Integrated Financial Reporting and its Impact

In recent years, the emphasis has been on integrated financial reporting and how it can evolve businesses into

sustainable models. Integrated financial reporting involves reporting both the financial and non-financial aspects of

the growth of a company. From being merely a concept a few years back, it is now gradually being embraced by a few

organizations. The International Integrated Reporting Committee (IIRC) formed by the International Federation of

Accountants, the Global Reporting Initiative (GRI), and The Prince's Accounting for Sustainability Project; has been

working toward formulating global and standardized guidelines on integrated financial reporting. These new

guidelines are expected to enhance sustainability and corporate social responsibility, along with operational

transparency.

The new proposed structure for an integrated financial report ideally involves an honest account of the company's

economic, social, and environmental impact. This would mean hiring an external audit firm to ensure that the report is

credible. However, many businesses claim that this would only benefit audit firms and that the structure followed by

current financial reports is already comprehensive. In fact, some critics of integrated financial reporting suggest that

the new structure would only add to the number of pages in the annual reports without adding much value.

This is not entirely untrue, since financial reports already contain a lot of superfluous information and lengthy details.

These make it difficult for investors to find information that is actually relevant to the financial performance of the

company. Apart from this, an integrated financial report also requires the organization to give a truthful account of its

impact on the economic, social and environmental systems. For instance, the carbon footprints it has accumulated

while conducting business over different countries. In such cases, it is doubtful as to how honest the company would

be about the damages (intentional or collateral) that have occurred while doing business. In addition, the report would

also require an organization to discuss the nature of its relation with its employees. Companies which have been

embroiled in worker strikes and union troubles, may find it difficult to give an honest account of the same.

Astep in the Right Direction or Yet Another Piece of Paper?

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On the other hand, there is also a lot to be said for incorporating an organization's sustainability efforts in the financial

report. For one, it builds trust and goodwill among investors and stakeholders. Transparency can build immense

trust, leading to a good brand reputation and more business. It can also encourage corporate social responsibility,

which can be beneficial for both society in general, as well as businesses.

It remains to be seen whether integrated financial reporting will increase transparency and accountability in

corporate organizations, or if it will be relegated to just another legislation without any real impact on the business

world and the global economy. But, given its positive implications, investors are keeping their fingers crossed and

hoping that it comes into effect in the near future. If successful, it could have far-reaching effects on the way business

is conducted and on the very meaning of profit and loss.

Successful Implementation and its Implications

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