How IR Affects Small Business

The International Integrated Reporting Framework was released by the International Integrated Reporting Council (IIRC) in December 2013. Since then, companies around the world have been working to implement the Framework to more cohesively and efficiently report on their ability to creat value over the short, medium and long term. So how does that impact small businesses within the larger picture? I asked Brad Monterio, managing director of Colcomgroup and vice chair of IMA’s Technology Solutions & Practices Committee, about Integrated Reporting (<IR>) and what small business owners should expect for the future.

LDM: What can <IR> do for small businesses?Quotes-03-02-15
BM: <IR> benefits businesses of all sizes. As popularity grows for <IR> around the world, a common misperception is that it’s only for the largest companies or publicly traded companies. The purpose behind <IR> is to provide a way to tell a company’s unique story to stakeholders; link its business strategy to its business model; and report how it will create value over the short, medium, and long term.

LDM: Are there any downfalls?
BM: As companies become more familiar with the <IR> Framework from the IIRC, there will be less of a learning curve for them. <IR> is an evolved way of looking at not only how the company reports information to stakeholders but how it operates internally. This manifests through a culture of integrated thinking where the areas of the business work more collaboratively toward its goals, which is a shift in dynamic for many small businesses. The shift takes time to adjust to.

LDM: Small businesses have fewer staff and smaller revenue pools than large companies. Could that potentially hold them back from integrating <IR>?
BM: <IR> isn’t intended to increase the reporting burden; in fact, quite the opposite. It’s designed to help improve and streamline the disclosure process (to make reporting better, not bigger). Leveraging existing disclosure vehicles, such as financial statements and annual reports, to communicate <IR> information helps smaller businesses. A culture of integrated thinking will help businesses collaborate internally and be more efficient with their resources as well as how they share information, reducing redundancies.

LDM: Why is <IR> important for small businesses?
BM: <IR> has many benefits and outcomes, including keeping pace with or surpassing competitors. But those aren’t the only reasons to undertake a transition to <IR>. Linking the company strategy and business model to how a company uses all of its resources in that business model Quote2-03-02-15helps a company more clearly understand what’s happening inside its business. This means they can more accurately portray what’s happening to stakeholders outside their business and communicate their value more effectively.

LDM: What else do small-business leaders need to know about <IR>?
BM: <IR> isn’t sustainability reporting as you might see with GRI or CSR reports. Sustainability reports look at both financial and nonfinancial information but don’t typically go as far as an integrated report in linking strategy and business model to future economic value. Additionally, actual accounting standards for sustainability topics in the market require companies to report on material nonfinancial matters. This helps streamline the reports and bring comparability to this content in all types of reports.

MORE WAYS TO LEARN
If you’re an IMA member, you can participate in a webinar that Brad is moderating on March 10 called “Integrated Reporting and Integrated Thinking: Which Comes First?” – which is part of IMA’s new Tech Talk series. If you aren’t a member, read his article “Integrated Reporting: A Chat with the Experts” from Strategic Finance. You can also read more on the Technology Solutions & Practices Committee’s LinkUp community.

Written by Linda Devonish-Mills, CMA, CPA, CAE

 

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International Integrated Reporting Framework – IIRC

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