An integrated report provides insight into the organsation’s activities, its ability to create value over time and provides a financial return to the providers of its financial capital. In addition, another fundamental concept of integrated reporting is how an enterprise uses other material resources or capital.
The six capitals
Defined as ‘stocks of value that are increased, decreased or transformed through the activities and outputs of the organization,’ the integrated (IR) framework capitals are:
Financial capital — The pool of funds obtained through financing or generated through operations or investments
Manufactured capital — Manufactured physical objects used in the production of goods or the provision of services — buildings, equipment and infrastructure
Intellectual capital — Knowledge-based intangibles, including intellectual property, such as patents, copyrights, software and licenses
Human capital — The competencies, capabilities, experiences and motivation of people, along with their ability to lead, management and innovate to implement the organisation strategy
Social and relationship capital — The institutional and social relationships, including shared norms, common values and behaviours — intangibles associated with brand and reputation, and an organisation’s social license to operate
Natural capital — All renewable and non-renewable resources that support the prosperity of the organisation, including air, water, land, minerals, forests, along with eco-system and biodiversity health.
While most organisations likely have some interaction with each of the capitals to some extent, not all capitals are materially significant for every organisation. They are provided as part of the framework as underpinning to the concept of value creation, preservation, or erosion — a guideline to ensure that organisations consider all forms of capital that they use or affect.