The benefits of sustainability and integrated reporting: an investigation of accounting majors' perceptions.

Author:James, Marianne L.


During the past decade, a continually increasing number of entities have started formal reporting of their sustainability-related activities. These reports commonly are referred to as sustainability, sustainable development, corporate social responsibility (CSR), or environmental, social, and governance (ESG) reports. While some reports focus primarily on a company's environmental impact (sometimes referred to as "green reporting"), most sustainability reports also focus on social and corporate governance issues. Stakeholder demand for sustainability-related information, not regulatory requirements, appears to motivate this reporting trend.

The majority of companies that currently issue sustainability reports follow the guidelines provided by the Global Reporting Initiative (GRI), which allows for a choice among three reporting levels that differ with respect to the types of issues and the number of parameters referred to as performance indicators--that must be reported. The GRI guidelines continue to evolve and the 4th generation of the guidelines was recently released (GRI, 2013). Although GRI guidelines can be applied globally across many different industries, other guidelines, some applicable to specific nations/regions or industries, exist as well. This makes inter-company comparability difficult.

Currently, most companies that formally report their sustainability activities issue standalone reports that are not integrated with their annual financial or 10-K statements. However, a movement toward combining sustainability reporting with companies' financial results is gaining momentum; this is referred to as "Integrated Reporting" (IR). Some companies, such as Nova Nordisk, Sony, and Hyundai Engineering, already issue integrated report. This movement is supported by the International Integrated Reporting Council's (IIRC) efforts to develop a globally applicable IR framework.

Sustainability and especially integrated reporting can be very useful to external stakeholders such as investors and customers, but it can also be extremely beneficial to internal users by enhancing the company's ability to effectively and efficiently achieve long-run goals. Relevant, reliable, comparable, and thus useful sustainability and integrated reporting require commitment by an organization's key personnel and by those responsible for the reporting process. While companies tend to rely on accounting professionals to support their sustainability reporting function, IR requires even stronger support from accounting professionals. Accounting professionals are more likely to be supportive if they understand the long-term benefits of high-quality and comparable sustainability and integrated reporting and believe that reporting sustainability information is important. In addition, consensus is necessary regarding the scope, type, and comprehensiveness of the information that will be beneficial to stakeholders to enable them to assess a company's comprehensive impact on the environment and on people and not just profit.

Accounting majors represent the future accounting professionals. Many of the current accounting majors have grown up in an environment that strongly values ecologically, ethically, and socially responsible corporate behavior. Their support is necessary to help continue to motivate the trend toward sustainability and integrated reporting and lead to a future in which organizations routinely report their comprehensive performance and their impact on profit, people and planet, also referred to as the "Triple Bottom Line."

This study investigates accounting majors' perceptions regarding sustainability and integrated reporting. The study focuses on the perceived benefits to multiple stakeholders, the expected scope and type of issues reported, the reporting time frame, and the need for high-quality global sustainability and integrated reporting standards.

The study finds that overall students majoring in accounting tend to support both sustainability and integrated reporting. In fact, assuming that a high-quality framework for integrated reporting is developed, the vast majority of the students participating in the study felt that companies should issue integrated, instead of stand-alone, reports and that this would enhance the value and comparability of annual reporting. The students also tended to perceive that reporting of multiple performance indicators relating to environment and safety, employees and community, and corporate governance both in terms of current year and comparative year information is important. Students tended to perceive that sustainability and integrated reporting were more beneficial for large than for small and midsize companies. This study provides important insights into the perception of future accounting professionals, whose support will tend to be critical to the success and usefulness of comprehensive and unbiased sustainability and integrated reporting.


Sustainability-related concerns represent a global issue of long-standing nature. In 1987, the World Commission on Environment and Development (also referred to as the Brundtland Commission), formally defined sustainability development as a "development that meets the needs of the present without compromising the ability of future generations to meet their own needs" (United Nations, 1987, 37).

As the world population increases and the availability of natural resources decreases, concern for the preservation of resources accelerates. For example, according to the World Resource Institute, during the past decade, water use has increased twice as fast as the world population (World Resource Institute, 2011). To help alleviate the long-term global consequences associated with resource shortages, organizations of all types and sizes have embraced actions that help maximize value while minimizing their negative impact on the environment, the availability of natural resources, and thus on society. For instance, many organizations have implemented sustainability-related programs that reduce waste and harmful emissions, conserve energy, reduce the use of scarce resources, improve employee health and wellbeing, and support community projects. In fact, global investment in new clean energy rose from $50 billion in 2004, to $260 billion in 2011 (Bloomberg, 2012).

Current Regulatory Environment--Sustainability Reporting

The need to preserve natural resources for future generations represents a globally critical issue. Governmental and non-governmental entities address the related issues to varying degrees through rules, regulations, and guidelines. In many countries, governmental units have implemented sustainability-related requirements and programs such as setting maximum emission levels, providing funding for environmentally and socially beneficial programs, and requiring that organizations report their activities and results to regulatory agencies. Legal and regulatory guidelines and requirements pertaining to formal reporting of sustainability-related activities vary considerably among nations and may be set by governmental or non-governmental organizations. Reporting requirements for nations that are part the European Union typically are based on laws. For example, the revised Danish Financial Statements Act mandates that all large companies disclose CSR information; this has led to a significant increase in sustainability reporting in Denmark (KPMG et al., 2013). In some countries, such as South Africa, sustainability reporting is mandated by stock-market regulators (KPMG et al., 2013).

In the U.S. and in many other nations, sustainability reporting is primarily voluntary and unregulated. While some laws exist that require sustainability-related disclosures, they tend to address only specific issues and/or pertain to particular industries. U.S.-based governmental and non-governmental entities that currently address some aspect of sustainability/CSR reporting include the U.S. Securities and Exchange Commission (SEC), U.S. Congress, the Environmental Protection Agency (EPA), and the Forum for Sustainable and Responsible Investment (US SIF).

U.S. Regulation--Sustainability Reporting

During the past few decades, the SEC issued several rules and interpretations that address disclosure of environmental issues. For example, in the 1971, the SEC issued an interpretative release that encouraged companies to disclose the financial impact of environmental laws. The release, however, did not mandate such disclosures until the 1980s and focused primarily on the financial aspect of an organization's impact on people, the environment and the community.

SEC Regulation S-K, which public companies that report to the SEC must comply with, requires disclosures relating to environmental rules and regulations. Specifically, section 101, "Description of Business," states that: "Appropriate disclosure also shall be made as to the material effects that compliance with Federal, State and local provisions which have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, may have upon the capital expenditures, earnings and competitive position of the registrant and its subsidiaries." (SEC, n.d. paragraph 229, item 101 (c) (1) (xii)). In addition, regulation S-K requires that SEC-reporting companies disclosure material environmentally-related legal actions (SEC, n.d., paragraph 229, item 103). Another SEC Rule that became effective for 2010 fiscal periods requires that companies disclose in their proxy statements information about risk management relating to the company's compensation and corporate governance (SEC, 2009). Thus, current SEC rules focus on disclosure of environmental-related expenditures, environmental-related risk such as litigation, and compensation and governance-related issues. Furthermore, SEC disclosure rules and regulations only pertain...

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