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Approach to Integrated Reporting

In partial fulfillment of Summer Internship of

(Post Graduate Diploma in Industrial Safety and Environment Management)


Under the guidance of:

Ashish Ranjan Prof. Shirish Sangle

Manager, KPMG, Mumbai NITIE, Mumbai

National Institute of Industrial Engineering (NITIE)

Vihar Lake, Mumbai - 400087

Executive Summary

Integrated report is a relatively new reporting framework that is based on the

premise that investors today are more interested in knowing the value creation
potential of an organisation over and above the financial condition of the
company at a given point of time. To know the value creation potential of a
company, it is important that we know the effects of a companys processes
across different domains. Integrated report is a step in that direction which has a
long term vision of a world in which integrated thinking is embedded within
mainstream business practices. It is quickly gaining ground in the corporate sector
and is soon expected to become the corporate norm.
In lieu of this, it is important to thoroughly study the principles and requirements
of integrated report. The IIRC has prescribed several principles and content
elements for smooth completion of integrated report and fulfilments of its
objectives. It would be imperative to analyse this framework and develop a
comprehensive plan on how to approach it. The project was primarily aimed at
putting forth the way integrated report can be approached and the specific areas
where changes in annual reports are required so that an integrated report can be

Table of Contents

Certificate of Project completion

Executive Summary
1. Introduction..4
1.1 Corporate reporting and its evolution ..4
1.2 Problem statement..5
1.3 Scope of the project.5
1.4 Approach and methodology for project.5
2. Literature Review..7
2.1 Overview of Annual Report.7
2.2 Learning the methodology of GRI report preparation.7
2.3 Understanding Integrated Reporting7
3. Description of Work.8
3.1 Annual Report.....8
3.1.1 An overview of Annual Report.....8
3.1.2 Contents of Annual Report8
3.2 GRI Report.9
3.2.1 An overview of GRI reporting..9
3.2.2 Principles of GRI report..10
3.2.3 The Implementation Manual..11
3.2.4 The KPMG approach 12
3.3 Integrated Reporting14
3.3.1 Overview and Relevance of Integrated Reporting..14
3.3.2 Integrated Reporting Framework15 Guiding Principles (Over view and probable approach)..15 The Capitals.20 Content Element..21
3.4 Implementation of Integrated Reporting process23
3.4.1 Possible implementation steps.23
3.4.2 What corporates can do to make it smoother23
4. Limitations24
5. Scope of improvement24
6. Bibliography24

1. Introduction
1.1 Corporate Reporting and its evolution
Corporate Report is an official written communication released by a company
for a particular set of audience with the purpose of conveying both financial
and non- financial information related to the company. The contents of a
particular report is decided by the target audience set for the report.
Over the years the corporate reporting patterns have evolved due to various
regulatory compliances, changing business circumstances and the ever
increasing need for transparency and accountability. The companies were
historically reluctant to reveal any inside information in the form of reports
for the fear of overexposure, litigations, no standard framework, no visible
tangible benefits etc. Then due to statutory compliances and regulations the
companies started disclosing financial information annually with the core aim
of providing present and potential shareholders information about financial
performance. As the concept of triple bottom line became popular companies
started including the societal and environmental performance in their annual
reports. With growing clamour for corporate accountability for the impact of
their actions on environment and society and as the scope for environmental
reporting increased, companies started coming up with separate disclosures
for such issues. Some independent firms also released reporting frameworks
that were widely used for reporting purposes. The frameworks released by
GRI and AccountAbility became the most widely used ones. But as the
sustainability reports became more and more complex, it became increasingly
difficult to see the inter-related effects of policies, practices and impacts.
Several leading organisations like Novo Nordisk started researching on the
idea of integrated reporting. The first regulatory compliance came from South
Africa. Afterwards, the International Integrated Reporting Council (IIRC) was
formed which came up with a framework for integrated report. The main aim
of this framework is to provide a concise report that would indicate an
organisations most important social, environmental and economic and also
risks and opportunities in a manner that reflected the integrated nature of
these factors.

