The IFRS Foundation is a not-for-profit public interest organisation established to develop high-quality, understandable, enforceable and globally accepted accounting and sustainability disclosure standards.

IFRS Standards are developed by two standard-setting boards, the International Accounting Standards Board (IASB) and International Sustainability Standards Board (ISSB). The IASB sets IFRS Accounting Standards and the ISSB sets IFRS Sustainability Disclosure Standards. The IASB and ISSB are jointly responsible for the Integrated Reporting Framework.

The Integrated Reporting Framework defines integrated reporting as ‘a process founded on integrated thinking that results in a periodic integrated report by an organisation about value creation over time and related communications regarding aspects of value creation’. Integrated reporting collects material information about an organisation’s strategy, governance, performance and prospects in a way that reflects the commercial, social and environmental context in which it operates. Integrated reporting provides a clear and concise representation of how the organisation demonstrates stewardship and how it creates value in the present as well as in the future.

Integrated reporting is founded on integrated thinking, which is sometimes also known as systems thinking. Integrated thinking drives an improved understanding of how value is created and improves the decision-making of boards and management. The more that integrated thinking is embedded in daily operations, the more naturally this understanding is expressed in internal and external communications. On this basis, integrated thinking and integrated reporting are mutually reinforcing.

Integrated reporting aims:

• to improve the quality of information available to providers of financial capital to support the efficient and productive allocation of capital;
• to promote a cohesive and efficient approach to corporate reporting that draws on various reporting strands and communicates the full range of factors that affect an organisation’s ability to create value over time; and
• to support integrated thinking, decision-making and actions that focus on value creation over time.

An integrated report benefits anyone interested in an organisation’s ability to create value, including providers of financial capital. Employees, customers, suppliers, business partners, local communities, legislators, regulators and policy-makers might also have an interest in an organisation’s integrated report.

Integrated reporting, which is underpinned by integrated thinking, also benefits an organisation’s management and governing bodies. Integrated thinking pushes organisations to holistically consider business units and functions, time horizons, and internal and external perspectives to evolve their business models and strategies. In doing so, organisations benefit from a clearer understanding of cause and effect, improved decision making and reduced organisational silos.

An integrated report is the most visible and tangible product of integrated reporting. It is a summary of how an organisation’s strategy, governance, performance and prospects lead to value creation over time, in the context of its external environment. An integrated report is prepared in accordance with the Integrated Reporting Framework.

The Integrated Reporting Framework defines integrated thinking as ‘the active consideration by an organisation of the relationships between its various operating and functional units and the capitals that the organisation uses or affects’. Integrated thinking leads to integrated decision-making and actions that consider the creation of value over the short, medium and long term. In simple terms, this means thinking holistically about the resources and relationships the organisation uses and those it affects, and the dependencies and trade-offs between them as value is created. In applying this mindset, an organisation can better view itself as part of a greater system—one shaped by the quality, availability and cost of resources, as well as evolving regulations, norms and stakeholder expectations.

We discourage use of the label ‘integrated report’ on reports that have not been prepared in accordance with the Integrated Reporting Framework, because such reports can send a confusing and misleading signal to the market about what integrated reporting really is.

Paragraph 1.17 of the Integrated Reporting Framework sets the conditions for any communication claiming to be an integrated report and referencing the Integrated Reporting Framework. Specifically, such reports should apply all requirements shown in bold italic type (summarised on pages 55–56 of the Integrated Reporting Framework), unless specific conditions preclude their application.

Many organisations are on the path to integrated reporting and have published reports that mostly adhere to the Integrated Reporting Framework, even if they still have areas for improvement. We see no harm in such reports being labelled integrated reports, as long as the reports communicate an intent to develop future reports to achieve full adherence to the Integrated Reporting Framework.

The Integrated Reporting Framework explains the concepts of integrated reporting and underpins our work. It establishes fundamental concepts, guiding principles and content elements governing the preparation and presentation of an integrated report. It’s written primarily in the context of private sector, for-profit companies of any size, but is also applied by public sector and not-for-profit organisations.

The Integrated Reporting Framework was developed in 2013 and revised in 2021 following extensive consultation and testing by preparers and users in around the world.

