A template for integrated reporting

DOIhttps://doi.org/10.1108/14691931311323869
Published date12 April 2013
Pages227-245
Date12 April 2013
AuthorIndra Abeysekera
Subject MatterAccounting & finance,HR & organizational behaviour,Information & knowledge management
A template for integrated
reporting
Indra Abeysekera
School of Accounting and Finance, University of Wollongong, Wollongong,
Australia
Abstract
Purpose – The purpose of this paper is to outline the concept of integrated repo rting and to propose
a template for integrated reporting in organisations.
Design/methodology/approach – The approach to the conceptual model is founded on concepts
proposed on integrated reporting by the King Report on Governance for South Africa (King III), and
the International Integrated Reporting Council in the UK.
Findings – The integrated repo rt should explain the sto ry of reaching the organisation’s vision,
underpinned by its values, enacted by management, monitored by governance, and using facets of
resources relating to financial capital, intellectual capital, social capital, and environmental capital.
Practical implications – The paper proposes an integrated reporting framework, and provides an
example of a template to be used in organisations.
Originality/value – To the best of the author’s knowledge, this is the first academic paper that
provides a coherent framework on integrated reporting, with a template.
Keywords Integrated reporting, Intellectual capital, Reporting, Organizations, Vision, Values,
Corporate strategy
Paper type Conce ptual paper
1. Introduction
In an era in which news spreads as it happens through the internet and social media
networks, investors, society, and governments are increasingly demanding that
organisations be accountable to stakeholders, not merely shareholders, and be
transparent about their activities. Sizeable investments are made by superannuation
funds and investment funds, and the ultimate investors in these funds are doing so
with a long-termobjective such as savingsfor retirement. Theseinvestors are individuals
who are concern ed not only about the fina ncial and non-fina ncial perfor mance of
the fund, but also about how the investments impact on the environment and on society.
The change in investor landscape from a typicalinvestor whose only focuswas financial
return to investors with a broad focus on sustainable responsible performance, has not
only demanded that organisations re-think their use of resources but also how the
information should be reported to those concerned. These ultimate investors are aware
that action falling short of taking care of society and the environment can cost them via
taxes to repair damagecaused by organisationsthat reap short-term benefits. Theyhave
witnessed financial crises at a global scale, corporate failures and bank failures at a
national scale,and the impact on individuals throughloss of paid work, taxpayer-funded
welfare, and schemes to repair damage to the environmentand society – and sometimes
to bail out organisations responsiblefor such damage under the rationale that liquidating
them would result in loss of employment.
Although the broadening of accountability and reporting aspects has already begun
among organisations, such initiatives are reported with no coherence to organisations’
long-term objectives, and are often presented as unconnected activities undertaken by
organisations, in separate reports such as annual rep orts and sustainability reports.
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1469-1930.htm
Received 25 October 2012
Accepted 29 October 2012
Journal of Intellectual Capital
Vol.14 No.2, 2013
pp. 227-245
rEmeraldGroup Publishing Limited
1469-1930
DOI 10.1108/14691931311323869
227
A template for
integrated
reporting
Integrated reporting attempts to combine the repor ting of different facets of
organisational activities on a common platform with a unified objective. KPMG (2011,
p. 8) views it as a way of demonstrating how corporate strategy “fits” with the financial
aspects so that capital market participants can fully understand how corporate
strategy affects corporate performance and corporate value.
The purpose of this paper is to introduce integrated reporting and its implications,
and propose a template for such reporting. To that end, Section 2 of this paper
discusses relevant literature, proposes a conceptual frame work, and outlines how
the content should be reported in a given context. Section 3 outlines a template for
integrated reporting, and Section 4 presents concluding remarks.
2. Concepts of integrated reporting
2.1 Relevant literature
Power imbalances in disclosure. Nearly three decades ago, Brudney (1985) pointed out
that analysing shareholder-management relationship (shareholder-principal, or agent-
manager) as a contract where both parties are equally power ful is rhetorical.
Often shareholders have little or no ability to negotiate with management, contributing
to imbalanced power in the contractual relationship between the two parties.
The notion that the market corrects such misalignment is not convincing, as for
instance, shareholders as they exit the relationship by selling shares do so with less
than optimal knowledge about the organisation. Shareholders cannot direct
management activities, and in fact they are explicitly denied power to interfere in
such activities. Hence, neither the shareholders nor the market corrects the powe r
imbalance in the shareholder-management relationship. To correct this imbalanced
power relation, the Corporations Act an d accounting standards prescribe disclosures.
Although the Corporations Act an d accounting standards largely attempt to take care
of shareholders and investors with a direct monetary interest in organisations,
virtually all organisations have stakeholders who although not active participants
have a direct or indirect equitable interest in the organisation. The management in
organisations uses discretion to make voluntary disclosures to meet the needs of those
stakeholders (Gaa, 2010), but these voluntary disclosures are a trade-off between a
legitimate need for disclosing information to act fairly with stakeholders and an
equally legitimating need for withholding information to maintain secrecy for
organisational survival and growth.
Voluntary disclosures can become a strate gic decision where the board of directors
formulates policies and monitors o rganisational activities and their disclosure, while
the senior management carry out formulated policies that gener ate organisational
activities. As organisational activities are shaped by the o rganisational content
(e.g. products, services, markets, and ideals) and organisationa l context (e.g.
organisational characteristics and the environment in which the organisation
conducts its affairs), the appropriateness of voluntary disclosure be comes a matter
of inquiry adjudicated by the intentions of the board of directors (Abeysekera, 2008),
strategically deciding which disclosures are appropriate to stakehol ders and faithfully
represent organisational activities, rather than making disclosures neutrally based on
a set of rules (Westley and Mintzberg, 1989). The strategic thinking of the board,
organisational intent, and the operational activities undertaken by the senior management,
disclosing activities to faithfully represent the organisation to stakeholders, are
cornerstones in combining accountability and reporting transparency of activities
which are of monetary and non-monetary nature.
228
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