Non-Financial Performance Reporting and Its Economic Consequences

FINANCIAL ACCOUNTING

INTRODUCTION
A company has a large group of people that invests their trust the operations carried out by them.
These people are called the stakeholder’s of the company. There can be external as well as
internal stakeholders. It is a known fact that the primary aim of every company is to earn higher
profits and maximise the wealth of shareholders. But a company can experience a growth in this
financial performance consistently only when it pays attention to the non-financial performances
also. The shareholders invest their hard earned money after analysing the company’s financial as
well as non financial performances throughout the year (Shim and Siegel, 2008). There are
various types of non financial performances that a company has to perform apart from the
principle activity of the business. All the financial as well as non financial information should be
provided to the stakeholders so that they can know about the economic consequences which may
arise in future. The various non financial activities and their economic consequences shall be
discussed in this report. Also, the steps of reporting these non financial performances will be
discussed.

NATURE OF NON-FINANCIAL INFORMATION AND ITS ECONOMIC
CONSEQUENCES.
Every company discloses there financial performance in their financial reports annually. But in
the current scenario, there is a requirement of disclosing non financial performances also. Non
financial information provides us with a detailed disclosure regarding the company’s
environmental, social and human rights information. There are various types of non financial
information that a company is required to provide. Few of them are- Corporate social
responsibility (CSR), social performance, green banking disclosures, ESG, environmental
reporting and financial inclusion reporting (Bruner, Eades and Schill, 2017).
There are various reasons why companies should provide non financial information. The
investment decision of the investor is highly influenced by this report. A score is calculated by
the Bloomberg based on the ESG performance of the companies. It helps the company in
participating sustainability rating and benchmarks which provides them with various benefits
such as transparent information to the investors, improved reputation of the company and easy
access to capital. It is expected that the legislation regarding the non financial reporting will
become stricter in the near future. The non financial information of the company is collected
from different departments which help in creating awareness among the employees and it makes
them realise that a good non financial performance is equally relevant for the company. The
activities carried out as a part of non financial performance helps the stakeholders to know about
the corporate strategy.
Corporate social responsibility is a concept in which the company takes into consideration the
interest of the society and acting responsibly keeping in minds the impact of such activities on
employees, suppliers, customers etc (Reilly and Brown, 2012).
Green banking disclosures requires the company to disclose all those activities it has performed
by adopting environmental friendly practices by avoiding the carbon emissions in the
atmosphere.
ESG stands for Environmental, social and governance which has helped in integration of
investment analysis as well as portfolio construction which helps the investor to gain advantage
over the long term.