ACCOUNTING & SUSTAINABILITY
Integrated Reporting
Traditional corporate reporting focuses on financial performance, primarily through financial statements and related disclosures covering a specific time period. While the core purpose is consistent globally, reporting standards differ. In the United States, companies follow a rules-based system known as Generally Accepted Accounting Principles (GAAP), whereas many other countries use the more principles-based International Financial Reporting Standards (IFRS).
Traditional reporting emphasizes financial data and typically excludes social and environmental factors unless those factors can be translated into conventional financial terms.
Limitations of Traditional Reporting
Traditional financial reporting was never designed to address the full scope of risks and opportunities businesses face today. Its narrow focus excludes broader environmental, social, and governance (ESG) factors, even though growing evidence shows that these issues can have material impacts on financial performance. A meta-analysis by NYU Stern School of Business, which reviewed over 1,000 studies from 2015 to 2020, highlights the financial relevance of ESG considerations.
These limitations have fueled the demand for a new approach that integrates both financial and non-financial metrics. This evolution has led to the development of integrated reporting, a concept that is increasingly important for modern accounting professionals to understand.
Introduction to Integrated Reporting
Integrated Reporting: Merging Financial and Non-financial Information
Integrated reporting combines material financial and non-financial information to present a holistic view of a business. It emphasizes how various aspects of the organization work together to create and sustain value over time. According to the Value Reporting Foundation’s Towards Integrated Reporting discussion paper, the following guiding principles shape the preparation of an integrated report:
- Strategic focus
- Connectivity of information
- Future orientation
- Responsiveness and stakeholder inclusiveness
- Conciseness, reliability, and materiality
Integrated reporting aims to:
- Improve the quality of information available to providers of financial capital to enable a more efficient and productive allocation of capital.
- Promote a cohesive and efficient approach to corporate reporting by integrating different strands of reporting and communicating the full range of factors that materially affect value creation over time.
- Enhance accountability and stewardship for a broad base of capitals—financial, manufactured, intellectual, human, social and relationship, and natural—and foster understanding of their interdependencies.
- Support integrated thinking, decision-making, and actions focused on value creation over the short, medium, and long term.
Integrated Report Example
The Value Reporting Foundation shares examples of integrated reports resulting from various awards and ranking programs that they claim meet their standards for integrated reporting. Learn more about integrated reporting by reviewing these published reports by actual companies.
Integrated Reporting Around the World
Integrated reporting remains less widespread in the United States compared to other parts of the world, according to research from Columbia Law School. While a growing number of U.S. companies have begun voluntarily producing integrated reports, adoption is still limited. However, mounting pressure from investors, consumers, and regulators is accelerating the shift toward more comprehensive reporting.
For a deeper look at how sustainability reporting differs between the U.S. and other regions, see the “Global Reporting” page.
ADVANCE YOUR KNOWLEDGE OF REAL ESTATE AND SUSTAINABILITY
Learn what sustainable accounting is all about and its importance
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