reporting criteria against whichorganizations and assurance providers assess a reportsadherence (paragraph 5.21).

19. I assurance is to be obtained, should it cover theintegrated report as a whole, or specic aspectso the report? Why?

20. Please provide any other comments you have aboutCredibility (Section 5E). Assurance providers areparticularly asked to comment on whether theyconsider the Framework provides suitable criteria

or an assurance engagement.


Chapter 5 that are not already addressed by yourresponses above (please include comments on themateriality determination process [Section 5B] in

your answer to question 11 above rather than here).

Overa view22. Recognizing that will evolve over time, please

explain the extent to which you believe the contento the Framework overall is appropriate or use byorganizations in preparing an integrated report andor providing report users with inormation about anorganizations ability to create value in the short,medium and long term?

Deveopment o 23. I the IIRC were to develop explanatory material on

in addition to the Framework, which three topicswould you recommend be given priority? Why?

Other24. Please provide any other comments not already

addressed by your responses to Questions 1-23.


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drat InternatIonal ramework

4 www.theiirc.org


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CONTENTS

summarY o prInCIples-Based reQuIrements 6

1 oVerVIew 8

2 undamental ConCepts 10A Introduction 10

B The capitals 11

C The business model 14

D Value creation 16

3 guIdIng prInCIples 18A Strategic ocus and uture orientation 18

B Connectivity o inormation 18C Stakeholder responsiveness 19

D Materiality and conciseness 21

E Reliability and completeness 21

F Consistency and comparability 23

4 Content elements 24A Organizational overview and external environment 24

B Governance 25

C Opportunities and risks 26

D Strategy and resource allocation 26E Business model 27

F Perormance 28

G Future outlook 29

5 preparatIon and presentatIon 30A Frequency o reporting 30

B The materiality determination process 30

C Disclosure o material matters 31

D Involvement o those charged with governance 32

E Credibility 32F Time rames or short, medium and long term 32

G Reporting boundary 33

H Aggregation and disaggregation 34

I Use o technology 35

glossarY 36

appendICes 37A Other IIRC publications and resources 37

B Basis or conclusions 37



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Overview

The overview in Chapter 1 discusses the objectives andaudience o Integrated Reporting (), the objectives othe International Framework (the Framework) and howthe Framework should be applied. It also discusses how is guided by the concept o integrated thinking andhow interacts with other reports and communications,including how the IIRC aims to complement materialdeveloped by others with respect to specic indicators andmeasurement methods.

The overview sets out the conditions that need to be ullledor an integrated report to be in accordance with theFramework. Unless unable to do so because o the

unavailability o reliable data, specic legal prohibitions orcompetitive harm, an integrated report should comply withthe principles-based requirements identied throughout theFramework in bold italic type (paragraphs 1.11-1.12).Those requirements are to be applied taking accounto the content o the Framework as a whole, including theundamental concepts as explained in Chapter 2. Each othose requirements is included in this summary along witha paragraph number or ease o reerence.

Chapter 1 also includes the denition o and o anintegrated report (paragraphs 1.2-1.3), and requires thatan integrated report should be prepared: (i) in accordance

with this Framework (paragraph 1.4), and (ii) primarily orproviders o nancial capital (paragraph 1.6).

undamenta conceptsThe undamental concepts o are discussed in Chapter2. These underpin and reinorce the principles-basedrequirements and guidance set out in Chapters 3-5.

The undamental concepts centre on:

The various capitals (nancial, manuactured,intellectual, human, social and relationship, andnatural) that an organization uses and aects

The organizations business model The creation o value over time.

An organizations business model is the vehicle throughwhich it creates value. That value is embodied in thecapitals that it uses and aects. The assessment o anorganizations ability to create value in the short, mediumand long term depends on an understanding o theconnectivity between its business model and a wide rangeo internal and external actors. Those actors are disclosedin an integrated report prepared in accordance with theFramework.

Guiding Principes

The Guiding Principles inorm the content o an integratedreport and how inormation is presented. Each is explainedin Chapter 3, which includes the ollowing principles-basedrequirements:

Strategic ocus and uture orientation: An integratedreport should provide insight into the organizationsstrategy, and how that relates to its ability to createvalue in the short, medium and long term and its useo and eects on the capitals (paragraph 3.2).

Connectivity o inormation: An integrated reportshould show, as a comprehensive value creation story,the combination, inter-relatedness and dependencies

between the components that are material to theorganizations ability to create value over time(paragraph 3.7).

Stakeholder responsiveness: An integrated report shouldprovide insight into the quality o the organizationsrelationships with its key stakeholders and how and towhat extent the organization understands, takes intoaccount and responds to their legitimate needs, interestsand expectations (paragraph 3.13).

Materiality and conciseness: An integrated reportshould provide concise inormation that is material toassessing the organizations ability to create value in

the short, medium and long term (paragraph 3.22). Reliability and completeness: An integrated report

should include all material matters, both positive andnegative, in a balanced way and without materialerror (paragraph 3.30).

Consistency and comparability: The inormation inan integrated report should be presented on a basisthat is consistent over time and in a way that enablescomparison with other organizations to the extent it ismaterial to the organizations own value creation story(paragraph 3.48).

Content EementsThe Content Elements to be included in an integrated reportare explained in Chapter 4. An integrated report shouldstand alone as a concise communication, linked to otherreports and communications or those stakeholders whowant additional inormation (paragraph 4.4).

The requirements with respect to the Content Elementsare expressed as questions that should be answeredin an integrated report in a way that best expresses theorganizations unique value creation story and makesthe connections between the Content Elements apparent.

They are not intended to appear in a set sequence or asisolated, standalone sections.

SUMMARY O PRINCIPlES-BASED REQUIREMENTS


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An integrated report should answer the ollowing questions:

Organizational overview and external environment:What does the organization do and what arethe circumstances under which it operates(paragraph 4.6)?

Governance: How does the organizations governancestructure support its ability to create value in the short,medium and long term (paragraph 4.10)?

Opportunities and risks: What are the specicopportunities and risks that aect the organizationsability to create value over the short, medium and longterm and how is the organization dealing with them(paragraph 4.13)?

Strategy and resource allocation: Where does theorganization want to go and how does it intend toget there (paragraph 4.18)?

Business model: What is the organizationsbusiness model and to what extent is it resilient(paragraph 4.21)?

Perormance: To what extent has the organizationachieved its strategic objectives and what areits outcomes in terms o eects on the capitals(paragraph 4.27)?

Future outlook: What challenges and uncertaintiesis the organization likely to encounter in pursuingits strategy, and what are the potential implicationsor its business model and its uture perormance(paragraph 4.33)?

Chapter 4 urther identies the ollowing requireddisclosures (paragraph 4.5):

The organizations materiality determination process

The reporting boundary and how it has beendetermined

The governance body with oversight responsibilitiesor

The nature and magnitude o the material trade-osthat infuence value creation over time

The reason why the organization considers any o thecapitals identied in the Framework to be immaterialgiven its particular circumstances, i that is the case.

Preparation and presentationChapter 5 provides guidance, with no additionalrequirements, on the preparation and presentationo an integrated report. Topics include: the materialitydetermination process, the disclosure o material matters,involvement o those charged with governance,

requency o reporting, reporting boundary, and theuse o technology.

