Introduction

The evolution of corporate reporting has raised numerous concerns among governments, organizations, and stakeholders (Slack and Tsalavoutas, 2018). Corporate reporting remains to be an activity that many organizations engage in although it needs some adjustments if its quality and usefulness improve especially if this is going to be the future of corporate reporting. Companies should not only be accountable when it comes to financial reporting, but the virtue should also extend to non-financial reporting. Corporate reporting is the tool that organizations widely use to ensure that their decisions are communicated to its stakeholders (Atkins and Maroun, 2015). Corporate reporting will continually evolve to match the ever-widening diversity of users. The business and regulatory environment is always changing and thus the need for the evolution of reporting to ensure that it remains at pace (Slack and Tsalavoutas, 2018). There are numerous models of reporting being tested while others are already in use.

An excellent corporate reporting allows comparability between the items under analysis, has valid information which is to mean that the data written in corporate reports should be open to testing and that the reports should be complete which is to say that all the relevant information should be presented (Havlová, 2015). Other requirements are that it should be timely, reliable, and able to explain complicated matters transparently. Also, corporate reporting needs to be diversified so that it covers both the short-run and long-run phases. Corporate reporting, whose primary concern is financial reporting is gradually becoming outdated due to an arising need to report on non-financials. Integrated reporting is essential since it capitalizes on non-financials becomes essential.

Corporate reporting correctly reports on financial data but is ineffective when reporting non-financial information due to the numerous difficulties attached to it. The credibility of reporting non-financial data is founded on the accuracy of the information which is difficult to ascertain since it is hard to quantify non-financial data. Moreover, corporate reporting is an essential factor that dictates the extent to which a firm will be sustainable and stable (PwC, 2010). Regardless of the level or nature of decisions regarding corporate reporting, it is evident that the need to diversify and broaden it is inevitable (Atkins and Maroun, 2015). Integrated reporting appears to be the tomorrow of corporate reporting since it incorporates both the non-financial and financial elements of a firm.

Integrated Reporting: The Current Status and IIRC

In the past, non-financial information was scantly disclosed as part of the annual corporate financial reports. However, this has changed over the last two decades since social and environmental information is reported separately. Reporting non-financial information as a separate factor has made it possible to bring to book many issues that would have never been known if such a measure would not have been taken (Rupley, Brown, and Marshall, 2017). IIRC was tasked with the duty to come up with a new model of reporting to help companies have a means of communicating effectively and enable them to create value over time (Adams, 2015). Value creation demands a concise reporting, especially when dealing with the agents which are the alignment of the organization’s management, organization’s strategy, and expected opportunities as well as other factors that pertain an organization’s external environment. The King Report plays a significant role in South Africa. Currently, the Johannesburg Stock Exchangeof South Africa demands that all the firms listed with it must not only prepare but also present integrated reports (Atkins and Maroun, 2015). In other parts of the world, organizations are still negotiating on how to embrace the approach of integrated reporting (Ioana, and Adriana, 2014). From the word go, integrated reporting sought to provide a well-detailed report that would present the non-financial and financial aspects as well as a company’s opportunities and risks in an integrated manner (Slack and Tsalavoutas, 2018). For a better comprehension of the aims of reporting, there is a need to amplify its objectives. First, it requires that the access to quality information is improved for those willing to take the role capital providers as a way of attaining an efficient allocation of capital (Shu, Chen, and Lin, 2018). The second role is that it aims to establish a consistent approach by integrating various reporting factors. Such procedure takes into account all the elements that add to or limit the capability of a company to generate value. The third role of IR is that it seeks to promote stewardship and accountability for all the six kinds of capital to try to understand independencies that exist amongst them. Integrated reporting also serves a significant role since it offers the foundation to the decision-making process (Atkins and Maroun, 2015). Technology had a role to play since integrated reporting aimed at using electronic forms to provide quality information on the areas of interest to stakeholders. Moreover, many companies have voluntarily adopted integrated reporting, although the non-existence of a generally accepted framework has made it remained unclearly undefined. Even with this, integrated reporting is advancing (Adams, 2015).

In as much as integrated reporting appears to be a new concept, it is a potent tool with the potential of presenting a company’s picture as well as achieving its plans (Morros, 2016). Integrated reporting is the best means that organizations can embrace if they must produce a consistent corporate system. The need for an intergraded report is spearheaded by the increasing demand for clarity and simplicity in explanations of a specific organization fits in society. That is concerning its take on social responsibilities and management styles (Krechovska and Prochazkova, 2014). It is an excellent way of making comparisons of the elements under observation as well as the validity of data. Therefore, it is important to note that integrated reporting focuses on communicating detailed information touching on stakeholder’s specific interests and also focuses on making the information simplified.

