Accounting Report: Integrated Reporting, Theories, Purpose, Necessity

This accounting report provides a comprehensive overview of integrated reporting, a crucial concept in today's business environment. It begins by defining integrated reporting and highlighting its purpose: to integrate financial performance with social and environmental considerations, fostering sustainable development and financial stability. The report emphasizes the necessity of integrated reporting, addressing the limitations of traditional sustainability reports and the need for clear metrics to translate environmental and social issues into business terms. It further explores the relevance of stakeholder theory and legitimacy theory, demonstrating how they support the principles of integrated reporting by promoting value creation for stakeholders and ensuring alignment with societal norms. In conclusion, the report underscores the key benefit of integrated reporting: creating value for both the company and its stakeholders through the transparent disclosure of financial, social, and environmental information within a single, comprehensive report. This analysis aims to provide a clear understanding of the benefits and importance of adopting integrated reporting frameworks within modern business practices.

Running head: ACCOUNTING
Accounting
Name of the Student
Name of the University
Author’s Note

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Introduction
In today’s business world, it is needed for the businesses to disclose all the required
information about their different kinds of initiative towards the betterment of the people of
society and the environment. Due to the presence of large number of issues related to corporate
social and environmental aspects, the companies have been forced to release stand alone reports
for the disclosure of information related to these aspects. As these reports are long in lengths,
complex in nature and they lack integration with the financial performance of the organizations,
there is a greater need to have a single report that will ensure to integrate social and
environmental performance of the organizations with financial performance (Stubbs and Higgins
2014). In this aspect, corporate integrated reporting plays a crucial part by providing a succinct
communication about the process in which an organization’s strategy, governance and
performance help in the creation of value.
Purpose of Integrated Reporting
For the business organizations all over the world, it has become a global need for
promoting sustainable development and financial stability by effectively linking investment
decisions, corporate behavior and reporting. For this reason, businesses have the requirement of
an evolution in the reporting system so that the mega trends can be facilitated and communicated
without bringing any inadequacy and complexity of the present reporting requirements
(integratedreporting.org 2018). The main purpose for the creation of corporate integrated
reporting is to enhance stewardship, accountability and trust along with harnessing the
information flow and business transparency brought by the technology in today’s business world.
Integrated reporting helps to provide the investors with their required information in order to

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make more effective capital allocation decisions that facilitate in effective long-term investment
decisions (integratedreporting.org 2018).
On a more specific note, the main aim of corporate integrated reporting is to bring
reporting developments so that it becomes possible in providing a more holistic form of reporting
helping the businesses in value creation after considering the non-financial resources of the
businesses like human and social capital along with the financial capital (integratedreporting.org
2018). The vision of corporate integrated reporting is to align allocation of capital with corporate
behavior for wider goals of financial stability as well as sustainable development through
integrated thinking (icas.com 2018). In order to facilitate this vision, the international framework
for integrated reporting has been developed that includes principle-based guidance and other
elements for governing and explaining the information within a corporate integrated report. For
this reason, the framework for integrated has been introduced in accordance with the effective
value creation model that the businesses have in the recent era (icas.com 2018).
Necessity of Integrated Reporting
The above discussion shades light on the purpose of integrated corporate reporting. Now,
it is crucial to mention about the major necessities of corporate integrated reporting for the
business organizations of 21st centuries. Today’s sustainability reports are considered as more
window dressing than major substance as they lack effectiveness in influencing the resource
allocation decisions of the organizations. For this reason, there is a clear necessity of corporate
integrated reporting for making effective resource allocation decisions (de Villiers, Rinaldi and
Unerman 2014). The implementation of corporate integrated reporting ensures the integration of
sustainability into the core business operations of the companies. After that, another major issue

