An Analysis of Integrated Reporting: Advantages and Disadvantages

This essay provides a comprehensive analysis of integrated reporting, examining its advantages and disadvantages for businesses. It begins by defining integrated reporting as a tool for concise communication, emphasizing its role in value creation and stakeholder engagement. The essay highlights the benefits, including improved planning, holistic views of capital, enhanced stakeholder communication, optimized reporting, increased efficiency in the value chain, and transparent risk management. It also discusses how integrated reporting provides investors with a comprehensive view of a company's financial and non-financial performance. However, the essay also acknowledges the limitations of integrated reporting, such as challenges in value creation, connectivity issues, stakeholder reconciliation, consistency concerns, and resistance to change. It also points out the high costs, time commitment, and potential risks associated with increased transparency. The essay concludes by reinforcing the importance of integrated reporting as a tool for improved efficiency and effective value creation while acknowledging the need to address its limitations.

Running head: INTEGRATED REPORTING
Integrated Reporting
Name of the Student
Name of the University
Author’s Note

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Introduction
The main objective of this essay involves in the analysis and evaluation of all the related
issue of integrated reporting so that its major benefits and limitations can be identified for the
business entities. Integrated Reporting is regarded as a tool of concise communication showing
how the business entities create value for long term, medium term and short term. Integration
reporting provides great assistance to enhance the business entity’s manner to plan, think and
report the different aspects of their business (de Villiers, Rinaldi and Unerman 2014). Apart from
this, the implementation of integrated reporting provides the organizations with a major tool that
helps in establishing better communication with the stakeholders so that the needs of them can be
identified and fulfilled in the most efficient manner. Business organizations irrespective the size
and industry can adopt integrated reporting for the establishment of understating and trust within
the organizations as one cannot ignore the significance of trust among the company, stakeholder,
suppliers, customers and others. The implementation of integrated reporting assists in bringing
trust by focusing on the drivers of values within the organizations (Adams 2015).
Benefits of Integrated Reporting
The above discussion indicates towards the fact that integrated reporting play an
important part in the business organizations for the creation of value. For the creation of value, it
is required for the integrated reporting to be concise so that it becomes possible for the
highlighting the adopted process by the companies to create value (de Villiers, Rinaldi and
Unerman 2014). Thus, it needs to be mentioned that the implementation of integrated reporting
provides some major benefits to the business entities and they are discussed below:

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The effective implementation of integrated reporting in the organizations makes the
management of the companies in the development of a better and solid understanding about
different elements of the organizations that helps in determining the companies’ ability for value
creation (Flower 2015). Thus, the adoption of integrated reporting leads to the better planning
mechanism of the companies and also contributes towards the development of a holistic view on
the capital and other resources of the business entities. With the implementation of effective
integrated reporting, the management of the business entities become able in gaining effective
understanding about the financial capital of the businesses along with other non-financial capital
of the companies. As per the framework of integrated reporting, there is the existence of six
types of capital in the companies; they are financial capital, manufactured capital, intellectual
capital, human capital, natural capital and social and relationship capital (Abeysekera 2013). The
presence of integrated reporting can be regarded as the considerations among various aspects of
the above-mentioned capitals, internal factors and external environments.
The importance of the presence of integrated reporting cannot be ignored for the
implementation of an effective communication tool in order to adders the demands and issues of
the stakeholders. It largely helps in the process of the optimization of organizational reporting.
For example, integrated reporting can be used for the collaboration among more than one
departments in order to share information and to create synergies (Cheng et al. 2014). It helps in
the broadening of understanding and knowledge of organization people about different aspects of
the companies. For this reason, to strengthen the internal dialogue among different departments
can be considered as a major aim of integrated reporting that leads to bring efficiency in
resources. For example, it can be seen that the integration between annual report and
sustainability report saves both money and time of the entities and provides greater

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understanding on both the financial and non-financial issues (Cheng et al. 2014). Integrated
reports helps in bringing greater efficiency in the value chain of the companies; that leads to
faster and effective decision-making process. Bringing simplicity in the assumptions of risk and
opportunity management is another positive contribution of integrated reporting. The
implementation of integrated reporting contributes towards the correct disclosure of financial
information and it operates as an external communication tool for enhancing the image of the
entities to the external stakeholders (Stubbs and Higgins 2014). For this reason, the investors can
obtain all the required financial information for judging the current financial standing and
financial performance of the organizations. It implies that the investors can obtain a holistic
picture of the financial conduction of the entities.
Financial performance can be a major limiting factor in the way to create value as most of
the stakeholders judge the companies based on their financial performance. For this reason,
companies are required to provide access to the stakeholders to their audited financial reports for
effective investment decision-making (Frías-Aceituno, Rodríguez-Ariza and García-Sánchez
2013). Apart from financial performance, the stakeholders show their interest in other areas like
adopted business model by the entities and overall strategies that help the companies in
achieving their desired goals. All these factors are the main aspects of integrated reporting as this
report includes information about all these aspects for providing the overall outlook of the
organizations. It implies that integrated reporting puts additional focus in the non-financial
aspects of the businesses. Major external stakeholders of the companies like creditors, investors,
suppliers, lenders and others can understand value creation process of the companies by gaining
all the required financial as well as non-financial information (Frias‐Aceituno, Rodríguez‐Ariza
and Garcia‐Sánchez 2014). Integrated reporting should not be burdened with unnecessary details