Figure 1: The Guiding Principles and Content Elements.

strategIC oCus and uture orIentatIon

materIalItY and ConCIseness

relIaBIlItYandCo

mpleten

essstakeholder

respo

nsIVen

ess

Con

sIsten

CYand

Compara

BIlItY Co

nneCtIVItYo

fInfo

rmat

Ion

organIzatIonaloVerVIew and

externalenVIronment

perormanCe

opportunItIesand rIsks

BusIness modelstrategY and

resourCealloCatIon

goVernanCe

uture outlook


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1. OVERVIEW

1.1 This chapter provides an overview o and

o the Framework. Further background is availableon the IIRC website at www.theiirc.org.

Integrated Reporting defned

1.2 is a process that results in communication byan organization, most visibly a periodic integratedreport, about value creation over time.

1.3 An integrated report is a concise communicationabout how an organizations strategy, governance,perormance and prospects, in the context o itsexternal environment, lead to the creation o valueover the short, medium and long term.

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

Objectives o

1.5 aims to:

Catalyse a more cohesive and ecientapproach to corporate reporting thatcommunicates the ull range o actors thatmaterially aect the ability o an organizationto create value over time, and draws togetherother reporting strands

Inorm the allocation o nancial capital that

supports value creation over the short, mediumand long term

Enhance accountability and stewardship withrespect to the broad base o capitals (nancial,manuactured, intellectual, human, socialand relationship, and natural) and promoteunderstanding o the interdependenciesbetween them

Support integrated thinking, decision-makingand actions that ocus on the creation o valueover the short, medium and long term.

Audience or 1.6 An integrated report should be prepared primarily

or providers o nancial capital in order to supporttheir nancial capital allocation assessments.

1.7 Although providers o nancial capital are theprimary intended report users, an integrated reportand other communications resulting rom willbe o benet to all stakeholders interested in anorganizations ability to create value over time,including employees, customers, suppliers, businesspartners, local communities, legislators, regulators,and policy-makers.

1.8 Those providers o nancial capital who take a

long term view o an organizations continuationand perormance are particularly likely to benetrom . Their interests are likely to align overtime with the interests o other stakeholdersbecause both are ocused on the creation o valuein the short, medium and long term.

Objective o the ramework

1.9 The purpose o the Framework is to assistorganizations with the process o. Inparticular, the Framework establishes GuidingPrinciples and Content Elements that govern theoverall content o an integrated report, helping

organizations determine how best to express theirunique value creation story in a meaningul andtransparent way. The Framework does not,however, set benchmarks or such things as thequality o an organizations strategy or the levelo its perormance. Assessing these things is therole o the intended report users based on theinormation in an organizations integrated report.

1.10 The Framework is intended primarily orapplication by private sector, or-prot companieso any size but it can also be applied, adaptedas necessary, by public sector and not-or-prot

organizations.

Appication o the ramework

1.11 Any communication purporting to be prepared inaccordance with the Framework should apply allthe principles-based requirements identied in bolditalic type (taking account o the content o theFramework as a whole, including the undamentalconcepts as explained in Chapter 2) unless, andto the extent, the unavailability o reliable data,specic legal prohibitions or competitive harmresults in an inability to disclose inormation that

is material.1.12 Where the unavailability o reliable data, specic

legal prohibitions or competitive harm result in aninability to disclose inormation that is material, anintegrated report should:

Indicate what inormation has been omitted

Explain the reason why the inormation hasbeen omitted

In the case o the unavailability o data,identiy the steps being taken to obtain thedata and the expected time rame or doing so.


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a ici-b c

1.13 The requirements o the Framework are principles-based and do not ocus on rules or measurementor disclosure o individual matters or theidentication o specic key perormanceindicators (KPIs). Senior management and thosecharged with governance thereore need tocollectively exercise judgement to determine whichmatters are material. They also need to ensurematerial matters are appropriately disclosed giventhe specic circumstances o the organization,including the application o generally acceptedmeasurement and disclosure methods as

appropriate (see paragraph 1.19).1.14 The intent o the principles-based approach is to

strike an appropriate balance between fexibilityand prescription that recognizes the wide variationin individual circumstances o dierentorganizations but enables a sucient degree ocomparability across organizations to meetrelevant inormation needs.

Integrated thinking

1.15 is guided by the Framework and byintegrated thinking.

1.16 Integrated thinking is the active consideration byan organization o the relationships between itsvarious operating and unctional units and thecapitals that the organization uses and aects.Integrated thinking leads to integrated decision-making and actions that consider the creation ovalue over the short, medium and long term.

1.17 Integrated thinking can be contrasted withtraditional silo thinking. It takes into accountthe connectivity and interdependencies betweenthe range o actors that have a material eect onan organizations ability to create value over time,

including: The capitals the organization uses and aects,

and the critical interdependencies, includingtrade-os, between them

The capacity o the organizations governancestructure to assess resilience against short termdisruptions and to respond to stakeholderslegitimate needs, interests and expectations

How the organization tailors its business modeland strategy to respond to the opportunitiesand risks it aces, as well as major changes in

its external environment The organizations value drivers, activities,

perormance (nancial and other), andoutcomes in terms o the capitals past,present and uture.

Interaction with other reports

and communications1.18 The process is intended to be applied

continuously to all relevant reports andcommunications, including analyst calls and theinvestor relations section o an organizationswebsite. In addition, it is anticipated that astand-alone integrated report will be preparedannually in line with the statutory nancialreporting cycle. Organizations may provideadditional reports and communications (e.g.,nancial statements and sustainability reports) orcompliance purposes or to satisy the particular

inormation needs o a range o stakeholders. Theintegrated report may include links to these otherreports and communications.

1.19 The Framework does not prescribe specicindicators or measurement methods to be used inan integrated report. The IIRC aims to complementmaterial developed by established reportingstandard setters and others, such as industrybodies, and does not intend to develop duplicatecontent. Nonetheless, the IIRC may reerenceexamples o indicators and measurement methodsdeveloped by others.

1.20 Although builds on developments innancial and other reporting, an integrated reportdiers rom other reports and communications ina number o ways. In particular, it has a combinedemphasis on: conciseness, strategic ocus anduture orientation, the connectivity o inormation,the capitals, the business model, the ability tocreate value in the short, medium and long term,and providers o nancial capital as the primaryaudience.


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2. UNDAMENTAl CONCEPTS

2A Introduction

2.1 recognizes that value is not created by orwithin an organization alone, but is:

Infuenced by the external environment(including economic conditions, technologicalchange, societal issues and environmentalchallenges), which creates the context withinwhich the organization operates

Created through relationships with others(including employees, customers, suppliers,business partners, and local communities)

Dependent on the availability, aordability,

quality and management o various resources.2.2 thereore aims to provide insight about the

ollowing (as depicted in Figure 2):

The external environment that aects anorganization (see paragraphs 4.8-4.9)

The resources and relationships used andaected by the organization, which arereerred to in this Framework as the capitals(see paragraphs 2.12-2.25)

How the organization interacts with theexternal environment and the capitals to create

value over the short, medium and long term(see paragraphs 2.4-2.11).