1.2 Problem statement
With globalization and several other associated factors like growing expectations
of corporate transparency and accountability the current reporting frameworks
fall short in providing the critical interdependencies between various factors that
affect the ability of the organisation to create value for itself. Balance sheets and
financial statements no longer provide the requisite information that might help
shareholders and investors gauge the capability of the company to sustain growth
in the long term. They have to be supplemented by information that explains the
critical inter relation between strategy, governance, operations and financial and
non-financial performance. Integrated Reporting is a step in that direction. It
helps to bring together the diverse strands of reporting into a coherent,
integrated whole and demonstrate an organisations ability to create value now
and in future.
But since the integrated reporting framework is based on a relatively new
concept, there is a need to properly look into the requirements of this framework
both from the perspective of the company and the consultants and come out with
a broad strategy on how to go about it. The study done here would help KPMG
understand the process and requirements of the Integrated Reporting and also
help companies formulate processes that would ensure smooth making of the

1.3 Project scope

The scope of the project was limited to suggesting changes in annual report so
that it becomes an integrated report and developing a comprehensive approach
for integrated reporting both from the perspective of the consulting firms and the

1.4 Approach and methodology for project

The approach used was to understand the reporting process in detail by analysing
the current widely used reporting frameworks in detail. The annual reports and
the GRI G4 frameworks were analysed for this purpose. This was followed by

analysing the integrated reporting framework and comprehending its
requirements. Based on the above studies, recommendations for changes in
annual reports so that an integrated report can be formed and a comprehensive
approach for integrated report was developed.

2. Literature Review
2.1 Overview of annual report
The following material was thoroughly gone through to get proper
insights into annual reporting
Reliance annual report
HUL annual report

2.2 Learning the methodology of GRI report preparation

The following material was thoroughly gone through to get proper
insights into GRI reporting:
GRI implementation manual
GRI reporting principles and standard disclosures
Sustainability reports

2.3 Understanding Integrated reporting

The following material was thoroughly gone through to get proper
insights into integrated reporting:
Integrated reporting framework
IIRC capital and materiality background papers
EY background paper on value creation
Altron, Asahi and TATA Steel integrated Reports

3. Description of work
3.1 Annual Reports:
3.1.1 An overview of annual report
Annual reports are formal financial statements that are published
yearly that assess the companys yearly financial and operational
conditions and some specific accomplishments during a particular year.
Annual reports are intended to give shareholders and other interested
people information about the company's activities and financial
performance. A large part of the contents of the annual report is as per
the statutory compliances. In India, they are mainly determined by the
Income tax act and the Companies act.

3.1.2 Contents of annual report

The main contents of the annual reports are as follows:
a. Vision and Mission statements: The vision statement describes
the organisation as it wants to be in a future state. The mission
statement describes how the company intends to reach its vision.
It conveys the purpose of the companys existence
b. Company Information: Corporate information gives information
about the companys brands, verticals of operation,
products/services offered, subsidiaries etc.
c. Corporate governance: It gives information about the governance
structure of the company that includes process of taking
important decisions, board of directors, roles of various
designates etc.
d. Management discussion and analysis: This section gives detailed
information on the companys past performance, trends in the
industry, competitive strengths and weaknesses of the company
and the managements approach to handle them.

e. Information on companys shares: This section provides the
historical performance of companys shares, share holding
pattern, splitting of shares and other such share related
f. Auditors report: They are the comments of the auditors on the
financials of the company. Audits are conducted within the agreed
scope and boundary. They are included in the report so as to
instill confidence about the authenticity of the financial reports in
the minds of the readers
g. Financial Statements: This section contains balance sheets, profit
and loss statements, cash flow statements and schedules of the
financials for two years
h. Miscellaneous: Any special accomplishment or any other activity
taken up by the company during the course of the year that it
thinks fit to report upon may also be included in the report

3.2 GRI Reporting:

3.2.1 An overview of GRI reporting
GRI is an international independent organization that is
pioneer in developing sustainability reporting framework
which has been instrumental in making sustainability reporting
a mainstream practice. Its vision is to create a future where
sustainability is an integral part of decision making process of
every organization. It is the most widely used sustainability
framework worldwide due to its comprehensive nature and
freedom to choose the issues that an organization wants to
report upon. It is constantly updated to keep it relevant to the
changing times and continuously make it easier for the
companies to report upon. GRI standards are the latest in the
series. However, G4 framework is currently the most widely
used framework and hence has been used for the scope of the

