LECTURE 10

SUSTAINABILITY
REPORTING
UKAF4023 ACCOUNTING THEORY AND PRACTICE
REFERENCE: S. SUSELA DEVI CHAPTER 15
 LEARNING OUTCOMES
At the end of the lecture, students will be able to:
• Explain the history of sustainability reporting
• Identify the terminology used in sustainability reporting
• Explain the benefits and challenges in sustainability reporting
• Evaluate the level of sustainability reporting in Malaysia
• Discuss the regulation of sustainability reporting
 INTRODUCTION
SUSTAINABILITY REPORTING
LECTURE 10 SUSTAINABILITY REPORTING
UKAF4023 ACCOUNTING THEORY AND PRACTICE
EVOLUTION OF CORPORATE REPORTIING

As early as 1850s
From the early 1990s
Financial
Accounting & 1990s
Reporting Financial
aspects of Late 1990s
corporate Environmental
governance reporting From 2000s
Social
accounting &
Reporting Sustainability
Reporting
 INTRODUCTION
• Climate change, sustainability, clean technology, “going green” are topics high on the
agenda of boards and management of most, if not all, major companies.
• Many are doing much more than talking about it—they are undertaking large-scale
initiatives to improve their business performance, manage costs, respond to stakeholder
demands, and prepare for regulatory requirements and recognizing the need to
integrate their sustainability strategy to their fundamental operational strategies.
 WHAT IS SUSTAINABILITY?
• People and companies refer to sustainability by different names—corporate citizenship,
social responsibility, climate change initiatives, or “Green” movement
• In essence, sustainability includes anything from environmental awareness and
involvement in local community issues, to capturing, measuring, and reporting green
house gas (GHG) emissions data, to modifying company business processes to reduce
the operational use of natural resources and energy
• Social Responsibility (CSR), Environmental Social Governance (ESG) or Triple
Bottom Line (TBL) reports - that convey information about an organization’s
economic, environmental, and social impact are increasingly being issued in
conjunction with financial report - and stakeholders are using them more often in
evaluating the long term viability of a company.
 SUSTAINABILITY REPORTING
• A sustainability report is a report published by a company or organization about the economic,
environmental and social impacts caused by its everyday activities. A sustainability report also
presents the organization's values and governance model, and demonstrates the link between
its strategy and its commitment to a sustainable global economy.
• Sustainability reporting can help organizations to measure, understand and communicate their
economic, environmental, social and governance performance, and then set goals, and manage
change more effectively. A sustainability report is the key platform for
communicating sustainability performance and impacts – whether positive or negative.
• Sustainability reporting can be considered as synonymous with other terms for non-financial
reporting; triple bottom line reporting, corporate social responsibility (CSR) reporting, and
more. It is also an intrinsic element of integrated reporting; a more recent development that
combines the analysis of financial and non-financial performance.
 IMPORTANCE OF SUSTAINABILITY
REPORTING
• Building and maintaining trust in businesses and governments is fundamental to
achieving a sustainable economy and world. Every day, decisions are made by
businesses and governments which have direct impacts on their stakeholders, such as
financial institutions, labor organizations, civil society and citizens, and the level of
trust they have with them. These decisions are rarely based on financial information
alone. They are based on an assessment of risk and opportunity using information on a
wide variety of immediate and future issues.
• The value of the sustainability reporting process is that it ensures organizations
consider their impacts on these sustainability issues, and enables them to be transparent
about the risks and opportunities they face. Stakeholders also play a crucial role in
identifying these risks and opportunities for organizations, particularly those that are
non-financial. This increased transparency leads to better decision making, which helps
build and maintain trust in businesses and governments.
 WHO SHOULD REPORT?
• Sustainability reports are released by companies and organizations of all types, sizes and
sectors, from every corner of the world.
• Thousands of companies across all sectors have published reports that reference GRI’s
Sustainability Reporting Guidelines. Public authorities and non-profits are also big reporters.
GRI’s Sustainability Disclosure Database features all known GRI-based reports.
• Major providers of sustainability reporting guidance include:
• GRI (GRI's Sustainability Reporting Standards)
• The Organisation for Economic Co-operation and Development (OECD Guidelines for
Multinational Enterprises)
• The United Nations Global Compact (the Communication on Progress)
• The International Organization for Standardization (ISO 26000, International Standard for
social responsibility)
 REPORTING AROUND THE WORLD
Governments or stock exchanges of 33 countries have required or encouraged some level
of sustainability reporting:
 BENEFITS OF SUSTAINABILITY
REPORTING

