Organisations are increasingly preparing integrated reports to communicate their value creation story effectively. However, determining the appropriate disclosures for an integrated report can be challenging as it involves efficiently leveraging information from other reports to benefit stakeholders.
As a result, following the application of integrated reporting, organisations might no longer have to prepare numerous reports. Therefore, determining the information to include in these reports becomes crucial. One guiding principle in the Integrated Reporting Framework is the materiality of information, defined as information that could substantively affect the organisation’s ability to create value in the short, medium, or long term. It considers positive and negative information or matters, risks and opportunities, and the positive and adverse impacts on performance.
Identifying the appropriate information or disclosures to include is essential to keep the integrated report relevant to stakeholders, particularly the providers of financial capital.
Here are the four to determine the materiality of information to include in integrated reports.
The first step outlined in the Integrated Reporting Framework is identifying the relevant matters based on their ability to affect value creation.
Consider matters or information linked to strategy, that are important to stakeholders and may lead to significant risks or lost opportunities.
The second step is to evaluate the importance of relevant matters regarding their known or potential effect on value creation. Organisations should consider the qualitative and quantitative impact, including the magnitude of effects and their likelihood of occurrence.
The third step is to prioritise the matters based on their relative importance. The ranking process should consider the significance of matters or information in the context of the organisation’s values, commitments, and policies. The fourth and final step involves determining the information to disclose about material matters.
Organisations should be prepared to apply judgment when deciding what information to disclose on material matters, including qualitative and quantitative data.
They should ensure that their materiality determination process is integrated into their regular management process so that as material matters change over time, the content of the integrated report changes similarly to keep up with stakeholder expectations and ensure that the report includes relevant information.
Akinyemi Awodumila is a Partner at Deloitte East Africa. He is an author who writes and speaks on corporate reporting.
