The 21st Century has witnessed a rapid increase in the debate about the ability of the tradition model of reporting to show the actual performance status of a firm (Kang and Gray, 2011, pp.403). That is the cased especially now that most of the investors, governments, customers, suppliers, Non-Governmental Organizations and the community, in general, are persistently demanding from the available companies to depict both their financial and corporate social responsibility performance. It has become evident that the current reporting model is not in any position to meet these demands and new trends that are existing in the current business environment (Kang and Gray, 2011, pp.404). Integrated Reporting is now being considered as one of the most effective and reliable reporting innovations that are being expected to transform the usefulness of corporate reporting across the world (Krzus, 2011, pp.274). In its latest report, the “Institute of Chartered and Accountants in England and Wales” has indicated that Integrated Reporting is now the best hope of effective corporate reporting in the future (Walker, 2011, pp.187). Integrated Reporting is viewed as a comprehensive holistic approach of communicating the strategy employed, performance and governance of a company and has the ability to enhance the corporate values (Krzus, 2011, pp.275). It is also defined as a comprehensive reporting strategy that signals the general recognition of the current growing need of maintaining a comprehensive reporting practice on financial and corporate social responsibility measures and which meets the information requirements of stakeholders (Atkins and Maroun, 2015, pp.200). This research paper sets to critically discuss how Integrated Reporting is gradually becoming the future practice of corporate reporting through analysing a variety of academic journals including the CW article that is provided in the course work.
Critical Analysis of Integrated Reporting
Although it is a legal requirement for the existing corporations operating in Europe and across the world to provide reports that have adequate amount of data related to corporate sustainability performance, most of the data that is given these entities has been found to be presented in a way that does not link it to economic drivers, social and environmental impacts (Kang and Gray, 2011, pp.407). Sustainability reporting has emerged under the umbrella of corporate social responsibility concepts and has been enabling the companies to measure their performance, change their ineffective operational methods and set new targets for sustainable economic growth (Jensen and Berg, 2012, pp.299). However, the sustainability reports have been found to lack the full capacity to allow the stakeholders of an organisation to make informed decisions as they require sufficient financial statement data. According to Jensen and Berg (2012), this shortcoming has facilitated the need of establishing new innovative ways which can be employed hence leading to Integrated Reporting being put into consideration as one of the possible solutions (Jensen and Berg, 2012, pp.301). Companies have started to realise the importance of integrated reporting which is now becoming part of the regulatory requirement in the effort of enhancing their competitive advantage.
Roth, (2014) argues that the traditional forms of financial reporting have failed to adequately address various information requirements of the stakeholders given the fact that these parties depend on the data provided during financial and non-financial reporting to make informed decisions (Roth, 2014, pp.65). For instance, investors have started demanding more information from the companies regarding how they have strategised themselves in the attempt of creating long-term value. The data reported to these investors through the financial statements have greatly determined their decision on whether to invest or not (Roth, 2014, pp.66). There is an increased need for the companies especially those with the intentions of expanding internationally to reconsider practices such as accounting for internally generated intangible assets since they make up three-quarter or more of their total market value (Roth, 2014, pp.67).
The current financial reporting system has proven to be very weak in meeting the present financial and non-financial reporting needs of the companies. For instance, the balance sheet only displays the debt coverage of the available assets rather than exhibiting their value to the company. That has limited the ability of most of the organisations to make informed decisions.
Cheng et al., (2014), claim that corporate reporting has in the 21st century become an essential element of showing the level of accountability of a given company since it enables it to communicate its position and performance to all its stakeholders (Cheng et al., 2014, pp.92). Integrated reporting is now being considered by most of the people as one of the ways of supplementing corporate reporting. For instance, organisations such as Stockland, Lend Lease, Australia Post, National Australia Bank and Vic Super that are based in Australia have already started adopting the integrated reporting principles (Cheng et al., 2014, pp.92). In the current digital world, there are high expectations that integrated reporting will become the global norm for most of the local and global organisations. Moreover, the past three decades have witnessed a rapid increase in the demand for sustainability reports that describe the non-financial performance of the companies whereby about 93% of the G250 companies and approximately 75% of the N100 firms have been issuing corporate social responsibility reports to their key stakeholders (Goicoechea, Gómez-Bezares and Ugarte, 2019, pp.3). However, despite corporate responsibility reporting being standard practice for most of the companies across the world, there are claims that these reports are often static and disconnected hence reducing their value and usefulness during the decision-making process (Goicoechea, Gómez-Bezares and Ugarte, 2019, pp.3).
According to Goicoechea, Gómez-Bezares and Ugarte, (2019), the issue about the need for harmonising sustainability informati
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