Integrated Reporting and Sustainable Corporate Governance from European Perspective

The International Integrated Reporting Council’s International <IR> Framework has been a mainstay in corporate disclosure for more than a decade, but whereas the GRI standards and SASB standards have made steps to account for new knowledge on the intersection between corporate strategy, sustainability, and systems value, integrated reporting has fallen behind.

The <IR> Framework is based on an idea of ‘shared value creation’ by providers of the ‘six capitals’ (financial, manufactured, intellectual, human, societal, and environmental capitals), and it is organised from the perspective of how these capitals allow for the creation of financial value for investors. Although the framework acknowledges that a company should have proper regard for the interest of others, it does not adequately account for the boundaries of the planet or the social foundations for humanity. Rather, the principal function of integrated reporting is the reporting of ‘value’ to financial investors - not to the environment, society, or even to stakeholders.

If you are in the process of deciding between sustainability-related disclosure frameworks, this analysis from Jukka Mähönen provides a compelling explanation of how the International <IR> Framework normalizes and perpetuates the shareholder primacy model; how the framework’s investor orientation determines the content of the integrated report; and how <IR> has limited ability to highlight and transparently discuss the interdependencies between your business strategy and the systems upon which you depend.