Sustainability reporting and approaches to materiality: tensions and potential resolutions

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sveinung Jørgensen ◽  
Aksel Mjøs ◽  
Lars Jacob Tynes Pedersen
Keyword(s):  
Financial Markets ◽  
Financial Reporting ◽  
Information Needs ◽  
Information Quality ◽  
Qualitative Interviews ◽  
Sustainability Reporting ◽  
Global Reporting Initiative ◽  
Financial Return ◽  
Financial Reports ◽  
Content Type

Purpose The concept of materiality is becoming increasingly important for sustainability performance measurement and reporting. It is widely agreed upon that materiality matters, in the sense that companies should identify, prioritize and disclose information on sustainability issues that are considered material. There is, however, a tension at the heart of this consensus, owing to parallel approaches to materiality being used in practice. This paper aims to shed light on how and why the parallel uses of the materiality concept may cause confusion and how this tension could be resolved. Design/methodology/approach This paper takes as point of departure the tension between two approaches to materiality: based on the Global Reporting Initiative definition, which emphasizes sustainability issues that are important to stakeholders and that have significant impacts and based on the Sustainability Accounting Standards Board definition, which emphasizes sustainability issues that are financially material, i.e. likely to influence the financial performance of the company. This paper discusses the nature and consequences of the tensions between how the two definitions of materiality in sustainability reporting are used in practice, with a particular emphasis on users of information in financial markets. This paper provides empirical insight on these users’ perspectives through a survey (n = 30) and qualitative interviews (n = 6) of financial market professionals. Findings This study reveals tensions between different approaches to materiality in practice and how this may lead users of sustainability reports to draw unjustified conclusions on the basis of materiality assessments. Specifically, this paper demonstrates the perceived shortcomings in information availability and information quality from the perspectives of different stakeholders in financial markets with different information needs. Practical implications The users of sustainability reporting information require clarity in the communication of materiality in non-financial reports. This paper addresses how such clarity can be pursued. Social implications Clarity about materiality in non-financial reporting is important both for investors that pursue financial return on green investments and for society at large, which relies on information about real sustainability impacts. Originality/value This paper furthers the understanding of how different materiality concepts may be problematic and how recent and ongoing developments may mitigate the risks of conflating uses of the concept.

scholarly journals The pre-history of sustainability reporting: a constructivist reading

2021 ◽  
Vol 34 (9) ◽  
pp. 131-150
Author(s):  
Carlos Larrinaga ◽  
Jan Bebbington
Keyword(s):  
Financial Reporting ◽  
Historical Analysis ◽  
Sustainability Reporting ◽  
Epistemic Communities ◽  
Global Reporting Initiative ◽  
Environmental Reporting ◽  
Content Type ◽  
Time Period ◽  
History Of ◽  
Institutional Actors

PurposeThe aim of this paper is to provide an account of the period prior to the creation of the Global Reporting Initiative (GRI): a body that was critical to the institutionalization of sustainability reporting (SR). By examining this “pre-history,” we bring to light the actors, activities and ways of thinking that made SR more likely to be institutionalized once the GRI entrepreneurship came to the fore.Design/methodology/approachThe paper revisits a time period (the 1990s) that has yet to be formally written about in any depth and traces the early development of what became SR. This material is examined using a constructivist understanding of regulation.FindingsThe authors contend that a convergence of actors and structural conditions were pivotal to the development of SR. Specifically, this paper demonstrates that a combination of actors (such as epistemic communities, carriers, regulators and reporters) as well as the presence of certain conditions (such as the societal context, analogies with financial reporting, environmental reporting and reporting design issues) contributed to the development of SR which was consolidated (as well as extended) in 1999 with the advent of the GRI.Research limitations/implicationsThis paper theorizes (through a historical analysis) how SR is sustained by a network of institutional actors and conditions which can assist reflection on future SR development.Originality/valueThis paper brings together empirical material from a time that (sadly) is passing from living memory. The paper also extends the use of a conceptual frame that is starting to influence scholarship in accounting that seeks to understand how norms develop.

