Integrated Reporting (IR) versus Sustainability Reporting (SR)
Firms and corporations are under continued pressure to alleviate their accountability and transparency levels by the disclosure of a broad or a variety of information about their activities (Soderstrom 32). Therefore, the paper objectifies at explaining the differences between integrated reporting as presented by the International Integrated and Reporting Council (IIRC) and sustainability reporting as it exists under the Global Reporting Initiative (GRI). Both reports are founded on the cornerstone of value creation or materiality. However, one exists supposedly as a wider or broader reporting initiative as compared to the other. The global arena has continually become sensitized to the issue of conserving the environment and hence, a push towards sustainable practices. The development of the trend towards sustainability has created the need to account and report on sustainability.
Sustainability reporting involves the quantification, disclosure and accountability to both internal and external stakeholders about the corporation’s progress towards a sustainable future. It is the process of detailing the organization’s strategy and communicating the metrics used by a company to assess the environmental and social issues most significant to the company, management of the issues and the corporation’s performance targets against each of the issues (Paia Consulting 1). For example, talent retention can expose the company to either risk or opportunities and thus, a sustainability report communicates how the organization is identifying and managing the risks or opportunities (Paia Consulting 1).
Integrated reporting takes on a wider perspective. It brings together the value information about an organization’s strategy, governance, performance and prospects in an approach that depicts the commercial, social and environmental context in which it operates (Dr. Stubbs and Dr. Higgins 5). The integrated report endeavors to not only show financial, employee, environmental and social facts but also how these risks and opportunities fit into the long-term strategy, risk management, operational policies and procedures of the company.
According to Mark McElroy, sustainability has been thrown under the bus after the emergence of integrated reporting that is quickly being picked up by companies and countries such as South Africa (MCElroy 1). The author denotes the term ‘value’ as utilized in the definition to accrues to financial value disregarding other forms of materiality such as the environment, social and human non-financials unless they play a part in the shareholder value (MCElroy 1). Therefore, it is notable that IR mainly targets the providers of financial capital such as shareholders as compared to SR that focusses on a wider base of stakeholders. The other issue is the attention on the impacts to the environment, society and economy by the SR that is implicitly different from the focus on effects of capital on value creation over time, on the part of IR. The differences portray that sustainability reporting does not underlie the reporting of the link or connectivity between the various forms of capital or the relevance of the capitals to value creation. Therefore, it means that it would include numerous exposés of a company that would not be deemed fit or material in the integrated reports.
In conclusion, an IR is a concise overview of business, strategy, governance, performance and serves as a reflection of how the organization creates its value over time. Therefore, it is can be said that it is not an exhaustive disclosure of the financials and non-financials, and does not communicate to all stakeholders in one report. On the other hand, a sustainability report is non-financial, communicating to a wider base and focusses mainly on the environmental and social issues against performance targets of an organization and communicates to wider forum of stakeholders. However, taking into consideration the GRI guidelines that guide sustainability reporting in combination with IIRC guidelines on IR can result in an articulate documentation of sustainability practices. The both represent a narrow focus (KPMG 10).
Works Cited
Dr. Stubbs, Wendy and Collins Dr. Higgins. “Sustainability and Integrated Reporting: A Study of the Inhibitors and Enablers of Integrated Reporting.” Report prepared for The Institute of Chartered Accountants in Australia. 2012.
KPMG. “Bridging the gap between integrated and GRI G4 Reporting.” September 2014. KPMG. COM. 3 May 2016 <http;//www.KPMG.Com>.
MCElroy, Mark. Has Integrated Reporting thrown sustainability under the bus? 4 November 2014. 3 May 2016 <https://www.greenbiz.com/article/has-integrated-reporting-thrown-sustainability-under-bus>.
Paia Consulting. What is the difference between Sustainability Reporting & Integrated Reporting? . 21 May 2015. 3 May 2016 <http://paiaconsulting.com.sg/what-is-the-difference-between-sustainability-reporting-integrated-reporting/>.
Soderstrom, Naomi. “Sustainability reporting: past, present, and trends for the future.” Insights: Melbourne Business and Economics (2013): 31-37.