A company’s annual report can tell you what happened during the year. But can it explain how the business creates value, what that value depends on, and what could shape it in the future?
That is where integrated reporting comes in.
Integrated reporting connects financial and non-financial information to present a more complete picture of how an organisation creates, preserves or erodes value over the short, medium and long term. Rather than treating financial performance, strategy, governance, risks, people and environmental factors as separate subjects, it brings them together through one connected value creation story.
The short answer
Integrated reporting is a way of explaining how a company creates value over time, rather than focusing only on the financial results of the previous year.
A traditional annual report primarily looks back at financial performance. An integrated report connects strategy, governance, risks, performance and the six capitals to explain where value comes from, what it depends on and how it may evolve.
In one line:
A traditional annual report tells you what happened to the money; an integrated report helps explain why, what it depends on, and what happens next.
What is integrated reporting?
To define integrated reporting precisely, the IFRS Foundation describes it as a process founded on integrated thinking that results in a periodic integrated report about value creation over time. The report communicates how an organisation’s strategy, governance, performance and prospects, in the context of its external environment, contribute to the creation, preservation or erosion of value over the short, medium and long term.
In simple terms, integrated reporting connects financial numbers with the factors that produce them.
A company’s future value is influenced by much more than the assets recorded on its balance sheet. Its people, knowledge, brand, customer and supplier relationships, licence to operate and dependence on natural resources can all influence its ability to create value.
Financial statements capture important outcomes, but they do not always explain the wider system that produced those outcomes.
Integrated reporting brings these connections into view.
The emphasis is on the word “integrated.” It is not about adding a sustainability section to an annual report. It is about showing the relationships between different aspects of the business: how a strategic decision influences risks, how resources are allocated, how different capitals are affected, and how these factors ultimately influence performance and future value.
This is why integrated reporting is closely linked to integrated thinking. The thinking happens within the organisation; the report communicates those connections to stakeholders.
Who sets the integrated reporting framework?
The term “integrated reporting standards” is commonly used, but the more accurate description is the Integrated Reporting Framework.
The <IR> Framework is principles-based rather than a prescriptive set of line-item disclosure requirements. It focuses on how information should be connected and communicated, rather than prescribing a fixed list of metrics. This distinguishes it from frameworks and standards such as the GRI Standards and the IFRS Sustainability Disclosure Standards.
The framework has evolved over more than a decade. The International Integrated Reporting Council (IIRC) was established in 2010 and published the first International Integrated Reporting Framework in 2013. The framework was revised in 2021.
Following the merger of the Value Reporting Foundation into the IFRS Foundation in 2022, responsibility for the framework moved to the IFRS Foundation. It is now positioned alongside the work of the International Accounting Standards Board (IASB) and the International Sustainability Standards Board (ISSB), with the Integrated Reporting and Connectivity Council providing advisory input.
This positioning is significant because integrated reporting provides a connective layer between financial reporting and sustainability-related financial disclosures. It helps organisations bring different forms of reporting together into a coherent explanation of value creation.
What are the six capitals in integrated reporting?
At the centre of the integrated reporting model is the idea that organisations rely on and affect six forms of capital.
These capitals represent the resources and relationships that businesses draw upon, transform and influence while creating value.
| Capital | What it covers |
| Financial | Funds available to an organisation through equity, debt, grants and operations |
| Manufactured | Physical assets such as buildings, equipment and infrastructure |
| Intellectual | Knowledge-based resources such as patents, systems, processes, protocols and brand |
| Human | People’s competencies, capabilities, experience, motivation, health and safety |
| Social and relationship | Relationships and trust with communities, customers, suppliers and other stakeholders |
| Natural | Environmental resources such as water, air, land, minerals, biodiversity and ecosystems |
The value of this approach is that it makes trade-offs more visible.
For example, a company may report strong financial performance while simultaneously placing pressure on its workforce, relationships or natural resources. Looking at all six capitals provides a broader perspective on how today’s decisions may influence future value.
What are the building blocks of an integrated report?
The <IR> Framework is structured around seven Guiding Principles and eight Content Elements.
The Guiding Principles influence how the report should be prepared, while the Content Elements define the key areas the report should address.
Seven Guiding Principles
- Strategic focus and future orientation
- Connectivity of information
- Stakeholder relationships
- Materiality
- Conciseness
- Reliability and completeness
- Consistency and comparability
Eight Content Elements
- Organisational overview and external environment
- Governance
- Business model
- Risks and opportunities
- Strategy and resource allocation
- Performance
- Outlook
- Basis of preparation and presentation
The principles and elements are not meant to operate as isolated sections. Connectivity of information is particularly important because it requires organisations to explain the relationships between them.
For example, a strategic priority should ideally connect to the resources required to deliver it, the risks and opportunities associated with it, the governance decisions behind it, and the resulting performance and impact across the capitals.
How does integrated reporting differ from a traditional annual report?
