2. Agenda Opening & welcome Discussion Paper walkthrough
<IR> Framework
Pilot Programme
Q&A
Closing

3. Discussion Paper – context for Integrated Reporting

4. Discussion Paper Overview
Available from 12th September 2011
Public comment until 14th December 2011
Ten specific questions
Other comments respondents would like to make
Rationale behind Integrated Reporting
Outline of an International Integrated Reporting Framework
Central themes: business model and value creation
Guiding Principles
Content Elements
Benefits and challenges along the reporting supply chain
Future directions

5. The percentage of market value represented by physical and financial assets versus intangible factors, some of which are explained within financial statements, but many of which are not.

6. The world has changed – reporting must too
The world population is increasingly urban
Global population by type of area and by region:
Global economic power is shifting
Top 10 economies by GDP in 2050
The global middle class is rapidly expanding
Population in low- and middle-income countries earning $4,000-$17,000 per capita (purchasing power parity)
Growth
Source: Goldman Sachs, BRICs and Beyond, 2007
Source: World Bank, Global Economic Prospects, 2007
Source: UN Population Division, World Population Prospects: The 2008 Revision, 2008
Greenhouse gas emissions keep rising
GHG emissions by regions
Environmental degradation jeopardises people’s quality of life
People living in areas of water stress by level of stress
The world could be running out of some resources
Global supply forecasts according to the implied ultimate recoverable resources of conventional oil, date of peak production and the post-peak aggregate decline rate
Degradation
Source: UN Population Division, World Population Prospects: The 2008 Revision, 2008
Source: Goldman Sachs, BRICs and Beyond, 2007
Source: World Bank, Global Economic Prospects, 2007
Source – WBCSD Vision 2050 6 6

7. Reports: Increasing length and complexity
Prudential annual report pages
Key point: …even though it is trying (quantity over quality)
Undue focus and commitment of effort on financial aspects of model
Lacking in strategic focus (wood for trees)
Increasing length, complexity and clutter in reports (haphazard evolution)
External reporting increasingly separate from internal management information
Governance reporting (last place to look)
Sustainability reporting - often a stand alone silo
Uncertainty on what's audited
Source: Investis research - PwC

8. The evolution of Reporting…

9. …Integrated Reporting – the Future

10. Coordinated, International Action Needed Now
Reporting has a fundamental impact on decision-making
Critical interdependencies need to be made clear
A clear, concise picture of performance, impacts and interdependencies, to:
drive innovation
be focused on communication and not just on compliance
support resource allocation decisions consistent with sustained value creation and with long term economic stability
Build on the many positive developments to date
Bring together divergent strands of reporting

11. Aims of the Framework
Support the development of reporting over the coming decades
Reporting organizations – consistency of content and approach
Policy makers and regulators – consistent reporting regimes within and across jurisdictions
Standard-setters – focal point for harmonization
Initial proposals in Discussion Paper – interim guidance to be on the IIRC website
Initial focus – larger companies and the needs of their investors

12. What Will it Mean for Me?
Benefits and challenges

13. Future Direction
Continue developing the International Integrated Reporting Framework
draw on Pilot Programme experiences
Exposure Draft in 2012
Work with others on measurement and reporting relevant to Integrated Reporting
Explore with regulators etc opportunities to harmonize reporting requirements within and across jurisdictions
Conduct regional roundtables and other engagement and communications activities
Public consultation regarding ongoing governance of Integrated Reporting

14. International Integrated Reporting Framework - overview

15. How is Integrated Reporting Different?
Thinking:
Disconnected 
Integrated
Stewardship:
Financial capital
All forms of capital
Focus:
Past, financial
Past and future, connected, strategic
Timeframe:
Short term
Short, medium and long term
Trust:
Narrow disclosures
Greater transparency
Adaptive:
Rule bound
Responsive to individual circumstances
Concise:
Long and complex
Concise and material
Technology enabled:
Paper based
Technology enabled

16. Central themes Business model & value creation

17. Resources and relationships or “capitals”
Financial capital: The pool of funds available to the organization.
Manufactured capital: Manufactured physical objects, as distinct from natural physical objects.
Human capital: People’s skills and experience, and their motivations to innovate.
Intellectual capital: Intangibles that provide competitive advantage.
Natural capital: Includes water, land, minerals, and forests; and biodiversity and eco-system health.
Social capital: The institutions and relationships established within and between each community, group of stakeholders and other networks to enhance individual and collective well-being. Includes an organization’s social license to operate.

19. Guiding Principles
Strategic focus: An Integrated Report provides insight into the organization’s strategic objectives, and how those objectives relate to its ability to create and sustain value over time and the resources and relationships on which the organization depends.
Connectivity of information: An Integrated Report shows the connections between the different components of the organization’s business model, external factors that affect the organization, and the various resources and relationships on which the organization and its overall performance depend.
Future orientation: An Integrated Report includes management’s expectations about the future, as well as other information to help report users understand and assess the organization’s prospects and the uncertainties it faces.
Responsiveness and stakeholder inclusiveness: An Integrated Report provides insight into the organization’s relationships with its key stakeholders and how and to what extent the organization understands, takes into account and responds to their needs.
Conciseness, reliability and materiality: An Integrated Report provides concise, reliable information that is material to assessing the organization’s ability to create and sustain value in the short, medium and long term.

20. Content Elements
Organizational overview and business model: What does the organization do and how does it create and sustain value in the short, medium and long term?
Operating context, including risks and opportunities: What are the circumstances under which the organization operates, including the key resources and relationships on which it depends and the key risks and opportunities that it faces?
Strategic objectives and strategies to achieve those objectives: Where does the organization want to go and how is it going to get there?
Governance and remuneration: What is the organization’s governance structure, and how does governance support the strategic objectives of the organization and relate to the organization’s approach to remuneration?
Performance: How has the organization performed against its strategic objectives and related strategies?
Future outlook: What opportunities, challenges and uncertainties is the organization likely to encounter in achieving its strategic objectives and what are the resulting implications for its strategies and future performance?

21. Pilot Programme

22. What is the Pilot Programme?
A two year programme:
Trying and testing IIRC’s proposed principles for Integrated Reporting
In support of the development of an International Integrated Reporting Framework
Asking leading companies and investors to develop and exchange good practice 22

23. Programme Milestones Expression of Interest
September 2011 – Dry Run Conducted
Dry Run (Phase 1)
17-18 October Pilot Programme Kick-off Meeting (Rotterdam, the Netherlands)
Pilot Cycle 1 (Phase 2)
September Mid-Programme Conference
Pilot Cycle 2
(Phase 3)
November 2013 – Closing Conference 23

24. Questions?