Business 10th Edition by Ferrell,Geoffrey Hirt,Linda Ferrell

Exercise 8

Companies Investigate Ways to Integrate Financial Information and Sustainability Costs
Most people believe that financial statements such as income statements and balance sheets provide the entire picture of a firm's financial standing. In reality, however, this is not the case. It has been estimated that about 80 percent of a firm's value is not found on the balance sheet. One of the least understood areas involves sustainability. For instance, how much does violating an environmental law truly cost a firm, not only monetarily but also regarding its reputation? Some socially responsible businesses have adopted a triple bottom line approach in which the organization reports its financial results, its impact on society, and its impact on the planet. Yet, even these companies find it difficult to take three different dimensions and add them up to provide an overall report.
A pilot program consisting of 75 global companies is investigating ways to overcome these challenges. This program, monitored by the International Integrated Reporting Council, seeks to create an integrated reporting model giving investors the opportunity to receive a holistic view of the company's operations and business strategies. Integrated reporting combines both financial and nonfinancial information. Companies testing this program include Microsoft, Unilever, Clorox, and Coca-Cola. Although most of these firms already develop sustainability or social responsibility reports, these reports are separate from the company's financial information. Such an endeavor requires the active participation of both company financial officers and accountants. Integrated reporting may become the new norm for investor reports-stock exchanges such as NASDAQ are beginning to require more information on a firm's corporate governance and environmental activities. 5
What is the purpose of the Integrated Reporting Council?