What is Integrated Reporting?

What is Integrated Reporting?

Integrated reporting is a framework for communicating how an organization's strategy, governance, performance, and prospects create value over the short, medium, and long term. Developed by the International Integrated Reporting Council (IIRC)—now part of the IFRS Foundation—it centers on six capitals (financial, manufactured, intellectual, human, social/relationship, and natural) and aims to break down the silos between financial and sustainability reporting.

Why It Matters

Integrated reporting emerged from a fundamental critique: traditional annual reports present financial results in isolation from the resources, relationships, and environmental systems that enable them. A company might report record profits while depleting the natural capital and human capital that produced them—a pattern invisible in conventional financial statements but critical for understanding long-term value creation and risk.

The IIRC's merger into the IFRS Foundation in 2022 gave integrated reporting institutional backing alongside the ISSB standards. While the Integrated Reporting Framework isn't mandatory in most jurisdictions (South Africa's King IV Code is a notable exception), its concepts underpin the ISSB's approach to connectivity between financial and sustainability reporting. IFRS S1 explicitly requires companies to explain how sustainability-related risks and opportunities connect to financial performance—a core integrated reporting principle.

For companies navigating the current reporting landscape, integrated thinking—the practice underlying integrated reporting—delivers practical benefits. Organizations that connect sustainability performance to business outcomes make better capital allocation decisions, communicate more effectively with investors, and identify trade-offs and synergies that siloed reporting obscures. When a company can articulate how its employee development investments (human capital) drive innovation (intellectual capital) that improves market position (financial capital), it tells a value creation story that resonates.

The reporting convergence underway—CSRD, ISSB, SEC proposals—is moving toward greater connectivity between financial and non-financial disclosures. Companies that have practiced integrated reporting are finding the transition easier because they've already built the cross-functional processes and narrative discipline these frameworks demand.

How It Works / Key Components

The six capitals model provides the analytical framework. Financial capital (funds available), manufactured capital (physical assets and infrastructure), intellectual capital (IP, systems, and tacit knowledge), human capital (skills, capabilities, and experience), social and relationship capital (stakeholder relationships, brand, and social license), and natural capital (environmental resources and processes). Organizations map how their business model draws on these capitals as inputs and transforms them through activities into outputs and outcomes.

Value creation narrative connects strategy to outcomes across capitals. The integrated report explains the organization's external environment, governance, business model, risks and opportunities, strategy and resource allocation, performance, and future outlook—all through the lens of how they affect value creation. This isn't a data dump; it's a coherent story that helps readers understand the organization's ability to create value over time.

Connectivity and trade-offs explicitly addresses how different capitals interact. Investing in renewable energy (reducing natural capital depletion) may require significant financial capital in the short term but reduce energy costs and regulatory risk in the medium term. Automating processes (increasing manufactured capital) may reduce human capital needs, creating social implications. Integrated reporting requires organizations to surface these trade-offs rather than present each dimension in isolation.

Materiality and conciseness are guiding principles. An integrated report should focus on the matters most material to value creation—it's not meant to be an exhaustive data repository. The IIRC Framework emphasizes conciseness, strategic focus, and connectivity over comprehensiveness, distinguishing it from the more prescriptive data point requirements of ESRS or GRI.

Council Fire's Approach

Council Fire helps organizations adopt integrated thinking and reporting practices that connect sustainability performance to business value. Whether preparing a standalone integrated report or embedding connectivity principles into CSRD and ISSB disclosures, we work with cross-functional teams to develop value creation narratives, map capital interdependencies, and build the processes that sustain integrated thinking beyond annual reporting cycles.

Frequently Asked Questions

Is integrated reporting required by law anywhere?

South Africa is the most prominent example—the Johannesburg Stock Exchange requires listed companies to produce integrated reports under the King IV Code of Corporate Governance (apply-or-explain basis). Japan, Malaysia, India, and several other countries encourage or incentivize integrated reporting without mandating it. While not directly required by the CSRD, the regulation's emphasis on connectivity between financial and sustainability information draws heavily on integrated reporting principles.

How does integrated reporting relate to CSRD and ISSB?

They're complementary. The CSRD/ESRS provides detailed data point requirements for sustainability disclosures. ISSB standards focus on financially material sustainability information for investors. The Integrated Reporting Framework provides the overarching logic that connects these disclosures to the organization's strategy and value creation story. Many companies use integrated reporting as the narrative backbone that ties together their various regulatory disclosures.

Do we need a separate integrated report, or can we embed it?

Either approach works. Some companies publish standalone integrated reports. Others embed integrated reporting principles into their annual report, connecting financial statements with sustainability disclosures through a value creation narrative. The trend is toward embedded approaches—particularly as CSRD requires sustainability reporting within the management report, naturally creating an integrated document. The format matters less than the substance of connectivity.