First of all, we need to know why we need Integrated reporting?
The main reason is that capital markets need the right information to be delivered at the right time in the right format and the content that the markets want and believe in. <IR> also allows capital markets to better understand a company’s performance and strategy planning. In order to bring greater consistency and reliability in the company by taking the first steps toward better business reporting. Through Integrated Reporting, business reporting can improved by efficient capital allocation, streamlined reporting processes, reduced reporting costs and enhanced organizational clarity in terms of business strategy and the business model. The most immediate advantages of a better managed company caused by taking a more understanding view of the relationships between financial performance and nonfinancial performance. If investor were being proactive in asking for information regarding financial and nonfinancial performance, <IR> can help companies in answering investor by creating sustainable strategies that enable them to create value for shareholders as well while contributing to a sustainable society.
By referring to Integrated Reporting – Performance insight through Better Business Reporting – Issue 1 of KPMG, South African organizations have shown a positive start in the adoption of Integrated Reporting. They have seen the clear benefits in adopting the principles of <IR>. But full implementation could take three to five years for many organizations, so which they need take more time achieve this new reporting style. Many companies in South Africa feel that these principles have helped them better understand and manage the <IR> business. Implementation of <IR> is not a single event cause it may require organizational change at all levels and challenges that will need to be overcome include the efficient gathering of non-financial information.
1) Strategic focus and future orientation.
An <IR> should provide comprehensive information and insight into the organization’s strategy, future outlook and the effects on the capitals.
If these elements are partially covered in the current financial report, then they are often not developed or simply mentioned in traditional CSR reports. According to The International Integrated Reporting Council (IIRC), adopting a strategic focus and future orientation includes clearly articulating how the continued availability, quality and affordability of significant capitals contribute to the organization’s ability to achieve its strategic objectives in the future and create value.
2) Connectivity of the information
This area of improvement more concerns inter-relatedness between the factors that affect the organization’s ability to create value in future time. More integrated thinking is needed to embed into an organization’s operation to create more connectivity of information flow into management reporting, analysis and decision making. According to The International Integrated Reporting Council (IIRC), the key forms of connectivity of information include the connectivity between the content elements, the past, current and future information, the capitals of the company, financial information, quantitative and qualitative information, management information, board information and information reported externally, information in the integrated report, information in the organization’s other communications, and information from other sources. The connectivity of information and the overall usefulness of an <IR> is enhanced when it is logically structured, well presented,written in clear and understandable.
3) Materiality
From Mazars Insurers Reports, material information is relevant information regarding anything that has a remarkable impact on the value creation process of the company, and therefore, is likely to interest stakeholders. The materiality determination process is important in preparing and presenting <IR>. First, we need to identify the relevant matters which have effects on the company’s ability to create value. Next, not all relevant matters are material, so we need to evaluate the importance and prioritizing important matters. Lastly, information to disclose need to determine and also the reporting boundary which related to the financial reporting entity and risks, opportunities and outcomes that companies might be facing.
4) Conciseness and readability
Integrated reports distinguish themselves by the <IR> conciseness and the clarity of the <IR> content. This principle can be related to the materiality principle which companies only focus on significant matters. An integrated report includes sufficient content to understand the company’s strategy, governance, performance and prospects without any less relevant information.
CSR in Malaysia received influence from the west as more multinational companies are formed, corporate contributions became more structured and link to corporate strategy. Frameworks for implementation of CSR initiatives were developed by Malaysia government’s increasing focus on CSR.
From Ruth Yap : Corporate Social Responsibility in Malaysia. It became compulsory for companies listed on Bursa Malaysia to disclose the <IR> CSR activities or practices in the year 2007. The idea of CSR was expanded even further as the government Introduced tax incentives to businesses that implement broad CSR programs. Most of the companies are also eager to have their brand name mentioned by the press, which are not actually committed to the CSR programs. Bursa Malaysia noted this problem has since then called for long-term programs with increased levels of involvement and performance measurement rather than individual donations.
Let’s compare Malaysia with developed country like Japan. Japanese companies in Malaysia have been involved with various CSR activities over the years. Companies such as Toyota, Nippon Paint, Fujitsu and Sony putting on-going CSR effort to promote environmental conservation through education. All these CSR programs by Japanese related corporations have been received and accepted well by the local people in Malaysia. The relationship between Japan and Malaysia has strengthened over the years. Advanced technology, good values and work ethics of the Japanese Society is absorbed and transfer to Malaysia. It is hoped that Malaysia will one day be able to achieve the status of a developed country with the assistance of Japan.
Next, We talk about another developing country, Pholippine. By referring to Lala Rimando: How CSR evolving in the Philippines, most of the CSR activities are still mainly philanthropy and event-driven, but employee volunteerism has become more important in the CSR designs. Companies in Philippines still are mainly putting efforts on environment sector because top management still support and push on it. Due to the poor and traditional communication skill, the results assessment of the CSR project is weak and need for further improvement. Moreover, the main motivation for companies to engage in, report, and communicate about their CSR is "Goodwill", but business economics in the Philippines are more motivating in financial support.
After comparing with Japan and Philippines. The companies in developed countries like Japan is more affordable to enhance environmental prospect and well planned in conducting CSR. Developing countries like Malaysia and Philippines, the focus will be more on company strategy so that CSR is conducted to enhance the strategy plan. Many companies scored very low in the environmental domain in Bursa Malaysia’s survey of listed companies. CSR activities aimed at preserving that environment do not give as much weight in Malaysia as the environment has been secondary compared to the economic benefit of businesses.