Boards that tell a clear business story—from strategy and performance, to business model, to risk management and future prospects—can anticipate greater market confidence in their company’s resilience and, ultimately, impact on the cost of capital.

In our experience, boards are facing increased demands on their time and expertise at an accelerating rate.

“Oversight” as a word now signifies a much wider role for the board, over and above assessment of performance and direction. This of course reflects truths about today’s business: global, fast-moving, complex business models, reliance on technology and intellectual property, scarce resources, involved supply and delivery chains and the prevalence of data.

Following the global financial crisis, the need for boards to build trust in their businesses with all their stakeholders, and demonstrate their contribution towards long-term economic stability, has become a high priority.

But boards are also concerned with other matters that perhaps underpin all of the above: trust in business—arguably at an unprecedented low; better decision-making based on concise, relevant information; and better and more productive engagement with investors and providers of financial capital.

Many want to emphasise long-termism and the wider social purpose of their organisations. They want increasingly to demonstrate they are addressing the need for sustainable development within their core purpose and strategies. In short, more and more businesses are expected to report not just on profit, but their impact on the wider economy, society and the environment.

Expectations

Discharging this role is leading to increasing expectations of board members, especially given the proliferation of available information.

Is the board focused on the most important issues affecting the business? Is there sufficient time dedicated to driving long-term strategy and performance?

Board members want to know that what they see and discuss in their meetings is truly reflective of the material issues and concerns of the companies they govern. They want, or should want, these issues and discussions to be the basis for wider engagement with stakeholders and especially investors and providers of financial capital.

While there is no one solution, one movement has been growing that has a beneficial impact on many of the issues highlighted, in relation to reporting on the whole business. This is integrated reporting (IR), through which companies are able to explain more widely how they are creating value for the short, medium and long term.

With effective ownership and sponsorship by the board, reporting can influence corporate behaviours, drive integrated thinking within the company and support better engagement with investors and other stakeholders.

Corporate reporting, and the thinking that has to accompany it, are boardroom issues. This is where strategy, performance and the development and communication of long-term value are best understood, aligned and led.

This view is endorsed by the International Corporate Governance Network (ICGN), whose revised Global Governance Principles now include the recommendation that boards should produce an integrated report. Reporting is firmly placed among the responsibilities of top management.

Reporting in this context is an output of the board’s collected view of the strategy, business model and other relevant factors relating to strategy over time. The report Tomorrow’s Business Success poses a range of questions that sound easy to answer but which form the basis of telling the story effectively. To what extent do we have a shared understanding of our business model and how we create value? Do we understand the connection between different value-adding activities and the decisions made? To what extent does our current reporting adequately describe our business model and how we create value?

Recognition

Business leaders are already recognising the need to consider and report on wider business issues, with 74% of chief executives saying that measuring and reporting the total impact of their company’s activities across social, environmental, fiscal and economic dimensions contributes to long-term success, according to a PwC survey.

Since the release of the International Integrated Reporting Framework by the International Integrated Reporting Council (IIRC) in December 2013, IR has been gaining considerable global momentum. It is helping businesses to think holistically about their strategy and plans, make informed decisions and manage key risks to build investor and stakeholder confidence and improve future performance.

With businesses, investors and other stakeholders from all over the world joining the IR movement, there has been a marked improvement in the quality of information available in a report. Equally, the actual process of reporting has become more productive. There is now a better understanding of the factors that materially affect an organisation’s ability to create value over time.

A principal achievement is that IR requires business units and functions to communicate with each other, and it challenges internal silo mentality, so management information becomes more cohesive.

This also provides an early warning system that alerts boards to significant risks earlier and triggers decisions that otherwise may not have been taken. IR therefore plays an important role in strengthening governance frameworks.

Evidence

There is increasing evidence of the benefits boards can gain from adopting IR. Research conducted by corporate communications consultancy Black Sun identifies both external and internal benefits.

Among organisations using the International IR Framework, 91% have seen a positive impact on external engagement with stakeholders, including investors; 92% have a better understanding of value creation; and 79% report improvements in decision-making.

IR also leads to the provision of information valued by investors. PwC’s recent survey among investment professionals found that a large majority (87%) of respondents felt that clear links between a company’s strategic goals, risks, key performance indicators and financial statements was helpful for their analysis.

Furthermore, a forthcoming survey by EY of more than 200 institutional investors around the world concludes that the proportion of respondents conducting a structured, methodical evaluation of such wider disclosures has increased from just under 20% to 40% in just two years.

Today there are more 1,000 businesses worldwide that are using IR as a key mechanism for presenting their value-creation story, and as a tool to understand and communicate value creation in its broadest context. We think that such a commitment from boards can help them to address some key challenges they are facing, while also strengthening the role they can play in aligning corporate behaviours to wider goals of financial stability and sustainable development.

Neil Stevenson is managing director, global implementation, at the International Integrated Reporting Council.