Developing a GRI-G4-based persuasive communication framework for sustainability reporting (SR)

2018 ◽  
Vol 13 (1) ◽  
pp. 136-161 ◽  
Author(s):  
Ranjan Kumar ◽  
Neerja Pande ◽  
Shamama Afreen
Keyword(s):  
Financial Reporting ◽  
Banking Sector ◽  
Sustainability Reporting ◽  
Persuasive Communication ◽  
Global Reporting Initiative ◽  
Sustainability Metrics ◽  
Content Type ◽  
Reporting Practices ◽  
Communication Framework ◽  
Indian Banks

Purpose The purpose of this paper is to critically examine sustainability reporting (SR) practices of top 10 Indian banks, on parameters derived from a Global Reporting Initiative (GRI)-G4-based persuasive communication framework. Design/methodology/approach SR metrics from GRI-G4 guidelines were mapped to persuasive communication parameters to develop a blended analytical framework. Content analysis (CA) technique was used to assess SR of top 10 banks on this framework. Findings The study has three key findings. First, most of the top 10 Indian banks are yet to adopt adequate disclosure and transparency practices in SR. Second, even though environmental and social goals are broadly reported, there are glaring omissions on metrics like “equal remuneration,” “occupational health and safety” and “customer privacy.” Third, stakeholder engagement focus is weak as reflected in low persuasive appeal of SR content of most banks. Research limitations/implications The blended framework provides a theoretical and analytical pathway for operationalizing the sustainability context principle, which has been inadequately addressed even within the GRI framework implementation. Practical implications The paper provides a “health check” and identifies “red flags” in SR of top 10 Indian banks, enabling them to undertake a critical review of their sustainability metrics and reporting practices. Social implications The paper establishes the significance of evaluating non-financial reporting practices addressing broader sustainability metrics in the banking sector, in an emerging economy context. Originality/value This paper develops a GRI-G4-based persuasive communication framework for SR assessment, and conducts an evaluation of top 10 Indian banks using CA technique.

Accounting information quality and decision-usefulness of governmental financial reporting

2017 ◽  
Vol 25 (1) ◽  
pp. 95-113 ◽  
Author(s):  
Sandra Cohen ◽  
Sotirios Karatzimas
Keyword(s):  
Financial Reporting ◽  
Information Quality ◽  
Accounting Information ◽  
Public And Private ◽  
Financial Reports ◽  
Accounting Systems ◽  
Content Type ◽  
Decision Usefulness ◽  
Public And Private Sector ◽  
Cash Basis

Purpose This paper aims to provide an assessment of the decision-usefulness and quality of governmental financial reports in Greece under the recently adopted modified-cash basis. The evaluation is performed within the wider debate regarding the actual benefits of a transition toward an accounting paradigm that lies closer to accrual accounting as the Greek modified-cash basis borrows several accrual characteristics. Design/methodology/approach The transition to modified accruals is analyzed through the prism of the new institutional theory. The approach adopted builds on the characteristics of the accounting information pertaining to the conceptual frameworks of public and private sector accounting standard setting bodies. The assessment is conducted on the basis of the perceptions of public sector financial information users on a Web-based questionnaire. Findings The findings provide empirical evidence, albeit of moderate magnitude, in favor of the benefits associated with a move to full accruals. Originality/value The study moves the debate on the merits of accounting systems’ changes toward the worldwide witnessed trajectory a step forward by providing practical evidence on the matter.

scholarly journals Current State of Sustainability Reporting: A Case of Public Universities in Western Kenya

2020 ◽  
Vol 5 (2) ◽  
Author(s):  
Patrick Ojera ◽  
Collins Otieno Odoyo
Keyword(s):  
Financial Reporting ◽  
Public Universities ◽  
Corporate Sustainability ◽  
Critical Role ◽  
Secondary Data ◽  
Sustainability Reporting ◽  
Global Reporting Initiative ◽  
Bottom Line ◽  
Current Case ◽  
Financial Reports