The Integrated Reporting Framework acknowledges the uniqueness of individual entities and so strikes an important balance: neither overly flexible nor overly prescriptive. Its principles-based approach encourages organisations to communicate their unique value creation story, while at the same time allowing for comparability across organisations. The Integrated Reporting Framework promotes a convergence in approach in the sense that all report preparers should provide core business information, as formalised in required content elements.

Core disclosures include information about the business model, strategy and resource allocation, performance and governance. The Integrated Reporting Framework encourages both qualitative and quantitative disclosures, because each provides context for the other. Where measurement is appropriate, we endorse the use of generally accepted measurement methods to the extent they are appropriate to the organisation’s circumstances and consistent with the indicators used internally by those charged with governance.

No. We do not impose a time limit to meet the Integrated Reporting Framework’s 19 requirements. Preparers of integrated reports learn from experience, so assigning a deadline would be inconsistent with the Integrated Reporting Framework’s principles-based approach. Integrated reporting is a journey whose time frame varies according to organisational size, complexity, regulatory context and disclosure history.

Notwithstanding this stance, new preparers are encouraged to prioiritise full adherence to the Integrated Reporting Framework, particularly because this commitment factors into the statement of responsibility from those charged with governance (paragraph 1.20). Based on observed market practice, organisations new to integrated reporting generally achieve full Integrated Reporting Framework adherence within three or four reporting cycles.

Revisions to the Integrated Reporting Framework were published in January 2021, to enable more decision-useful reporting.

As part of the 2021 revision of the Integrated Reporting Framework, the term ‘purpose’ was added to Figure 2 in recognition of the term’s growing use and acceptance in the business vernacular.

In practice, the word ‘purpose’ can have many interpretations depending on the context; its meaning can overlap, for example, with terms such as ‘mission’ or ‘vision’. For this reason, the Framework treats these closely-related themes generically and encourages organisations to consider how their central commitment—regardless of the chosen label— influences the process through which value is created, preserved or eroded.

Process disclosures outline the measures an organisation takes to ensure the integrity of the integrated report. Such disclosures, which should be relevant to the organisation, can include governance-related matters on:

• the validation of the materiality determination process and material matters; 
• oversight by, and final recommendation of, the relevant board committee; and 
• approval of the final integrated report.

These disclosures can also include matters relating to important responsibilities and activities, such as:

• the role of internal audit function and external assurance providers;
• approaches to combined/integrated assurance;
• executive(s) with accountability for report preparation and presentation;
• the functional composition of the reporting team, including important departments and subject-matter experts involved; 
• information sources, including outside support;
• the timing of significant processes and activities; and
• other quality measures (for example, peer reviews).

In South Africa, preparers of integrated reports will also benefit from market-specific guidance issued by the Integrated Reporting Committee of South Africa. In particular, page 9 of the publication Disclosure of Governance Information in the Integrated Report (Updated): An Information Paper presents sample process disclosures.

Comparisons of the purpose, audience and scope of various report forms

View the comparison table.

The IFRS Foundation recognises that the Integrated Reporting Framework (revised in January 2021) and the proposals in the Exposure Draft Management Commentary (published in May 2021) have similarities and differences to one another. The IFRS Foundation staff analysed and presented these similarities and differences at the IFRS Advisory Council and Integrated Reporting and Connectivity Council meetings in April 2023, and in an IASB education session in May 2023.

In general, narrative reports such as the directors’ report, management commentary, management’s discussion and analysis, and operating and financial review supplement the financial statements and provide contextual information. Such information, provided through the perspective of management or directors, helps users of the financial statements understand the effects of transactions and other events on the organisation’s economic resources and the claims against it.

An integrated report goes further than providing context to the financial statements, requiring a broader multi-capitals perspective, over a longer time horizon, to better communicate how value is created.

The main differences between the two report forms, in terms of purpose, audience and scope are summarised in Table 2.

Table 2—Main differences between integrated reports and narrative reports

Depending on the jurisdiction, there is potential to apply integrated reporting to existing regulatory arrangements for narrative reporting. This can be achieved by ensuring that the important concepts and principles of integrated reporting are integrated into the reporting requirements for the narrative report.