2.3 An integrated report results in a broader

explanation o perormance than traditionalreporting by describing, and measuring wherepracticable, the material elements o value creationand the relationships between them. In particular,it makes visible all the capitals on which valuecreation (past, present and uture) depends, howthe organization uses those capitals and itseects on them.

2.4 The elements o an organization that interact withthe external environment and the capitals to createvalue over time are depicted in the expandeddiagram in Figure 3. These elements are aligned

with the Content Elements o an integrated report(see Chapter 4).

2.5 The mission and vision encompassing the wholeorganization set out its purpose and intention inclear, concise terms.

2.6 Those charged with governance are responsibleor creating an appropriate oversight structure,within which the various elements are indynamic fux.

2.7 Continuous monitoring and analysis o the externalenvironment in the context o the organizationsmission and vision identies opportunities and risksrelevant to the organization.

Figure 2: An organization interacts with its external environment and uses and aects the capitals to create value over the short, medium and long term.

Financial

ManufacturedManufactured

IntellectualIntellectual

HumanHuman

Social and relationshipSocial and relationship

NaturalNatural

Financial

External environment

Short, medium and long termvalue creation by the organization


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Figure 3: The complete picture o an organizations value creation process, showing the interaction o the Content Elements and the capitals in the context o the organizationsexternal environment.

Organizatio

n

External environment

Manufactured

Intellectual

Human

Social and relationship

Natural

Financial

Society

Financial

Manufactured

Intellectual

Human

Social and relationship

Natural

Society

Organization

Mission and vision

GovernanceOpportunities

and risksStrategy and

resource allocation

Future outlookPerformance

Businessactivities

OutputsInputs Outcomes

Business model

2.8 The organizations strategy identies how it intends

to maximise opportunities and mitigate or managerisks. It sets out strategic objectives and strategiesto achieve them, which are implemented throughresource allocation plans.

2.9 At the core o the organization is its businessmodel, which draws on various capitals in oneorm or another as inputs and, through its businessactivities, converts them to outputs (products,services, by-products and waste). Theorganizations activities and its outputs lead tooutcomes in terms o eects on the capitals. Someo the capitals belong to the organization, while

others belong to stakeholders or to society morebroadly (identied as society in Figure 3). Theorganization and society thereore share both thecost o the capitals used as inputs and the valuecreated by the organization.

2.10 The organization needs inormation about itsperormance, which involves setting upmeasurement and monitoring systems to provideinormation or decision-making.

2.11 The system is not static; regular review o eachelement and its interactions with other elements,and a ocus on the organizations uture outlook,

lead to revision and renement to improve allthe elements.

2B The capitas

t c ci2.12 All organizations depend on various orms

o capital1 or their success. In this Framework,the capitals comprise nancial, manuactured,intellectual, human, social and relationship, andnatural, although as discussed in paragraphs2.19-2.21 this categorization is not requiredto be adopted by organizations preparing anintegrated report.

2.13 The capitals are stores o value that, in one ormor another, become inputs to an organizations

business model. They are increased, decreasedor transormed through the activities and outputso the organization in that they are enhanced,consumed, modied, destroyed or otherwiseaected by those activities and outputs. Forexample, an organizations nancial capital isincreased when it makes a prot, and the qualityo its human capital is improved when employeesbecome better trained.

1 The capitals are sometimes also reerred to as resources and relationships.


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2. FUNDAMENTAL CONCEPTS CONTINUED

2.14 The overall stock o capitals is not xed over time.

There is a constant fow between and within thecapitals as they are increased, decreased ortransormed. For example, where an organizationimproves its human capital through employeetraining, the related training costs reduce itsnancial capital. The eect is that nancialcapital has been transormed into human capital.Although this example is simple and presentedonly rom the organizations perspective2, itdemonstrates the continuous interaction andtransormation between the capitals, albeitwith varying rates and outcomes.

2.15 Many activities cause increases, decreases ortransormations that are ar more complex than theabove example and involve a broader mix ocapitals (or o components within a capital, e.g.,the use o water and ertilizers to grow crops thatare ed to livestock, all o which are componentso natural capital).

2.16 Although organizations aim to create value overall,this may involve the diminution or destruction ovalue stored in some capitals, resulting in a netdecrease to the overall stock o capitals. In manycases, whether the net eect is an increase or

decrease will depend on the perspective chosen;as in the above example, employees andemployers may value training dierently. In thisFramework, unless otherwise stated, the term valuecreation includes instances when the overall stocko capitals is decreased (i.e., when value isdiminished or destroyed).

Ci cii ci

2.17 For the purpose o this Framework, the capitals arecategorized and described as ollows:

Financial capital: The pool o unds that is:

available to an organization or use inthe production o goods or the provisiono services

obtained through nancing, such as debt,equity or grants, or generated throughoperations or investments.

Manuactured capital: Manuactured physical

objects (as distinct rom natural physicalobjects) that are available to an organizationor use in the production o goods or theprovision o services, including:

buildings

equipment

inrastructure (such as roads, ports, bridges,and waste and water treatment plants).

Manuactured capital is oten created by otherorganizations, but includes assetsmanuactured by the reporting organizationwhen they are retained or its own use.

Intellectual capital: Organizational,knowledge-based intangibles, including:

intellectual property, such as patents,copyrights, sotware, rights, and licences

organizational capital such as tacitknowledge, systems, procedures andprotocols

intangibles associated with the brandand reputation that an organizationhas developed.

Human capital: Peoples competencies,

capabilities and experience, and theirmotivations to innovate, including their:

alignment with and support or anorganizations governance ramework, riskmanagement approach, and ethical values

ability to understand, develop andimplement an organizations strategy

loyalties and motivations or improvingprocesses, goods and services, includingtheir ability to lead, manage andcollaborate.

2 Other relevant perspectives include the increase to the trainers fnancial capital due to the payment received rom the employer, and the increase to social capital thatmay occur i employees use newly acquired skills to contribute to community organizations.


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3 Based on diagrams by www.orumortheuture.org and www.incite.co.za.

Figure 43: This diagram is one way to visualize the capitals; it is not intended to implya hierarchy that must be used or. While fnancial and manuactured capitalsare commonly reported on by organizations, takes a broader view by alsoconsidering intellectual, social and relationship, and human capitals, all o which arelinked to human activity. also captures natural capital, which provides theenvironment in which all the other capitals sit.

Intellectualcapital

Social andrelationship

capital

Humancapital

Naturalcapital

Financialcapital

Manufacturedcapital

Social and relationship capital: The institutions

and the relationships within and betweencommunities, groups o stakeholders and othernetworks, and the ability to share inormationto enhance individual and collective well-being. Social and relationship capital includes:

shared norms, and common valuesand behaviours

key stakeholder relationships, and thetrust and willingness to engage thatan organization has developed andstrives to build and protect with externalstakeholders, such as customers, suppliers,

business partners, local communities,legislators, regulators, and policy-makers

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 uture prosperityo an organization. It includes:

air, water, land, minerals and orests

biodiversity and eco-system health.