Corporate sustainability reporting, also known as Triple-bottom-line reporting, involves reporting nonfinancial and financial information to a broader set of stakeholders than just shareholders and seek to fortify an organization’s ability to manage key risks. The current case is that, the quality, rigor, and utility of sustainability reporting remains contentious with concerns about the suitability of the criteria or standards used to prepare the reports. Despite the rapid increase in the number of companies around the world adopting Global Reporting Initiative standards, little is known about the extent of practice of corporate sustainability reporting in public universities in Kenya. The study selected five universities that had their 2017-18 audited financial reports available online for the readers, which served as the main source of secondary data. The guidelines on corporate sustainability reporting was derived from literature review, which provided key indicators upon which the data from each university was evaluated. It was observed that almost all the institutions recognize the critical role of both internal and external independent audit of financial statements. In conclusion, financial reporting sustainability is guided by strict compliance to the factors of sustainability.

Satisfaction gap in public sector financial reporting

2016 ◽  
Vol 6 (3) ◽  
pp. 232-253
Author(s):  
Maria Krambia-Kapardis ◽  
Colin Clark ◽  
Anastasios Zopiatis
Keyword(s):  
Public Sector ◽  
Financial Crisis ◽  
Financial Reporting ◽  
Information Needs ◽  
Significant Information ◽  
Financial Reports ◽  
Content Type ◽  
Expectation Gap ◽  
Consultation Paper

Purpose – Public information disclosure is a manifestation of transparency and contributes to governance-by-disclosure. Also, better financial reporting can improve the credibility and integrity of public finances and contribute to a better management of public resources. A survey was carried out in Cyprus of users’ of public financial reports concerning an expectation gap about the types of information included in such reports (information needs expectation gap) as well as the quality of such information (information quality satisfaction gap). The paper aims to discuss these issues. Design/methodology/approach – Two focus groups of users and preparers of public financial reports were used to construct the questionnaire. Users of such reports, who belonged to all three categories of public sector financial reporting identified by IPSASB, were surveyed. The quantitative data obtained was analysed using SPSS and quadrant analysis to answer the research questions posed. Findings – Data from 101 respondents confirmed that each of the information needs identified in the IPSASB Consultation Paper (2008) was rated as being a significant information need. Data analysis also showed that both types of expectation gap exist, especially as far as local authority and semi-public organisations are concerned. Research limitations/implications – The response rate in the self-administered survey was admittedly rather low but it was not unexpected mainly due to the survey’s very specialised nature and the tendency by people in Cyprus not to critique public bodies. Practical implications – Deficient financial public sector reporting means the auditor general is not able to adequately express an opinion on public spending at the local government level. This, in turn, means taxpayers do not get the quality of services they pay for. At the same time, the lack of information transparency means corrupt practices are not eradicated. One answer to the problem would be legislating the content of public financial reports. Social implications – The lack of governance-by-public exposure means that services to the local community cost a lot more, due to corruption and inefficiency. In addition, it contributes to lowering market confidence and eventually contributes to financial crisis at the national level. Originality/value – The survey conducted was the first of its kind in Cyprus to investigate financial public sector reporting and document both manifestations of the expectation gap. In addition, information needs identified in the IPSASB Consultation Paper (2008) was rated as significantly needed and this is the first time it has been done in Eurozone member state and in a country facing a financial crisis.

scholarly journals Content requirements for narrative reporting in the public sector: a contextual perspective

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Benson Igboke ◽  
Razaq Raj
Keyword(s):  
Public Sector ◽  
Service Delivery ◽  
Financial Reporting ◽  
Information Needs ◽  
Financial Statements ◽  
Financial Reports ◽  
Content Type ◽  
The Public ◽  
Narrative Reporting ◽  
The Impact