The Integrated Reporting Framework describes financial capital as the pool of funds available to an organisation for use in the production of goods or the provision of services. It includes funds obtained through financing, such as debt, equity or grants, or generated through operations or investments. In a sense, this could be equated to the credit side of the balance sheet in terms of traditional financial reporting (as the source of money, rather than its application when used to purchase other forms of capital). While not all forms of capital are or can be purchased with money, or even measured in monetary terms, integrated reporting recognises that the value of financial capital lies in its use as a medium of exchange, and that value is realised when it is converted to other forms of capital.

As with other forms of capital, the Framework does not prescribe specific measurement methods or the disclosure of individual matters with respect to financial capital; however, it does expect that when information in an integrated report is similar to, or based on other information published by the organisation (such as IFRS financial reports), it is prepared on the same basis as, or is easily reconcilable with, that other information.

IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information has integrated concepts from the Integrated Reporting Framework, building on the Framework’s:

• definitions of sustainability and the resources and relationships (capitals) that a company ‘depends on or affects’ to create, preserve or erode value over time; and
• focus on the importance of connected information.

Furthermore, the disclosures on sustainability-related risks and opportunities and the importance of connected information required by IFRS S1 and IFRS S2 Climate-related Disclosures could be embedded into an integrated report to provide users of general purpose financial reports with comparable and material information that enables them to make decisions on providing resources to the company (for example, see the interactive tool: ‘How to apply the Integrated Reporting Framework with IFRS S1 and IFRS S2: A mapping tool’).

For more information, see the FAQs on risks and opportunities in paragraphs 2.4–2.9 and 2.10–2.16 of the Integrated Reporting Framework; and paragraph 2 of IFRS S1.

The Integrated Reporting Framework has become an IFRS Foundation resource following the Foundation’s consolidation with the Value Reporting Foundation, which included the International Integrated Reporting Council and the Sustainability Accounting Standards Board. Therefore, the language used in the Framework sometimes differs from that used in other IFRS Foundation documents, even if the meaning is the same.

Table 3—Terms used in the Integrated Reporting Framework compared with those used in other Foundation documents

View the comparison table.

Whether information is material varies from one company to the next and also varies according to the purpose of a report. An integrated report’s primary purpose is to explain to providers of financial capital how a company’s value has been created, preserved or eroded over time. In contrast, a multi-stakeholder sustainability report’s primary purpose is to explain to a range of stakeholders a company’s economic, environmental and social effects, and a financial statement’s primary purpose is to explain to investors a company’s financial position and financial performance. The information that is material will vary depending on the document’s purpose, and therefore, so will the definition of materiality. For more information, see the FAQs on materiality.

No. An integrated report can be either a stand-alone report or included as a distinct, prominent and accessible part of another report or communication. For example, an integrated report might be included at the front of a report that also includes the organisation’s full financial statements.

A combined report merges a range of existing disclosures, including, for example, the organisation’s financial report, sustainability report, governance filings and website content. Although the combined report offers a quick summary of organisational information, it can also suffer several drawbacks. Whereas each component report has a well-defined purpose, and is prepared with a specific audience and set of information needs in mind, the consolidated report is necessarily larger in volume and broader in scope.

By contrast, an integrated report uses the concept of value creation over time to examine information in a more fine-tuned way than a combined report. An integrated report is intended to make it easier to see connections between information, and its emphasis on conciseness is aided by its focus and clarity of purpose.

Yes, an integrated report can be prepared in response to existing compliance requirements. For example, an organisation might be required by local law to prepare management commentary or other report that provides context for its financial statements. If that report also meets the requirements of the Integrated Reporting Framework, it can be considered an integrated report. If the report is required to include information beyond that required by the Integrated Reporting Framework, the report can still be considered an integrated report, as long as other information does not obscure the information required by the Integrated Reporting Framework.

To evaluate how successfully a company delivers value, it should consider the effects of its outputs and activities on each class of capital. We call these effects ‘business model outcomes’ and, when taken in aggregate, they point to a net positive, net negative or neutral position—in which value is created, eroded or preserved, respectively.

