Implementing

Integrated
Reporting

PwC’s practical guide for

a new business language

July 2015
 ‘Despite an increase in the volume and frequency of information made available by
companies, access to more data for public equity investors has not necessarily translated into
more comprehensive insight into companies. Integrated reporting addresses this problem
by encouraging companies to integrate both their financial and ESG performance into one
report that includes only the most salient or material metrics.’
Al Gore and David Bloom, A Manifesto for Sustainable Capitalisma

‘Financial capital is disproportionate in the way in which a company is valued. Social and
environmental impacts are not recognised to the extent they need to be in investment and
capital allocation decisions. Integrated Reporting is also about giving credit where credit
is due. A company that leaves the environment and the community better off than when it
started should have this reflected in its true value proposition.’
Peter Bakker, Chairman World Business Council for Sustainable Development and Vice-
President IIRCb

‘BM&FBOVESPA (Brazilian stock exchange) is recommending that companies state whether

they publish a regular integrated sustainability report and where it is available, or explain
why not. BM&FBOVESPA believes that this report-or-explain initiative will encourage the
adoption of sustainability reporting by a steadily growing number of listed companies.’
BM&FBOVESPA, Brazilian Stock Exchangec

‘The imperative to build a long-term business model that takes cognisance of the impacts, risks
and opportunities in relation to the environmental, social and economic contexts within which
an organisation operates, is increasingly becoming part of the licence to operate for companies
the world over. Investors also progressively recognise that they can no longer ignore these
elements when performing fundamental analysis, and evidence is mounting that companies
who integrate broader sustainability considerations into their value proposition, clearly
position themselves for better performance in the longer term. JSE (Johannesburg Stock
Exchange) maintains a ‘report-or-explain basis’ when dealing with integrated reporting.’
JSE, Johannesburg Stock Exchanged

‘Corporate reporting is of the utmost importance to investors. Long-term investors are already
well known to look beyond the financial facts and figures only. Integrated reporting is a logical
and necessary next step in corporate reporting, as environmental, social and governance
information already is critical for assessing the performance and prospects of companies, and
for the important stewardship role that investors both want and need to exercise.’
EUMEDION, The corporate governance platform for institutional investorse

‘The European Commission welcomes the adoption by the Council of the Directive on
disclosure of non-financial and diversity information by large companies and groups.
Companies concerned will disclose information on policies, risks and outcomes as regards
environmental matters, social and employee-related matters, respect for human rights, anti-
corruption and bribery issues, and diversity on boards of directors. Even though this directive
does not link directly to integrated reporting, the EU does monitor with great interest the
evolution of the integrated reporting concept.’
European Commissionf

a [Link]
[Link] d [Link]
b [Link] e [Link]
earchContextKey=true [Link]
c [Link] f [Link] &
[Link] [Link]

2 Implementing Integrated Reporting

Foreword from Paul Fitzsimon,
PwC Head of Reporting and
Chief Accountant

Today’s businesses are operating in a world of significant example of how the concepts of integrated reporting are
change. Increasingly, we are seeing a trend towards more capturing imaginations, in 2015 130 Japanese companies
and more information being supplied by business, driven by have produced self-declared integrated reports, as have over
a number of factors including: 10% of the UK’s FTSE 100. We are also keeping a close eye on
the experiences coming out of South Africa and Brazil, where
• The availability of big data to a degree not seen before –
integrated reporting is part of the listing requirements.
as Google’s Eric Schmidt put it: “We create as much
information in two days now as we did from the dawn
What’s emerging from this experimentation? Many
of man through to today”
organisations are finding that a fundamental change in
• Resource constraints reporting requires much more than a focus on the end
report. It requires a deeper understanding of all the building
• The push from an ever wider stakeholder group for
blocks of the business value creation process. How does the
greater accountability.
outcome of the stakeholder dialogue link to strategy and risk?
How does it connect to value drivers and performance and
We’re seeing CEOs from across the globe seize this as an
ultimately to impact? And does the impact reflect key
opportunity. In a recent PwC survey, 75% of CEOs told us that
messages from stakeholders? It is my belief that for
measuring and reporting the total impact of their company’s
companies to achieve the holy grail of connectivity, a
activities across social, environmental, fiscal and economic
fundamental internal change is required, in the form of
dimensions contributes to the long-term success of their
integrated management information. This is why I am so
organisation.1 We asked investors what they thought about
pleased to be introducing our practical guide to implementing
this widening of emphasis from the traditional financial
integrated reporting. This guide has at its core:
reporting models. We were told clearly that annual report
disclosures about strategy, risks, opportunities and other • A focus on materiality and value creation to improve
value drivers can have a direct impact on a company’s cost of your management team’s understanding and assessment
capital. Only 11% thought otherwise.2 To me, all of this of your business’ value drivers
promises an interesting, if challenging, future for reporting.
• An emphasis on building a deep understanding of
connectivity within your business
At PwC we have for some time now been working on more
holistic reporting models. In 1999, we introduced the Value • The creation of an integrated dashboard for your business
Reporting Framework which became a spark for the debate decision makers, enabled by information technology.
that has evolved to the concept of integrated reporting. The
drivers behind integrated reporting – a focus on value creation I hope this publication will both help you to get started and
across resources or capitals (such as financial, manufactured, support your ongoing journey. It provides a roadmap drawn
human, social, intellectual and environmental) – continue to from our experiences across the globe as strategy, business
align with our own long-term vision for thriving and self- management and reporting advisers. I hope it both
sustaining economies. stimulates debate for your management teams and clarifies
the stages needed for a fundamental internal change.
Integrated reporting, as a response to accounting for broader I welcome your feedback as your journey progresses.
stakeholder value and longer-term consideration, is inspiring
many reporters around the globe to move from the Paul Fitzsimon
theoretical concept to practical implementation. I think it’s PwC Head of Reporting and Chief Accountant
important that this journey continues to be market-led. As an

1 PwC 17th Annual CEO survey.

2 PwC (2014). Corporate performance: What do investors want to know? Powerful
stories through integrated reporting.

June 2015 3
 Contents
1 Executive Summary 5
2 The business case for integrated reporting 7
3 Our roadmap for integrated reporting 9
4 Five stages towards integrated reporting 12
Stage 1: Look at the outside world and engage with your investors
and other stakeholders 14
Stage 2: Determine your stakeholder value proposition and refresh
your strategy 16
Stage 3: Align your internal processes to your strategy 20
Stage 4: Develop your integrated dashboard 24
Stage 5: Integrate your reporting for a better investor dialogue 28
5 Glossary 31

4 Implementing Integrated Reporting

1 Executive summary
There is mounting evidence to suggest a positive link The PwC roadmap
between the reporting and management of pre-financial Our roadmap (chapter 3) identifies three fundamental
factors (such as environmental, social and governance foundations that should underpin your organisation’s efforts
issues) and operational/financial performance. At the towards integrated reporting:
same time, company boards are increasingly coming under
pressure to explain in their corporate reporting how they are • Materiality analysis
developing longer-term, sustainable businesses – and how Understanding material issues for your business, based
well they are performing against longer-term goals. on investor and other stakeholders’ input
• Value creation
Many are responding through integrated reporting – a way Understanding how your particular organisation creates
not only to communicate business performance, but also to value for all its major stakeholders
create more connectivity across different parts of the
business. Integrated reporting involves a new way of • Impact evaluation
‘integrated thinking’, where management take strategic Monitoring the indicators that capture the impact of your
decisions based on a broad range of performance data. strategy and operations, and using them to report your
value creation story to investors and other stakeholders.
We believe that integrated reporting can help businesses
achieve a better dialogue with investors and other Based on these foundations, our roadmap sets out five stages
stakeholders, and so support the growth of more stable, (chapter 4) to introduce and embed integrated reporting in
thriving economies (see the business case for integrated your organisation:
reporting in chapter 2). Additionally – and for some
Look at the outside world and engage with
businesses this may be the primary incentive – we believe
your stakeholders
integrated reporting will drive intelligence for more
connected internal decision making.
Determine your stakeholder value proposition
Practical guidance need and refresh your strategy
Making the leap from traditional annual financial reports to
a fully integrated report is challenging. While a number of Align your internal processes to your strategy
frameworks have been developed, there is little practical
guidance to help management teams implement integrated
reporting in a way tailored to their organisation. With this
publication, we aim to help management focus their Develop your integrated dashboard
attention initially on how they create value for stakeholders,
how they monitor and manage that value creation process,
and how they ultimately report their performance externally. Integrate your reporting for more effective and
complete investor dialogue
Our guidance is based on a roadmap we have developed for
managing and measuring the broader value drivers that form
the basis of integrated reporting.

