A Guide to IIRC Framework

Dec 21, 2021 | by Yosy Christy Natalia

Dec 21, 2021 | by

ESG Evaluation Frameworks Series: A Guide to IIRC Framework

ESG evaluation frameworks are used to facilitate businesses in determining their sustainability steps further. Standard frameworks and metrics not only help in reporting and business ethics but also build a credible brand. What is sustainable business ethics? What options impact investors? Can it be fully dedicated to the company’s ongoing mission or perhaps simply fulfilling its responsibilities? How important does financial play in sustainability? Some ESG criteria can answer questions and make reporting sustainable.

Several globally recognized standards are available for businesses and companies to use in reporting sustainability and for investors can be used to gauge the credibility of their current and potential investors.

There are common all-encompassing frameworks such as GRI and GIIN IRIS. There are also some specifics such as CDP — relating to water, deforestation, and greenhouse emissions — and SASB that examines the relationship between ESG issues and an organization’s financial performance. In this blog, we’ll discuss more clearly other significant and well-known frameworks, and how does this framework fits your business? Let’s find out about IIRC.

Understanding IIRC framework

IIRC, The International Integrated Reporting Council, as the name suggests, is a council – a group or a coalition comprising those involved in setting standards, non-government and nonprofits, accounting experts, companies, investors, regulators, among others. What do they do? Primarily, study the global market situation and keep a tab on the need of publishing new corporate reporting standards or overhauling and refurbishing the existing ones.

IIRC framework aims at providing an integrated, seamless and standardized reporting mechanism that promotes both sustainability and financial stability. The same is achieved by the means of integrated reporting which is exhibited or presented in the form of an integrated report.   

What is Integrated reporting?

Integrated reporting involves companies communicating the various aspects of value created by their operations and efforts, primarily financial. It involves looking at all the material data involving a company’s governance, performance, strategy, and prospects to assess its commercial, social and environmental standing. It aims at providing a clear picture of how and what kind of value/impact is being created by a business and how. The same is presented in the form of an integrated report. 

Integrated report

Think of this report as a company’s mouthpiece to communicate how its governance, strategy, performance and prospects with respect to its external environment lead to the creation of short, medium and long-term value. 

An integrated report is prepared in accordance with the International Integrated Reporting framework which we shall talk about at length in the next section.

How it works

IIRC’s reporting standards are popularly known as The International framework which basically act as the guiding principles that govern the content of an integrated report. The framework is a cohesive and practical answer to all possible corporate reporting woes. It helps the analysis of all material data and information provided by a company, sift through what is relevant and arrive at the factors that impact a company’s value-creating ability. 

It provides examples, guidance, tools and methodologies which can be used by the companies to work up an integrated report. The examples database shows how integrated reporting and IR framework can be put to practice via a range of examples. 

The benefits

  • The framework offers a range of benefits for corporates and investors. One of the primary advantages of using IR frameworks is for investors as it provides them with quality data and aids judicious allocation of capital.
  • The framework facilitates businesses in making decisions based on robust insight and material data and focuses on its long-term value creation. It is concerned with an organization’s business model, strategy, external environment, governance, resource allocation, capital procurement, performance, value creation.  

The pitfalls

  • Similar to SASB, the IR framework is directed to providers of financial capital and communicates how value is created over time by a corporate entity. It does not include a company’s larger social and environmental impacts and is not aimed at a multi-stakeholder audience. 
  • It may not map a company’s environment, social, ethical performance, and societal influences as aggressively and minutely. 

Our take

IIRC’s IR framework is a good starting point for companies that want to report and map their performance in terms of value-creation – short, medium, and long term – that is most relevant to its lenders, investors, and financial providers. 

The framework is built to help companies share their outward impacts in a language that is most relevant to their financial stakeholders. However, companies may feel the need to work in tandem with other reporting standards to cater to and satisfy different types of stakeholders besides the financial ones. 

Read also:

ESG evaluation framework series: A Guide to Carbon Disclosure Project (CDP)

ESG evaluation framework series: A Guide to The Sustainability Accounting Standard Board (SASB)

Artemis Impact is a network of corporate, donors &  non-profits. With our corporate enterprise solution, we aim to empower companies to build human-centered impact stories and create sustainable impact with their CSR programs & core business.

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