This analysis is not exact, and involves a degree of subjectivity and uncertainty. Some companies might have imperfect knowledge of the interdependencies and trade-offs between the capitals. Despite these limitations, the Integrated Reporting Framework provides a robust approach for identifying and communicating how value is created, preserved or eroded, beyond the financial bottom line.

No. The Integrated Reporting Framework does not call for a calculation of net value created or destroyed over the reporting period. Moreover, the integrated report should not attempt to place a value on the organisation itself. Assessments of value are the role of others using information presented in the report.

For more information, see paragraph 1.11 of the Integrated Reporting Framework.

For all forms of reporting:

• material information is any information that is capable of making a difference to the evaluation and analysis at hand;
• reporting focuses on the information needs of the primary stakeholders for whom the report is issued;
• judgement is necessary to determine the appropriate level of aggregation or disaggregation of detailed information; and
• the inclusion of immaterial information must not obscure material information.

Some, but certainly not all, information identified as material for other report forms will also be material for the integrated report. Organisations can improve the efficiency of their reporting process by identifying where existing report strands are mutually supportive (see page 10 of Materiality in integrated reporting, issued jointly with the International Federation of Accountants). For example, integrated reports typically include a summary of financial performance, as reflected in the financial report. They also include any sustainability matters (such as raw material shortages or climate-related risks) that significantly affect an organisation’s ability to create value, particularly if those matters affect the continued availability, quality or affordability of key capitals. Ideally, any such matters will connect to explanations and metrics that are consistent with financial, sustainability or other reports.

For more information, see paragraphs 3.5 and 4.37 of the Integrated Reporting Framework.

The process for determining the content of the integrated report (the so-called ‘materiality determination process’) should be consistent with, and ideally embedded in, existing value creation processes—for example, strategic development, business planning, risk management, governance, stakeholder engagement and business model refinement. The reasoning is simple: an integrated report explains how a company creates value; therefore, if the integrated report reflects what the company does, and what it does to create value, the company can better align the processes involved in determining what information is material and processes in explaining how the company creates value.

Matters relevant to value creation are typically discussed at board meetings. These matters typically represent the first step in determining which information to report, and which correspond to risks and opportunities that could reasonably be expected to affect a company’s prospects. Such matters are often discussed in relation to elements of the company’s value creation process and are often connected to strategic themes, performance objectives and risk management. However, the process of understanding relevant matters is dynamic, so the board agenda might not offer a full picture of all relevant matters.

The short answer is ‘no’. Ultimately the materiality determination process outlined in the Integrated Reporting Framework that is applied to determine what to report on in the integrated report is a company-specific assessment. This assessment could be informed by engagement with stakeholders, but the Integrated Reporting Framework does not require such engagement. The purpose of stakeholder engagement is not to tailor the report’s content to the information needs of all stakeholders, but to understand effects and dependencies, to understand the matters that are likely to be relevant to value creation and thus important for providers of financial capital.

Some companies might choose to carry out a dedicated consultation to inform this aspect of the materiality determination process; however, this approach may be unnecessary for those who already engage with providers of financial capital during the normal course of business. Some, for instance, regularly interact with customers and suppliers as a quality control measure or to inform stakeholder satisfaction scores. Others engage with a broad stakeholder base to carry out risk assessments or develop strategic plans. External consultation might also be done for a specific purpose (for example, community engagement to inform plans for a factory extension). The more that integrated thinking is embedded into the company’s processes, the more likely the legitimate interests of providers of financial capital will be reflected in normal business activities.

If a stand-alone stakeholder consultation exercise does occur as part of the materiality determination process, its findings should be considered alongside those from other engagement mechanisms and, most importantly, the company-specific assessment.

For more information, see paragraphs 3.10 and 3.13 of the Integrated Reporting Framework.

In integrated reporting, the materiality determination process focuses on value creation over the short, medium and long term. Like the disclosure requirements in IFRS S1, the length of each timeframe is defined by the company, with reference to its industry or sector, strategies and business and investment cycles. The nature of the company’s business model outcomes will also influence the timeframe considered in this materiality determination process. For example, issues affecting natural or social and relationship capitals can be very long term. Clear identification of the periods considered in the integrated report is helpful to users.