June 2015 5
 In this guidance document, each of the five stages is broken the other resources a business uses (for example, human,
down into a number of key steps and considerations. For social and relationship, and natural) interact and impact on
example, in stage 1 we explain how you can engage the financials and each other. It requires a forward-looking
effectively with stakeholders to identify issues material to stance where all these interrelated factors are considered at
your organisation’s future success. In stage 2, we outline a strategic level. We refer to these other resources as
how you can capture your particular organisation’s value pre-financials.
creation process, typically in the form of an infographic.
Stage 3 looks at the management information, risk and A number of initiatives have begun to explore frameworks
performance indicators you need for integrated reporting, for more holistic reporting. Much useful work has been done
and the potential impact on your processes. Stage 4 by organisations such as the International Integrated
identifies four steps for developing the integrated dashboard Reporting Council (IIRC), the Global Reporting Initiative
that brings together all the relevant management (GRI) and the Sustainability Accounting Standards Board
information you will need. Last but not least, stage 5 ties all (SASB). We do not examine the individual frameworks in
previous work together, looking at how to go about writing this guidance.
an integrated report that fairly and fully represents your
organisation’s unique value creation story. When we refer to integrated reporting, this includes two
matters – both the internal business management (which is
For each stage we offer practical insights based on our sometimes referred to as integrated thinking) and the
experience working with clients as they experiment with external periodic report.
integrated reporting. We also outline the benefits you can
expect to gain along the way. Who is this practical guidance for?
This guidance is for anyone looking to implement a more
A cycle of continuous improvement holistic business management system or integrated reporting.
The process of introducing and embedding integrated Management teams setting out on the journey will find
reporting in your organisation is an iterative one. Refinements practical advice and steps to follow. Those already on the
and adjustments will be made during the process. It also has a journey can use it to assess their current approach and
circular, ongoing nature: it begins with stakeholder dialogue support future enhancement. Our roadmap is formulated as a
and ends with your annual reporting – which itself should continuous improvement process. You can step in at any time,
stimulate further stakeholder dialogue. whether you are starting your first integrated report or want
to improve your current reporting process.
What do we mean by integrated reporting?
Integrated reporting is the means by which the broader The guide will also provide the ‘how to’ for companies seeing a
value drivers of a business are managed internally and then move by their regulators towards more holistic reporting, e.g.
communicated to investors and other stakeholders. It in the form of the EU directive on non-financial disclosure, the
involves a widening of focus from traditional models, which Strategic Report (UK) and the International Integrated
look mainly at financial and manufactured resources. It also Reporting Framework issued by the IIRC.
involves a more connected approach, i.e. understanding how

6 Implementing Integrated Reporting

2 The business case for
integrated reporting

In this chapter we look at the research into the correlation Evidence supporting the link between ESG performance
between more holistic reporting and operational as well and stock returns is found in a recent set of studies5 from
as investment performance. Harvard Business School. A value-weighted portfolio of
‘high sustainability’ companies outperformed their ‘low
Integrated reporting connects the internal management of sustainability’ counterparts by 4.8% p.a. on a risk-adjusted
a business’ value drivers to its financial performance, and basis over the 20-year period studied. A more recent study6
so creates a shared business language for management and considered these companies’ ESG performance only in
investors. This new and shared business language enables relation to their material issues as identified by the
a better and more robust dialogue with investors, which Sustainability Accounting Standards Board. The results
can deliver real benefits for companies and investors. were striking: the study shows that it’s the material issues
Almost 75% of CEOs say that measuring and reporting that matter. Firms with high performance on material issues,
the total impact of their company’s activities across social, and concurrently low performance on immaterial issues,
environmental, fiscal and economic dimensions contributes show the best future stock performance.
to the long-term success of their organisation.3

Academic research focused on Figure 1: The impact of good management of material ESG issues on
sustainability reporting (covering investment performance
environmental, social and governance
performance, or ESG for short) backs up 30
this finding. Even without the potentially $28.36

enhanced strategic focus and

connectivity enabled by integrated 25
Value of $1 invested in 1993 ($)

reporting, ESG reporting is associated

with positive impacts on operational 20
performance and risk management,
leading to a reduced cost of capital. In
15 $14.46
other words, managing broader value
drivers (both your financial and pre-
financial performance) is in the best 10
interests of shareholders.4

0
‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14
The ­figure shows the evolution of $1 invested in a portfolio of fi­rms with high performance on material sustainability issues
(red line) versus competitor fi­rms with low performance on material sustainability issues. Materiality of sustainability issues is
industry-specifi­c and it is defi­ned by the Sustainability Accounting Standards Board.
Source: Mo Khan, George Serafeim and Aaron Yoon. Corporate Sustainability: First Evidence on Materiality. HBS working
paper, 2014 quoted in Serafeim (2014). Turning a Profit While Doing Good: Aligning Sustainability with Corporate Performance.
Harvard Business School.

5 Robert G. Eccles, Ioannis Ioannou, George Serafeim (2011). ‘The Impact of a

Corporate Culture of Sustainability on Corporate Behavior and Performance.’
Harvard Business Review.
3 PwC 17th Annual CEO survey. 6 Mo Khan, George Serafeim and Aaron Yoon (2014). Corporate Sustainability: First
4 Clark, Feiner and Viehs (2014). From the Stockholder to the Stakeholder: how Evidence on Materiality. HBS working paper quoted in Serafeim (2014). Harvard
sustainability can drive financial outperformance. Business School.

June 2015 7
 Evidence has now also started to emerge to support the
Figure 2: Business benefits from integrated reporting
value of integrated reporting and demonstrate how it can
lead to a better investor dialogue. A PwC survey shows that
Direct value investment professionals believe the principles behind
integrated reporting can enhance their investment analysis.7
Cost reduction Revenue growth
Academic studies find that issuing an integrated report will
• Eco-efficiency cost savings • Business model innovation
positively influence the valuation of a company8 and make it
• Reduced cost of compliance • Product innovation
more likely to attract a longer-term investor base.9
• Reduced procurement costs • New revenue streams

Further research shows that companies that have already

Indirect value started on the integrated reporting journey demonstrate:

Risk management Brand and intangibles • Better understanding of business opportunities and
• Reduced cost of capital • Brand enhancement risks (65%)
• Reduced reputational, • Employee engagement, • Improvements in decision making (79%)
operational, supply chain attraction and retention
or regulatory risk • Improved market access or • More collaborative thinking about targets and goals
• Reduced dependency on licence to operate by the board and strategy departments (78%).10
scarce resources • Improved security and
quality of supply
Acting on the evidence
As the evidence for the positive effects of integrated thinking
and reporting mounts, more businesses are starting to
consider how they can introduce the approach into their
management processes. We have already worked with many
businesses in this area. Our experience and insights have
resulted in the roadmap we now present to help others
progress along their integrated reporting journey.

7 PwC (2014). Corporate performance: What do investors want to know? Powerful

stories through integrated reporting.
8 Arnold, Bassen and Frank (2012). Integrating CSR reports into financial
statements: An experimental study. Working paper.
9 Serafeim (2013). Integrated reporting and investor clientele. Harvard
Business School.
10 Blacksun (2014). Realizing the benefits, the impact of integrated reporting.

8 Implementing Integrated Reporting

3 Our roadmap for
integrated reporting

Our roadmap is based on three

Figure 3: A roadmap for managing and measuring broader
fundamental foundations which we
value drivers: the fundamental foundations
explain in this chapter: materiality,
value and impact.
Materiality analysis
The business challenge
With any new concept, attention is
often focused on the intended output.
In the case of integrated reporting, this
can result in a disproportionate focus
of energies on the end product – the
‘integrated report’ – without similar
time and resources spent on assessing
and improving more holistic business
management approaches – sometimes
also referred to as ‘integrated thinking’.

While many organisations have

improved the quality of their reporting,
n
Eval

e a tio

a communication gap still exists

between reporter and investor11 and
u at

e cr

other stakeholders. We believe every

ing

organisation will reach its own ‘tipping

lu
Va
im

point’ – a stage where further

pa

improvement requires fundamental

ct

change. Simply redesigning the

reporting structure or adding some
new content won’t be enough.
Businesses that fully embrace the
concept of integrated thinking and
reporting can hope to achieve higher
quality investor dialogue.

