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Four essential features of integrated reporting

28 February 2024
Mario Matthys Expert Practice Leader CFO Services (Pragmatic Advisory & Implementation) Connect on Linkedin

For all kinds of stakeholders, integrated reporting emerges as a critical tool, extending beyond traditional reporting boundaries to provide a comprehensive view of a company's value creation, performance, and sustainability. 

True integration, however, goes beyond simply combining financial and sustainability reports. In this blog post, ESG reporting expert Mario Matthys highlights a few key elements that distinguish integrated reports: emphasis on value creation, coherence between financial and non-financial aspects, and clarity for stakeholders. 

Companies that embrace integrated reporting get closer to transparent communication and long-term value generation, all while meeting changing stakeholder expectations.

Assessing a company's value

Investors and other stakeholders want to know how a company adds value in terms of economics, the environment, and social responsibility. Integrated reporting is a recent response to this, aiming to provide reporting that serves as a more comprehensive foundation for assessing a company's value, performance, and continuity. However, simply attaching the Financial Annual Report to the Sustainability Report does not constitute an integrated report. It distinguishes itself through several essential and specific elements:

  • Increased focus on the value creation of a company
  • Increased emphasis on the relationship between financial and non-financial figures
  • Clear information for all stakeholders
  • Increased attention to qualitative process descriptions

Integrated reporting is frequently viewed as a form of integrated thinking. Long-term thinking is prioritized over a purely financial focus that is only of interest to short-term investors.

Mario Matthys, Expert Practice Leader Corporate Reporting, CFO Services

#1. Value creation

One of the fundamental principles upon which an integrated report is based is value creation. The business model should not only be extensively described, but the organization must also explain how it creates value for shareholders and other stakeholders. Additionally, attention should be given to strategic objectives and the progress the company is making towards these objectives. Long-term thinking is prioritized over a purely financial focus that is only of interest to short-term investors.

#2. Coherence

An integrated report will demonstrate the relationship between sustainability and financial performance. Environmental risks, personnel impact, reputation, and corporate governance aspects should be described in a clear and organized manner, with the financial impact estimated as accurately as possible.

#3. Clarity

The expectations of investors are high. They expect a company to communicate clearly and provide insight into the current state of sustainability. No vague performance indicators, as sometimes encountered in older reports, no greenwashing, no ambiguous stories. Readers want to know exactly what type of company they are dealing with. Integrated reporting will help to achieve this.

#4. Processes

Whereas a financial annual report is more of a snapshot, an integrated annual report reflects how a company makes decisions, how it thinks, how it will further develop, and what role its efforts in terms of the environment, people, or governance will play.

Integrated reporting is frequently viewed as a form of integrated thinking that should be reported in an annual report that includes information on the company's value creation in the short, medium, and long term.

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