The timeframe considered in integrated reporting is typically longer than in traditional financial reporting such as in the financial statements. A company should consider, in particular, issues that might become more damaging or difficult to manage over the long term if left unchecked.

For more information, see paragraphs 3.23 and 4.57–4.59 of the Integrated Reporting Framework and paragraphs 30–31 of IFRS S1.

By addressing the International Integrated Reporting Framework’s eight content elements, the integrated report naturally covers past, present and future time dimensions. With respect to future-oriented disclosures, the Integrated Reporting Framework encourages report preparers to consider short-, medium- and long-term time horizons. Because of the nature of the issues addressed in integrated reporting, organisations are likely to consider longer time scales than they would in other kinds of annual reports.

There is no one answer for establishing the length of each term. In fact, the length of the future time horizon varies by sector. While one sector might define the short, medium and long term as one year, two to five years and beyond five years, another might allocate these time frames over several decades. On this basis, it is important that an organisation define its own time horizons based on the pace and scale of important activities and programme cycles. It is also useful for entities to explicitly communicate the time horizons used for short, medium and long term in the integrated report. Disclosures about the long term are more likely to contain more qualitative information than shorter-term disclosures, because that information tends to be less certain.

For more information, see paragraphs 4.57–4.59 of the Integrated Reporting Framework.

No. Organisations are not required to explicitly identify which matters are considered material. The Integrated Reporting Framework requires only that they disclose ‘information about’ such matters. Arguably, having conducted a materiality determination process, most of the information in the report is material, making it unnecessary to prepare a separate list of material matters.

On the other hand, the Integrated Reporting Framework does not prohibit such a list, which can lend structure to the report and assist readers’ understanding. However, this approach should not preclude a fully integrated discussion that connects material matters to the content elements. By fully integrating material matters into the report, the report preparer upholds the guiding principle of connectivity of information.

For more information, see paragraphs 3.8 and 3.17 of the Integrated Reporting Framework.

No. A materiality matrix, more commonly associated with multi-stakeholder sustainability reporting, is not required by the Integrated Reporting Framework. In fact, plotting issues according to their importance to the company or importance to stakeholders is inconsistent with the Framework’s concept of materiality, which focuses on value creation over time, looking primarily from a provider of financial capital’s perspective.

For more information, see Integrated Reporting Framework paragraph 1.7.

Yes, the Integrated Reporting Framework requires an integrated report to answer the question, ‘How does the organisation determine what matters to include in the integrated report?’ The guidance accompanying this requirement elaborates on this expectation further. The materiality determination process is to be summarised in the integrated report. This summary enhances the report’s credibility by showing how embedded the materiality determination process is in the organisation’s normal course of business, including the role of those charged with governance. The summary is intended to be brief and, if necessary, linked to more detailed information elsewhere (for example, on a website or in an appendix).

For more information, see paragraphs 4.40–4.42 of the Integrated Reporting Framework.

An integrated report provides insight into the resources and relationships used or affected by the organisation—the Integrated Reporting Framework refers to these collectively ‘the capitals’. Capitals are stocks of value on which an organisation’s business model depends as inputs, and which are increased, decreased or transformed through its business activities and outputs. The capitals are categorised in the Integrated Reporting Framework as financial, manufactured, intellectual, human, social and relationship, and natural.

For more information, see paragraphs 2.10–2.19 of the Integrated Reporting Framework.

The Oxford English Dictionary defines capital as ‘wealth in the form of money or other assets owned by a person or organisation or available for a purpose such as starting a company or investing’. When used with a modifier (for example, ‘financial capital’ or ‘human capital’), it refers to ‘a valuable resource of a particular kind’. The term ‘financial capital’ is already embedded in the language of business and investment. The Integrated Reporting Framework applies this same convention to the full range of resources and relationships on which organisations rely or have an effect.

No. Paragraphs 2.17–2.18 of the Integrated Reporting Framework recognise that the categories of capitals may not suit all organisations. Rather, they are to be used as a guideline for completeness when preparing the integrated report to ensure a capital that is materially used or affected does not go overlooked. Where different categories are used, an explanation may improve comparability.

