Reporting to stakeholders: formula sheet

Key formulas

Six capitals

Financial, Manufactured, Intellectual, Human, Social and relationship, Natural

Remember as FM-IHSN. The organisation need not use these exact labels in its report, but the framework uses them as a guide.

Seven guiding principles

Strategic focus and future orientation; Connectivity of information; Stakeholder relationships; Materiality; Conciseness; Reliability and completeness; Consistency and comparability

These govern how the report is prepared and presented.

Eight content elements

Organisational overview and external environment; Governance; Business model; Risks and opportunities; Strategy and resource allocation; Performance; Outlook; Basis of preparation and presentation

They are linked, not stand-alone sections. Each is framed as a question the report should answer.

Value creation flow

Capitals (inputs) → Business activities → Outputs → Outcomes (effects on the capitals)

Outcomes can be positive or negative. A good answer shows both trade-offs between capitals.

Mendelow's matrix: high power, high interest

High power + high interest = key player → manage closely

Give regular, detailed, two-way information.

Mendelow's matrix: high power, low interest

High power + low interest = keep satisfied

Make sure they are not surprised or upset; provide key summaries.

Mendelow's matrix: low power, high interest

Low power + high interest = keep informed

Use reports, newsletters and briefings. They may form coalitions that gain power.

Mendelow's matrix: low power, low interest

Low power + low interest = minimal effort

Monitor only. Their position can change.

Mandatory vs voluntary test

Required by law, standard, regulator or listing rules? Yes = mandatory. No = voluntary

Use this to classify any disclosure named in the scenario.

Triple bottom line

Economic (profit) + Environmental (planet) + Social (people)

A concept for judging performance on three dimensions. There is no single combined figure.

GRI focus

Impact materiality: the organisation's effects on economy, environment and people

Aimed at a broad range of stakeholders.

ISSB focus

Sustainability information that could affect the entity's cash flows, access to finance or cost of capital

Aimed at investors, lenders and other creditors. Often called financial materiality.

Double materiality

Impact materiality + financial materiality

A topic is reportable if it matters on either view. Use it when a scenario needs both investor and wider stakeholder perspectives.

ESG split

E (environment) + S (social) + G (governance)

Use as a checklist to organise answers and make sure none of the three is missed.

Limited vs reasonable assurance

Limited assurance = negative-form conclusion (nothing found to suggest a problem); Reasonable assurance = positive-form conclusion

Reasonable assurance needs more evidence and gives higher confidence, but never absolute assurance.

Input/output balance

Material inputs = product outputs + waste and emissions

Any gap suggests unrecorded waste or poor data. Use it to spot hidden cost.

Life cycle cost

Life cycle cost = design and development + production + use and maintenance + end-of-life (disposal, decommissioning)

Include environmental costs at each stage, especially at the end of life.

Environmental cost categories

Prevention + detection + internal failure + external failure

A common way to group environmental costs. Not every exam answer needs the labels, but they give a structure.

Comply or explain

Comply with the code provision, or disclose the departure and give reasons

Applies to principles-based codes. Say whether the explanation is convincing, not just that it exists.

Core aims of disclosure

Transparency + Accountability + Informed stakeholder decisions

Use these three as a frame to judge any disclosure in the scenario.

Qualities of useful narrative reporting

Balanced, specific, forward-looking, consistent with the financial statements, understandable

Use as criteria when assessing or criticising a report.

Remuneration report content

Policy + amounts paid + performance measures + link to strategy and long-term results

Check each element against the scenario facts.

Quick revision

• Reporting should fit the stakeholder: investors, lenders, employees, regulators and communities need different information.
• Integrated reporting focuses on how an organisation creates, preserves or erodes value over time.
• Know the six capitals in <IR>: financial, manufactured, intellectual, human, social and relationship, and natural.
• An integrated report is a concise communication, not a larger annual report.
• Sustainability reporting covers environmental, social and governance performance and its link to strategy and risk.
• Greenwashing is a key risk: claims that overstate real performance damage trust and invite scrutiny.
• Social and environmental accounting extends measurement beyond financial results to wider impacts.
• Assurance over non-financial information adds credibility but is often limited in scope.
• Governance disclosures show how the board is structured and how it oversees risk and controls.
• Narrative reporting should be balanced, linked to strategy and not just positive.
• Always state who the reader is, what they need and what is missing in the case.
• Recommend, then justify with case facts, and mention costs and limits.

Common mistakes

• Listing the six capitals, principles or elements with no link to the scenario. Fix: For every item, add a fact from the case and say what it means for value creation or the report's users.
• Saying an integrated report replaces the financial statements. Fix: State that it is a concise communication that connects information. Financial statements remain a separate legal requirement.
• Listing every stakeholder generically without using the scenario. Fix: Choose only the stakeholders named or implied in the case and tie each to a specific fact.
• Saying all stakeholders need the annual report. Fix: Explain that employees, communities and customers often need other forms, such as sustainability reports or direct communication.
• Treating GRI and ISSB as the same thing. Fix: State the audience and focus: GRI is about the organisation's impacts on the world and wide stakeholders; ISSB is about sustainability matters affecting the entity's value, for investors.
• Describing the triple bottom line with no application. Fix: Give a case example for each of the three and say how it could be measured or what trade-off it creates.
• Listing every method from memory without linking to the scenario. Fix: Choose methods that suit the facts given. Name the scenario's emissions, supply chain or workforce in each point.
• Treating assurance and audit as the same as a financial statement audit. Fix: Explain that sustainability assurance is usually voluntary, uses chosen criteria and often gives only limited assurance.
• Listing code provisions from memory without using the scenario. Fix: Tie every point to a fact in the case. Say what the company did and why it matters.
• Treating disclosure as the same as good governance. Fix: State that disclosure shows practice but does not prove it. Check whether the reality matches the words.

Exam tips

• Always tie each capital or element to a fact in the scenario. Generic lists earn few marks.
• Use trade-offs between capitals to show depth and to earn professional skills marks for analysis and judgement.
• When asked to evaluate, give both benefits and limitations, then a clear conclusion.
• Keep the audience in mind. A board needs advice, while an investor needs to know what the report tells them.
• Do not spend time reciting all seven principles or eight elements unless asked. Choose those most relevant to the case.
• Always use names and facts from the scenario. Generic stakeholder lists score low.
• Link each stakeholder to a decision they make. This shows you understand why they need the information.
• Say clearly whether each report is mandatory or voluntary, and say when it depends on jurisdiction.