A global coalition of regulators, institutional investors, companies, and standard setters, is proposing a new model of corporate reporting, designed to improve how companies communicate with shareholders and the market.

The International Integrated Reporting Council (IIRC) issued for consultation a draft of its proposed international “integrated reporting framework”, which, it says, ” creates the foundations for a new reporting model which will enable a business to provide a concise communication of how it creates value over time.”

The group says that its proposed framework introduces the concept of six forms of capital financial, manufactured, intellectual, human, social and relationship, and natural — which “creates a prism through which organizations should assess, and then report, the degree to which they are creating and destroying value over time.”

It says that this approach would address a challenge faced by institutional investors, which is that intangible factors, such as intellectual property, brand, talent and environmental resource use, “are insufficiently integrated into the strategic decision-making and reporting by businesses, leading to the potential for a misallocation of resources and a higher cost of capital.”

The new model aims to achieve a more cohesive and efficient approach to reporting; better inform capital allocation decisions; enhance accountability and stewardship; and, support integrated thinking.

The framework is out for comment until July 15; and is being launched with 15 events being held around the world, including at the Toronto Stock Exchange.

Speaking at the South African launch, chairman of the IIRC, professor Mervyn King, said, “The world today faces two critical and interconnected dangers: financial instability and unsustainability. Both of these dangers pose threats to the livelihoods of communities across our planet – to their wealth and welfare. They are risks that have been under-managed and under-reported for too long. The corporate reporting landscape has not kept pace with the scale of the changes that have taken place in the world economy, business and society in recent decades.”

“Businesses and investors have a central role in making capital allocation decisions that will ultimately determine the resilience of our financial system and the success of the economy over the short, medium and long term. Integrated Reporting brings businesses and investors to the centre of this debate,” King added. “It charges them with the responsibility to communicate how they create value over time. It empowers them to create new tools and mind-sets that will improve the quality of decision-making by businesses and investors. And, crucially, it will lead to changed behaviour, a focus on the future as well as the past and a reporting model that reflects and communicates the reality of business, its operations and its impacts, in the 21st century.”

“Over the last three years, the IIRC has built consensus around the idea that the current corporate reporting model must change to meet the needs of today’s business and investment environment. The Framework is the product of business and investor input and testing involving over 300 individuals and organizations,” noted the IIRC’s CEO, Paul Druckman, at the New York launch.