Integrated reports are not required to use the term ‘capitals’. Organisations can use terminology that is consistent with other existing communications, and that may be more understandable to stakeholders or users. For example, if an organisation uses the term ‘people’ in other communications, it might use that term in the integrated report rather than ‘human capital’. Likewise, the word ‘partnerships’ might be more appropriate for some organisations than ‘social and relationship capital’.

No, the integrated report is not required be structured along the lines of the capitals. As noted in Paragraph 2.17 of the Integrated Reporting Framework, an organisation is free to structure its integrated report however it chooses. Of course, an organisation may choose to structure its integrated report around the capitals if it thinks this is the best way to explain its value creation story.

No. While most organisations interact with all capitals to some extent, these interactions might be relatively minor or so indirect that they are not important enough to include in the integrated report.

As an organisation defines its reporting boundary, it finds that some capitals are strongly associated with key stakeholders. For example, human capital is most often linked to the organisation’s workforce. Page 24 of Capitals: Background paper for Integrated Reporting illustrates links between capitals and stakeholders to demonstrate how an organisation can use the capitals approach in conjunction with a stakeholder analysis when determining its reporting boundary.

The simplest way to differentiate between these three capitals is to consider who ‘holds’ each type of capital:

• intellectual capital is held by the organisation itself;
• human capital is held by workers or employees; and
• social and relationship capital is held by both the organisation and its external networks and partners.

No. Social- or societal-based disclosures in multi-stakeholder sustainability reports generally focus on a company’s effects on stakeholders or society at large. Such disclosures often describe the company’s investments—financial or otherwise—in social and community programmes.

In contrast, disclosures on social and relationship capital in an integrated report cover the company’s important networks, partnerships and interactions, and explain how these various relationships influence the company’s ability to create value (for better or for worse).

Such disclosures might describe, for example, the effects of the company’s activities and outputs on customer satisfaction or suppliers’ willingness to trade with the company, and the terms and conditions with which they do so. Such relationships are generally premised on the principles of mutual benefit, trust and shared values, recognising that the value created for the company is inextricably linked to the value created for others.

For more information, see paragraphs 2.2, 2.6 and 2.15 of the Integrated Reporting Framework.

Not all capitals an organisation uses or affects are owned or controlled by it. Some may be owned by others. For example, a logistics company may rely on the availability, quality and affordability of a government-owned transportation infrastructure. Some capitals may not be owned at all in a legal sense. For instance, social and relationship capital, by its nature, is not ‘owned’ the ordinary sense; nonetheless, an organisation’s networks, partnerships and interactions can be essential to its ability to create value.

With these considerations in mind, an integrated report should encompass all capitals that are material to the organisation’s ability to create value, whether they are owned by the organisation or not.

For more information, see paragraphs 4.15, 4.20, 4.54 and 4.56 of the Integrated Reporting Framework.

No. Although quantitative information such as performance indicators or monetised metrics can help explain an organisation’s use of and effects on the capitals, the purpose of an integrated report is not to quantify or monetise the value of the organisation at a point in time, nor the value it creates over a period, nor its uses of or effects on all the capitals. It is up to the organisation to decide which combination of quantitative and qualitative information best explains its value creation story over time.

For more information, see paragraphs 1.11 and 4.54–4.55 of the Integrated Reporting Framework.

Connectivity of information is important to an integrated report, and this includes demonstrating the links between the capitals. So, while it is usual for some information in an integrated report to relate only to one capital, the report also needs to show the important interdependencies and trade-offs between the capitals.

For more information, see paragraph 3.8 of the Integrated Reporting Framework.

The positive and negative interactions within and among the capitals rarely cancel each other out exactly. Consider that it would not be practicable (or even possible, in some cases) to quantify and explain all complex relationships within and among the full range of capitals to an exact net overall effect. Gains and losses can be inherently difficult to measure, in part because their precise evaluation depends on the perspective chosen. Imperfect information about external perceptions also introduces uncertainty and subjectivity, and prioritising one set of interests over another set of interests necessarily involves judgement. Furthermore, the evaluation process assumes that the effects on all capitals can be reasonably and reliably translated into a common unit of measurement.