11 PwC (2014). Corporate performance: What do

investors want to know?

June 2015 9
 Materiality analysis is vital to our roadmap.
A better investor dialogue
The importance of materiality is widely accepted, being
Corporate reporting encourages better investor dialogue
in two ways: included in the reporting models of the Global Reporting
Initiative and the IIRC’s International Integrated Reporting
1. The quality of corporate reporting affects investor Framework, as well as financial reporting models. However,
perceptions and confidence
In our survey of investors 80% said the perception of a
definitions of materiality vary, as do the processes that lie
company’s reporting impacts their perception of its behind the materiality analysis.
management. Further, 82% said they felt more confident in
their own analysis when companies presented information We believe that to implement integrated reporting,
clearly and concisely.
businesses must develop processes for listening to investors
2. Higher quality corporate reporting helps investors to and other stakeholders. This helps management to gain
understand how management have identified and are insights into material issues and to understand where value
managing drivers of value in the business.
can be created. This outside-in perspective aids
In our survey only 11% of investors didn’t believe that
disclosures in an annual report about strategy, risks, management in developing a more holistic view of their
opportunities and other value drivers could have a direct business and its operating context. A growing number of
impact on the company’s cost of capital. organisations already understand the value of a more direct
dialogue with their stakeholders and are taking steps to
achieve it. In this way they also gain greater understanding
of how external stakeholders perceive the impact the
The starting point: materiality, value and business is having, both in financial and other terms.
impact
The concept of value creation is the second key
From our experience we know that boards are increasingly
component of our roadmap. Your organisation should have
seeing the importance of engaging in holistic discussions
a qualitative understanding of how value is created for its
when reaching decisions, taking into account a broad set of
stakeholders. In our view, value creation is a circular process
financial and pre-financial value drivers. However,
which depends on seven connected building blocks:
these discussions are rarely supported with integrated
stakeholders, their key messages, risk, strategy, value
management information. Where information is available
drivers (what activities influence the achievement of
in the organisation, reporting systems and processes are
strategic objectives), performance and impact.
not always able to deliver it in an integrated and easily
accessible manner. Integrating these value drivers
Value creation is an iterative process: value creation cannot
throughout the whole organisation and value chain
be defined without robust outcomes from stakeholder
can be even more challenging.
dialogue, while you need an understanding of value creation
to achieve an effective dialogue. Further, your understanding
How can organisations manage their steps on the road
of value creation will change as the impact of management
towards integrated reporting? How can they manage and
decisions is being evaluated and measured.
measure their drivers of value more effectively, and use this
to improve internal and external reporting?
Evaluating impact forms the third foundation of our
roadmap. This is first achieved by translating the value
Our solution is contained in a roadmap based on three
creation process into management information systems and
fundamental foundations. These should underpin all
processes, so that the organisation can monitor performance
your organisation’s efforts towards integrated reporting.
and make informed decisions – we call this the ‘integrated
The three foundations are:
dashboard’. This integrated dashboard includes connected
1. Materiality analysis and broader information on stakeholders, key material
2. Value creation matters, risks, strategic objectives, value drivers, KPIs,
targets and impacts. It helps companies to manage their
3. Impact evaluation
impact by evaluating it systematically, though management
teams may need to accept that not all data used will be 100%
accurate and assured at the start.

10 Implementing Integrated Reporting

 The next stage involves developing your external reporting
Note on data measurement and reliability
to investors and other stakeholders. Maintaining
The right KPIs connectivity along the way is often difficult. For example,
Identifying KPIs that reveal a company’s connected impact on does performance managed by KPIs have a positive
the world around it, and the resulting trade-offs (for example,
where maximising financial returns would damage the correlation with impact? Does actual impact, if it can
environment), is an evolving practice. We currently lack robust, be evaluated, connect back to your stakeholder dialogue,
standardised methodologies for measuring impact. Each impact i.e. can the organisation report an impact that actually
can often require a different methodology; primary data is often addresses the outcomes of the stakeholder dialogue?
lacking, and a lot of creativity is required. For the time being,
management teams may have to accept these imperfections,
understanding that investors would rather have imperfect Having set out our roadmap for integrated reporting, we
information than none. This feels uncomfortable in the context now focus on how to implement it in practice. In the next
of traditional financial reporting, but we see the absence of chapter we identify the five key stages through which
reporting in key areas necessary for an understanding
of a company’s performance as a bigger problem. Investors organisations can progress in order to deliver more holistic
agree. They have told us they prefer to receive information that thinking and reporting. We also highlight the specific
may not reach 100% accuracy than to receive none at all. They benefits that can be gained along the way.
also accept the inherent limitations of certain information sets.
Today’s assurance model doesn’t always fit
Today’s assurance model doesn’t necessarily fit evolving
corporate reporting models, particularly the developing focus
on broader, more forward-looking and more holistic information.
We propose a new approach focused on providing insight into
various aspects of an organisation’s reporting. This would let
stakeholders look behind what is reported to see where an
organisation is positioned on its reporting journey. We are
testing this with investors and clients.

June 2015 11
 4 Five stages towards
integrated reporting

In this chapter we expand on the Figure 4: PwC’s roadmap for integrated reporting
three fundamental foundations
of our roadmap for implementing
integrated reporting. Materiality analysis

We do this by outlining five stages, Look at the outside world and

broken down into a number of engage with your stakeholders De
te
practical steps. va rmi
ref lue p ne y
res ro o
hy p

ur sitio rate
o
Our proposed stages and steps shouldn’t
o r st
sta ns gy
u

ke and
be read as a set of prescriptive tasks,

ho
lde
nor should achieving the benefits of
r
integrated reporting and thinking be
approached as a compliance exercise.
fo r a
I n te g r a t e y o u r r e p o r o g u e

Each organisation will need to tailor

better investor d

our guidance to their specific situation

and remain focused on their own
A new business
assessment of value and their value
n
te g y

language
Eval

e a tio
l

creation process.
yo e r n a
st r a
ial
tin
u at

to i n t

e cr
ur
g

Each stage is centred around a number of

es u r
ing

s s yo

lu

guiding questions designed to structure

n

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im

ig

and stimulate the thinking process for oc

pa

pr
management teams. Our approach
ct

supports a continuous improvement i n t D e ve l o p

eg r
a te d y o u r
process and promises concrete benefits, d a s h b o a rd
not only at the end of the road, but also
at the end of each stage.

12 Implementing Integrated Reporting

Stages on the journey Guiding questions The cumulative benefits
to your reporting

Stage 1 • Have you identified and prioritised your • Stakeholder engagement process
Look at the stakeholders and assessed how you • Value chain map
outside world and engage with them?
• Analysis of operational
engage with your • Have you considered the business context and competitors
stakeholders opportunities and risks arising from
• Materiality matrix
megatrends?
• How well do you understand your
competitive position in the market?
• How do you assess materiality?

Stage 2 • How do you define value for your • Definition of value

Determine your stakeholders? • Improved risk reporting
stakeholder value • How do you create value for your • Value creation process
proposition and stakeholders?
refresh your
• Is your strategy resilient for the short,
strategy
medium and long term?
• Should you refresh your strategy and
goals to reflect all your material issues?

Stage 3 • How does your organisational culture • Value drivers

Align your internal and behaviour support delivery of your • Qualitative disclosures of connectivity
processes to your strategic objectives?
• Insight into cultural alignment
strategy • Is your integrated management
• Relevant KPIs
information enabled by systems
and processes? The first three stages enable reporting disclosures
• Can you link your strategic objectives to as highlighted as well as contributing to the
your suite of management information? overall operational benefits listed below.

