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IIRC INTEGRATED REPORT 2017 / Business environment

Business environment

Our strategy remains focused on anticipating future global trends and being able to respond to them, to ensure that integrated reporting continues to remain relevant to the issues and market needs of today and tomorrow.

Globalization and interconnectedness

The International Monetary Fund, World Economic Forum and other bodies highlight that risks can no longer be isolated and managed according to geography or type.
Integrated reporting encourages systems thinking, the basis for effective risk management in a globalized environment.

Inclusive capitalism

Growing inequality risks harming development and growth potential and demands greater focus on social and environmental value. This has driven a movement towards ‘inclusive capitalism’.
Integrated reporting underscores the importance of a holistic approach to understanding, measuring, managing and expressing value creation, including the broader dimensions of human, economic and social progress seen through a multi-capital lens.

Stewardship and governance

Increased shareholder interest in corporate governance drives improved communication between businesses and their investors. Stewardship codes reflect investors’ role as custodians of long-term and other assets.
Integrated reporting is strongly aligned with enhanced corporate governance and improved decision-making among capital market participants. It is already mainstream in South Africa and Japan with growing country level alignment globally.

Sustainable development

The United Nations Sustainable Development Goals, European Union Non-financial Reporting Directive, Paris Agreement on climate change and the 2016 FSB Task Force work reinforce the status of sustainable development as a public and private sector imperative.
Integrated reporting encourages stewardship of a broader resource base, which includes human and natural resources. While translating global commitments into a shift towards productive and sustainable investments remains a challenge integrated reporting serves a role by bringing investors and businesses to the table.

Technological change

New technologies can affect, for better or worse, anorganization’s operations, innovation and valuation. Artificial intelligence and robotics are already impacting the future of work and threatening jobs. The contributions of intellectual property and an innovative culture are increasingly driving organizational success, while the proliferation of data drives the desire for consistent and comparable metrics.

Integrated reporting helps organizations discuss the material impacts of technology on value creation and stakeholders, either in stimulating progress or in mitigating risks. Whether in the hands of business or the stakeholder, technology is a powerful tool to drive better quality corporate reporting.

The corporate reporting system

The different elements of the corporate reporting system are not in harmony – such as conflicting objectives, disjointed definitions and unclear objectives. UN PRI, UNEP FI and the EU High Level Expert Group on Sustainable Finance are examples of bodies working to align the financial system to sustainable development.

There is a renewed urgency to bring coherence to the reporting landscape brought about by market demand, while advances in technology are also making an impact. This is an opportunity to embed integrated reporting within these developments, particularly through the Corporate Reporting Dialogue.

Long-termism

Institutional investors are increasingly vocal about the dangers of a short-term focus. To support the large investments in infrastructure, particularly in emerging economies, a longer-term view of value is needed to shift business practices, resource allocation and capital market behaviour.

Investors have voiced the need for reform in corporate reporting. Integrated reporting aligns with FCLT Global’s ‘10 elements of a long-term strategy’ by supporting and managing this transformation by providing investors with long-term information on risk and opportunity and creating the foundations for sustainable investment. [http://integratedreporting.org/resource/michael-p-krzus-integrated-reporting-for-a-long-term-strategy/]
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