Purpose Accounting literature is definite about the content and presentation of traditional financial statements, but the basic information to be provided in the narrative reports of public sector entities remains unsettled. This paper aims to investigate the needs and expectations of stakeholders (primary users and preparers) regarding the content and presentation of narrative reports in the public sector of Nigeria. Design/methodology/approach The research used a qualitative approach that draws on stakeholder and contingency theories to collect primary data through in-depth individual interviews using semi-structured questionnaires. Data were analysed by a thematic method using the NVivo 11 Pro software package. Findings The study reveals that financial statements constitute the statutory financial reports of public sector entities in Nigeria as narrative reporting is undeveloped, both as a concept and in practice. Stakeholders believe that narrative reporting is required to enhance the accountability usefulness of the annual financial reports published by the government and public agencies. Data analysis further reveals that public perception about the management of government financial resources influences the information needs of stakeholders regarding financial reporting. In addition, stakeholders consider the approved budget as the cornerstone of public financial reporting. Accordingly, users and other stakeholders expect public sector narrative reports to provide budget-based performance information that relates the accounting data presented in the financial statements to the key budgetary provisions, in both financial outlays and service delivery achievements. Stakeholders also expect narrative reports to be presented in plain language and provide information about the impact of financial decisions and actions on the basic socioeconomic variables that signpost citizens’ well-being, such as education, health care, employment and security. Practical implications The study suggests that the inclusion of narrative information in the statutory financial reports of public entities in Nigeria is imperative and should engage the attention of policymakers and relevant regulatory authorities. In addition, a more elaborate systematic investigation of the information needs of stakeholders in Nigeria should be undertaken by relevant units of government. Originality/value To the best of the authors’ knowledge, this is the first documented research on narrative reporting and the information needs of a broad range of stakeholders in the public sector of Nigeria. The paper identifies the approved budget as the focal point of governmental financial reporting, and a clear linkage between budget provisions, accounting results and service delivery achievements as the basic content of a narrative report in developing countries.

OBJECTIVES OF FINANCIAL REPORTING, ABORIGINAL COST, AND POOLING OF INTERESTS ACCOUNTING

2012 ◽  
Vol 39 (2) ◽  
pp. 45-80 ◽  
Author(s):  
Hugo Nurnberg
Keyword(s):  
Public Policy ◽  
Financial Reporting ◽  
Information Needs ◽  
Public Utility ◽  
Financial Reports ◽  
Policy Makers ◽  
Business Combinations ◽  
Decision Usefulness ◽  
Rate Base ◽  
Utility Rate

ABSTRACT Through the years, pooling of interest accounting was criticized as contrary to the decision usefulness objective of financial reporting and potentially misleading to stockholders and creditors, the assumed principal users of financial reports. This paper does not dispute those criticisms. It demonstrates, however, that there were some very good reasons for permitting pooling accounting for certain business combinations when the method was developed in the 1940s. At that time, the basic objectives of financial accounting encompassed stewardship and decision usefulness for multiple users, including public utility regulators and public policy makers. Pooling accounting developed in part to satisfy the information needs of public utility regulators who favored aboriginal (original historical) cost to determine the utility rate base; additionally, it was favored by public policy makers who sought lower utility rates (prices) to foster social and economic goals.

Do globalisation and adoption of IFRS by banks in Africa lead to less earnings management?

2019 ◽  
Vol 17 (2) ◽  
pp. 222-248 ◽  
Author(s):  
Mohammed Amidu ◽  
Haruna Issahaku
Keyword(s):  
Financial Reporting ◽  
Design Methodology ◽  
Information Quality ◽  
Accounting Information ◽  
Financial Statements ◽  
International Standards ◽  
Content Type ◽  
Financial Reporting Standards ◽  
Accounting Information Quality ◽  
National Economies