Stage 4 • Can you communicate to the rest of your • Connected insights into (predictive)
Develop your organisation how your strategy delivers relationships between stakeholder value
integrated value to stakeholders? and impact
dashboard • Can you ensure that your management • The integrated dashboard breaks down
information provides holistic insight to silos between different departments,
the board and other decision makers? clarifying how each department contributes
• Do you make decisions based on holistic to business benefits
management information? • Reduced reporting burden as the integrated
• Do you have the right data to drive dashboard combines several (pre-existing)
your decisions? reports into one overarching report with
factual (vs. intuitional) stakeholder value
• How do you evaluate your impact and is
it incorporated into your dashboard? • Communication tool (internal and
external) on how the organisation creates
the value that stakeholders are looking for
• Aligned internal and external reporting,
improving the efficiency of external
reporting processes at the end of the year
• Measurement of impact: Total Impact
Measurement and Management
[Link]/totalimpact

Stage 5 • Within your existing reporting process, • External reporting becomes more valuable
Integrate your have you nominated a multidisciplinary for your investor dialogue, and for the
reporting for a steering group? dialogue with other stakeholders
better investor • Has the board provided the steering • Your external reporting becomes the solid
dialogue group with a clear vision? What story basis for continuous and fundamental
is to be told? improvement of your reporting and
• Have you nominated one alignment of internal and external reporting
responsible writer?
• Have you started on a blank page and
determined the scope and boundaries?
• Are you using the connectivity matrix
(see figure 12) as the storyline?
• Is there a clear communication plan for
how to improve the use of the annual
report within your investor dialogue?

June 2015 13
 Stage 1: Look at the outside world
and engage with your stakeholders

Figure 5: PwC’s roadmap for integrated reporting, stage 1

Guiding questions
• Have you identified and prioritised your
stakeholders and assessed how you Materiality analysis
engage with them?
• Have you considered the business Look at the outside world and
opportunities and risks arising from engage with your stakeholders
megatrends?
• How well do you understand your
competitive position in
the market?
• How do you assess materiality?

Your organisation cannot function

independently of the stakeholder
environment in which it operates.
Investors are interested in multiple

n
stakeholder interests that represent
Eval

e a tio
important sources of risk and
u at

opportunity for the company. Their

e cr
ing

perception of the quality of

lu
Va
im

management is influenced by how

pa

management are seen to deal with the

ct

complex mix of loyal customers,

motivated employees, strong business
partners, constructive dialogue with
communities, government and
regulators, and broader societal trust.

Your business also depends on spotting

and responding to megatrends – long- To develop a holistic understanding your reporting manual, so that it
term macro-level shifts in the external of the strategic risks and becomes part of the formal
landscape. These could include factors opportunities arising from the reporting process and instructions.
such as changing demographics, rapid changing external environment, Your programme should include
urbanisation, shifting economic stakeholder views, competitive position establishing a project team and
power, technological change, resource and global megatrends, the key steps ensuring that the analysis of your
scarcity and climate change.12 These are as follows: competitive position and impact of
shifts can pose risks, but they can also megatrends is acted upon, for example
provide opportunities if they are 1. Establish a programme of as part of your strategy process.
identified, assessed and managed systematic engagement with
effectively, and used to create investors and other stakeholders 2. Based on desktop research, create
competitive advantage. Risks and (internal and external), which is ‘the comprehensive list’ of issues
opportunities will also arise from the embedded in your governance. In that may be relevant to your
impact of these trends on your our view, best practice is to organisation and its stakeholders.
customers, competitors and the other integrate your annual stakeholder In our experience, such lists may
players in your value chain. dialogue and materiality analysis in include some 40 to 70 issues, or

12 PwC (2014) Megatrends [Link]

14 Implementing Integrated Reporting

 even more. The comprehensive list is mainly derived 9. The project team uses the x- and y-coordinates to create
from external sources to maintain the outside-in a graphical ‘cloud’ of relevant issues, across the value
perspective. Such sources could include sector and chain (so outside of traditional financial reporting
industry reports, boundaries) in a materiality matrix. The x-axis
media, publications from government and supervisory represents the impact on the strategy or organisation,
authorities, Global Reporting Initiative (GRI) lists, as determined by the board. The y-axis represents the
Sustainability Accounting Standards Board (SASB) impact on stakeholders or their interest.
publications, etc.
10. Finally, discuss and analyse what issues can be
3. Use your desktop research as the basis for more holistic considered to be material. In our view, best practice is to
analysis of the operational context, competitors’ analysis identify the top six to 12 as the material matters. There
and megatrends. There are many good examples of how are many good examples of how this final materiality
companies report on operational context (see below). matrix can be presented (see below).

4. The project team reduces the comprehensive list to ‘the Where do you stand at the end of stage 1?
long list’ of some 20 to 30 issues. This process should Based on your structured dialogue with key stakeholders,
eliminate issues that are highly unlikely to be material, you now have better insight into the areas where your
so making the stakeholder dialogue more relevant. organisation can create most value. Those are also the areas
where most value can potentially be destroyed. In the next
5. Identify your key stakeholders and why they are key. stage we build on these insights by gaining a better
Allocate a weighting factor, usually between one and understanding of how your organisation creates value.
two, to each stakeholder, reflecting the weight that your
management agrees should be allocated to their views in Completing stage 1 also brings benefits for your external
the final consolidation of all results. Establish the method reporting by providing relevant content. These benefits are
of engagement with each stakeholder. Will it be a survey, highlighted in the table below, along with references to other
a round table or workshop, or an interview? Discuss your companies’ external reports that contain similar content.
list of key stakeholders, their respective weights, and the
engagement method with the executive board.
Benefits to your reporting:
6. Submit the long list to each key stakeholder, asking them
to identify three to five principal issues they believe are • Stakeholder engagement process
important to the long-term success of your organisation. • Analysis of operational context and competitors
Ask each stakeholder to indicate whether impact is • Materiality matrix
restricted to the organisation itself or extends into the
value or supply chain. Ask each stakeholder to score the
issues from one to three or one to five. In case of
interviews, make sure you have taken a template with
you to capture the results. Inspiring examples:

7. Consolidate all the results by adding all the points given, Stakeholder engagement
including the weights, to each issue on the long list. Each
AmorePacific CSR report 2013 Pages 73–74
issue will then have a value indicating its importance to
stakeholders or their interests – providing the AU Optronics CSR report 2013 Page 15
y-coordinates in subsequent analysis (see point 9). Tieto CSR report 2014 Pages 11–13

Woolworths Annual report 2013 Pages 25–27

8. The project team considers the impact of each long list
item on the organisation or its strategy, presenting this Competitor analysis
as a proposal for the executive board to discuss and Deutsche Post DHL Annual report 2013 Pages 24–30
adapt. The values allocated to each item become the Sacyr Vallehermoso Annual report 2013 Pages 38–39
x-coordinates for use in subsequent analysis.
Swisscom Annual report 2014 Pages 39–42
Materiality matrix

Aegon Annual review 2014 Page 15

AGCO CSR report 2012 Page 8

June 2015 15
 Stage 2: Determine your stakeholder value
proposition and refresh your strategy

Figure 6: PwC’s roadmap for integrated reporting, stage 2

Guiding questions
• How do you define value for your
stakeholders? Materiality analysis
• How do you create value for your
stakeholders? Look at the outside world and
engage with your stakeholders De
• Is your strategy resilient for the short, te
va rmi
medium and long term? ref lue p ne y
res ro o
hy p
• Should you refresh your strategy and

ur sitio rate
o

o r st
sta ns gy
goals to reflect all your material issues?

ke and
ho
lde
r
Implementing integrated reporting may
not necessarily lead you to refine your
organisation’s strategy. Nevertheless,
stakeholder responsiveness should be
reflected in your strategy and business

n
model – and this can often require
Eval

e a tio
a refreshing of strategy.
u at

e cr
ing

In the previous stage you identified the

lu
Va
key areas where you believe – based on
im
pa

your stakeholder dialogue – that you can

ct

potentially create the most value. But

how do you create value? What are your
stakeholder propositions? And what
risks do you face that could potentially
destroy the most value? In this stage you
consider those questions and so develop
a better picture of your organisation’s
value creation process.

Step 1: Defining value – the • The material matter related to you make in your strategy) could
opportunities shareholders and providers of be: ‘We value the talent in all our
To determine your stakeholder value financial capital can be economic people’. Naturally this promise then
proposition you first have to define performance: your strategic has to be operationalised further in
value for each key stakeholder group. response (i.e. your stakeholder policies, programmes and actions.
The materiality matrix resulting from value proposition) may be
your stakeholder engagement process innovation in chosen markets. • Customers may ask for
(described in stage 1) should be used environmental stewardship. Your
as the basis for defining these value • For employees the material matter value proposition may be: ‘We
propositions. Some examples of value may be personal development. Your double our impact and half our
propositions are as follows: value proposition (i.e. the promise footprint by 2020’.

