6. Evolution of CSR Reporting

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  ARTICLE   IN   PRESS   JID:   RACREG   [m5G;   November   9,   2017;16:56   ]   Research   in   Accounting   Regulation   0   0   0   (2017)   1–5   Contents   lists   available   at   ScienceDirect   Research   in   Accounting   Regulation    journal   homepage:   www.elsevier.com/locate/racreg   Research   Report   Evolution   of    corporate   reporting:   From   stand-alone   corporate   social   responsibility   reporting   to   integrated   reporting   Kathleen   Hertz   Rupley   ∗ ,   Darrell   Brown,   Scott   Marshall   Portland   State   University,   Portland,   OR,   United   States   a   r   t   i   c   l   e   i   n   f   o    Article   history:   Available   online   xxx   Keywords:   Integrated   reports   CSR    Voluntary   disclosure   Non-financial   reporting   SASB   GRI   a   b   s   t   r   a   c   t   Both   financial   and   corporate   social   responsibility   (CSR)   reporting   are   bound   by   global   constraints.   A   com-   mon   trait   among   the   reporting   systems   is   a   growing   movement   toward   comparability   and   accountability.   Global   pressures   initially   motivated   the   push   toward   stand-alone   CSR    reporting   and   now   toward   inte-   grated   reporting.   Integrated   reports   (IR)   include   financial,   economic,   governance,   and   social   information   in   one   report.   In   the   United   States,   integrated   reporting   is   voluntary   and   only   a   small   number   of    compa-   nies   have   issued   IRs   to   date.   This   report   provides   a   history   of    CSR    reporting   and   then   examines   whether   the   non-financial   economic,   governance   and   social   indicators   identified   in   prior   literature   as   being   of    in-   terest   to   retail   investors   (Cohen   et   al.   2011)   are   disclosed   in   the   pioneering   U.S.   IRs.   Descriptive   results   indicate   the   initial   IRs   cover   predominately   indicators   of    economic   and   social   performance   with   little   focus   on   governance.   Further   analysis   indicates   that   the   IRs   examined   do   not,   as   a   rule,   provide   the   infor-   mation   most   highly   desired   by   investors   (i.e.   market   share,   executive   compensation,   and   product   safety).   This   study   provides   a   baseline   for   companies   preparing   IRs   and   for   regulators   (i.e.   SEC,   FASB)   in   the   con-   text   of    determining   future   disclosure   regulations.   Published   by   Elsevier   Ltd.   1.   Introduction   While   traditional   financial   statements   report   information   that   has   financial   implications   to   stakeholders,   corporate   social   respon-   sibility   (CSR)   reports   provide   non-financial   information   regarding   governance   and   social   1   impacts   of    organizations   that   have   both   financial   and   non-financial   implications   to   stakeholders.   Although   both   financial   statements   and   CSR    reports   are   used   to   report   rele-   vant   information,   firms   increasingly   rely   on   CSR    reports   to   address   stakeholders’   increasing   demands   for   transparency   and   account-   ability,   in   addition   to   information   relating   to   a   variety   of    risks   and   opportunities   not   evident   from   traditional   reports   (   KPMG,   2008   ).   In   this   paper,   the   evolution   of    corporate   reporting   from   finan-   cial   statements   to   stand-alone   CSR    reports   to   integrated   reports   (IR)   is   examined.   An   IR    combines   financial,   economic,   governance,   and   social   information   in   one   report.   As   stakeholders   increasingly   make   decisions   based   on   a   combined   understanding   of    financial   and   non-financial   implications,   integrated   reporting   presentation   meets   user   needs.   As   the   global   demand   for   CSR    reporting   in-   creases,   the   costs   and   risks   of    not    reporting   both   financial   and   non-   financial   information   will   also   increase.   Therefore,   it   is   likely   in   the   ∗ Corresponding   author.   E-mail   addresses:   rupleyk@pdx.edu   (K.H.   Rupley),   darrellb@pdx.edu   (D.   Brown),   rsm@pdx.edu   (S.   Marshall).   1   The   term   “social” includes   reference   to   both   social   and   environmental   issues.   economic   interest   of    firms   to   report   accordingly.   In   this   study,   an   examination   of    the   types   of    non-financial   information   reported   in   the   front-running   U.S.   IRs   is   conducted.   As   the   SEC   is   currently   seeking   public   comment   related   to   Regulation   S-X   disclosure   re-   quirements,   this   study   provides   some   initial   evidence   on   the   type   and   usefulness   of    information   disclosed   in   the   front-running   U.S.   IRs.   Legitimacy   theory   suggests   that   firms   communicate   informa-   tion   to   stakeholders   in   order   to   conform   to   societal   expectations   (   Ashforth   &   Gibbs,   1990   ).   The   past   focus   for   firm   management   to   provide   historical   financial   information   to   external   stakehold-   ers   has   evolved.   Though   costly   to   collect   and   report,   it   is   now   a   good   business   practice   for   firms   to   provide   information   on   non-   financial   issues   in   their   organization   in   order   to   attract   and   re-   tain   clients   and   customers.   Stakeholders   demand   transparency,   accountability,   and   strategic   information   connecting   the   past   to   fu-   ture   risks   and   opportunities   (information   generally   not   provided   by   traditional   financial   reporting).   Shareholders   have   expressed   in-   terest   in   non-financial   performance   measures   through   shareholder   resolutions   requiring   companies   to   report   sustainability   informa-   tion   using   Global   Reporting   Initiative   (GRI)   disclosure   guidelines.   In   the   United   States,   regulators   have   weighed   in   on   the   impor-   tance   of    non-financial   performance   measures   in   the   Dodd-Frank   Act.   Additionally,   the    JOBS   Act   passed   by   U.S.   Congress   in   April   of    2012   requires   the   SEC   to   examine   ways   to   simplify   and   mod-   ernize   disclosure   requirements   for   “emerging   growth” companies.   https://doi.org/10.1016/j.racreg.2017.09.010   1052-0457/Published   by   Elsevier   Ltd.   Please   cite   this   article   as:   K.H.   Rupley   et   al.,   Evolution   of    corporate   reporting:   From   stand-alone   corporate   social   responsibility   reporting   to   integrated   reporting,   Research   in   Accounting   Regulation   (2017),   https://doi.org/10.1016/j.racreg.2017.09.010  
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