Purpose This paper aims to analyse the implications of globalisation and the adoption of international standards (International Financial Reporting Standards [IFRS]) for accounting information quality. Design/methodology/approach This paper uses a sample of 329 banks across 29 countries leading up to and beyond the implementation of IFRS to test for related hypotheses. Findings First, banks’ financial statements are prepared on the basis of international standards as national economies are integrated when social norms are diffused. Building on these results, the second test suggests that the relatively high-quality earnings among banks in Africa during the period is attributable to the adoption of and interaction of IFRS with globalisation and the strategy of banks to diversify within and across interest and non-interest income. Originality/value The authors investigate how globalisation and the adoption of IFRS affect accounting information quality.

scholarly journals Compliance with materiality in G4-sustainability reports by electric utilities

2019 ◽  
Vol 14 (3) ◽  
pp. 583-608 ◽  
Author(s):  
Johannes Slacik ◽  
Dorothea Greiling
Keyword(s):  
Content Analysis ◽  
Information Needs ◽  
Electric Utility ◽  
Global Reporting Initiative ◽  
Actual Performance ◽  
Content Type ◽  
Reporting Practices ◽  
Reporting Practice ◽  
Sustainability Reports

Purpose Materiality as an emerging trend aims to make sustainability reports (SR) more relevant for stakeholders. This paper aims to investigate whether the reporting practice of electric utility companies (EUC) is in compliance with the materiality principle of the Global Reporting Initiative (GRI) when disclosing SR. Design/methodology/approach A twofold content analysis focusing on material aspects (MAs) is conducted, followed by correlation analysis. Logic and conversation theory (LCT) serves to evaluate the communication quality of documented materiality in SR by EUC. Findings The coverage and quality of documented MAs in SR by EUC do not meet the requirements for relevant and transparent communication. Materiality does not guide the reporting practice and is not taken seriously. Research limitations/implications Mediocre quality of coverage and communication in SR shows that stakeholders’ information needs are not considered adequately. The content analysis is limited in focusing on merely documented aspects rather than on actual performance. Originality/value This study considers the quality of communication of documented materiality through the lens of LCT. It contributes to the academic debate by introducing LCT as a viable theoretical perspective for analyzing SR. The paper evaluates GRI-G4 reporting practices in the electricity sector, which, while under-researched is crucial for sustainability. It also contributes to the emerging body of empirical research on the relevance of materiality as a guiding principle for sustainability reporting.

Indigenous reporting of a national housing corporation

2018 ◽  
Vol 36 (2) ◽  
pp. 221-233 ◽  
Author(s):  
Alistair Brown
Keyword(s):  
Papua New Guinea ◽  
Financial Reporting ◽  
Local Level ◽  
New Guinea ◽  
Financial Statements ◽  
Financial Reports ◽  
Content Type ◽  
Housing Corporation ◽  
Regulatory Instruments ◽  
National Housing

Purpose The purpose of this paper is to assess the level of reporting compliance achieved by the National Housing Corporation (NHC) of Papua New Guinea in terms of local indigenous reporting expectations. Design/methodology/approach Testing of a framework of indigenous accountability through indigenous enactments and regulations is conducted by textual analysis, which is informed by the theory of indigenous alternatives to assess the financial reporting compliance of the NHC of Papua New Guinea’s financial statements for years ending 2004-2013. Findings Documentary evidence of the state auditor reports of the NHC’s financial statements reveals that the corporation’s financial reports are not submitted for audit on a timely basis and receive disclaimed audit opinions. Despite the clear indigenous reporting expectations raised by local legislative and regulatory instruments, the NHC is unable or unwilling to provide an accurate account of their activities. Practical implications The lack of compliant reporting suggests that the planning, management and monitoring of the housing needs of residents of Papua New Guinea are compromised. There also appears merit in asking why parliament continues to fund the corporation given its difficulties in meeting local-level reporting expectations. Social implications The results have wider implications for the reporting ideologies of indigenous-run housing corporations operating in other developing countries. It might be fruitful to meet local reporting expectations before taking on the specialized reporting that accompanies introduced western-oriented policies on housing. Originality/value Accountability in relation to indigenous property management is constructed through a lens of reporting issues facing a developing country housing corporation.

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