16 Implementing Integrated Reporting

In this context value is always a ‘co-creation’ – developed • Scarcity of qualified personnel in general might result in
through relationships with others. Therefore the examination higher staff turnover, leading to increased recruitment
of the value creation process requires a solid analysis of all costs, lower productivity and a loss of intellectual capital.
relevant interdependencies. In other words, you can’t expect
• If your customers expect protection of biodiversity
to make one intuitive step from material matters to
in the supply chain or respect for human rights, non-
stakeholder value proposition and impact. Defining the value
compliance of your suppliers with your suppliers’ code
creation process is an iterative process, and so you shouldn’t
of conduct may damage your business reputation.
try to define the whole process at this stage. Instead, focus on
representing your initial understanding, perhaps in the form • Demands from the public and politicians in the area of
of a qualitative infographic (see suggested examples at the regulatory compliance or executive remuneration may –
end of this chapter). if not adequately addressed – destroy social capital.

Step 2: Defining value – the risks As already noted, in order to capture these potentially
The material matters you have identified indicate where significant risks of destroying value, organisations should
most value can be created, but also where most value can consider how to embed material matters in their risk
be destroyed. assessment procedures. In our experience, it has so far
proved difficult for organisations to embed materiality
The material matters should therefore be connected to risk (see the fundamental foundations for a discussion of
and embedded in your organisation’s regular risk assessment materiality in integrated reporting in chapter 4) in the
process. Your risk function should help to identify risks that regular risk assessment process. Even so, aim for continuous
relate to your material matters. Here are a few examples: improvement by making material matters an integral part
of regular risk assessment and reporting.
• If the success of your business model relies on well-
educated, trained and motivated staff, demographic
change is a significant risk to resourcing the
business model.

June 2015 17
 Figure 7: Value creation process of PwC Netherlands

Our purpose (why) Our mission (what) Our strategy (how) Our impact

Our clients and society Greater trust in financial

• I ssues/themes markets

Society
• Expectations Contribution to the
• (Global) trends public debate

Our Contribution to development

Our people Build clients Social Enterprise sector
• T alent and trust in

&
skills society Reliable financial and
• T raining and non-financial information
Create

Clients
experience value for Better insight for internal
• ( Personal) Solve and external stakeholders
important Our Assurance
networks
people Society Higher efficiency and
problems effectiveness
Tax & HRS
Development

People
Appreciation
Advisory
Social involvement

Integrated dashboard

Stakeholder Key material Risks Strategic Value KPIs Targets Impact

groups aspects objectives propositions

Step 3: Developing the value creation process We identify the following elements:
Your organisation should now have an understanding of the
• Input from your key stakeholders, representing the
link between material matters and opportunities and risks.
input capitals
The impact of material matters on your opportunities and
risks should be part of the value creation analysis. This • The material matters
brings us to the next step, the capturing or representation
• The related risks
of the value creation process.
• The strategic pillars, addressing the material risks and
As stated above, this requires a thorough understanding of opportunities
interdependencies. But in this step, your main purpose is to
• The value drivers – the activities you want to excel at for
develop a first qualitative understanding of what value you
successful execution of strategy
could (and wish to) create. In our experience, a good way to
do this is through an infographic, describing the links from • The output/outcome indicators, i.e. the key indicators
stakeholders to strategy and ultimately impact. related to your management information (against targets)
• The outcome/impact, i.e. the value you wish to create for
your stakeholders, thus closing the loop with the start of
your value creation process.

Figure 7 offers one example of how the value creation

process can be shown in an infographic. We provide
references to more at the end of this chapter.

18 Implementing Integrated Reporting

As you progress along the roadmap and gain a better
understanding of all connectivities, your understanding of Inspiring examples:
the value creation process will improve, as will your ability
Improved risk reporting (including future viability)
to represent it accurately. In our experience, it may take a
few versions before the board will intuitively recognise your Adidas Annual report 2013 Pages 159–179
representation. Value creation is about distinguishing your
Deutsche Telekom Annual report 2013 Pages 138–141
organisation from others and focusing on your uniqueness,
which will then be of value for your stakeholders (e.g. clients Fresnillo Annual report 2013 Pages 42–45
who are willing to pay for innovative products and services). Gas Natural CSR report 2013 Pages 78–82

Gold Fields Annual report 2013 Pages 31, 58, 60

Where do you stand at the end of stage 2?
Inditex Annual report 2013 Pages 38–39 (future
By the end of stage 2 you have gained a clearer understanding viability)
of how you create value for your stakeholders and the risks
Munich Airport Annual report 2013 Pages 120–125
you face. You have also captured this understanding in a
model of your value creation process. It may take two or three NS Annual report 2013 Page 61
years before your model is sufficiently robust, validated by Philips Annual report 2012 Page 11
your stakeholders and further refined on the basis of data
analytics. But you will have begun a continuous improvement Swiss Re Annual report 2012 Pages 49–51
and learning process in your organisation. This work lays the Value creation process
foundation for the next stage, where we focus on how to align AkzoNobel Annual report 2013 Pages 2–3
management information with strategy and develop a
Anglo American Annual report 2013 Pages 20–21
meaningful performance management system. Platinum

Completing stage 2 also brings benefits for your external Enagas Annual report 2013 Pages 20–21
reporting by providing relevant content. These benefits are Inditex Annual report 2013 Pages 36–37
set out in the table below, along with relevant examples from
Interserve Annual report 2013 Pages 10–11
other companies’ external reports.
KPN Integrated report 2014 Page 17

Randstad Annual report 2012 Pages 22–23

Benefits to your reporting:
• Definition of value
• Improved risk reporting
• Value creation process

June 2015 19
 Stage 3: Align your internal processes
to your strategy

Figure 8: PwC’s roadmap for integrated reporting, stage 3

Guiding questions
• How does your organisational culture
and behaviour support delivery of your Materiality analysis
strategic objectives?
• Is your integrated management Look at the outside world and
information enabled by systems and engage with your stakeholders De
te
processes? va rmi
ref lue p ne y
• Can you link all your strategic objectives res ro o
hy p

ur sitio rate
to your suite of management information? o

o r st
sta ns gy
u

ke and
ho
lde
r
Integrated management information
aligned with your organisation’s
sustainable strategy is the foundation
of integrated reporting. But what do we
mean by integrated management

n
te g y
information? We define it as follows: a
Eval

e a tio
l
yo e r n a
well-balanced and connected set of

st r a
u at

to i n t
financial and pre-financial key

e cr
ur
es u r
ing

performance indicators (KPIs), aligned s s yo

lu
n

Va
with value drivers and embedded in Al e
im

ig

oc
pa

systems, processes and supporting pr

ct

culture, which are used in governing

your organisation.

The first step is to align your strategy

with management information, KPIs
and value drivers. This is generally
referred to as ‘performance
management’ or preferably ‘integrated e.g. work in progress, throughput Culture and behaviour
risk and performance management’. times, in real time Your organisation should aim to
Within performance management the • Improve data integrity and increase develop a purpose-driven culture that
organisation aims to: transparency in management reports values the needs of stakeholders.
Leaders in the organisation need to
• Align KPIs with strategy and reduce • Align resource allocation with motivate and mobilise employees and
the volume and complexity of the strategy display an ongoing desire to receive and
management reports act on internal and external feedback to
• Create insight into the added value
• Reduce budgeting cycle time and for stakeholders support delivery of strategic objectives.
increase its added value Success requires a conscious and
• Measure and manage the continual effort by everyone to embed
• Automate planning, reporting and effectiveness of values and behaviour in line with
analytical reporting implemented projects stakeholder expectations.
• Control operational performance,

20 Implementing Integrated Reporting

Figure 9: The three leadership dimensions in culture change

Staff inspiration based on

belief in the importance of
core values and the urgency
of the cultural change
l

System
ou

S
The three
dimensions

Demonstrating and facilitating

cultural change through
organisational systems, processes
and structures (such as the The continuous process of
Sta m

organisational structure, embedding culture through a

performance management, values-based approach to daily
remuneration system and decision making and
in

internal audits business operations

a

Key steps for embedding your desired culture are as follows: 4. Provide the right conditions for employees to act
in the interests of stakeholders: System
1. Go back to first principles You need to align your organisation’s systems with your
Start by clearly defining the culture and behaviours needed desired culture, and ensure that senior management
for the delivery of your strategy. Consider this question: To have the capability and tenacity to change what may
what extent do we currently consider stakeholder interests be very engrained in the organisation, such as
in our behaviour, systems and decisions? approaches to performance management, remuneration
and internal audit.
2. Identify, and understand, the ‘moments that matter’
Identify the critical decisions and interactions (‘moments 5. Embed stakeholder needs into business operations:
that matter’) that win or lose business, and therefore Stamina
contribute to sustainable profitability. Target specific What do others expect? Do I recognise leaders’ priorities
behaviour that is demonstrated during these key in their management approach? Are (supervisory) board
moments of stakeholder interaction. members really focused on stakeholders’ interests? The
creation of public and social value must be evident in the
3. Inspire employees: Soul explicit decisions made by management and employees.
As illustrated in Figure 9, ‘soul’ is one of three leadership Leaders can embody a desired culture by acting as role
dimensions you need to address in order to achieve models for the necessary values and behaviour.
culture change.
6. Use behavioural indicators to drive change
a. Appeal to employees’ intrinsic motivation to act in
Key behavioural indicators (KBIs) define the desirable
the interest of stakeholders.
behaviour employees need to demonstrate in order to
b. Create a framework that offers guidance to employees be successful within the organisation.
in making personal choices about stakeholder-centric
value creation and how to deal with ethical dilemmas.
c. Lead by example.

