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IIRC INTEGRATED REPORT 2017 / Materiality

Materiality

Material matters

Material matters are those that substantively affect our ability to create value. Those that may destroy value are termed risks; those that may create value are termed opportunities.

We start by identifying a wide variety of risks and opportunities, by considering our strategy and work plans, observing market trends, reviewing agendas and minutes of the Board and the Council meetings, reviewing the Framework Implementation review and Board Evaluation report and checking risk management tools/checklists.

Identified risks and opportunities are assessed quantitatively in terms of: (a) the potential severity of their impact, (b) likelihood of their occurrence and (c) the effectiveness of our controls and response.

The management team evaluates this initial assessment – drawing on their experience, judgement and own engagement with stakeholders – and agree which matters may be material and what response measures may be or should be in place.

Our Board reviews our conclusions and methodologies and provides constructive input and challenge.

Our material matters fall into three categories as shown in the table that follows, where they are discussed further.

 Risk

 Opportunity


Our response to material matters

1. Value proposition of integrated reporting

Material matter and description of risk/opportunity IIRC response Strategic theme
(pages 27-37)
Relevance of integrated reporting to macro themes.
Making the links between macro trends and integrated reporting can provide a powerful tool for building support for integrated reporting and ensuring it continues to be seen as a relevant response to current issues.
  • Make public statements, issue policy papers and continue to deliver communications to demonstrate alignment of integrated reporting to global developments.
  • Ensure attendance at important economic summits, e.g. the World Economic Forum and B20.
5
Credibility of integrated reports.
Poor quality integrated reports would fail to meet investors’ information needs and undermine the benefits and concept of integrated reporting.
  • Deliver action points identified in the <IR> Framework review.
  • Monitor quality of reports through internal and external surveys.
  • Disseminate best practice through <IR> Network programme (pages 27-28), Examples Database and Training Programme.
  • Work with the International Auditing and Assurance Standards Board (IAASB) and others to develop the role of assurance.
1, 2
Making the case for integrated reporting.
Insufficient understanding or evidence of the benefits of integrated reporting to businesses, investors and broader capital markets would hinder growth in adoption.
  • Build the business case for integrated reporting, including case studies on how boards are adapting to global trends and encourage research.
  • Expand our global communications programme, leveraging key global partners, to increase profile, accessibility and understanding of the business case.
  • Develop thought leadership on the role of integrated thinking as a foundation of integrated reporting and inclusive decision-making.
1
Business focus on sustainable development.
Integrated reporting is an effective means of linking material sustainability matters to value creation.
  • Continue our programme of alignment with the SDGs through partnerships and supranational platforms (pages 28 and 34), and include in the <IR> Network programme.
  • Seek further leverage from the work of the Business and Sustainable Development Commission, including its legacy projects on blended finance and benchmarking.
1

2. Pace and scale of Framework adoption

Material matter and description of risk/opportunity IIRC response Strategic theme
(pages 27-37)
Corporate reporting system.
The range of standards, frameworks and regulations risks adding to the perception that integrated reporting could cause further burden and fragmentation. Perceived competition and divergent definitions of integrated reporting would create market confusion and uncertainty.
  • Support the Corporate Reporting Dialogue as a unifying force and seek a clear move from dialogue to alignment, with integrated reporting as the 'umbrella'.
  • Work bilaterally with leaders in the world of financial reporting to position integrated reporting as central to the future of mainstream corporate reporting and distinct from sustainability reporting, and develop an understanding of a new ‘end-game’ for the corporate reporting system – in particular through collaboration with IASB’s management commentary practice statement project.
  • Engage with global initiatives relevant to the future of corporate reporting, capital market reform, digitalization, inclusive capitalism and sustainable development, building an understanding of the role and impact of integrated reporting in achieving their aims.
1, 2, 4, 5
Investor demand for integrated reporting.
Visible demand from investors is a vital incentive for business adoption of integrated reporting – low demand would stall widespread business adoption.
  • Build investor support through engagement with key influencers in the capital markets, including through events.
  • Increased emphasis internally on investor engagement through individual targeting, working with investor networks and bodies, in particular CFA Institute, PRI and ICGN. Use trend towards ESG investment as catalyst for integrated investment.
  • Build further the evidence base on benefits of integrated reporting to investors through partnering on research.
1, 3
Supportive regulatory environment.
Endorsement from regulators and policymakers could accelerate adoption of integrated reporting.
  • Engage with policymakers to ensure revised corporate governance and stewardship codes endorse and/or align to integrated reporting.
  • Work to build increasing recognition of integrated reporting by major supranational institutions.
1, 5
Key markets: USA and China.
Slower progress of integrated reporting penetration in the key markets of USA and China (i.e. the two largest economies) would hinder global adoption.
  • Dedicated USA lead in place who has established a USA Network. Development of working groups, e.g. with technology companies and wider engagement with lead investor representative bodies.
  • Two country visits to China planned for 2018 with the Ministry of Finance (now a Council member).
  • Develop with the Board clear strategies for USA and China markets.
1
Demonstrable momentum of adoption.
A pronounced and measurable shift to integrated reporting could stimulate further uptake of the <IR> Framework to support critical mass.
  • Target businesses to adopt integrated reporting, developing new target markets and sectors and encourage them to join integrated reporting networks.
  • Engage with, and increase support from, international business organizations and their national members.
  • Increase collaboration with existing and new convening partners to encourage wider networking around integrated reporting with leading companies and sectors.
1
Ease of adoption.
A perception that implementing integrated reporting is too challenging might hinder growth in adoption.
  • Deliver action points identified in the <IR> Framework Implementation Feedback Report.
  • Work with training partners to enhance quantity and review quality of programmes.
  • Deliver an engaging and useful <IR> Network programme, and grow and enhance the Examples Database.
  • Deliver tailored strategies in priority markets to overcome practical obstacles to adoption.
2

3. IIRC capacity

Material matter and description of risk/opportunity IIRC response Strategic theme
(pages 27-37)
IIRC resource constraints.
Our funding model, global spread and capacity gaps challenge our ability to deliver our strategy and take full advantage of the momentum for integrated reporting.
  • Establish a fundraising campaign to increase grant income while maintaining existing core support.
  • Close resource gaps through new secondments and partnerships on specific projects.
  • Identify funding opportunities through existing relationships.
6
IIRC relationships.
Our institutional reach is extended by our coalition and partners who build awareness and advance our vision.
  • Review current priority partners list and forge deeper partnerships with those that will deliver most.
  • Lever support from international business organizations and their national members.
  • Identify and work with partners to pursue projects that support our strategy and lever communication channels.
4, 6
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