Risks and Opportunities
The <IR> Framework asks, "What are the specific risks and opportunities that affect the organization's ability to create value over the short, medium and long term, and how is the organization dealing with them?"28 Relevant risks and opportunities are those that affect the availability, quality, and affordability of the capitals the company needs to create value over different time frames.29 A comprehensive discussion about either risks or opportunities was rare in the reports we analyzed. On the whole, the discussion was even more scattered in the report, especially for opportunities, than it was for organizational overview and external environment. This could often be attributed to differences in how companies frame these topics. When companies saw risk and opportunity as two sides of the same coin, they discussed them, including their interdependencies, together. Otherwise, opportunities were covered in a variety of places, such as the outlook section (itself a content element) or in discussion relevant to one of the capitals, such as R&D investments. Perhaps driven by regulatory reporting requirements, it was more common for risks to be a stand-alone section. Still, they were also covered in such sections as materiality, governance, or even in a general "About This Report" or "About Us" section.
Strategy and Resource Allocation
The <IR> Framework asks, "Where does the organization want to go and how does it intend to get there?"30 Answering this question includes a statement of strategic objectives for the short-, medium-, and long-term; what the company is doing to accomplish them; resource allocation plans for implementing this strategy; and how it will measure achievements and target outcomes over different time frames.31 We found strategy and resource allocation to be one of the most diffuse of the content elements, as it never appeared as a separate section or even as the main topic of a well-defined section by another name. The topics in this content element were typically covered in discussions about the company's business model and performance. Companies varied in the extent to which they were explicit about the six capitals when discussing resource allocation. In some cases, one or more of the capitals was described, but the company was not explicit about the use of this capital as a resource.
The <IR> Frameworks asks, "To what extent has the organization achieved its strategic objectives for the period and what are its outcomes in terms of effects on the capitals?"32 This includes both qualitative and quantitative information such as indicators with respect to targets and opportunities, with explanations of their significance, implications, and the methods and assumptions used in compiling them; the organization's positive and negative effects on the six capitals; the nature of its relationships with key stakeholders and how the organization has responded to their legitimate needs and interests; and linkages between past and current performance, and between current performance and outlook.33 For the most part, the reports we reviewed would be better categorized as "combined reports" rather than "integrated reports." They included the anticipated information on financial and operating performance, often presented well through summaries earlier in the report and with more detail and accompanying explanation. Sometimes later in the report, detail included the business unit or even product level.
Although typically framed as "sustainability" or "corporate social responsibility" performance, all reports contained information on nonfinancial performance, with the capitals discussed more in the background than foreground. The degree of detail regarding nonfinancial performance varied widely, as did how prominently it was displayed. For a relatively small number of companies, a modest amount of forward-looking information—targets or projections—was presented in the context of past performance, both financial and nonfinancial. Noticeably lacking in nearly all reports were explanations of how financial and nonfinancial performance related to each other—a grave oversight considering the centrality of "connectivity" as an idea. Also lacking in virtually all reports was any explanation of how past performance and other factors would contribute to future value creation considered for the short-, medium-, and long-term.
The <IR> Framework asks, "What challenges and uncertainties is the organization likely to encounter in pursuing its strategy, and what are the potential implications for its business model and future performance?"34 As the company's view on anticipated future changes, outlook should be built on sound and transparent analysis about changes in the external environment in the short-, medium-, and long-term; what effect these will have on the organization; and how the organization is currently equipped to respond to critical challenges and uncertainties that are likely to arise.35
Although a few came close, virtually no company provided all of the information suggested by the <IR> Framework. Further evidence that this was the weakest of the content elements is that only 25 companies scored a 3, compared to 45-50 for all the others. Various formats were used to present the company's view on outlook. Some companies had a specific outlook section, although titles and level of detail varied. Others provided this information throughout the report, sometimes down to the business unit level. A few companies combined performance and outlook into a single section. Companies varied substantially in exactly what information they regarded as important for this element. It was fairly common for companies to discuss trends and challenges. Although less common, a number of companies identified challenges and uncertainties. Probably due to liability and competitive concerns, most companies did not provide targets, forecasts, projections, or even scenarios.