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as it is not to report for endless details. It only includes the necessary information so that the
erasers become able to get specific results.
The implementation of integrated reporting makes the management of the companies
largely beneficial as it ensures better access to the required data and information that leads to
easier and faster decision-making process. In addition, it also increases the overall efficiency of
the whole workforce (García-Sánchez, Rodríguez-Ariza and Frías-Aceituno 2013). The
transparent process to create value with the assistance of integrated reporting helps in bringing
improvement in the risk management mechanism of the companies. In the presence of
transparent organizations operations, the management becomes able to assess the risk and
opportunities from the businesses for the development of effective risk mitigation strategies. The
implementation of integrated reporting helps the management of the business entities in the
identification of the most efficient employees within the organizations that leads to better value
creation process. Value drivers are another major aspect of integrated reporting as it assists the
management of the companies in the identification of the factors that work as drivers for creating
value (Brown and Dillard 2014). Thus, based on the above discussion, it can be said that the
implementation of integrated reporting helps the businesses from both the financial and non-
financial perspectives.
Limitations of Integrated Reporting
The above discussion involves in the identification of the major benefits of the
implementation of integrated reporting as the reporting tool. How, it needs t be mentioned that
the business entities have to face certain limitation while dealing with the aspects of integrated
reporting. All the major limitations related to integrated reporting is shown below:

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Value creation is the major objective of integrated reporting. However, business entities
face some major challenges while creating value through integrated reporting due to the fact that
sometimes companies fail in the underatsding and identification of the aspect that is considered
as value to the stakeholders (Crowther 2016). After that, another major limitation of integrated
reporting is connectivity in the presence of the fact to break down the silos in the business
organization in order to bring change in the procedure for collecting data. There are many
instances for the implementation of integrated reporting that shows the failure of the business
entities to identify the scopes for changing positive improvement with the help of the
connectivity of financial as well as non-financial information (Churet and Eccles 2014). By
bringing improvement in the process of integrated reporting, management of the companies
become able in establishing interrelatedness, combination and dependencies in order to create
value in a better possible manner.
Reconciliation of the needs of the major stakeholders of the companies is considered as
another major limitation in the way of the implementation of integrated reporting. It can be
observed that almost 45% of the integrated reports become successful in providing the
explanation about materiality determination process and the overall efficiency of integrated
reporting become largely affected by this (Eccles and Krzus 2014). For this reason, maintaining
the required consistency in the whole process of integrated reporting is regarded as another major
limitation of it. It can be observed that most of the integrated reports have length over 150 pages
and it creates difficulties for the management of the companies in the reconciliation of
conciseness and efficient communication with the major stakeholders. The absence of balance
between the good news and bad news in the integrated reports can be regarded as another major
limitation of it as lack of reliability and completeness can be observed in most of the integrated

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reports (Higgins, Stubbs and Love 2014). In order to overcome this limitation, the management
are required to understand what is a good news and a bad news that should be included in the
integrated reports.
Another major limitation of integrated reporting is the presence of resistance to change.
At the time of the introducing integrated reporting process in the companies, the management
faces major resistance from individual departments as well as specific employees due to the
change in the procedures of financial reporting (Busco 2016). At the time of the implementation
of integrated reporting, the business entities have to incur large amount of costs. At the same
time, large degree of work involved in the process to implement integrated reporting. It implies
that both the increased amount of work and higher cost are two of the major limitations of the
implementation of integrated reporting (Bartocci and Picciaia 2013). As the overall transparency
in reporting process increases due to integrated reporting, it exposes the business entities to some
potential risks due to the fact that the companies are required to disclose positive as well as
negative performance of them in both financial as well as non-financial areas.
The adoption of integrated reporting brings some drastic changes within the operations of
the companies and whole integrated reporting implementation process takes huge time. It takes
several years from the initial decision to the full implementation process of integrated reporting
and thus, there is a need for great coordination (de Villiers, Rinaldi and Unerman 2014). Apart
from this, it also demands experience as lack of experience can lead to the failure in the whole
integrated reporting implementation process that can lead to waste of money and time for the
companies. Most impotently, there is a need for correct and sufficient data and information for
the implementation of integrated reporting as lack of correct and required information can make
the whole implementation process ineffective that can lead in the failure of integrated reporting

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implementation. Moreover, some other limitations of integrated reporting are lack of time,
limited number of employees, lack of financial resources, lack of work alignment related to the
clear role of employees in the whole implementation process and others (Cheng et al. 2014).
Conclusion
The above discussion indicates towards the fact that the implementation of integrated
reporting ensures the increased efficiency in the reporting as well as effective value creation. The
implementation of integrated reporting ensures that there is an effective tool of combination
between the major stakeholders and the company to addressing their needs. Moreover, by
accessing the integrated reports, the stakeholders can obtain a holistic picture about the whole
financial as well as non-financial performance of the organizations. These benefits of integrated
reporting come with some of the major limitations of it. The involvement of large amount of
work and higher cost for the companies is considered as major limitations of integrated
reporting. At the same time, absence of coordination and inexperienced workforce are major
constraints in the effective implementation of integrated reporting. Another limitation of
integrated reporting is the absence of conciseness in the reporting process. Thus, in order to
ensure the correct adoption and implementation of integrated reporting, companies are required
to secure the support from all departments and the companies should take help of external
expertise. Apart from this, the introduction of various strategies like training and development
campaigns, effective communication and others can ensure the effective adoption of integrated
reporting.

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