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in sustainable business reports is the lack of clear metrics that helps in the translation of
environmental and social issues into the language of business that is figures and numbers. For
example, the GRI standards used by the companies have not been able to fill this gap yet. This
particular aspect shows the necessity of corporate integrated reporting that will use ESG matrix
for solving this issue (Adams 2015). This aspect will lead to the healthy competition between the
companies in order to be more sustainable.
In the recent years, it can be observed that most of the companies are adopting different
reporting framework like GRI reports and others, but there are still many companies that do not
adopt these reporting frameworks. This scenario indicates towards a lack of global regulated
sustainability reporting system (Adams 2015). This particular aspect has created the necessity of
the adoption of corporate integrated reporting framework as it aims in establishing a global
framework for both sustainability as well as financial reporting. Apart from the above, it is
necessary to impalement corporate integrated reporting in order to ensure the quality of auditing
in the organizations (de Villiers, Rinaldi and Unerman 2014). Thus, based on the above
discussion, it can be observed that there are many aspects that create the necessity of the
implementation of corporate integrated reporting within the business organizations.
Relevant Theories
The above discussion shows the purpose and necessity of corporate integrated reporting.
Now, it needs to be mentioned that there are some major accounting theories having positive
connection with corporate integrated reporting as they supports the concept of corporate
integrated reporting in the organizations. Two of those theories are Stakeholder Theory and
Legitimacy Theory. They are discussed below:

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Stakeholder Theory: The main concept of stakeholder theory is the fact that the main purpose
of the business organizations is to as much value as possible for the stakeholders. Thus, in order
to be successful and sustainable over the years, the business executives are required to keep the
interest of their stakeholders by providing them all the required information about financial as
well as sustainable performance (Harrison and Wicks 2013). The match of this theory can be
seen with corporate integrated reporting as it aims in the value creation in the business
organizations by providing require financial and sustainability performance information.
Legitimacy Theory: The derivation of legitimacy theory can be seen from organizational
legitimacy concept. As per this theory, the value creation system of the organizations is
connected with the value creation system of the larger society. In addition this theory states that
an organization always ensure their business operation within the bounds and norms of the social
system. The adoption of legitimacy theory demands the mandatory reporting on social and
environmental activities of the companies (Deegan 2014). It needs to be mentioned that to
disclose the information about the social and environmental activities of the companies is a
major objective of corporate integrated reporting. In this way, this theory is connected with
corporate integrated reporting.
Conclusion
From the above discussion, it can be observed that the main purpose to introduce
corporate integrated reporting is the creation of value in the organizations by providing all the
required information related to social as well as financial performance. It can also be observed
from the above discussion that the lack of integration between the financial reporting with
corporate social and environmental responsibility has created the major necessity for corporate

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integrated reporting. In this aspect, the stakeholder theory and legitimacy theory have relevance
with the corporate integrated reporting as both these theories promotes the disclosure of financial
as well as corporate social and environmental information. Thus, it can be concluded from the
above discussion that the major benefit of the implementation of corporate integrated reporting is
the value creation for the company as well as stakeholder by providing all the required financial
as well as social and environmental information in a single report.

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References
Adams, C.A., 2015. The international integrated reporting council: a call to action. Critical
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de Villiers, C., Rinaldi, L. and Unerman, J., 2014. Integrated Reporting: Insights, gaps and an
agenda for future research. Accounting, Auditing & Accountability Journal, 27(7), pp.1042-1067.
Deegan, C., 2014. An overview of legitimacy theory as applied within the social and
environmental accounting literature. Sustainability accounting and accountability, pp.248-272.
Harrison, J.S. and Wicks, A.C., 2013. Stakeholder theory, value, and firm performance. Business
ethics quarterly, 23(1), pp.97-124.
Icas.com. (2015). What is Integrated Reporting and why does it matter? | News | ICAS. [online]
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Integratedreporting.org. (2018). Why was <IR> developed? | Integrated Reporting. [online]
Available at: https://integratedreporting.org/why-the-need-for-change/why-was-developed/
[Accessed 27 Apr. 2018].
Integratedreporting.org. (2018). Why? The need for change | Integrated Reporting. [online]
Available at: https://integratedreporting.org/why-the-need-for-change/ [Accessed 27 Apr. 2018].
Stubbs, W. and Higgins, C., 2014. Integrated reporting and internal mechanisms of
change. Accounting, Auditing & Accountability Journal, 27(7), pp.1068-1089.