Trends in NonFinancial Reporting

1
Trends in Non-Financial Reporting

• Michelle Corti, Marie Fukudome Gabriel Brown
• April 9, 2007

2
Background

• Non-financial reporting includes reports
  covering a wide range of issues
• Environment, Corporate Social Responsibility
  (CSR), sustainable development, and social
  performance
• N. America and W. Europe are most active
  reporting regions in world
• In 1990 (and before) few companies were screened
  based on these criteria
• No framework or guidelines
• Limited awareness and understanding
• Socially responsible investment (SRI) didnt
  exist

Background
3
Non-financial reporting has increased over the
past 10 years 1993 lt 100 reports
worldwide 2003 gt 1500 reports, but leveling off
4
Non-financial reports have become more focused on
the broader issue of sustainability
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Is Information Accurate?

• External assurance statement
• Enhances reports credibility among stakeholders
• 2003 External assurance statement included in
  40 of reports

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External Assurance Trends
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Issues

• Total non-financial reporting is still low on a
  global scale
• Assurance standards are not yet fully developed
• Disclosure varies widely in quality and quantity
• Need to identify dynamics of successful
  reporting develop standards, regulations, codes,
  etc. to make it easier for others to start
  reporting

8
Association for the Chartered Certified
Accountants (ACCA)

• Launched the worlds first environmental
  reporting awards in 1990 with the following
  objectives.
• Facilitate greater transparency in reporting and
  improve corporate accountability
• Raise awareness of environmental reporting
• Encouraged organizations to prepare reporting
  guidance material
• Helped improved quality and quantity of reporting

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Pressure has increased for businesses to publish
non-financial reports

• Mandatory environmental reporting in countries
  such as Denmark, France, the Netherlands, Norway
  and Hong Kong.
• 50 of Europes financial institutions offer SRI
  products. Similar initiatives worldwide.
• Increased govt. support to produce env. reports,
  and some govt.s even provide guidelines
• Surveys to compare standards (KPMG, URS)
• Financial indices (JSI, FTSE4Good)
• Reporting guidelines (AA1000, FAR recommendation)

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Conclusions

• The changing dynamic of annual reporting has
  improved non-financial reporting over time
• Generalized reporting data (as opposed to area
  specific), strong push by NGOs.
• Larger, high profile companies are more likely to
  participate in process (GE, Shell etc.)
• Rate or new repots is declining
• Lack of a GAAP equivalent for assurance

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Discussion

• Should non-financial reporting be mandatory?
• externalities do have a value, but difficult to
  quantify
• How to increase non-financial reporting?
• Competitive advantage
• How to/who should come up with a set of
  guidelines?
• If mandatory, need consistency.
• How important is external assurance?