The importance of Integrated Reporting for internal decision making

Source: IIRC, 24 January 2017

While much of the focus on Integrated Reporting has been on the needs of external stakeholders, the needs for better internal decision making can be significantly improved through utilizing the six capitals approach. As an example in 2014 I worked with a US industrial service company which serves the steel industry, to incorporate a checklist into their strategic planning process through which the impact of all six capitals was considered especially as it pertained to the risk of investing or not investing financial capital in order to sustain competitive capability and advantage. The approach was simple and assessed several aspects of each capital as high (red), medium (amber) or low risk (green); this simple approach quickly identified that there were several areas where lack of sustainable financial investment had increased the level of risk in several non-financial capitals. The company earnings had been consistently in the upper quartile but the negative impact of focusing on maximizing financial earnings quickly showed up through the depletion and increasing risk of non-financial capital sustainability.

Read the full article by Nick A. Shepherd (owner of Eduvision Inc. and also leads the Integrated Reporting work of the UK based Maturity Institute, a world leader in the understanding of human capital).