2.18 Not all capitals are equally relevant or applicable

to all organizations. While most organizationsinteract with all capitals to some extent, theseinteractions may be relatively minor or so indirectthat they are immaterial or purposes.

r ci i

2.19 The Framework does not require that the categoriesidentied above be adopted by all organizations.Rather, the primary reasons or including thecapitals model in the Framework are or it to serve:

As a benchmark or ensuring thatorganizations consider all the orms o capital

they use or aect (see paragraph 2.21) As part o the theoretical underpinning or the

concept o value (see Section 2D).

2.20 It would be impracticable, and indeed unnecessary,or the Framework to dene every possible stocko value exclusively and exhaustively, and ina way that attempts to cover every organizationsapproach to value creation. For example,relationships with external stakeholders (part osocial and relationship capital in paragraph 2.17),and the intangibles associated with brand andreputation (part o intellectual capital in paragraph

2.17), may be considered by some organizationsto be separate capitals, part o other capitals orcutting across a number o individual capitals.

2.21 Regardless o how an organization categorizesthe capitals or its own purposes, the categoriesidentied above are to be used as a benchmarkto ensure the organization does not overlooka capital that it uses or aects (see alsoparagraph 4.5).

avibiiy, qiy biiy ci

2.22 The extent to which organizations, collectivelyor individually, are building up or running downthe various capitals can have an important eecton the availability, quality and aordability othose capitals, particularly with respect to capitalsthat are in limited supply and are non-renewable.This can aect the long term viability o anorganizations business model and, thereore, itsability to create value over time. Disclosures aboutthe capitals thereore include the actors that aecttheir availability, quality and aordability and theorganizations expectations o its ability to producefows rom them to meet uture demand.


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oi ci

2.23 Not all capitals that an organization uses oraects are owned by the organization. They maybe owned by others or may not be owned at allin a legal sense (e.g., access to unpolluted air).This point is relevant to the concept o value andis discussed urther in Section 2D.

Qiiv qiiv ii

2.24 Quantitative indicators, such as KPIs andmonetized metrics, can be important in explainingan organizations use o and eects on variouscapitals. Nonetheless, the Framework does not

require, and it would not be practical to expect,organizations to attempt to quantiy all uses o andeects on the capitals. Many uses and eects arebest (and in some cases can only be) reported onin the orm o narrative rather than throughquantitative indicators.

Ciy, ici -

2.25 The Framework does not require, and it wouldnot be practical to expect, to providean exhaustive account o all the complexinterdependencies between the capitals such

that an organizations net impact on the globalstock o capitals could be tallied. It is important,however, that an integrated report disclose (asrequired by paragraph 4.5) the interdependenciesthat are considered in determining its reportingboundary, and the material trade-os that infuencevalue creation over time, including trade-os:

Between capitals or between components o acapital (e.g., creating employment through anactivity that negatively aects the environment)

Over time (e.g., choosing one course o actionwhen another course would result in superiorcapital increment but not until a later period)

Between capitals owned by the organizationand those owned by others or not at all.

2C The business mode

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2.26 An organizations business model is its chosensystem o inputs, business activities, outputs andoutcomes that aims to create value over the short,medium and long term.

2.27 As shown in Figure 3, the business model sits

at the core o an organization and representsthe undamentals o its activities, operating withinthe overarching organizational architecture.

I

2.28 An integrated report identies the key inputs. It alsoshows how those inputs relate to the capitals onwhich the organization depends, or that provide asource o dierentiation or the organization, to theextent that they are material to understanding therobustness and resilience o the business model.The discussion provides a concise yet meaningulaccount o how these key inputs link to the capitals,opportunities and risk, strategy and nancialperormance (e.g., cost base). For example:

To enhance the intended report usersunderstanding o its use o nancial capital,

the organization ordinarily provides anoverview o its unding model.

In terms o manuactured capital, theorganization may explain how acilities andequipment enhance operational eciencyand eectiveness in the orm o productivity,cost containment, enhanced saety andenvironmental stewardship. Organizationsmay also explain their reliance on externalinrastructure, which may be in the ormo public assets or third-party resources.The continued existence o this external

inrastructure can be essential to the long termsuccess o the business model.

Many knowledge and organizationalintangibles are not captured on the balancesheet but may be vital to a robust businessmodel. It is important to explain their capacityto create value.

Employees, a key element o human capital,can be an organizations greatest asset, butdisclosures oten overlook their contributionto long term success. Many business modelsrequire not only a dedicated and committed

workorce but also one with specializedknowledge or skills. The importance o humancapital may be refected in a discussiono the morale, motivation and diversity oemployees and how key skills are maintained,such as through training and developmentprogrammes.

With respect to social and relationship capital,most business models require a network orelationships to succeed. For some, supplychain management can be one o the mostimportant aspects o the business model,

while others can be predicated on interactionswith local communities or joint technologydevelopment.



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Many organizations rely on raw materials

to ensure production continuity. Planetarylimits can render a business vulnerable tonatural resource changes, some o whichmay be sudden and irreversible. Ecosystemservices such as water purication, nutrientcycling, pollination and carbon sequestrationmay also eature prominently in the businessmodel. It is important to explain how securethe availability, quality and aordability othese components o natural capital are.Also, environmental remediation eorts areexplained in the integrated report where theyare likely to be signicant.

2.29 An integrated report does not attempt to providean exhaustive list o all capitals used. Rather, theocus is on those capitals that have a materialbearing on the ability to create value in the short,medium and long term, whether or not they areowned or controlled by the organization.

Bi civii

2.30 At the centre o the business model is theconversion o inputs into outputs through businessactivities. These activities may include the planning,design and manuacture o products or the

deployment o specialized skills and knowledge inthe provision o services. Carrying out theseactivities requires the business model to refectattributes such as quality, cost competitiveness andtechnological advantage.

2.31 Where material, an integrated report discusses thecontribution made to the organizations long termsuccess by initiatives that infuence the eectivenessand eciency o business activities, such asprocess improvement, employee training andrelationships management.

2.32 The description o business activities includes howthe organization dierentiates itsel in the marketplace (e.g., through product dierentiation, marketsegmentation, delivery channels and marketing). Itmay also explain the extent to which the businessmodel relies on revenue generation ater the initialpoint o sale (e.g., extended warrantyarrangements or network usage charges).

2.33 Encouraging a culture o innovation is oten

a key business activity in terms o generating newproducts and services that anticipate customerdemand, introducing eciencies and better useo technology, substituting inputs to minimizeadverse social or environmental eects, andnding alternative uses or outputs. The capacityo the business model to adapt to changes (e.g.,in the availability, quality and aordability oinputs) can aect the organizations longer termviability. The business model description thereoreexplains the approach to innovation andresponsiveness to change.

o2.34 An integrated report identies an organizations

key products and services. There may be otheroutputs, such as by-products and waste (includingemissions), that need to be discussed withinthe business model disclosure depending ontheir materiality.