This is one of the most common questions when organisations begin exploring integrated reporting.
The distinction is not simply about adding more pages or introducing a sustainability section. It is about how information is connected and what story the report is designed to tell.
| Traditional annual report | Integrated report | |
| Core question | What were the financial results? | How does the business create value over time? |
| Time horizon | Primarily focused on the year ended | Short, medium and long term |
| Primary audience | Shareholders and regulators | Providers of financial capital and stakeholders more broadly |
| Scope of value | Primarily financial capital | All six capitals |
| Structure | Statutory sections presented in sequence | Connected content elements |
| Governing document | Companies Act and accounting standards | <IR> Framework alongside applicable statutory requirements |
| What it explains | The numbers and the year’s performance | The story behind the numbers and factors influencing future value |
| Underlying discipline | Compliance and record-keeping | Integrated thinking |
The difference, therefore, is not necessarily the length of the report.
A traditional annual report could tell readers that revenue increased and emissions increased during the same year, with both figures appearing in separate sections. An integrated report seeks to explain the relationship between these developments, the decisions taken by management and the board, the resources involved, and what these developments could mean for future value.
Integrated report or integrated annual report: is there a difference?
The terms “integrated report” and “integrated annual report” are often used interchangeably, but there is a practical distinction.
An integrated annual report is essentially an annual report that incorporates the principles and approach of integrated reporting rather than presenting the statutory annual report and integrated report as two separate documents.
The <IR> Framework allows an integrated report to be presented as a distinct document or incorporated into the organisation’s primary report.
In practice, the objective is the same: to provide a connected explanation of how the organisation creates, preserves or erodes value over time.
Where does integrated reporting stand in India?
Integrated reporting has been part of India’s corporate reporting landscape for several years.
Through a circular dated 6 February 2017, SEBI advised the top 500 listed entities by market capitalisation to adopt integrated reporting voluntarily from FY 2017-18. Companies could include the information within the annual report, Management Discussion and Analysis, or publish it as a separate report.
Integrated reporting and BRSR serve different purposes.
BRSR provides a structured approach to ESG-related disclosures, while integrated reporting provides a broader framework for connecting those disclosures with strategy, governance, financial performance, risks and value creation.
For organisations working across multiple reporting frameworks, the challenge is therefore not simply to disclose more information. It is to connect the information meaningfully.
What separates a real integrated report from a decorated one?
One common challenge is treating the six capitals as nothing more than section headings.
Simply renaming chapters as “Human Capital”, “Natural Capital” or “Social and Relationship Capital” does not make a report integrated.
A useful test is to take one strategic priority and trace it through the report.
Can you identify:
- the resources and capitals required to deliver it?
- the risks and opportunities associated with it?
- the governance decisions behind it?
- the financial and non-financial performance indicators connected to it?
- the impact it has across different capitals?
- the implications for future value creation?
If these connections are visible, the report is demonstrating integrated thinking.
If the strategic priority appears once in the strategy section and remains disconnected from the rest of the report, the organisation may have changed the structure without changing the underlying approach.
That is why integrated reporting is ultimately a thinking discipline before it is a reporting exercise.
The report communicates the connections. The real work happens in understanding and managing them.
Frequently asked questions
What is integrated reporting in simple terms?
Integrated reporting is a way of explaining how a company creates value over time, rather than focusing only on its financial results. It connects strategy, governance, risks, performance and the six capitals – financial, manufactured, intellectual, human, social and relationship, and natural – to provide a broader view of value creation.
What is the difference between an integrated report and an annual report?
A traditional annual report primarily focuses on the company’s financial performance and statutory disclosures for the year. An integrated report connects financial and non-financial information to explain how the organisation creates value over the short, medium and long term. Its defining feature is the connectivity between strategy, governance, risks, performance and the six capitals.
Are there integrated reporting standards, or is it a framework?
It is a framework. The <IR> Framework is principles-based and maintained under the IFRS Foundation. It focuses on seven Guiding Principles and eight Content Elements rather than prescribing a fixed list of metrics.
Is integrated reporting mandatory in India?
Integrated reporting was encouraged by SEBI for the top 500 listed entities on a voluntary basis from FY 2017-18. It is distinct from BRSR, which provides a structured ESG disclosure framework for listed entities within the applicable regulatory requirements.
What are the six capitals in integrated reporting?
The six capitals are financial, manufactured, intellectual, human, social and relationship, and natural. They represent the different resources and relationships that an organisation draws upon and affects while creating value.
Where K&A comes in
At K&A, we approach integrated annual reporting as more than a change in report structure.
We build integrated annual reports around a connected value creation story, bringing together strategy, governance, risk, business performance and ESG information into one coherent narrative.
The objective is not simply to rename chapters around the six capitals. It is to help organisations show the connections between their decisions, resources, performance and future priorities – and communicate those connections clearly to the people who rely on the report.
Ready to move from reporting the past to explaining the future? Let’s connect.
