The Role of Integrated Reporting in Efficient Communication and Dissemination of Information

Introduction

Environmental reporting is not a new phenomenon. Initially, companies published this information as a part of their annual report. This section of annual report is fairly brief and does not present the amount of information that stakeholders expect today. Later, environmental disclosures evolved into a separate report to inform stakeholders, and public at large, about firms` the social and environmental efforts (Buhr, 2007; Cho et al., 2009).

Recently, due to the complexity and number of reports that firms publish, there is a move toward creating a combined report expounding upon various aspects of companies` operations. These reports mix the financial and non-financial aspects. Non-financial aspects cover strategic decisions that the company has made and future direction as well as Corporate Social Responsibility (CSR). These reports, named integrated reporting (IR), provide a more holistic picture of the firm and enable the stakeholders to digest the information necessary in a more concise manner (Hopwood et al., 2010; Prado-Lorenzo & Garcia-Sanchez, 2010; Loprevite et al. 2018).

Since 2010, with formation of International Integrated Reporting Committee (IIRC), collating and publishing IRs have garnered a lot of attention. IIRC provides guidelines on how to design, what information to include and how to disseminate IRs. As a result many firms adopted the approach for various reasons. Apart from legal requirements in countries such as South Africa, companies publish IRs, at macro level, to adhere to cultural trends and better positioning in financial markets. At micro level, adoption of IR may be a result of firms` market value, profitability or the degree of diversity among the board of directors (Cheng et al., 2014, De Villiers et al., 2014; Loprevite et al. 2018).

Researchers have also explored some of the benefits of adopting integrated reporting. Even though, IR is considered as an incremental advancement (Adams, 2018; Brusca et al., 2018) it can lead to more transparency in information dissemination among stakeholders and strengthening internal communication (Stubbs & Higgins, 2014). Integrated reporting can also result in creating and sustaining value by firm. Value creation is a product of focused objectives and accurate direction provided by IRs (Menicucci & Paolucci, 2018). Another benefit of adopting IR is disseminating useful and forward-looking information for investors which can lead to higher valuation of the firm (Loprevite et al. 2018). Moreover, comprehensive approach of IR provides a guideline for managers to efficiently allocate resources and minimize waste (Frı´asAceituno et al., 2013). Hence, the main purpose of IR is to improve the accuracy and quality of data provided to firm`s stakeholder for more precise decision making (International Integrated Reporting Council, 2013; De Villiers & Sharma 2020). IR also improves organization`s dissemination of information and communications by providing a comparable data across sectors about firms` impact on society and the environment (James, 2014). Previous studies have explored the role of IR in efficient communication and dissemination of information internally and externally (De Villiers et al., 2014; Stubbs & Higgins, 2014; Havlová, 2015). As a result, IR, as a more concise and practical tool for presenting past performance and future direction, can improve the efficiency and speed of communication and dissemination of information by organsations. However, more detailed studies investigating the impact of IR on the quality of disclosed information in specific sectors, such as financial institutions, and recently developed digital platforms using XML formats can broaden our understanding of information and communication sciences.