By Leigh Roberts.
Over the past two years, the IRC has released two inter-related Information Papers. The Papers have been well received locally and internationally.
In 2023, A global comprehensive corporate reporting system came out and in October 2024, Integrated reporting and using a layering approach to sustainability reporting was released. (Both Papers are available on this website.)
The IRC has produced Information Papers and FAQs for over ten years. Our latest two Papers, however, proved to be rather a challenge in their development with many rounds of intellectual input, debate and discussion within the IRC Working Group! But the two Papers, could I think, take the mantle of being our best work yet. They are informative, address the issues, put reporting in its correct context of governance, and link reporting to integrated thinking. Both Papers offer practical considerations for companies.
The aim of the first Paper is to highlight the board’s role in reporting and outline the various considerations when structuring a corporate reporting suite. The Paper also includes a useful overview of the main sustainability reporting standards in its Appendix. The Paper culminates in two recommended approaches to structuring a corporate reporting suite that can achieve comprehensive corporate reporting. The two approaches are:
- The umbrella approach (also known as the ‘octopus’ approach): This approach positions the integrated report as the report that offers a concise, holistic and complete view of the organisation. It can be the ‘first read’ report to obtain a good understanding of the organisation, what it uses and the resulting effects on the six capitals, its external environment, strategy, risks and opportunities, performance and governance. The high-level integrated report offers links to the company’s other detailed and subject-specific reports for more information, such as the financial statements, sustainability report, mineral reserves report and more (large companies may have about 15 different reports).
- The single-report approach: This approach is likely to be applicable to smaller or less complex organisations. The only difference to the umbrella approach is in the presentation format – this is an all-in-one report but with different sections. The integrated report is the concise overview and is housed in the first section, followed by financial statements in the next section, and sustainability report in the next section.
The Paper carries a very informative Foreword by Professor Mervyn King. It highlights that reporting must be seen in the context of governance and that the board discharges its duty of accountability to the company through reporting on all material matters, and this includes reporting on the company’s impacts on the economy, society and the environment over time.
Onto the second Paper… this builds on the first Paper which mooted the view of layering sustainability information when applying multiple sustainability reporting and housing all of this detailed information in a separate sustainability report. This view caters for the ISSB positioning of its standards as a global baseline for investor-focused information and a ‘layering’ of further disclosures required by other sustainability reporting standards (GRI, ESRS etc) as well as jurisdictional reporting requirements.
Both Papers emphasise, and this is a strong view, that all the detailed ISSB information should not be located in the integrated report (as has been mooted in some quarters). This is inappropriate because such information is detailed and voluminous; the amount of information will grow as more topic standards are released; and it presupposes that the GRI information is housed elsewhere. It is not a practical approach, nor does it meet the Integrated Reporting Framework’s guiding principles that the integrated report is concise with strategic information. All the detailed sustainability information – whether its ISSB, GRI or industry body requirements – are better suited being located in a separate sustainability report. The ISSB Standards do not specify a location for its information, provided the information is not obscured by other
disclosures.
Following on from this view, the question may arise as to which of this information ends up in the integrated report. The preparation of the integrated report carries on as it always has… it is information that meets the requirements of the Integrated Reporting Framework. Naturally, some ISSB, GRI and financial information will be included in the content of the integrated report in explaining the company’s process of value creation, preservation or erosion over time.
In the Paper we give some useful practical key considerations in applying layering. These considerations are divided into two sections, namely implementation processes and presentation.
The Paper also highlights the usefulness to companies of using a double materiality approach, because this can meet a number of different needs including integrated thinking and the governance duty of reporting on significant impacts.