What you need to know about strategic focus and future orientation in integrated reporting

The <IR> Framework has seven guiding principles. The first principle articulates the importance of communicating your company’s strategic focus and future orientation.

Value creation is the foundation of every business. By identifying a clear end-state, and leveraging strengths and weaknesses, companies can achieve results. Your organisation’s strategic focus will shift over time, and the integrated report presents a consistent and comparable opportunity to communicate your strategic focus and future orientation over time.

What do I have to disclose to comply with the framework? 

According to the <IR> Framework, an integrated report:

“should provide insight into the organisation’s strategy, and how it relates to the organisation’s ability to create value in the short, medium and long term, and its use of and effect on the capitals.” 

A 2016 EY report articulates value creation as a broad concept that includes the resources that are shared between organisations and wider society. The integrated report should position how your company sustainably creates value over time, including current and future considerations. This involves disclosure on the impact your strategy has on the six capitals: financial, manufactured, human, social and relationship, intellectual, and natural. 

How do we apply this principle? 

In applying this principle, you should include information focused on the company’s strategic focus areas, and highlight the associated risks and opportunities. You should also highlight the dependencies that flow from your market position and business model. It is also important to reflect on the relationship between past and future performance, and the factors that currently have the potential to influence that relationship, either positively or negatively. You can also strengthen your reputation by reflecting on how your company has incorporated learnings from past experiences in determining the organisation’s future strategic direction. 

Examples of linking strategy to value creation

In their 2017 integrated report, Liberty highlights a shift in strategy in response to market pressures and a change in leadership. The company makes a case for this change in the context of their internal and external factors. Liberty goes on to link their principal risks to their strategic objectives. We think the clear way in which they express the change in strategy and the strategic response to risk is important. They could have reinforced this link even further by showing what actions they will take to realise the strategic response.

Extract from Liberty’s 2017 integrated report.

Redefine demonstrates how strategy should not exist in isolation. They make strong links to strategy in a number of areas of their report. The example below highlights their strategic response to stakeholder concerns, and also shows the associated risks and opportunity.

Extract from Redefine’s 2017 integrated report.

Not sure how to go about reporting on your strategic focus and future orientation? Contact Alchemy Creative Studios for assistance: info@alchemycs.co.za

This is the first article in a series of seven relating to the <IR> Framework guiding principles. Return to our blog to read more on these principles.