The focus of the Integrated Report on one target audience by no means implies a materiality determination process that is not inclusive. Responsible investors may have specific concerns about who has been involved…

The IIRC’s International Integrated Reporting (IR) Framework prescribes a materiality determination process of four steps. It recognizes the role of all stakeholders in providing insights, among others related to new trends and perceptions of value. It notes that the materiality determination process should involve regular engagement with the providers of financial capital, without prescribing what form that may take.


The four step process of the International Integrated Reporting (IR) Framework involves:

  1. Identifying relevant matters based on their ability to affect value creation as discussed in Section 2B.
  2. Evaluating the importance of relevant matters in terms of their known or potential effect on value creation.
  3. Prioritizing the matters based on their relative importance.
  4. Determining the information to disclose about material matters.

The IR Framework states that the process applies to both positive and negative matters, thus reflecting the principles of reliability, completeness as well as balance as found in GRI G4. It adds that this implies risks and opportunities, favourable and unfavourable performance information, financial and non-financial information, as well as direct and indirect implications.

The reporting boundary specified by the IR Framework has at its heart the financial reporting entity. In this respect it leans towards the conventional approach of financial reporting versus the broader value chain and societal impact approach of the GRI. The IR Framework states that it is the financial reporting entity in which providers of financial capital invest and therefore need information about. It is also the financial statements of that entity to which the other, non-financial information needs to be linked.

Relevant matters are those that have, or may have, an effect on the organization’s ability to create value. This implies effect on the organization’s strategy, governance, performance or prospects.

In evaluating importance, not all relevant matters are considered material. To be included in an integrated report, the matter (aspect, topic) also needs to be sufficiently important in terms of its known or potential effect on value creation. This involves evaluating the magnitude of the matter’s effect and its likelihood of occurrence. The prioritization of important matters is done on the basis of their magnitude.

While the IIRC does not define or prescribe thresholds, its IR Framework states that in evaluating the magnitude of effect the following needs to be considered:

  • Quantitative and qualitative factors;
  • Financial, operational, strategic, reputational 
and regulatory perspectives;
  • Area of the effect, be it internal or external; and
  • Time frame (short / immediate, 3-5 year time span, or longer term).

Determining the information to disclose involves the exercise of judgement. IIRC reminds that this includes consideration of internal and external perspectives (“viewpoints” as per GRI G4), including regular engagement with the providers of financial capital to ensure that the IR meets it primary purpose. If a matter is highly material to non-financial stakeholders but not in the view of providers of financial capital, it is unlikely to find its way into the IR.