3.2.2 Principles of GRI Reporting
GRI subscribes some principles which form the basis of the
content and quality of the GRI report. These principles form
the basis of the report and are customary to ensure
transparency in sustainability reporting. They are divided into
two parts. They are as follows:
Principle for defining Report Content: There are four principles
in all which are used in combination to define the content of
the report
a) Stakeholder inclusiveness: The stakeholders should be
identified and the steps taken to address their reasonable
expectations and interests reported.
b) Sustainability Context: The report should present the
organizations performance in the wider context of
sustainability. The information in the report should reflect
the organizations past and future contributions to the
social, economic and environmental conditions at local,
regional or global level.
c) Materiality: Companies should identify and report on those
issues that substantially impact companys social,
environmental and economic performance.
d) Completeness: The report should include coverage of all the
relevant material aspects and their boundaries that would
enable stakeholders to assess the organisations
performance in the reporting period.

Principles for defining report quality: These principles are

there with the view of ensuring transparency in the report.
The quality of information is important to enable
stakeholders to make sound and reasonable assessments of
performance and take appropriate actions. There are six
principles in all. They are:
a) Balance: Both positive and negative aspects of the
performance should be reported

b) Comparability: The reported information should be in a
manner that readers can compare changes across time
c) Accuracy: The information should be in considerable
detail so that stakeholders are able to analyse them.
d) Timeliness: Reports should be published at regular
intervals and at appropriate time so that information is
available to stakeholders for informed decisions at
appropriate time.
e) Clarity: Information should be in a manner that is easily
comprehensible to the readers.
f) Reliability: The data collection process should be in a
way that instills confidence in the stakeholders
regarding the veracity of the content.

3.2.3 The implementation manual

The implementation manual contains explanation of how to
apply reporting principles, how to select the information to be
reported and how to disclose the information in the report.
They also give specific guidance regarding each principle and
indicator which helps us know the particular requirements
which helps in report formation.
They also give details about General Standard Disclosures and
Specific Standard Disclosures upon which the company can
report. The General Standard Disclosure contains disclosures
relating to Strategy and Analysis, Organizational Profile,
Identified Material Aspects and Boundaries, Stakeholder
Engagement, Report Profile, Governance and Ethics and
Integrity. The specific standard disclosure contains disclosure
on management approach and specific indicators on which a
company decides to report upon. There are some general
standard disclosures that all companies have to report upon
irrespective of the in the accordance option they choose.
These disclosures pertain to general information like the basic

details of the organization, list of stakeholders to be engaged,
the scale of organization, information on employees etc.

3.2.4 The KPMG Approach

KPMG broadly follows the following steps to complete the
process of GRI reporting:
a) Kick-off meet: This meet is conducted with the top
management of the organization before the actual process
of reporting starts. In this meet, the agenda, terms and
conditions of the meet are decided. Also the scope of
materiality assessment and stakeholder engagement is
decided in this meet. A bucket list of probable relevant
issues is passed on to the consented stakeholders which are
filtered to be processed further to find out the material
b) Capacity Building Workshop[CBW]: The agenda for CBW is
decided in the kick-off meet. It is done mainly with the
intention of sensitising the organisation and its employees
over the issue of sustainability. The sensitising process is
necessary so that proper systems can be put into place for
easy reporting process. It may also include a brief
introduction of the reporting process to be employed so
that it may become easier to extract relevant data from the
c) Materiality Assessment: This step mainly includes
identification of relevant issues, prioritising them and short
listing the most material issues which would be used for
reporting purposes. Identification of relevant issues is done
by passing a bucket list of probable relevant issues to the
stakeholders. The management in the end decides which
issues have to be taken into consideration which becomes
relevant issue. Relevant issues are not material issues but
their priority to different stakeholders is seen to see if they
are material issues. The relevant issues thus recognized are