Despite these limitations, the Integrated Reporting Framework illustrates that alternative courses of action invite various balancing acts in terms of their effects on the capitals. If these effects, and their potential trade-offs, are material to a company’s value creation story, they are included in the integrated report.

For more information, see paragraphs 2.11–2.14 and 4.56 of the Integrated Reporting Framework.

No. Climate can affect other capitals. The climate-related risks and opportunities described in IFRS S2 can also encompass social aspects, such as just transition to a lower-carbon economy, which is related to social and relationship capital. Furthermore, disclosures made in accordance with IFRS S2 may be relevant in a range of places in an integrated report, as shown in 'How to apply the Integrated Reporting Framework with IFRS S1 and IFRS S2: A mapping tool'. Therefore, in providing these disclosures, it is important for a company to take into consideration the wider process of value creation, preservation and erosion, and the relationships and trade-offs between the capitals that are part of that process.

Both the Integrated Reporting Framework and IFRS S1 acknowledge that companies do not operate in a vacuum. The relationships between them and their stakeholders, society, environment and natural environments can give rise to sustainability-related risks and opportunities that can affect the resources and relationships (capitals) on which a company relies or that it effects. Furthermore, the Integrated Reporting Framework and the IFRS Sustainability Disclosure Standards share the same target audience—primary users of general purpose financial reports.

The Framework generally refers to risks and opportunities that can affect a company’s ability to create value over the short, medium and long term, and how the company deals with these risks and opportunities. IFRS S1 specifically requires preparers to report information on those sustainability-related risks and opportunities that could reasonably be expected to affect a company’s cash flows, access to finance and cost of capital over the short, medium and long term. In some jurisdictions an integrated report might serve a different audience and, consequently, the number of of risks and opportunities might be greater within that report.

For more information, see paragraphs 2.4–2.9 and 2.10–2.16 of the Integrated Reporting Framework and paragraph 2 of IFRS S1.

Disclosures on risks and opportunities provided in accordance with IFRS Sustainability Disclosure Standards reflect different aspects of how a company’s value is created, preserved or eroded over time than those in an integrated report. As a result, these disclosures may be relevant across different guiding principles and content elements in an integrated report.

Opportunity-based disclosures offer insight into an organisation’s understanding of and readiness for future developments. Such forward-looking information help providers of financial capital and others evaluate how the organisation is positioned for the future. It also influences readers’ confidence in the adaptability of the organisation’s strategy and longer-term business model.

Effective organisations continuously monitor the operating environment for risks and opportunities. It’s important that the integrated report show both of these perspectives. Failure to seize opportunities can be as detrimental to a business model as mismanagement of risks, particularly in a disruptive or competitive environment.

For more information, see paragraphs 2.26 and 2.27 of the Integrated Reporting Framework.

The integrated report should answer the question: ‘What are the specific risks and opportunities that affect the organisation’s ability to create value over the short, medium and long term, and how is the organisation managing them?’

The Integrated Reporting Framework does not emphasise risks over opportunities. In fact, risks and opportunities are referenced together throughout the Integrated Reporting Framework—including in a single, dedicated content element—because they are often connected. For example, in pursuing its strategic objectives, an organisation might aggressively exploit new opportunities, a move that can carry inherent risks. On the other hand, emerging risks that have the potential to disrupt business models can also present new opportunities for innovation and growth.

The level of disclosure on opportunities (and risks) depends on the extent to which they influence value creation. Report preparers should realistically assess the likelihood that opportunities (or risks) will materialise, as well as the magnitude of their potential effects and their ability to deliver on key opportunities if those opportunities (or risks) do materialise.

Some companies are reluctant to disclose information about opportunities out of concern that does so would be revealing too much to competitors. Where this is of genuine concern, disclosures of a general nature about the matter, rather than specific details, can instead be included.

For more information, see the FAQs under competitive landscape and market positioning and paragraphs 4.23-4.25, 4.36, 4.50 of the Integrated Reporting Framework.