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2.35 Outcomes are dened as the internal andexternal consequences (positive and negative)or the capitals as a result o an organizations

business activities and outputs. Outcomes can,thereore, be:

Internal to an organization (e.g., employeemorale and organizational reputation) orexternal (e.g., benets customers deriverom the organizations products and services,contributions to the local economy throughemployment and taxes, and environmentaleects)

Positive (i.e., result in a net increase in thecapitals and thereby create value) or negative(i.e., result in a net decrease in the capitals

and thereby diminish or destroy value).2.36 Identiying and describing outcomes, particularly

external outcomes, requires organizations toconsider the capitals more broadly than thosethat are owned or controlled by the organization.For example, it may require disclosure o theeects on capitals up and down the value chain(e.g., carbon emissions caused by products theorganization manuactures and labour practiceso key suppliers) (see also Section 5G regardingthe reporting boundary).


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2D Vaue creation

2.37 explains how an organization creates valueover time. Value creation, thereore, lies at theheart o. As noted in paragraph 2.16,whenever value creation is mentioned it alsoincludes value destruction. In essence:

An organization can create and maximizevalue by serving the interests o, andworking with, all its key stakeholders, suchas employees, customers, suppliers, businesspartners, local communities, legislators,regulators, and policy-makers. Value createdin this way maniests itsel in nancial returnsto providers o nancial capital and also inpositive or negative eects on other capitalsand other stakeholders.

As noted in paragraph 2.13, the capitalsare stores o value. Value is created or anorganization and its stakeholders as a result othe increase, decrease or transormation o thecapitals caused by the organizations activitiesand outputs.

Value or purposes is determined byreerence to a wide range o interactions,

activities, relationships, and causes and eectsin addition to those directly associated withchanges in nancial capital.

Inormation that enables assessment o theability o an organization to create value overtime is communicated through a descriptionthat includes: how the organization has usedand intends to use the dierent capitals, theeects on and the trade-os between thosecapitals over time, and the organizationsvalue drivers and the opportunities and risksthat aect them. Such actors are encapsulatedin the Content Elements in Chapter 4.

V vi fci ci

2.38 Providers o nancial capital are ocused on valuein the orm o nancial returns. Those returns are,however, dependent on inter-relationships betweenvarious types o capital in which other stakeholdershave an interest. Thereore, other stakeholders arealso likely to benet rom the inormation in anintegrated report.

2.39 By communicating inormation that assists

providers o nancial capital to assess anorganizations ability to create value over time, can support their decision-making,engagement and voting practices. It also supportsbroader societal interests by encouraging theallocation o nancial capital to reward andsupport long term, as well as the short and mediumterm, value creation within planetary limits andsocietal expectations.

2.40 Business strategies that are overly ocused onoptimizing short term nancial perormance canimpede the ability to create long term value. It can,

or example, limit investment in research aimedat long term innovation and in the inrastructureneeded to address global challenges (e.g.,resource shortages as planetary limits areapproached, economic instability, climate change,and changing demographics and societalexpectations).

t i v

2.41 Traditionally, the meaning o value has beenassociated with the present value o expecteduture cash fows and value creation has beenunderstood as the change in that measure o value

due to an organizations nancial perormance. is based on the understanding that uturecash fows and other conceptions o valueare dependent on a wider range o capitals,interactions, activities, causes and eects, andrelationships than those directly associated withchanges in nancial capital.

2.42 Value or purposes, thereore, encompassesother orms o value that the organization createsthrough the increase, decrease or transormationo the capitals, each o which may ultimately aectnancial returns. , thereore, considers the

broader context o the value created in all thecapitals. It is not, however, the purpose o anintegrated report to measure the value o anorganization or o all the capitals, but rather toprovide inormation that enables the intendedreport users to assess the ability o the organizationto create value over time.

2.43 Value is created over dierent time horizons andor dierent stakeholders through dierent capitals,and is unlikely to be created through themaximization o one capital while disregarding theothers. For example, the maximization o nancial

capital (e.g., prot) at the expense o humancapital (e.g., through inappropriate humanresource policies and practices) is unlikely tomaximize value in the longer term.



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2.44 takes account o the extent to which eects on

the capitals have been externalized (i.e., the costsor other eects on capitals that are not owned bythe organization). Externalities may be positive ornegative (i.e., they may result in a net increase ordecrease to the value embodied in the capitals).Externalities may ultimately increase or decreasevalue to providers o nancial capital whothereore need inormation about materialexternalities to assess their eects and allocateresources accordingly.

V iv

2.45 Value drivers aect an organizations ability to

create value over time. They are the capabilitiesor variables that give an organization competitiveadvantage and over which it has some degreeo control. The type and combination o eachorganizations value drivers are unique. They mayinclude, or example:

Financial drivers, such as growth in sales ormarket share, pricing strategy, operationaleciency, brand equity, and the cost onancial capital

Customer relations, responses to societalexpectations and environmental concerns,innovation, and corporate governance

Values such as integrity and trust, andteamwork.


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3. GUIDING PRINCIPlES

3.1 The ollowing Guiding Principles underpin the

preparation o an integrated report, inorming thecontent o the report and how inormation ispresented:

A Strategic ocus and uture orientation

B Connectivity o inormation

C Stakeholder responsiveness

D Materiality and conciseness

E Reliability and completeness

F Consistency and comparability.

3A Strategic ocus and uture

orientation3.2 An integrated report should provide insight into the

organizations strategy, and how that relates to itsability to create value in the short, medium andlong term and to its use o and eects on thecapitals.

3.3 Applying this Guiding Principle is not limited to theContent Elements Strategy and resource allocationand Future outlook. It pervades the selection andpresentation o other content, and may include,or example:

Highlighting signicant opportunities, risks anddependencies fowing rom the organizationsmarket position and business model

An explanation o those charged withgovernances view o:

the relationship between past and utureperormance, and the actors that maychange that relationship

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

3.4 Adopting a strategic ocus and uture orientationin an integrated report includes clearly articulatinghow the continued availability, quality andaordability o signicant capitals contribute tothe organizations ability to achieve its strategicobjectives in the uture and thereby create value.

3.5 Care is needed with respect to uture-orientedinormation to avoid boilerplate disclosures.Inormation is only included in an integrated reportwhen it is o practical use to the intended reportusers. This requires that disclosures be specic tothe circumstances o the organization.

3.6 Future-oriented inormation is by nature more

uncertain and, thereore, less precise than historicalinormation. Uncertainty is not, however, a reasonin itsel to exclude such inormation, but the natureand extent o that uncertainty needs to be disclosed(see also paragraph 5.15).

3B Connectivity o inormation

3.7 An integrated report should show, as acomprehensive value creation story, thecombination, inter-relatedness and dependenciesbetween the components that are material to theorganizations ability to create value over time.

3.8 Connectivity is central to ensuring that anintegrated report:

Focuses on the total picture o theorganizations unique value creation story (i.e.,how its strategy, governance, perormanceand prospects create value over time)

Supports the intended report usersunderstanding o the dierent actors that aectthe uture o the organization and how theyinteract

Helps to break down established silos inaccessing, measuring, managing anddisclosing inormation, and to extend theocus o reporting beyond the traditional ocusprimarily on nancial and historical matters

Facilitates the intended report users ability todrill down and interlink inormation in othercommunications depending on their needs.

3.9 The more that integrated thinking underlies theorganizations unique value creation story bybeing embedded into its activities, the morenaturally will the connectivity o inormation fowinto management reporting, analysis and decision-making, and subsequently into the integratedreport. Accordingly, introducing ways to improveintegrated thinking within the organization canhelp drive the process.

