Organizational Overview and External Environment

While the <IR> Framework asks, "What does the organization do, and what are the circumstances under which it operates?"22 and explains what the answer to this question should include, it intentionally does not prescribe a format for the report.23 We found no consistent approach in how companies provided this information. It was often mixed with other content elements, like business model and/or performance-related information like financial results, which in some cases were about financial capital. Moreover, when an organizational overview was provided, it appeared in different places. For example, the company might include a link in its online integrated report to another part of the company's website—such as "Corporate Profile," "Who We Are," "About Us," or a "snapshot"—where the user would still have to search for the information of interest.

Governance

The <IR> Framework asks, "How does the organization's governance structure support its ability to create value in the short, medium and long term?"24

In contrast to organizational overview, most companies discussed governance in a single, well-defined section of their report. This is likely due to the fact that most countries have codes and regulations regarding corporate governance that define it as a topic. Nevertheless, we found substantial variation in how companies treated the issue. Some used very lengthy sections of their report— dozens of pages—providing many details about the various elements of corporate governance, such as executive compensation. Longer sections sometimes contained discussions about risk but usually did not address those risks that come from pursuing opportunities. Other companies had very short sections with little detail. Many factors explain this variation in length, from the impact of mandated reporting requirements, companies taking a compliance-only, tick-the-box approach, and simply not knowing how best to discuss this element. Rarely did this discussion explicitly include time frames.

Business Model

The <IR> Framework asks, "What is the organization's business model?"25 As depicted in Figure 7.1, how the organization creates value over the short-, medium-, and long-term is at the core of the <IR> Framework. The <IR> Framework emphasizes that effectiveness and readability can be enhanced by explicit identification of its key elements, a simple diagram with accompanying explanation of these elements' relevance to the organization,26 a narrative flow that is logical given the particular circumstances of the organization, and identification of critical stakeholder dependencies and important factors affecting the external environment.27

As a Guiding Principle, most business model discussions would benefit from increased "connectivity of information." While some companies combined the description of their business model with a discussion of performance, we did not find a single case in which the company explicitly defined the relationship between its business model and short-, medium-, and long-term value creation. As with governance, we noted substantial variation in the depth with which companies discussed their business model, although we did not find a single example in which a company used the <IR> Framework's recommended features for enhancing effectiveness and readability. Even at the business unit level, some had detailed descriptions that included a discussion of the company's market and strategy, and how the capitals were used in the resource allocation process. Rarely, however, did a company explicitly link the capitals to the capital input/activities/output/capital impact process.