06 Integrated Reporting Flashcards
IR 3 Major Concepts
IT - Integrated Thinking
IR - Integrated Report
VC - Value Creation
Org can then explain: -strategy -Governance -Ee/Mgt Performance Lead to Value Creation
IT Integrated Thinking
Process of
- Decision Making
- Management
- Reporting
Prerequisite to IR
IR Integrated Report
Communicates How
-Strategy
-Governance
-Performance
leads to value creationIR Framework - published in 2013
a holistic view of org
not a combination of annual report with sustainability and social responsibility
**gives providers of financial capital more info about how entity creates value over a period of time
3 required fundamental concepts
- Value Creation
- Six Capitals
- Value Creation Process
IR Fundamental Concept 1 - Value Creation
Selling affects financial and reputation, relationship with stakeholders
- its social license to operate
if value created = Material, include in IR
IR Fundamental Concept - 2
Capitals 6
- Financial Captial
- Natural Capital
- Manufactured Capital
- Intellectual
- Human
- Social and Relationship
Affected by REGULAR COURSE OF BUSINESS
FINANCIAL CAPITAL
Available pool of funds
from debt, equity or operational
NATURAL CAPITAL
renewable and non-renewable ENVIRONMENTAL resources.
- land, water, air , ecosystems
MANUFACTURED CAPITAL
- manufactured tangible objects
does not have to be owned, just available
ie a port, road
but is also, property, plant and equipment
INTELLECTUAL CAPITAL
- the Knowledge of the organization
including intellectual property
patents, software, copyrights
**EE competencies are NOT intellectual capital, they can be transferred to another org
HUMAN CAPITAL
EE competencies, abilities and experience
Social and Relationship Capital
- relationship of org with envrionment in which it operates
- networks between org, stakeholders, institutions, communities and shreholders
- brand recognition
- reputation
- orgs social license to operate
Capitals in the IR (basic rules)
- all need not be present in every report
- some not relevant for an org
- don’t need to id’d by same name in every IR
- does not need to be structured using six capitals
- only ensure orgs at least THINK about the capitals
Fundamental Concept 3
Value Creation Process
Consists of
- Inputs: Capital used (are from External)
- Business Model: transforms inputs to outputs and outcomes
- Business Activities: Core of the biz model that transforms capitals into outputs
- Outputs: results of biz activiities
- Outcomes are the INTERNAL/EXTERNAL effects on capitals of of biz activities and outputs
- relate directly to external environment. not necessarily controlled by org
- determine the status of new inputs