3.10 It is only by connecting the Content Elements overtime that the organization is able to express itsunique value creation story. The key componentso connectivity o inormation are, thereore, theconnectivity between:

The Content Elements, i.e., the connectivitybetween the organizations externalenvironment, governance, opportunitiesand risks, strategy and resource allocation,business model, perormance, and utureoutlook. The organizations value creationstory integrates the Content Elements intoa total picture that refects the dynamic andsystemic interactions o the organizationsactivities as a whole. For example:


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an analysis o existing resource allocation,

and how the organization will combineresources or make urther investment toachieve its targeted perormance

inormation about how the organizationsstrategy is tailored when, or instance, newopportunities and risks are identied orpast perormance is not as expected

linking the organizations strategy and riskswith its KPIs

The past, present, and uture. An analysis bythe organization o its activities in the past-to-present period can provide the intended

report users with useul inormation to assessthe plausibility o what has been reportedconcerning the present-to-uture period. Theexplanation o the past-to-present period mayalso be useul to the intended report users inanalyzing the quality o management.

3.11 Other components o the connectivity oinormation include the connectivity between:

The capitals, i.e., the increases, decreasesand transormations, including trade-os, othe capitals over time (see discussion o thecapitals in Section 2B).

Financial inormation and other inormation,especially as it relates to uture cash fows.For example:

research and development policy,technology/know-how, capital investment,or investment in human resources, alongwith their implications or expected revenuegrowth or targeted market share

environmental policies, energy eciency,cooperation with local communities, ortechnologies to tackle social issues, along

with their implications or cost reduction ornew business opportunities

long term customer relationships, customersatisaction and reputation, along with theirimplications or revenue and prot growth

Quantitative and qualitative inormation.Both quantitative and qualitative inormationare necessary or an integrated reportto properly represent the organizationsunique value creation story as each providescontext to the other. Including KPIs as parto a narrative explanation can be an

eective way to connect quantitative andqualitative inormation.

Management inormation, board inormation

and inormation reported externally.Inormation reported externally needs tobe consistent with that used internally bymanagement and those charged withgovernance. For example, as noted inparagraph 4.31, it is important or thequantitative indicators in an integrated reportto be consistent with the indicators used bythose charged with governance.

Inormation in the integrated report,inormation in the organizations othercommunications, and inormation romother sources. This recognizes that allcommunications rom the organizationneed to be consistent, and that the intendedreport users make assessments by combininginormation the organization provides withinormation they have accumulated romother sources.

3.12 The connectivity o inormation and the overalluseulness o an integrated report are enhancedwhen it is logically structured and well presented,written in clear and understandable language,and includes eective navigation devices, suchas clearly delineated (but linked) sections andcross-reerencing. In this context, inormation andcommunication technology (e.g., the Internet,eXtensible Business Reporting Language (XBRL),and social media) can be used to improve theintended report users capability to search, access,combine, connect, customize, re-use or analyseinormation (see discussion o technology inSection 5I).

3C Stakehoder responsiveness

3.13 An integrated report should provide insight into thequality o the organizations relationships with its

key stakeholders and how and to what extent theorganization understands, takes into accountand responds to their legitimate needs, interestsand expectations.

3.14 emphasizes the importance o ongoing,positive relationships with the organizations keystakeholders because, as noted in paragraph 2.1,value is not created by or within an organizationalone, but is created through relationshipswith others.


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3.15 Stakeholders provide useul insights about matters

that are important to them that also aect theorganization, including economic, environmentaland social issues. These insights assist theorganization to:

Understand how stakeholders perceive value

Identiy uture trends that may not yet havecome to general attention but which are risingin signicance

Identiy material matters, includingopportunities and risks

Develop and evaluate strategy

Manage risks Implement activities, including strategic and

accountable responses to material matters.

3.16 An integrated report enhances transparency andaccountability, which are essential in building trustand resilience, by disclosing:

The nature and quality o the organizationsrelationships with key stakeholders

How key stakeholders legitimate needs,interests and expectations are understood,taken into account and responded to.

3.17 Responsiveness is demonstrated through decisions,actions and perormance, as well as ongoingcommunication with stakeholders. Making internalprocesses more transparent is valuable to moststakeholders.

3.18 Engagement with stakeholders occurs regularly inthe ordinary course o business (e.g., day-to-dayliaison with customers and suppliers or broaderongoing engagement as part o strategic planningand risk assessment). It may also be undertakenor a particular purpose (e.g., engagementwith a local community when planning a actory

extension). The more integrated thinking isembedded in the business, the more likely it is thata uller consideration o stakeholders legitimateneeds, interests and expectations is incorporatedas an ordinary part o conducting business.

3.19 The Guiding Principle Stakeholder responsiveness

does not mean that an integrated report shouldattempt to satisy all the inormation needs o allstakeholders. Rather, by ocusing on matters thatare material to short, medium and long term valuecreation, an integrated report will oten providerelevant inormation in itsel, as well as a clearreerence point or other communications. Othercommunications include compliance inormation,investor presentations, detailed nancialinormation, sustainability reports, andcommunications directed to specic stakeholderswho have particular inormation needs. Mucho this more detailed inormation is likely to be

placed online.

3.20 As noted above, an integrated report enhancestransparency and accountability. Accountability isclosely associated with the concept o stewardshipand the responsibility o an organization to careor or use responsibly the capitals that its activitiesand outputs aect. Where the capitals are ownedby the organization, a stewardship responsibilityis imposed on management and those chargedwith governance via their legal responsibilities tothe organization.

3.21 Some capitals that the organization uses oraects are not owned by it. As discussed inparagraph 2.23, they may be owned by othersor may not be owned at all in a legal sense.In either case, the organization may havestewardship responsibilities imposed on it throughlaw or regulation (e.g., through a contract with theowners, or through labour laws or environmentalprotection regulations). Where a stewardshipresponsibility is not imposed by law or regulation,the organization may nonetheless acceptstewardship responsibilities in accordance withgrowing stakeholder expectations to do so, and

to do so transparently. Responding to stakeholderslegitimate needs, interests and expectations in thisway is consistent with the concept o value asexplained in Section 2D.

3. GUIDING PRINCIPLES CONTINUED


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3D Materiaity and conciseness

3.22 An integrated report should provide conciseinormation that is material to assessing theorganizations ability to create value in the short,medium and long term.

miiy

Defnition

3.23 A matter4 is material i, in the view o seniormanagement and those charged with governance,it is o such relevance and importance5 that it couldsubstantively infuence the assessments o theprimary intended report users with regard to the

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

3.24 In determining whether a matter is material, seniormanagement and those charged with governanceconsider whether the matter substantively aects,or has the potential to substantively aect, theorganizations strategy, its business model, or oneor more o the capitals it uses or aects in the short,medium or long term.

The materiality determination process

3.25 Determining materiality or the purpose o

preparing an integrated report involves: Identiying relevant matters (i.e., those matters

that have had a past eect, have a presenteect, or could have a uture eect on theorganizations ability to create value over time)

Assessing the importance o those mattersin terms o their known or potential eect onvalue creation

Prioritizing the matters identied based ontheir importance in terms o known or potentialeect on value creation.