ranked by various stakeholders who themselves are ranked
based on their impact on the organisation. This is how
prioritisation is done. The required details are put in the
KPMG tool which gives us the materiality matrix and the
ranking of various relevant issues. Materiality matrix is a
graph against impact on stakeholders Vs importance for
managers. The issues on the top right corner which are
important for both are generally considered material.
d) Identify Indicators: After the identification of material
issues the material issues are mapped against the relevant
indicators. If the report is in accordance with
comprehensive then the organisation must report upon all
the indicators within a particular aspect.
e) Data Retrieval: After the indicators are identified, the
requirements of those indicators are identified. The
implementation manual helps us to identify these
requirements. Then the required data is retrieved from the
various sources.
f) Report Formation: The data retrieved is consolidated,
analysed and the specific position of data in the report is

3.3 Integrated Reporting
3.3.1 Integrated Report: Overview and Relevance
Various researches have shown that the current reporting
practices, although extensive, fail to provide the critical inter-
dependencies between the various information that is available to
us. Hence, the effect of decision and events in one domain on
some other domain is unknown. Also, the reports have greater
emphasis on the financial aspects. The effect of intangibles on the
business is missing although they form a greater proportion of
companys market value. Hence, the overall value creation
potential of the company is unknown. Integrated reporting is a
step in that direction that could fill the required gap. It tries to
provide a holistic picture of the impact and risks businesses take
during their operations.

The long term vision of integrated report is to embed integrated

thinking within the mainstream business practices. IIRC is of the
view that repeatedly reporting on its framework would lead the
company to develop systems that would take care of the inter-
related effect during decision making. Another thing that should
be taken into consideration is that the integrated report is made
with investors as its target audience. Hence, the value creation
should be with respect to the investors. It is therefore not a
framework that would replace other reports like the sustainability
report due to basic difference in content due to different

3.3.2 Integrated Report Framework
The IIRC has developed a framework which provides the guiding
principles and the content elements. They assist companies in
deciding the content of the report. Guiding Principles

There are seven guiding principles that guide the content
of the report. The framework is itself based on these
principles. The intent of having principles based approach
is to strike a balance between flexibility and prescription.
There are seven principles in all. Their brief explanation
and the probable approach are given below.

1) Strategic focus and future orientation:

An integrated report should provide insight into
organisations strategy.

To approach this principle the company should segregate

different domains in which the strategy can be reported.
The important points that should be taken into
consideration are:
a) Broad strategy for the companys future direction
should be made available in the integrated report. It
should contain how the company intends to allocate its
resources across various domains. The decision may be
based on various factors like assessed risks and
opportunities, strengths and weaknesses, past
performance etc.
b) Companys strategy to handle the material issues and
proper feedback systems to see the implementation of
the strategy should be mentioned in the report. If they
are not there, then the company should try and put
proper procedures in place.
c) Short, Mid and Long term goals should be mentioned
in the report. Short and mid term goals should
preferably be definite with specific timelines. They
should align with companys vision. The specified
targets should be compared to the industrial standards
and any large deviation should be explained. This is to
have confidence in the companys process of
determining goals and targets.
d) Identified risks and opportunities should be mentioned
in the report. Also their influence on strategy and
business model should be reported. Companys
strategy to handle risk and capitalize on the
opportunities should also be mentioned.
e) Proper procedures to identify and strategise the above
issues with proper involvement of the senior
management should be in place and should be a part
of the report.

2) Connectivity of information
An integrated report should show a holistic picture of
combination, interrelatedness and dependencies
between the factors that affect the organizations
ability to create value over time.

An organisation can follow the following approaches to

come up with the required connectivity:
a) Integrated information would be available only if
integrated thinking is embedded in the
organisation. To ensure such a thinking the
organisation may take views on impact from each
department before reaching a big decision. Also
vital stakeholders should be identified and their
legitimate concerns incorporated in the decision
making process. Externalities may also be identified
and their effects on strategy, governance and
business models should be seen. For long term
smooth reporting, the internal reporting structure
of the company should be on the lines of integrated
b) Connectivity between capitals can be seen by first
grouping all the material issues under various
capitals. This is done to segregate different material
issues and those with similar effects can be grouped
together. After such grouping is done, their effect
across different capitals can be seen. Grouping
saves us from looking into individual effects which
can be cumbersome.
c) Connectivity between past performance, present
condition and future strategy and expectations
might also be reported. The systematic changes
made in lieu of past performance should also be
3) Stakeholder relationships
An integrated report should provide insight into the
nature and quality of the organizations relationships
with its key

This principle can be approached by conducting

stakeholder engagement. For this it is necessary to
identify key stakeholders and define the scope of
engagement. The scope should be defined keeping in
mind the legitimate needs, the value creation
perception, identifying general trends and reviewing
the quality of relationship.