To create value over the short, medium and long term, organisations need to establish and maintain an advantage over their competitors. This advantage is challenged by the threat of new competition and substitute products or services, the bargaining power of customers and suppliers, and the intensity of competitive rivalry. In a fast-changing and competitive environment, if not effectively managed, any of these factors has the potential to put an organisation out of business very quickly. Therefore, an organisation’s assessment of, and responsiveness to, its competitive landscape and market positioning, is of critical importance to providers of financial capital and others interested in how it creates value over time.

For more information, see paragraph 4.5 of the Integrated Reporting Framework.

An organisation should show, through its integrated report, its understanding of the external environment and the effects of this environment on its strategy and business model. With respect to the competitive landscape and market positioning, this includes its awareness of:

• others in the market, as well as those with potential to enter the market;
• key market trends, such as changing customer demands and expectations, supply chain issues, or new or changing legislative and regulatory requirements;
• potential disruptors, (for example, from new technologies or alternative products and services);
• its position in the market, and how it differentiates itself in the market place (for example, through product differentiation, market segmentation, delivery channels and marketing); and
• specific risks and opportunities related to its competitive landscape and market positioning.

For more information, see paragraph 4.16 of the Integrated Reporting Framework.

Where disclosures on competitive landscape and market positioning could seriously reduce competitive advantage, it may be appropriate to address those matters in a more general way. The goal is not to divulge confidential information, but rather to demonstrate awareness of other market players and potential disruptors, and to show proactive consideration and management of their associated effects. However, the banner of commercial sensitivity should not be used inappropriately to avoid disclosure. If material information is not disclosed because of competitive harm, this fact and the reasons for it should be noted in the integrated report.

It’s important to strike an appropriate balance between achieving the primary purpose of the integrated report through complete disclosures and revealing sensitive information to competitors. There may be circumstances when omitting information could be more damaging to the organisation than including it, particularly in terms of investor and stakeholder confidence.

For more information, see paragraphs 2.4–2.9, 2.10–2.16, 3.51 and 4.50 of the Integrated Reporting Framework and paragraph 2 of IFRS S1.

Disclosures on risks and opportunities provided in accordance with IFRS Sustainability Disclosure Standards reflect different aspects of how a company’s value is created, preserved or eroded over time than those in an integrated report. As a result, these disclosures may be relevant across different guiding principles and content elements in an integrated report.

Opportunity-based disclosures offer insight into an organisation’s understanding of and readiness for future developments. Such forward-looking information help providers of financial capital and others evaluate how the organisation is positioned for the future. It also influences readers’ confidence in the adaptability of the organisation’s strategy and longer-term business model.

Effective organisations continuously monitor the operating environment for risks and opportunities. It’s important that the integrated report show both of these perspectives. Failure to seize opportunities can be as detrimental to a business model as mismanagement of risks, particularly in a disruptive or competitive environment.

For more information, see paragraphs 2.26 and 2.27 of the Integrated Reporting Framework.

The integrated report should answer the question: ‘What are the specific risks and opportunities that affect the organisation’s ability to create value over the short, medium and long term, and how is the organisation managing them?’

The Integrated reporting framework does not emphasise risks over opportunities. In fact, risks and opportunities are referenced together throughout the Integrated reporting framework—including in a single, dedicated content element—because they are often connected. For example, in pursuing its strategic objectives, an organisation might aggressively exploit new opportunities, a move that can carry inherent risks. On the other hand, emerging risks that have the potential to disrupt business models can also present new opportunities for innovation and growth.

The level of disclosure on opportunities (and risks) depends on the extent to which they influence value creation. Report preparers should realistically assess the likelihood that opportunities (or risks) will materialise, as well as the magnitude of their potential effects and their ability to deliver on key opportunities if those opportunities (or risks) do materialise.

Some companies are reluctant to disclose information about opportunities out of concern that does so would be revealing too much to competitors. Where this is of genuine concern, disclosures of a general nature about the matter, rather than specific details, can instead be included.

For more information, see the FAQs under competitive landscape and market positioning and paragraphs 4.23-4.25, 4.36, 4.50 of the Integrated Reporting Framework.