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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Integrated Reporting Framework, Global Reporting Initiative Framework and Business Responsibility and Sustainability Reporting

Board of Himalaya Cements Ltd is drafting its integrated report. A director suggests including only positive outcomes and omitting a year of declining water availability at its quarry, as it is not financially material today. Under the IIRC Framework's guiding principles, what is the correct view?

The report must disclose all material matters, positive and negative, that substantively affect the organisation's ability to create value, presented in a balanced way. Water scarcity affecting natural capital may be material even without a current profit effect, so omitting it would breach materiality and completeness principles.

  1. AOmission is fine because only positive outcomes interest investors
  2. BThe report should include material matters, favourable and unfavourable, that affect the ability to create value, in a balanced wayCorrect
  3. COnly matters already reflected in profit need disclosure
  4. DOmission is permitted if the quarry is small compared with total assets, without assessing materiality

Explanation

The materiality and reliability/completeness principles require the report to cover all matters that substantively affect value creation, with balance, free from material error and not biased to favourable news. Water decline may affect natural capital and future value, so it cannot be excluded merely because current profit is unaffected.

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