June 2015 21
 Systems and processes You also need to consider how the pre-financials can be
Systems and processes are, naturally, a crucial link in the integrated into your existing framework. You could try:
execution of strategy and ultimately the value you create.
Integrated reporting requires the scope of management • Establishing feedback mechanisms between data
information to be extended from financials to pre-financials. consumers and data owners
In most organisations the control environment around
pre-financials is still immature, which can raise doubts about • Starting to provide assurance over the pre-financials.
information quality. Even though most internal control
frameworks should be able to encompass pre-financials, real Align your strategy with your management
world experience shows that this doesn’t necessarily happen. information
We see organisations making progress by: The success of your strategy is reflected in pre-financial and
financial results in terms of output or outcome/impact. The
• Ensuring that the CFO and finance function take results are monitored through (key) performance indicators
responsibility for the quality of all pre-financials with – which clearly need to reflect your business strategy. This
clear allocation of roles and responsibilities between sounds simple, but it can be challenging to align your
finance and the data owners (governance) strategy firstly to value drivers, and then to KPIs appropriate
for providing management information. Many businesses
• Establishing a steering group that cuts across business use standard KPIs without truly aligning these with their
operations and includes those controllers whose remit organisation’s specific strategy. Effective performance
has been the pre-financials management is about achieving this alignment, as
illustrated in Figure 10.
• Gaining a more explicit understanding of how your
current internal control framework can be applied to
pre-financial information.

Figure 10: Alignment of strategy

Mission, vision 4 Target setting

and strategy
How much do we
Translate value drivers into want to measure?
driver-based plans and related Forecasting
budgets to focus your business
5 Planning and
1 Objectives planning on strategy budgeting
How do we reach
What should we targets?
excel at?

2 Value drivers Analyse and

Adjust
evaluate
results versus planning and
planning and forecasting
forecast
Strategy map
PwC suggestion
Using a strategic map can help
you to record alignment, showing
what to focus on to manage your
business performance
3 KPIs Integrated
dashboard
Translate value drivers How do we measure (Stage 4)
into KPIs at several levels in our performance?
your organisation to focus
reporting on strategy

22 Implementing Integrated Reporting

In order to translate your strategy into relevant management Where do you stand at the end of stage 3?
information (KPIs), Figure 10 outlines a number of steps to In stage 1 you analysed where you can possibly create the
complete. most value. You then translated that into stakeholder value
propositions. By completing stage 3 you have seen how to
1. Objectives align management information with strategy and develop
Clearly understand your organisation’s strategic a meaningful performance management system.
objectives (discussed in the previous stage).
One challenge for company boards is to avoid information
2. Value drivers overload. It is not unusual for executive and non-executive
Consider what activities the business should excel at directors to receive 15 to 25 different sets of financial and
to deliver on its strategic objectives. pre-financial information. The next stage focuses on
providing decision makers with a balanced set of connected
3. KPIs management information in order to meet the promise of
Think about how much you want to measure – and whether integrated reporting – better-informed decision making.
it can be measured. Remember your aim – selecting metrics
which are aligned to strategic goals and which will tell you Completing stage 3 has also provided tangible content for
what is really happening in the business. Therefore it is your external reporting. We set this out in the table below,
important to: with examples of how other companies have reported such
• Have a clear view of the strategic goals and how content externally.
these can be measured
• Find a balance between pre-financial and
Benefits to your reporting:
financial KPIs
• Value drivers
• Use leading (forecast) and lagging (past
• Qualitative disclosures of connectivity
performance) KPIs
• Insight into cultural alignment
• Make sure your KPIs provide intelligent, connected
• Relevant KPIs
information that is still easily understandable and
relevant for people in the entire organisation.

4. Target setting
Inspiring examples:
Your KPIs are also used to set targets and objectives
for teams and individuals, against which performance Value drivers and business model
is measured.
British Land Annual report 2014 Pages 14–15
Company PLC
5. Planning and budgeting
In order to achieve its targets, the organisation should Interserve PLC Annual report 2013 Pages 10–11
develop and implement action plans. Relevant KPIs

Bayer Annual report 2014 Pages 50–51

When completing these steps, you shouldn’t have to invent
new methodologies for pre-financials. The challenge is more DBS Annual report 2013 Pages 24–27
about finding a way to connect strategy people, finance EnbW Annual report 2013 Pages 24–25
people and sustainability people. This involves taking the MTN Group Limited Integrated report 2013 Pages 54–57
time to learn each other’s language and making clear,
mutual commitments. SABMiller Annual report 2013 Pages 15–17

Unilever Annual report 2014 Pages 7, 11

June 2015 23
 Stage 4: Develop your integrated
dashboard

Figure 11: PwC’s roadmap for integrated reporting, stage 4

Guiding questions
• Can you communicate to the rest of your
organisation how Materiality analysis
your strategy delivers value to
stakeholders?
Look at the outside world and
• Can you ensure that your management engage with your stakeholders De
te
information provides holistic insight to va rmi
the board and other decision makers? ref lue p ne y
res ro o
hy p

ur sitio rate
• Do you make decisions based on holistic o

o r st
sta ns gy
u
management information?

ke and
ho
lde
• Do you have the right data to drive your

r
decisions?
• How do you evaluate your impact and is
it incorporated into
your dashboard?

A new business

n
te g y
language
Eval

e a tio
l
yo e r n a
st r a
u at

An integrated dashboard for

to i n t

e cr
ur
es u r
connected insight into
ing

s s yo

lu
n
stakeholder value

Va
Al e
im

ig

oc
pa

The integrated dashboard is a tailor- pr

ct

made, organisation-specific tool i n t D e ve l o p

eg r
developed by PwC to monitor a te d y o u r
d a s h b o a rd
stakeholder value with a set of relevant
management information. It
demonstrates how the organisation’s
strategy makes an impact and creates
value for its key stakeholders, reflecting
the organisation’s dialogue with the
outside world and its mission and vision. The integrated dashboard broadens beginning to end, showing how
your reporting scope to include the different elements are connected. An
Most organisations have lots of entire value chain, focusing on interface can then be used to combine
different silo-based management stakeholder value. It is an umbrella all relevant data from different sources
reports and dashboards, but lack one tool, bringing together information and systems. In this way, management
integrated view showing the linkages from different source systems. gain access to dynamic information,
between the different elements. and are able to see past performance
Another weakness is that current In order to bring that information and projected future trends for topics
reporting is still focused on input and together, you need a connectivity of most importance to stakeholders.
output indicators instead of impact matrix (see Figure 12). This should
indicators (management information depict the value creation process from
that tells you something about the
value you create for your stakeholders).

24 Implementing Integrated Reporting

Set out below is a simplified example of a connectivity
matrix on which the integrated dashboard is founded.
It illustrates the building blocks to consider. The content
of your organisation’s dashboard will need to be tailored
to its specific circumstances.

Figure 12: Example connectivity matrix

Stake- Key Risks Strategic Value KPIs Targets Impact

holder material objectives drivers
groups matters
The internal Matters that Risks that The strategic The drivers Indicators Future outlook Looking
and external are relevant could prevent objectives of value to monitor with goals to beyond inputs
Explanation

stakeholders for your the organisa- should cover which ensure progress achieve the and outputs to
of the stakeholders, tion from the material strategy on your strategy in outcomes and
organisation, identified performing on matters execution and strategy the short and impacts –
categorised through a the material risk mitigation execution and long term understand-
into groups materiality aspects risk mitigation ing your
analysis footprint

• Employees Health and Incidents and We have the Working on • Lost time Best in the All employees
Example

• Sharehold- safety accidents best in awareness injuries industry on all feel safe and
ers industry and an open • Fatal indicators highly
safety culture culture accidents engaged in
• Suppliers safety
• Etc.