Moreover, integrated reporting provides in-depth descriptions of analytical tools used when making comparisons of financial capital with other forms of capital and the techniques employed when comparing the performance of a company with that of its competitors (Oprisor, 2015). Nevertheless, integrated reporting has received several criticisms in that it is not useful. Some researchers say that it has ignored the part of sustainability accounting. They argue that it has shifted from the essential goal of enlightening society. Critics of integrated reporting view the IIRC as a body formed out of circumstantial reasons (Atkins and Maroun, 2015).  Nevertheless, the reality of the matter is that integrated reporting as bore some fruits for a short time it has been in existence, and this implies that it will soon become the main corporate reporting technique.

Value Creation

As said earlier, IIRC was tasked with the duty to come up with a new model of reporting to help companies have a means of communicating effectively and also enable them to create value over time. There have been debates as to whether value addition includes raising the wealth of stakeholders, making the environment a better place to live in, improving the living conditions of people in the society, or all of these factors (Evans, Fernando, and Yang). These concerns are likely to have been brought about by the IIRC framework which recognizes value created for the firm and that designed for stakeholders (Morros, 2016). The value generated for the organization means that providers of capital will earn financial returns while an organization’svalue creation is affected by how it relates to its external environment. Also, the value generated or depleted by an organization for other parties has effects on the long-term value creation ability of an organization as well as its capital providers. Integrated reporting is concerned with how communication and management strategies are created and used to help stakeholders whether they have the know-how or not to understand how companies create value.

The IIRC council’s agenda outlined that integrated reporting is founded on the need for companies to have a clear understanding of all the six forms of capitals and in the end have a deeper understanding of the firm to create value (Slack and Tsalavoutas, 2018). Integrated reporting provides answers to inquiries on how an organization acquires, uses, and the impact it has on the various types of capital. Dealing with these capitals is a complicated process since they also influence each other. One way in which they affect each other is when a firm acquires highly skilled employees to train recruits with the aim of improving its customer satisfaction. Here is where integrated thinking comes in since it seeks to conceptualize the interdependency of these capitals. That is, its purpose is to collect data concerning an organization that matches its business environment. A firm’s activities may have adverse effects on the natural capital which is rarely documented in corporate reporting. Integrated reporting is thus crucial in creating value for both the organization and all stakeholders since it includes an analysis of how different forms of capital interact. However, using integrated reporting to achieve value creation will require that organizations see the need for being accountable and possess the skills of integrated reporting (Dragu, and Tiron-Tudor, 2013). It is guaranteed that firms are possessed with creating value which means that they will do all they can to achieve integrated reporting.

Integrated Thinking

In the course of value creation, there is a need to make inclusive decisions which are only achieved through integrated thinking (Hoque, 2017). Integrated thinking is the voluntary measure taken by a company to analyze the interrelationships that exist between its capitals and functional units.  It is an essential tool of integrated reporting since it makes an immense contribution towards achieving profitable businesses as well as better communities (Hoque, 2017). Organizations face challenges when handling capitals since they influence each other. It is at this point that integrated thinking becomes essential as it helps organizations think widely on how to create value and feed the stakeholders with more quality data. Integrated thinking may not be seen, but an organization that has embraced integrated reporting is deemed to succeed. Integrated reporting initiates integrated thinking, and it has been verified that organizations that produce high-quality reports have grasped the idea of integrated thinking. The benefits of integrated thinking do not stop here since through its companies are in a position to negotiate better with their financial providers.

Motivations for Integrated Reporting

Generally, there seems to be steadily progressing the adoption of integrated reporting across the world. With this trend, one may seek to know the underlying motivations for companies and countries to adopt integrated reporting. South Africa takes the lead in the implementation of integrated reporting due to the requirement by Johannesburg Stock Exchange of South Africa that all the firms listed with it must not only prepare but also present integrated reports (Atkins and Maroun, 2015). Other countries that top the list are the Netherlands, Brazil, and Australia (Morros, 2016). Most of the European countries adopting integrated reporting have already set legal principles on the sustainability of non-financial data. One primary motivation why integrated reporting is likely to take over corporate reporting is increased legislation requiring firms to adopt it. Some countries have merely imitated the principles of integrated reporting and set it as its laws. The legal requirement holds that organizations must avail data on the activities they take part in to enable them to realize social responsibility amidst their several corporate practices. Also, the statutory obligation that all the non-financial information must be disclosed has also contributed to increased reporting.