The nature and quality of information may also be

gauged by considering the ratings at various open
forums like the internet.

4) Materiality
An integrated report should disclose information about
matters that substantively affect the organizations

ability to create value over the short, medium and long

The materiality determination process might be broken

down into various steps as follows:
a) Identifying Relevant Issues:
A huge bucket list of probable relevant issues is
made by viewing past annual and sustainability
reports, sector specific study, any comments in
media, peer review etc. The above list is passed
through the relevant stakeholders who choose the
relevant issues. It is then handed over to the
management for final filtration.
b) Prioritisation:
Each issue analysed to see the interlinking effect
across various capitals, strategy, governance and
business model. The effect should be seen in the
light of severity of impact and the duration of
impact. It might require various resources like some
internal data and stakeholder engagements to
analyse them. After this the materiality matrix is
drawn and the material issues are identified. The
matrix is drawn between the severity of impact and
the duration of impact.
c) Determining Boundary and Scope:
The analysis of the impacts of particular material
issues should be done within specified boundaries.
The factors that determine the boundary and scope
are availability of time and data, depth and breadth
of stakeholder consultation that a company may
allow, financial constraints etc.

5) Conciseness
An integrated report should be concise to avoid
information over burden for the investors. This can be

ensured by reporting only on the relevant issues and
avoiding the very generic ones.

6) Reliability and Completeness

An integrated report should include all material
matters, both positive and negative, in a balanced way
and without material error

The following methods may be applied to ensure the

compliance of this principle:
a) Internal and external audit reports may be viewed
b) Stakeholder engagement can be done if some data
seems unreliable
c) Proper systems for internal reporting should be
d) Effective procedures in place for data monitoring
e) Both positive and negative material information
should be highlighted
f) Peer report review to ensure completeness
g) Reports should be compared with content elements

7) Consistency and Comparability:

The report presented should be comparable over time
and presented in a way that enables comparisons
across different organisations.
This can be done by reviewing information at different
forums so that there is no inconsistency across them.
Also the format of data representation should be
according to industrial benchmarks so that
comparisons are easier.

19 The Capitals
The capitals represent stores of value that an organisation
can use for the production of goods and services. The
capitals might increase or decrease or get transformed
into some other capital due to constant flow between
them. In the process of transformation value creation
process takes place. An important feature of the capitals
is that they are merely representative in nature and it is
not necessary to structure report around them. There are
six capitals in all which are represented as follows:

a) Financial Capital: Financial capital broadly represents

the pool of funds available to an organisation. This
includes both debt and financial equity. The financial
capital is a kind of umbrella capital as all other capitals
are expected to contribute to it now or in future.
b) Manufactured Capital: Manufactured capital is seen as
human-created, production-oriented equipment and
tools. It extends beyond that owned, leased or
controlled by an organisation like roads, bridges and
other infrastructure projects that assist the company in
its manufacturing processes. It is different from
manufactured goods.
c) Intellectual Capital: Intellectual capital can generally be
said to be as organizational and knowledge based
intangibles. They include the systems through the
company works and also the intellectual property
rights that the company has but are not limited to
these. These are directly owned by the company and
there are no intermediaries between them. It can be
used for competitive advantages and ay bring in
financial capital for the company in future.
d) Human Capital: Human Capital is understood to
consist of the individuals capabilities, and the
knowledge, skills and experience of the companys
employees and managers. These are directly owned by
the employees and the organisation owns them
through the employees. In this manner it is different
from the intellectual capital.
e) Social and Relationship Capital: They may include the
relationships within the organisation like that with the
vendors, contractors etc. and outside the organisation
like with the local community and customers. It
depends on the scope decided by the organisation. The
relationship with employees is not a part of this
f) Natural Capital: The natural capital, as the name
suggests, consists of natural resources like timber,
water, fish etc. that are processed to produce goods
and services for the consumers. The Content Elements