Stakeholders The aim is to While most The organisa- Ensure there Targets should The dashboard
should be bring together organisations tion’s strategy is a balance be set per includes
identified aspects which have a mature is a response between indicator. quantitative
through a are material risk assess- to, for example, leading Because all impact
stakeholder for different ment, the risks a value (input) and elements of the information.
mapping. stakeholder identified may proposition for lagging dashboard are Qualitative
Stakeholder groups. not be stakeholders. It (output) connected, information is
engagement Various (directly or is a manage- indicators, they can be not included,
should take frameworks indirectly) ment decision financial and directly linked but helps
Notes

place through are available related to the and as such it non-financial to the material with the
a structured, that provide material need not cover indicators, themes. interpretation
regular guidance. themes. The all the material internal and of quantitative
stakeholder existing risk aspects, external information.
dialogue. In assessment although best indicators and
many may need practice for process and
organisations to be revisited. long-term impact
this is still an sustainability indicators.
ad hoc process. is to address
all material
aspects.

June 2015 25
 The three fundamentals are the basis of the Creating an integrated dashboard in four steps
connectivity matrix Up till now we have developed a connectivity matrix,
The three fundamental foundations of our roadmap showing the foundations to fundamentally improve your
underpin the connectivity matrix: reporting. The matrix enables you to gain a better
understanding of connectivities and interdependencies in
Integrating the materiality analysis: the connectivity the organisation. Naturally, to enable better-informed
matrix starts with your stakeholder dialogue and materiality decision making this matrix has to be operationalised in an
analysis. It provides insight into how the material issues integrated set of management information embedded in a
identified in that dialogue are reflected in your approach to reporting tool, i.e. an integrated dashboard.
risk and your strategy; and whether your impact reflects
stakeholder needs. As illustrated below, we set out four key steps for
developing an integrated dashboard with a connectivity
Showing your value creation: the connectivity matrix matrix at its heart:
mirrors your value creation process and enables you to
1. Assess available information
gain a better understanding of how you create value for
your stakeholders. 2. Design the connectivity
3. Construct the dashboard
Evaluating your impact: the connectivity matrix presents 4. Implement in internal / external reporting
management information that connects across financial and
pre-financial factors and across individual departments –
this enables you to evaluate and ultimately measure the net
value you create for your stakeholders.

Figure 13: Steps to take for developing the integrated dashboard

1 Assess available
2 Design the
3 Construct
4 Implement in
Steps

information connectivity dashboard internal/external

reporting

• Define purpose, scope • Determine the • Determine final look and • Implement instruction
and (integrated) team correlations between the feel of integrated usage and adapt
• Assess current elements dashboard reporting manual
dashboards in place • Consider establishing • Make data logistics • Use integrated
existence of potential connections to source dashboard as foundation
Activities

• Discuss user needs

and (functional) connections using data systems for board meetings
requirements analytics • Establish integrated • Use the connectivity
• Assess available • Analyse the gaps and dashboard matrix in your external
information on all determine project plan reporting
elements and add to to overcome gaps • Review and adapt
dashboard format

Baseline assessment Connectivity matrix Integrated dashboard Integrated decision

Deliverables

making and reporting

26 Implementing Integrated Reporting

Here are some practical tips, based on our experience:
Benefits to your reporting:
• Define the purpose, scope and integrated team right
at the start. • Connected insights into (predictive) relationships between
stakeholder value and impact
• When forming your integrated project team, make sure • The integrated dashboard breaks down silos between different
you include different parts of the organisation with departments, clarifying how each department contributes to
expertise in stakeholder dialogue, risk, strategy, business benefits
performance management and value drivers, and • Reduced reporting burden as the integrated dashboard
reporting. Also include econometricians experienced in combines several (pre-existing) reports into one overarching
data analysis. report with factual (vs intuitional) stakeholder value
• Communication tool (internal and external) on how the
• Discuss the objectives of the integrated dashboard based on organisation creates the value that stakeholders are looking for
its intended users and how you wish to cascade it
• Aligned internal and external reporting, improving the efficiency
throughout the organisation.
of external reporting processes at the end of the year
• Determine scope based on availability of data, maturity • Measurement of impact: Total Impact Measurement and
of the insight into value creation (impact may still be one Management ([Link]/totalimpact)
step too far, outcome may already be feasible) and the
outcome of the stakeholder dialogue (material matters).

Developing an integrated dashboard requires some Inspiring examples

hard work and takes time, but it’s worth the effort.
Our experience tells us that: Integrated strategy

Alliander Annual report 2012 Pages 14–15

• The integrated dashboard project should be seen as a
Gold Fields Annual review 2013 Page 6
continuous improvement process. It is not a solution
to be finished within a year. Rank Group Annual report 2010 Page 13

Woolworths Holdings Ltd Integrated report 2013 Pages 34–43

• You should see concrete benefits for your external
Connectivity matrix
reporting in year one. The connectivity matrix, even
without the dashboard, should be the backbone of your ASML CSR report 2014 Page 18
external reporting (see inspiring examples right). It will Avis Europe plc Annual report 2010 Pages 4–5
also help you to engage with your investors and other Measurement of impact
stakeholders, as it explains the value creation process in
an insightful and intuitive manner. PwC UK CSR report 2014 Pages 32–41

• Outcomes (even without measured impacts) may provide

important insights for decision makers using the tool.

• The board and other decision makers gain improved

insight into the value you create for your stakeholders.
For many decision makers, the clear benefit of combining
all reporting lines in one overarching tool is itself a
strong reason to pursue an integrated dashboard project.

Where do you stand at the end of stage 4?

You have now developed an integrated set of management
information directly linked to your value creation process,
enabling you to manage your impact more effectively. This
allows you to move onto stage 5 – the development of integrated
external reporting that supports better investor dialogue.

Completing stage 4 also enables you to improve your reporting.

Expected benefits are shown in the table right, which also
provides references to relevant reports by other organisations.

June 2015 27
 Stage 5: Integrate your reporting for
a better investor dialogue

Figure 14: PwC’s roadmap for integrated reporting, stage 5

Guiding questions
• Within your existing reporting process,
have you nominated
a multidisciplinary steering group?
Materiality analysis
• Has the board provided the steering
group with a clear vision? What story is
to be told? Look at the outside world and
engage with your stakeholders De
• Have you nominated one responsible te
va rmi
writer? ref lue p ne y
res ro o
hy p
• Have you started on a blank page and

ur sitio rate
o

o r st
sta ns gy
determined the scope

ke and
and boundaries?

ho
lde
• Are you using the connectivity matrix as

r
the storyline?
fo r a
I n g r a te yo u r r e p o r o g u e

• Is there a clear communication plan for

t e

how to improve the

better investor d

use of the annual report within your

investor dialogue?
A new business
n
te g y

language
Eval

e a tio
l
yo e r n a
st r a
ial

All the previous stages in this practical

tin
u at

to i n t

e cr
ur
g

guide, even if not fully completed, may

es u r
ing

s s yo

lu

be seen as ‘homework’ or preparation

n

Va

Al e
im

ig

for your external reporting. This oc

pa

pr
preparatory work will help you make
ct

fundamental improvements in your i n t D e ve l o p

eg r
a te d y o u r
external reporting and enable better d a s h b o a rd
investor dialogue.