3.26 This materiality determination process applies toboth positive and negative matters (e.g.,opportunities and risks, and avourable andunavourable results or prospects or the uture),and to nancial and other inormation. Suchmatters may have direct implications or theorganization itsel or relate to the organizationseects on the capitals owned by or available toothers. The application o this process is describedin Section 5B.

3.27 Materiality assessments need to be perormed

at least annually; however, to be most eectivethe materiality determination process isintegrated into the everyday management o theorganization and includes regular engagementwith the primary intended report users to identiytheir inormation needs.

Disclosure

3.28 Material matters require disclosure. The natureand extent o disclosure in an integrated reportwill be infuenced by the nature o the matterand the application o all the Guiding Principles.The materiality determination process is required

to be disclosed in an integrated report to enablethe intended report users to understand howdecisions to include or exclude matters weremade (see paragraph 4.5).

Cci

3.29 An integrated report includes concise inormationthat provides sucient context to make itunderstandable, and avoids redundantinormation. The organization seeks a balancebetween conciseness and the other GuidingPrinciples, in particular completeness and

comparability. In achieving conciseness, anintegrated report can be linked to additionaldetailed inormation that is provided separately.

3E Reiabiity and competeness

3.30 An integrated report should include all materialmatters, both positive and negative, in a balancedway and without material error.

ribiiy

3.31 The reliability o inormation is aected byits balance and reedom rom material error.Reliability is enhanced by mechanisms such as

robust internal reporting systems, appropriatestakeholder engagement, and independent,external assurance.

3.32 Senior management and those charged withgovernance exercise judgement in decidingwhether inormation is suciently reliable tobe included in an integrated report. It may beappropriate in some cases (e.g., with respect touture-oriented inormation) or an integrated reportto describe the mechanisms employed to ensurereliability (see paragraph 1.12 or relevantdisclosures when material inormation is omitted

because o the unavailability o reliable data).

4 A matter includes, but is not limited to, an event, issue, opportunity, amount, or statement by the organization.5 Importance reers to both nature and magnitude.


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Balance

3.33 A balanced integrated report has no biasin the selection or presentation o inormation.Inormation in the report is not slanted, weighted,emphasized, de-emphasized, combined, oset orotherwise manipulated to change the probabilitythat it will be received either avourably orunavourably by the intended report users.

3.34 Important methods to ensure balance include:

Selection o presentation ormats that are notlikely to unduly or inappropriately infuenceassessments by the intended report users

Giving equal weight to both increments anddecrements to the capitals, both strengths andweaknesses o the organization, both positiveand negative perormance

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

Freedom rom material error

3.35 Freedom rom material error does not imply thatthe inormation is perectly accurate in all respects.It does imply that:

Processes and controls have been applied

to reduce to an acceptably low level the riskthat reported inormation contains a materialmisstatement

I errors have been identied they have beencorrected

Where amounts are estimates, this is clearlycommunicated, and the nature and limitationso the estimation process are explained.

C

3.36 A complete integrated report includes allmaterial inormation, both positive and negative.

To help ensure that all material matters havebeen identied, consideration is given to whatorganizations in the same industry are reportingon as certain matters within an industry are likelyto be material to all organizations in that industry.

3.37 In determining completeness, the organizationbalances potential concerns regarding costs,competitive advantage and uture-orientedinormation (each o which is discussed below)with the benets o being able to express, in itsown terms, its unique value creation story.

Cost/beneft

3.38 It is appropriate or the organization to evaluatethe cost and benets (to both the organization andto the intended users) associated with reportingwhen determining the extent, level o specicity,and preciseness o inormation to include, but notto rerain entirely rom making disclosures on thebasis o cost.

3.39 Costs to the organization (both time and expense)may arise rom the need to establish or strengtheninormation systems and controls or capturingand aggregating inormation or making estimates.Until such systems are implemented, it may be

impracticable or certain inormation to be ullyincluded (i.e., included to the optimum extent,level o specicity and preciseness).

3.40 I material inormation is not included in anintegrated report, the intended report users mayincur costs in obtaining inormation through othersources or may make sub-optimal decisions as aresult o not having that inormation.

3.41 Inormation included in an integrated reportis, by nature, central to running the business.Accordingly, i management is making decisionson inormation that is incomplete because o thelack o systems to capture and aggregate theinormation, the greater cost may be caused bythe inability to make sound decisions. As a result,analysing the suciency o existing systems whilepreparing an integrated report may highlight areaswhere better systems are needed or managing thebusiness, and not just or reporting purposes.

Competitive advantage

3.42 One perceived constraint on is the potentialor loss o competitive advantage through thedisclosure o commercially sensitive inormation.

It is not expected that the organization discloseinormation in an integrated report that wouldsignicantly harm its competitive advantage.However, the banner o commercial sensitivity isnot to be used inappropriately to avoid disclosure.

3.43 This principle is already adopted with respect toanalyst calls in which many organizations discusstheir strategic objectives and strategies. Similarly,the organization considers how to describe theessence o critical strategies in an integrated reportwithout identiying specic inormation that mightcause a signicant loss o competitive advantage.

3. GUIDING PRINCIPLES CONTINUED


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3.44 It may oten be the case that inormation about

strategies is already known to the market, andthereore available to competitors, and that the truecompetitive advantage lies in how those strategiesare executed (e.g., the eciency and eectivenesso the processes and practices used) rather than inthe strategies themselves.

3.45 Accordingly, the organization considers whatadvantage a competitor could actually gain rominormation in an integrated report, and balancesthis against the legitimate inormation needs o theintended report users. I material inormation is notdisclosed because o competitive harm, this act

and the reasons or it are to be explained in theintegrated report.

Future-oriented inormation

3.46 Legal or regulatory requirements may applyto certain uture-oriented inormation in somejurisdictions, covering or example:

The types o disclosures that may be made

Whether cautionary statements may berequired or permitted to highlight uncertaintyregarding achievability

An obligation to publicly update such

inormation.3.47 Key to the intended report users understanding

o uture-oriented inormation is a description othe main assumptions applied by the organization,the volatility o those assumptions, and how theinormation could change i the assumptions donot occur as described.

3 Consistency and comparabiity

3.48 The inormation in an integrated report should bepresented on a basis that is consistent over timeand in a way that enables comparison with other

organizations to the extent it is material to theorganizations own value creation story.

Cicy

3.49 Reporting policies are ollowed consistently romone period to the next unless a change is neededto improve the quality o inormation reported.This includes using the same KPIs to report on thesame matters i they continue to be material acrossreporting periods. When a signicant change hasbeen made, the organization explains the reasonor the change, describing (and quantiying ipracticable and material) its eect.

3.50 When inormation in an integrated report is

similar to or based on other inormation publishedby the organization, it is prepared on the samebasis as, or is easily reconcilable with, that otherinormation. For example, where a KPI coversa similar topic to inormation published in theorganizations nancial statements or sustainabilityreport, it is prepared on the same basis, and orthe same period, as that other inormation.

Cbiiy

3.51 The specic inormation in an integrated reportwill, necessarily, vary rom one organizationto another because each organization needs

to express its own unique value creation story.Nonetheless, addressing the questions relatingto the Content Elements, which apply to allorganizations, helps ensure a suitable levelo comparability between organizations.

