How Integrated Reporting Helps Define and Measure Value

4 min readFeb 21, 2019


This is the first part of a two-part series about making the case for asset owner integrated reporting.

By Keith Ambachtsheer, founder of KPA Advisory Services, and Bill Baue, Senior Director at Reporting 3.0.

Keith Ambachtsheer (left), Bill Baue (right)

Asset owner fiduciary duties call for creating “value” for their stakeholders. Among other things, it involves pooling investments in enterprises that create net positive value. But what exactly is that value– and how do we account for it? Conventional wisdom tries to distill it down to financial quantification, but does this really tell the whole story? Mariana Mazzucato, author of The Value of Everything, thinks not:

“Understanding that stories about value creation are around us everywhere is essential for the future of capitalism. Our greatest challenge is to define and measure collective contributions to wealth creation, so that value extraction is less able to pass as value creation. The idea that price determines value and that markets are best at determining prices has all sorts of nefarious consequences.”

So, how do asset owners tell their multi-dimensional value-creation story in ways that go beyond simplistic price signals which might mask value destruction, particularly at the collective level? By adopting Integrated Reporting (or IR as it is commonly abbreviated), we believe — following the late Canadian media philosopher Marshall McLuhan’s dictum that “the medium is the message.”

The value of integrated reporting derives only partly in the reporting itself — another powerful benefit comes from the required shift to integrated thinking that IR encourages. Over a decade ago, in his book The Opposable Mind, Roger Martin proposed that through integrative thinking we can “think our way through to new superior ideas.” We believe the time is ripe for asset owners to do just that.

While IR’s original application was in the corporate sector, application by asset owners who sit on top of the financial food-chain is arguably even more important, Ambachtsheer recently opined in his monthly client Letter. The Letter translates the seven Guiding Principles of IR (as articulated by the International Integrated Reporting Council, or IIRC) into asset owner contexts. The seven Principles include: Strategic Focus and Future Orientation; Connectivity of Information; Stakeholder Relationships; Materiality; Conciseness; Reliability and Completeness; and Consistency and Comparability.

The consistent theme in these translations is the need to make micro-macro linkages between micro enterprise-level impacts (i.e. enterprise value creation / destruction) on the one hand, and macro systems-level impacts (i.e. system value creation / destruction) on the other. For example, the Connectivity of Information Principle calls on organizations to “paint a holistic picture of how various factors integrate to create value over time.” The Letter extends this thus:

For asset owners, such a picture would include an explanation of how the organization’s own capital resources (e.g., its financial assets base, its human and intellectual capital, its network capital, its IT capital, and its physical capital) and ‘common’ external capital resources (e.g., air, water) combine to create both micro and macro ‘value’.

The Letter then translates the IIRC’s seven Integrated Report Content Elements (Organizational Overview and External Environment; Governance; Business Model; Performance; Risks and Opportunities; Strategy and Resource Allocation; and Outlook) into asset owner contexts. Here again, the micro-macro interlinkages loom large.

Finally, the Letter concludes by addressing five potential “elephants” in asset owner board rooms, and how IR can help identify — and thereby potential address — those elephants:

  1. Value-creating in asset owner organizations can take place at two levels: micro and macro. It is not a matter of choosing one over the other, but of integrating both perspectives into a seamless whole.
  2. Decisions must be based on the balanced consideration of the interests of all organizational stakeholders, not just some.
  3. Effective organization governance is a critical success driver. Thus, governance effectiveness must be measured and reported.
  4. Business model clarity and capital resource adequacy are also critical success drivers. Thus, they too must be clearly addressed in integrated reporting.
  5. Performance reporting must be directly integrated with the stated internal and external value-creating ambitions of the organization.

The Governance Center, in collaboration with PwC, has convened a cross-functional working group, consisting of corporate external reporting executives (financial, sustainability, and attorneys), investors, and service providers to discuss the current and desired state of integrated reporting. The Working Group meets on a quarterly basis to:

  • Explore trends in (financial and non-financial) corporate reporting, examples of innovative reporting, emerging standards, and stakeholder expectations.
  • Assess key challenges companies are facing in meeting any identified trends (i.e., lack of standards, systems, processes).
  • Discuss potential ways integrated reporting can continue to evolve to meet changing company and stakeholder needs.
  • Understand the legal, accounting, and other regulatory challenges that face IR efforts.

In the second blog post, we will delve more deeply into several of these potential “elephants.” Specifically, we will apply preliminary thinking from a joint project between IIRC and Reporting 3.0 on the shift from Monocapitalism to Multicapitalism. In particular, this project explores how enterprises can manage their impacts on vital capital resources at the micro level in ways that account for aggregate impacts that respect the carrying capacities of those vital capitals at a macro level. Such tests are required to ensure sufficient resources exist to support the wellbeing of stakeholders (or rightsholders as Reporting 3.0 calls them) not only at the micro-enterprise level, but also at the macro-societal level.

This blog post was first published on the Conference Board ‘On Governance’ series here. On Governance is a series of guest blog posts from corporate governance thought leaders. The series is meant to serve as a way to spark discussion on some of the most important corporate governance issues.




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