The following eight elements should be the part of
Integrated Report:
a) Organisation overview and external environment:
Integrated report should explicitly inform the readers
what it does and the circumstances under which it
operates. It should include the organisations ethics,
vision and mission, culture, effect of external
environment, regulatory environment, societal issues,
speed of technological upgradation etc.
b) Governance:
An integrated report should give information about
organisations governance and review structure and
the appropriate changes that would be made for
effective decision making.
c) Business Model:
The integrated report is expected to include the
business model. Business model is primarily
transforming inputs into outputs and outcomes that
fulfills the organisations strategic purposes and
creates value.
d) Risks and Opportunities:
The specific risks and opportunities that affect the
companys value creation potential should be
reported. Also companys strategy to tackle them
should also be a part of the report.

e) Strategy and Resource Allocation:

Companys broad strategy and resource allocation and
basis of those should be a part of the integrated
f) Performance:
The past performance of the company compared with
the targets sets should be a part of the integrated
report. KPIs that includes financial and other narrative
or a combination of both can be a good indicator of
the past performance.
g) Outlook:
The companys outlook towards challenges and
uncertainties of the future, anticipated changes in
future strategy etc. must be reported.
h) Basis of preparation and presentation:
The basis of including certain aspects of matter should
be a part of the integrated report. The relevant
boundaries of the report should also be included.
i) General Reporting Guidance:
The report should include disclosure of material
matters, capitals, short term, mid term and long term
time frames
j) Aggregation and disaggregation:
Aggregation of information that conveys the same
message or disaggregation if the analysis of a particular
information is difficult should be carried out based on
the judgement of the reporters.
3.4 Implementation of Integrated Reporting Process
3.4.1 Possible implementation steps
A consulting firm may follow the below steps to complete the
process of integrated reporting:
a) Kick off meet with the management: It would be same as that
of sustainability reporting as given above.
b) Capacity building workshop[CBW]: Since integrated reporting
is a new concept, CBW should be future oriented such that the
process of integrated reporting becomes smoother next time.
Hence, it is necessary that employees be told about the
requirements of integrated report and its importance in CBW.
c) Materiality Assessment: It should be carried out as discussed in
the section materiality of guiding principles.
d) SWOT analysis: Analysis of relevant issues (not just material
issues) to recognise the strengths and weaknesses should be
carried out. Opportunities and threats can be identified either
for a particular material issue or grouped under various
e) Connectivity: The information thus obtained should be
connected as discussed above.
f) Analysis, consolidation and report preparation: In this stage,
the position of various data in the report is decided and the
actual report formation takes place.

3.4.2 What corporates can do to make it smoother

a) Embed integrated thinking: This is to be done as discussed
b) Continuous identification of material issue: Identifying and
analysing material issue can be a daunting task for the
company and the consulting firms. Hence, it may not be
possible for organisations atleast in the beginning to come up
with all the material issues on an ad-hoc basis. Hence, the task
of identifying material issue should be continuous. Company

can ask different departments to report the important issues
on a periodical basis.
c) Active involvement of the senior management: Surveys have
found that only those companies where senior management is
actively involved have shown credible improvements in
integrated approach

4. Limitations
Due to lack of practical experience in reporting, I might not had been able
to gauge the practical difficulties faced in implementing the
recommendations given by me. Also I might have missed looking into the
concept of Integrated reporting from various angles due to lack of practical
exposure in the reporting process.

5. Future Scope of Improvement

a) Ranking of relevant issues: Ranking becomes important when the list of
relevant issues is too long. The conventional method of ranking used for
sustainability reporting is irrelevant here as the importance of material
issue for various stakeholders is not important in integrated reporting.
Some other way can be thought of for this. One way can be continuously
review the material issue list.
b) Assurance: Assurance of integrated report can be complicated due to
various intangibles involved which can be quite complicated.

6. Bibliography
KPMG research papers
EY research papers
GRI website