INTERNAL EXTERNAL
INTERNAL BENEFITS OF REPORTING
Internal benefits for companies and organizations can include:
• Increased understanding of risks and opportunities
• Emphasizing the link between financial and non-financial performance
• Influencing long term management strategy and policy, and business plans
• Streamlining processes, reducing costs and improving efficiency
• Benchmarking and assessing sustainability performance with respect to laws, norms,
codes, performance standards, and voluntary initiatives
• Avoiding being implicated in publicized environmental, social and governance failures
• Comparing performance internally, and between organizations and sectors
EXTERNAL BENEFITS OF REPORTING
External benefits of sustainability reporting can include:
• Mitigating – or reversing – negative environmental, social and governance impacts
• Improving reputation and brand loyalty
• Enabling external stakeholders to understand the organization’s true value, and tangible
and intangible assets
• Demonstrating how the organization influences, and is influenced by, expectations
about sustainable development
REASONS FOR NOT REPORTING
INTEGRATED REPORING
sources: http://integratedreporting.org
LECTURE 10 SUSTAINABILITY REPORTING
UKAF4023 ACCOUNTING THEORY AND PRACTICE
 WHAT? THE TOOL FOR BETTER REPORTING
• Definition : Integrated Reporting is an evolution of corporate reporting, with a focus
on conciseness, strategic relevance and future orientation. As well as improving the
quality of information contained in the final report, IR makes the reporting process
itself more productive, resulting in tangible benefits. IR requires and brings about
integrated thinking, enabling a better understanding of the factors that materially affect
an organization’s ability to create value over time. It can lead to behavioural changes
and improvement in performance throughout an organization.
• IR has been created for any organization that wants to embrace integrated thinking and
progress their corporate reporting. Businesses have reported breakthroughs in
understanding value creation, greater collaboration within their teams, more informed
decision making and positive impacts on stakeholder relations. For organizations or
stakeholders interested in real world examples and practical advice about the journey
towards <IR>, networks have been established to share experiences and learning.
 WHY? THE NEED FOR CHANGE
• To promote financial stability and sustainable development by better linking investment
decisions, corporate behaviour and reporting has become a global need.
• Due to the evolution of accounting reporting system. Businesses require an evolution
in the system for reporting, facilitating and communicating mega-trends without the
complexity and inadequacy of current reporting requirements.
• IR has been created to enhance accountability, stewardship and trust as well as to
harness the information flow and transparency of business that technology has
brought to the modern world.
• Providing investors with the information they need to make more effective capital
allocation decisions will facilitate better long-term investment returns.
 Integrated Reporting Framework
• Integrated reporting is built around the following key components:
• Organisational overview and the external environment under which it operates
• Governance structure and how this supports its ability to create value
• Business model
• Risks and opportunities and how they are dealing with them and how they affect the
company’s ability to create value
• Strategy and resource allocation
• Performance and achievement of strategic objectives for the period and outcomes
• Outlook and challenges facing the company and their implications
• The basis of presentation needs to be determined, including what matters are to be
included in the integrated report and how the elements are quantified or evaluated.
 HOW? PRACTICAL ADVICE AND TOOLS
• We have developed a number of programmes and resources in place to help implement IR. For
example, IR Network bring together trailblazing organizations that are adopting the principles and
practices of IR, in order to share experiences with peers, access expert and investor insights, and
explore the benefits and challenges that come with being at the forefront of a new reporting
movement.
• To help you with the report itself, the International IR Framework provides guidance on the
practicalities of producing an integrated report. It establishes the Guiding Principles and Content
Elements that govern the overall content of an integrated report, and explains the fundamental
concepts that underpin them. The Framework was developed after extensive consultation with
businesses and investors, and guided by the learning of 140 participants from 26 countries in the IIRC
Pilot Programme.
• With a network of other adopters to learn from and a framework in place to shape your own reporting,
the journey towards IR is not one taken alone. The momentum towards global adoption is building, and
the bank of examples to support the case for IR is growing, showing how companies are approaching
IR across the world. Guidance is also emerging from a number of organizations, offering practical tips
and support for adopting IR.
 WHEN? ADVOCATE FOR GLOBAL ADOPTION
• The IIRC is a global coalition with high-profile council members and ambassadors leading the
movement for IR adoption. There are now over 750 participants in IR networks worldwide,
with, for example, 180 businesses currently practicing IR in Japan alone. More than 1,000
businesses globally are using it to communicate with their investors and there is increasing
interest in IR by pioneers in the public sector.
• IR is on the agenda of international bodies, for example the B20 and IOSCO are both taking
an interest in IR as part of the answer to market challenges worldwide. Regulators in countries
such as Japan, India and the UK are among those taking a greater interest in <IR> as a route
towards achieving more cohesive reporting and promoting financial stability, with the
European Commission labelling IR as ‘a step-ahead’.
• The IIRC works with a wide range of partners and supporters to continue to build on this
momentum.
IR in Malaysia - Establishing the Committee
• The Integrated Reporting Steering Committee (“IRSC”) was established within the Malaysian
Institute of Accountants on 18 December 2014 upon the recommendation of the Securities
Commission Malaysia. The Committee focuses on creating the awareness on and promoting
<IR> in Malaysia.

The objectives of the Committee are as follows:

• To perform research and shape thinking on integrated reporting;
• To educate stakeholders and organisations and to promote the adoption of integrated
reporting in Malaysia;
• To provide support to organisations who have adopted integrated reporting;
• To engage stakeholders and organisations in shaping the continued development of integrated
reporting; and
• To give recognition to adopters and promote excellence in integrated reporting.
CURRENT REPORTING VS INTEGRATED
REPORTING
 END OF LECTURE
THANK YOU 
LECTURE 10 SUSTAINABILITY REPORTING
UKAF4023 ACCOUNTING THEORY AND PRACTICE