Another factor that has contributed to the acceptance of integrated reporting is the benefits associated with it. One advantage of integrated reporting is that it strategically focuses on the business process which is contrary to other techniques which focus on the end product. In other words, the report digs deep on how the company operates and not just the mere details contained in the reports (Havlova, 2015). Through integrated reporting, it is possible to adjust business systems and practices which in turn create a better understanding of how companies build and maintain value. It is also advantageous since it gives managers a well-detailed picture of the organization in both the short and long run at a glance as well as the organization’s internal view (Havlová, 2015). It also offers stakeholders with an opportunity to see the long-term potential which is different from the standard visualization of short-term validity. Embracing integrated reporting shows that a company is working towards attaining sustainability. Furthermore, strong investor confidence is created since a firm’s strategy is presented as part of the report (Atkins and Maroun, 2015). Still, companies enjoy various capital appreciations since integrated reporting focuses on an all-inclusive creation of an organization’s value. A combination of strong investor confidence and capital appreciation is an indication of how integrated reporting could be powerful. Since companies, governments, and stakeholders, want to experience such benefits, they have widely embraced it.

Drawbacks of Integrated Reporting

It is undeniable that integrated reporting comes along with many benefits. On the other hand, there are also some setbacks associated with it which may slow it down in shaping corporate culture in the coming days. First, its credibility is purely banked on the level of reliability and accuracy of non-financial data (Brusca, Labrador, andLarran, 2018Also, principles that govern integrated reporting, and this is one of the major setbacks since organizations may cite a lack of data as the reasons for not adhering to IIRC guidelines. More so, it is also challenging when it comes to raising audit specialists for the data documented in integrated reports. It is easier to handle corporate reports since they only involve financial capital which is easy to measure and quantify. However, this is not so with integrated reports since as they deal with non-financial data which are hard to quantify hence the need to hire specialists due to their complex nature (Ioana, and Adriana, 2014).

Additionally, integrated reports are highly diversified given that they serve many stakeholders such as employees, the government, and investors who may not be appealing to stakeholders. Most organization’s do not have established integrated strategies, yet the integrating reporting approach has always assumed that they exist. Therefore, the IIRC has still some work to do in ensuring that there are more elaborate guidelines as to how organisations are supposed to adopt this approach (Maroun, 2017). Otherwise, integrated reporting may not be the anticipated future of corporate reporting despite the many benefits it has proved to have.

Conclusion

Corporate reporting as it is at now needs various changes due to its small nature especially when it comes to non-financial reporting. Indeed, integrated reporting is a technique that every dangerous organization must consider employing particularly due to the transformative ability it has on an organization (Hoque, 2017). It does more than normal corporate reporting as it incorporates all the features of reporting and thus making it the future of corporate reporting. An excellent integrated report is not primarily after explaining the correlations between figures or demonstrating social responsibility. On the opposite, it assesses organizational strategies and communicates them to stakeholders in an accurate and timely manner. Also, integrated reporting aims to offer quality data concerning afirm’s capitals and in turn maximize on creating value. It will take the combination of market forces and legislative forces firms to adopt integrated reporting. Since there is no established framework for making integrated reports, voluntary adoption is likely to influence it (Slack and Tsalavoutas, 2018). Several benefits derived from integrated reporting also contribute to the approval of integrated reporting. The first benefit is that it strategically focuses on the business process which is contrary to other techniques which focus on the end product. Secondly, through integrated reporting, it is possible to adjust business systems and practices which in turn create a better understanding of how companies build and maintain value. Also, integrated thinking aids organization’s break away from unyielding cultures which slow down progress. It is also advantageous since it gives managers a well-detailed picture of the organization in both the short and long run at a glance as well as the organization’s internal view. There are also few setbacks identified which are that credibility is purely banked on the level of reliability and accuracy of non-financial information since it is difficult to quantify and that there are no laid down standards to govern integrated reporting. These issues could be solved by formulating effective policies to offer more insights to users. Integrated reporting focuses on creating value but seems to ignore accountability.

For future research, it is recommended that the element of responsibility is looked at more closely because it is an essential factor. Also, the IIRC refers to relationships among factors and resources as capitals. In the future, they should be seen as resources because that is what they are and not capitals to remove the notion that integrated reporting is all about making money (Flower, 2015). Also, an elaborate distinction between integrated reporting and integrated sustainability needs to be made (Brusca, Labrador and Larran, 2018). Researchers and academicians need to merge their efforts to ensure that an integrated reporting approach achieves the required effects on corporate reporting in time to come.

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