3.52 Other powerul tools or enhancing comparability(both in an integrated report itsel and in the moredetailed inormation that it links to) can includereporting:

Benchmark data, such as industry or regionalbenchmarks

Inormation presented in the orm o ratios(e.g., research expenditure as a percentageo sales, or carbon intensity measures suchas emissions per unit o output)

Quantitative indicators commonly used byother organizations with similar activities,particularly when standardized denitionsare stipulated by an independentorganization (e.g., an industry body). Suchindicators are not, however, included in anintegrated report unless they are relevant tothe individual circumstances o, and are used

by, the organization.


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4. CONTENT ElEMENTS

4.1 An integrated report includes the ollowing Content

Elements, answering the respective question posedor each one:

A Organizational overview and externalenvironment

B Governance

C Opportunities and risks

D Strategy and resource allocation

E Business model

F Perormance

G Future outlook

4.2 These Content Elements are undamentally linkedto each other and are not mutually exclusive.The sequence in which they appear in this chapterollows how they are explained in Section 2A, butthis is not the only way they could be sequenced.The Content Elements are not intended to serveas a standard structure or an integrated reportwith inormation about them appearing in a setsequence or as isolated, standalone sections.Rather, inormation in an integrated report ispresented in a way that makes the connectionsbetween the Content Elements apparent.

4.3 The content o an organizations integrated reportwill depend on the individual circumstances o theorganization. The Content Elements are thereorestated in the orm o questions rather than aschecklists o specic disclosures. Accordingly,senior management and those charged withgovernance will need to exercise judgementin applying the Guiding Principles to determinewhat inormation is reported, as well as howit is reported.

4.4 An integrated report should stand alone as aconcise communication, linked to other reports and

communications or those stakeholders who wantadditional inormation.

4.5 In addition to the Content Elements, an integrated

report should disclose: The organizations materiality determination

process(see paragraph 5.13)

The governance body with oversightresponsibilities or(see Section 5D)

The reporting boundary and how it hasbeen determined(see Section 5G)

The nature and magnitude o the materialtrade-os that infuence value creation overtime(see paragraph 2.25)

The reason why the organization

considers any o the capitals identied inthis Framework to be immaterial given itsparticular circumstances, i that is the case(see paragraphs 2.19-2.21).

4A Organizationa overview andexterna environment

4.6 An integrated report should answer the question:What does the organization do and what are thecircumstances under which it operates?

4.7 An integrated report identies the organizationsmission and vision, and provides essential context

by identiying: The organizations:

culture, ethics and values

ownership and operating structure

principal activities, markets, products andservices

competitive landscape and marketpositioning (considering actors such as thethreat o new competition and substituteproducts or services, the bargainingpower o customers and suppliers, and the

intensity o competitive rivalry) Key quantitative inormation (e.g., the number

o employees, revenue, and number ocountries in which the organization operates),highlighting, in particular, signicant changesrom prior periods

Signicant actors aecting the externalenvironment.


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4.8 Factors aecting the external environment includeaspects o the legal, commercial, social,environmental and political context that aect theorganizations ability to create value in the short,medium and long term. They can aect theorganization directly or indirectly (e.g., byinfuencing the availability, quality and aordabilityo a capital that the organization uses or aects).

4.9 These actors occur in the context o the particularorganization, in the context o its industry orregion, and in the wider social or planetarycontext. They may include, or example:

The legitimate needs, interests andexpectations o the organizations stakeholders

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

Market orces, such as the relative strengthsand weaknesses o competitors and customerdemand

The speed and eect o technological change

Societal issues and changing societalexpectations, such as population and

demographic changes, human rights, health,poverty, collective values and educationalsystems

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

The legislative and regulatory environment inwhich the organization operates

The political environment in countries inwhich the organization operates and in othercountries that may aect the ability o theorganization to implement its strategy.

4B Governance

4.10 An integrated report should answer the question:How does the organizations governance structuresupport its ability to create value in the short,medium and long term?

4.11 An integrated report provides insight about suchmatters as:

The organizations leadership structure,including the diversity and skills o thosecharged with governance

Specic processes used to make strategicdecisions and to establish and monitor the

culture o the organization, including itstone at the top and attitude to risk

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

How the organizations culture, ethics andvalues are refected in its use o and eects onthe various capitals, including its relationshipswith key stakeholders

Whether, and i so how, the organization is

implementing best governance practices thatgo beyond legal requirements

The responsibility those charged withgovernance take or 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 o and eects on thecapitals.

4.12 With respect to remuneration and incentives,

an integrated report ocuses on signicantcompensation policies and practices (includingcash, deerred compensation, post-retirementbenets and stock arrangements). This may involveboth quantitative and qualitative inormation aboutthe oversight arrangements or remuneration othose charged with governance and seniorexecutives, and how the links between theorganizations strategy and its use o and eectson capitals are used to arrive at perormance-based compensation, including uture remunerationand xed and variable components.


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4. CONTENT ELEMENTS CONTINUED

4C Opportunities and risks

4.13 An integrated report should answer the question:What are the specic opportunities and risks thataect the organizations ability to create value overthe short, medium and long term, and how is theorganization dealing with them?

4.14 An integrated report identies the key opportunitiesand risks that are specic to the organization,including those that relate to the organizationseects on, and the continued availability, qualityand aordability o, relevant capitals.

4.15 An integrated report identies:

The specic source o opportunities and risks,which may be internal, external or, commonly,a mix o the two. External sources includethose stemming rom the external environment,as discussed in paragraphs 4.8-4.9. Internalsources include those stemming rom theorganizations business activities, as discussedin paragraphs 2.30-2.33.

The organizations assessment o the likelihoodthat the opportunity or risk will come to ruitionand the magnitude o its eect i it does.This includes consideration o the specic

circumstances that would cause the opportunityor risk to come to ruition. Such disclosure willinvariably involve a degree o uncertainty.Guidance on likelihood and magnitude oeect is included in Section 5B, and guidanceon disclosures with respect to uncertainty isincluded in Section 5C.

The specic steps being taken to create valuerom key opportunities and to mitigate ormanage key risks, including the identicationo the associated strategic objectives,strategies, policies, targets and KPIs.

4.16 Care is needed to avoid boilerplate disclosuresabout opportunities and risks. Inormation is onlyincluded in an integrated report when it is opractical use to the intended report users. Thisrequires that disclosures be specic to thecircumstances o the organization.

4.17 An integrated report identies the organizationsapproach to any risks that are undamental to theongoing ability o the organization to create valueand that could have extreme consequences, evenwhere the likelihood o their occurrence might beconsidered quite small.

4D Strategy and resource aocation

4.18 An integrated report should answer the question:Where does the organization want to go and howdoes it intend to get there?

4.19 An integrated report identies:

The organizations short, medium and longterm strategic objectives

The strategies it has in place, or intendsto implement, to achieve those strategicobjectives

The resource allocation plans it hasin place, or intends to put in place,

to implement its strategy How it will measure achievements and target

outcomes or the short, medium and long term.

4.20 An integrated report describes:

The linkage between

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