This stage focuses on how to bring your

previous activity and outputs together • Multidisciplinary steering group: process. Its membership should be
to develop your integrated report. In your governance framework multidisciplinary, e.g. including
around the reporting process, representatives from strategy, HR,
1. When gathering the information make sure there is one steering internal audit, external
your organisation wishes to group that provides – for the communications, investor
disclose publicly, make use of reporting project team – the relations and reporting.
your existing reporting process vision of what the annual report
and governance. The process of • Avoiding a compliance mentality:
should contain. The steering
integrated reporting doesn’t require Integrated reporting will not
group should also assess whether
different reporting processes, but realise tangible, sustainable
milestones are being achieved
our experience suggests existing benefits for the organisation (as
during the writing and reporting
processes could be more effective: discussed in chapter 3) if it

28 Implementing Integrated Reporting

 becomes a compliance exercise. So the steering group, converted into a clear and compelling story of your value
on behalf of the board, must continue revisiting the creation process. Coach the writer throughout the
three fundamentals that underpin each stage on the process and make sure the steering group provides
roadmap each reporting year. regular feedback.
• Comparability with peers: Periodically check whether
3. Start with a blank page when planning your report
the information you report is comparable with that
content.
issued by your peers. The true value of information
When writing an integrated report for the first time, take
lies in comparability. When organisations begin to
a fresh approach. Avoid copying and pasting information
develop integrated reports, this usually results in
from previous years, and don’t assume you have to follow
more entity-specific information. This is welcome, but
the structure of previous reports. That said, information
you need to consider the risk of losing comparability
from previous years may still be useful.
with your peers.
• Responsibility for reporting results: Try to nominate When developing your content, take inspiration from
data-owners in the organisation: individuals best practice sources, e.g. databases of examples. Your
responsible for data collection and quality for each own table of contents should follow the storyline of your
material matter. Leaving this responsibility with the connectivity matrix (see point 4), but it might look
project team can create too great a burden for them. something like the example below.
• Quality and reliability of the data: If you seek Example table of contents for an integrated report:
assurance over your report, discuss the reporting
1. External environment: stakeholder dialogue
process with your auditor, both in terms of process
and content (structure, scope and boundaries of the 2. Opportunities and risks
report). This helps to ensure the audit plan is aligned
3. Strategy and resource allocation: inputs
to your assurance needs, and that the new structure
of the integrated report isn’t in conflict with the 4. Business model: value creation and business activities
assurance report.
5. Performance: outputs and outcomes
2. Nominate one responsible writer.
6. Governance
Writing an integrated report requires a different mindset
from writing a traditional annual report. Your writer will 7. Future outlook
need coaching in how the connectivity matrix serves as a
backbone for the report, i.e. how the matrix can be

June 2015 29
 4. Use the connectivity matrix as the storyline for • Evaluation should include ambitions to further
writing the report. develop IT solutions to align management reporting
Integrated reporting is about showing connectivity, from and external reporting, and to embed the integrated
stakeholder engagement to reporting on impact. But in management information in an integrated dashboard
our experience most ‘integrated reports’ still lack interface with underlying management systems
connectivity, e.g. between stakeholder engagement, and processes.
strategy and risk, but also between various stakeholder
• The evaluation process should include feedback
value propositions and various impacts. Try to avoid this
from investors and other stakeholders on how they
problem by basing your report’s story on your
perceive your report, and whether the new language
connectivity matrix, working through its columns from
of integrated reporting is understood and contributes
left to right. In this way, the performance and impact
to better stakeholder dialogue.
(i.e. the value you create for stakeholders) reported at
the end of your report should still link to the beginning • The reflection moment should capture the business
of the value creation process: the key issues identified case, i.e. the benefits of integrated reporting. These
from the stakeholder dialogue. outcomes should be shared with the board to ensure
their permanent engagement. The board should also
5. Determine the scope and boundaries of your report. consider to what extent integrated reporting and
In preparing the report, make a distinction between integrated management information provides better
scope and boundaries, the storyline and content of insight into the organisation.
the report:
7. Develop a three-year project plan for improving
• Scope and boundaries are not only relevant for
your reporting.
compliance with reporting guidelines, but also
As noted, integrated reporting involves a continuous
for making sure that the report remains relevant
improvement process, which requires time and resources.
and concise.
Therefore, prepare a project plan to prioritise your
• Scope and boundaries should be determined at the ambitions for a three-year period.
start, and then monitored by the steering group to
avoid less relevant content creeping in. There is a Where do you stand at the end of this stage?
risk of ‘scope drift’ because different parts of the You have now started a continuous process to improve
organisation often have their own content wish list. connectivity in your organisation. In this way you are on the
• Determine the scope and boundaries by reference to road towards fundamentally integrating your reporting for a
the material matters. Less relevant content could better investor dialogue, based on robust performance data.
always be included in enclosures or on the website.
The table below shows the benefits to your reporting that
• For integrated reports, the boundaries of your report you could achieve by completing this final stage.
are likely to be broader than for your financial
reports, extending beyond the legal ownership
structure to include your value chain.
Benefits to your reporting:

6. Evaluate the process. • Annual reporting becomes more valuable for your dialogue with
investors, and also for the dialogue with other stakeholders;
Integrated reporting is a continuous improvement
process. When asked, CFOs and other executives will • Annual report becomes the solid basis for continuous and
fundamental improvement of your reporting and alignment
often say that a key benefit of annual reporting is that it of internal and external reporting.
builds in a ‘reflection moment’ for the organisation. You
should therefore evaluate your integrated reporting
process, as follows:
• Evaluation by the steering group should take place Examples
at pre-defined milestones to capture lessons learnt,
Learning from the early adopters of integrated reporting – follow
conclude whether ambitions have been realised, the link for PwC’s review of the reports of organisations on the IR
and discuss whether that has an effect on future journey [Link]/en_GX/gx/audit-services/publications/assets/
ambitions. [Link]

30 Implementing Integrated Reporting

5 Glossary
Connectivity This depicts the organisation’s value Integrated An approach to management that
matrix creation process from beginning to end, thinking applies the principles of integrated
showing how different elements are reporting, basing strategic decisions
connected. See example on p. 25. on a broad range of performance data
The connectivity matrix is used when linked to the way the business creates
creating the integrated dashboard, and value for its stakeholders.
can also be used to provide the storyline
when writing your integrated report.
Materiality The first of the three foundations of
analysis PwC’s roadmap, the materiality analysis
Impact The third foundation of PwC’s roadmap, involves the process of listening to
evaluation impact evaluation refers to the process investors and other stakeholders to
by which organisations use relevant understand the issues they perceive
management information to assess to be material to the business and its
and manage the impact of strategic prospects, and their perception of the
decisions on stakeholders. It includes impact the business is having (in
the development of external financial and other terms).
integrated reporting.

Materiality Created as a result of stakeholder

Integrated A tailor-made, organisation-specific matrix engagement, the materiality matrix
dashboard tool developed by PwC to monitor indicates the issues that are believed to
stakeholder value with a set of be material to the business (and its future
relevant management information. It performance), based on the views of
demonstrates how the organisation’s external investors and other stakeholders
strategy makes an impact and creates and the opinions of the board.
value for its prioritised stakeholders,
reflecting its dialogue with the outside
world and its mission and vision. Pre- Resources that are not yet monetised
financials but which in the longer term can have
an impact on the financial results of an
Integrated Integrated reporting is the means by organisation. Examples include human
reporting which the broader value drivers of a and natural resources and relationships.
business are managed internally and
then communicated to investors and
other stakeholders. It involves a Value The second of the three foundations of
widening of focus from traditional creation PwC’s roadmap, value creation refers to
models which look mainly at financial the process by which the organisation
and manufactured resources. It also creates value for its stakeholders. It is a
involves a more connected approach, circular process that depends on seven
i.e. understanding how the other connected building blocks: stakeholders,
resources a business uses (e.g. human, their key messages, risk, strategy, value
social and relationship, and natural) drivers, performance and impact.
interact and impact on the financials
and each other. It requires a forward-
looking stance where all these Value The activities of the organisation
interrelated factors are considered at drivers that influence the achievement of
a strategic level. Our use of integrated strategic objectives and create value
reporting in this publication includes for stakeholders.
two matters – both the internal business
management (which is sometimes
referred to as integrated thinking) Value A statement of how your
and the external periodic report. proposition organisation creates value for
a specific stakeholder group.

June 2015 31
Acknowledgments
Nicolette Behncke Superna Khosla Atul Patel
Juriaan Besorak Robert van der Laan Maria-Luz Castilla Porquet
Melissa Carrington Jarie Luchtenborg Zubair Wadee
Gayle Donohue Linda Midgley Anouk Wentink
Gaia Giussani Kavita Nandram Judith Weuring
Ian Hitchen Mark O’Sullivan

[Link]
This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should
not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express
or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law,
PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any
consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision
based on it.
© 2015 PricewaterhouseCoopers LLP. All rights reserved. In this document, “PwC” refers to the UK member firm, and may sometimes refer to
the PwC network. Each member firm is a separate legal entity. Please see [Link]/structure for further details.
The Design Group 22099 (06/15)