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NQ: Measuring Integrated Thinking

Integrated thinking has been the cornerstone of the International Integrated Reporting Framework (IIRF), published by the International Integrated Reporting Council (IIRC, now part of the Value Reporting Foundation (VRF)) in December 2013 and updated in January 2021.

Integrated thinking has been described with the IIRF in the following way:

Integrated thinking is the active consideration by an organization of the relationships between its various operating and functional units and the capitals that the organization uses or affects.

Integrated thinking leads to integrated decision making and actions that consider the creation, preservation or erosion of value over the short, medium and long term.

Integrated thinking takes into account the connectivity and interdependencies between the range of factors that affect an organization’s ability to create value over time.

In June 2021, the “Integrated thinking: A virtuous loop” report added that:

Integrated thinking is engrained in the discipline of making a deliberate and coordinated effort to connect the organization’s strategy, governance, performance and prospects.

To guide Boards of Directors and senior management in assessing and implementing integrated thinking in their companies Integrated Thinking Principles prototype has been proposed by the Value Reporting Foundation in December 2021:

Integrated Thinking Principles represent a leadership and management philosophy focused on value creation over time for the enterprise and its key stakeholders. The Principles are rooted in the concept of integrated thinking, which leads to integrated decision-making and encourages the different parts of an organization to work collectively and create value over time across the variety of resources and relationships available to them.

As the VRF is now in the process of consolidation with the IFRS Foundation, and its bodies, International Accounting Standards Board (IASB) and International Sustainability Standards Board (ISSB) have announced that Integrated Reporting Framework and Integrated Thinking Principles will become part of the materials of the IFRS Foundation and these bodies encourage their continued adoption and use, further steps can be made to achieve enhanced and accelerated application of these foundational for better corporate governance and reporting methodologies. Such actions might help raising awareness, promote implementation, and suggest means to establish comparability of companies’ efforts and results in achieving integration in their activities — and ratings / rankings traditionally support such endeavors.

NQ (iNtegrated thinking Quotient) strives to measure the maturity of integrated thinking communicated. While integrated thinking emanates and demonstrates itself via decisions, actions, performance, and outcomes, only through the means of communication it can be comprehended in effective and efficient manner. Aimed at the stakeholders and following the integrated reporting logic such communication establishes an accountability link and trust between the company and those who are impacted or provide the impact on the business.

NQ is a concept that by the time of this publication is not yet endorsed by the IIRC, VRF, or IFRS Foundation. It is rather a concise and useful tool aimed at the:

  • investors in search of teams which demonstrate the ability to provide for and maintain a holistic approach and mature practices in leading and managing the companies they are trusted
  • business leaders, looking for major upgrade of their management systems
  • professional and academic communities in the fields of corporate governance, finance, and sustainability, who need a common platform for benchmarking and identification of best practices to research and advise on their implementation or further enhancement.

NQ can be assessed on different levels, mostly mirroring the approach used by the Integrated Thinking Principles:

  • on Foundations level — following the question set of Level 1 of the Integrated Thinking Principles (eg “How do we measure and communicate the enterprise value we have created for our investors and the value we have created for our other key stakeholders?”) and providing the high-level understanding of governance maturity
  • on Systems level — using the Level 2 statements (eg “Our KPIs and management information measure how well we are delivering against our strategic objectives. They also measure the value we are creating, preserving or eroding across the capitals which are material to our business model.”) and thus providing an assessment of the extent integrated thinking has been embedded in senior management approaches to managing the company
  • on Practices level — using the Level 2 statements and Level 3 practices (eg “The quality, relevance and reliability of the information by which we manage the business are formally assessed.”) for thorough measurement of how deeply and broadly integrated thinking has been operationalized across the company and communicated externally.

Of course, the results of measurement provided on each of these levels can be different if compared, as the Foundations level relies on a set of broad assumptions and generalizations, while the assessment on the Practices level deals with the application of specific procedures and tools thus providing for a more instrumental evaluation.

NQ if structured around the rating approach can result in the following grades that identify the integrated thinking maturity level:

  • Ultimate — the company demonstrates an outstanding holistic and visionary approach in its governance and management through embedding integrated thinking across its various units, functions, and time perspectives
  • Advanced — the company is much beyond others in embracing and implementing integrated thinking with developed governance and management systems and practices
  • Comprehensive — a core set of features aimed at sustainable management of the company is established
  • Aspirational — progress in embedding integrated thinking is evident and the company setting up its journey on the path to better governance for value creation
  • Emergent — some elements of integrated thinking are being applied
  • Conditional — integrated thinking is not yet approached in practice but via self-diagnosis the company is already aware of the development areas

NQ can be measured both using self-diagnostic tools and through independent appraisal.

While independent rating and ranking services in relation to integrated thinking and, specifically, NQ are yet to come, and when such providers would appear they might take some time and make their users apply extra effort to arrive at the desired measure — those interested with an instant measurement of their company’s NQ should rather follow the self-diagnostic path, which would also be beneficial in setting up, preparing for independent evaluation, and approaching the rating providers. provides an example of how NQ can be self-diagnosed: free, fast, and felicitously. It illustrates (using the direct questions and statements from the Integrated Thinking Principles) how NQ can be measured on the described above Principles, System, and Practice levels to achieve a score which would correspond to the proposed ratings of Ultimate, Advanced, Comprehensive, Aspirational, Emergent, and Conditional integrated thinking maturity.

Like any judgment-based assessment, NQ as an identified metric would not provide for a precise measurement of integrated thinking and its communication and remain static throughout the time — but as a guiding concept it would assist society, investors, and business leaders in researching how to adapt — and in some cases, disrupt — the way the companies are governed and managed for multicapital value creation to the benefit of its various stakeholders.

International Integrated Reporting Framework. Copyright © January 2021 by the International Integrated Reporting Council (‘the IIRC’). All rights reserved.

Integrated thinking: A virtuous loop. Copyright © June 2021 by the Value Reporting Foundation. All rights reserved.

Integrated Thinking Principles prototype. Copyright © 2021 by the Value Reporting Foundation. All rights reserved.




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Ivan Topolya

Ivan Topolya

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