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IABFM Articles > > Corporate Social Responsibility > A literature Review of Non-Financial Reporting by Corporations

A literature Review of Non-Financial Reporting by Corporations

By Brenda Yang

04 November, 2015


The International Accounting Standards Board philosophy for financial reports is that the information provided will be "useful for decision making purposes".  It can be assumed that the same critical standard can be applied to non financial reporting and this hypothesis was tested in a review of literature about the most popular form of non financial reporting which is triple bottom line (TBL) reporting which is an initiative of the Global Reporting Initiative.  It was found that the bulk of research reports concentrate on the various levels of success of TBL and the inter-relationship between the three factors to the exclusion of the variables that are not taken into consideration. There is also a major research gap, given the objective stated above, as corporations appear to see TBL as a means in itself rather than one other area of non-financial information. 


Stakeholders are any person or organisations that are considered to have an interest in the operations of an organisation whether it is corporate, non-profit organisation or government (Sridhar 2011).  Corporate stakeholders are the investors, or potential investors, in the organisation but also include employees, customers, government, the general community and trade associations. It is accepted that some, if not all, of these interest groups should have access to information concerning the operations of the entity (MacDermott 2003). Some information is mandated whilst other information is discretionary and the information provided by organisations will vary from entity to entity.  It appears that many corporations seem to perceive TBL, and hence the idea of sustainability, as being a end in itself as opposed to the idea of it being a means towards the objective of providing information that is useful for decision making purposes.  It appears that most research is conducted around the reporting of the corporations using TBL to the exclusion to identifying whether there are other areas within the corporation's operations that could be reported to provide more information that is important for stakeholder's decision making.  The purpose of this study is to see if there is any contemporary research into corporations going beyond the TBL approach and what would be the perceived benefits in doing so. This paper will concentrate on information that is provided by corporate entities.

Literature Review

Information is provided to organisational stakeholders so that they are in a better position to make judgements about their relationship with the entity(Venkatraman and Nayak 2015b).  For example an investor may, based on the information provided wish to invest or divest more funds.  A bank may decide whether to lend additional capital to an entity based on the information available.  The International Accounting Standards Board (IASB) in its Conceptual Framework states that basic objective of providing financial information is to "provide information about the entity that is useful to present and potential equity investors, lenders, and other creditors in their capacity as capital providers" (IASB 2015b).  This is the preamble to all of the International Financial Reporting Standards (IFRS).

Financial Information

The IFRS standards are the 56 accounting standards proscribed by the IASB for general-purpose financial reporting purposes.  The IFRS standards cannot be enforced by the IASB but the use of its standards is mandated by stock exchange listing requirements and/or legislation in the jurisdictions in which the IFRS are used(IASB 2015a).  The information in the financial reports is financial in nature and requires that corporations must prepare financial report for the current year with a comparison with last year's figures.  These are the minimum disclosure requirements.  Most entities do not disclose much more financial information although some, such as Myer (Myer 2000), have chosen to provide more information.

Non-Financial Information

The provision of non-financial information tends to be at the discretion of the reporting entity.  In some jurisdictions such as the European Union certain non financial disclosures are mandated (ECBF 2015) but they tend to be limited in their application and non prescriptive in the format required.  However, it is in the area of disclosure of non-financial information that the largest growth has taken place.  The modern corporation has been using sustainability of its operations as one of its goals and providing to stakeholders a greater insight into the operations of the organisation, which is consistent with the objective of providing information that is useful for decision making purposes(Venkatraman and Nayak 2015a).  These reports have been issued since early 1990s albeit the reporting has been ad hoc given that there were no specific directives as to content and format of information.  One attempt to come up with a measure of sustainability was made by John Elkington in the 1990s where he introduced a concept which went beyond the mandated financial reporting requirements and included both a social and environmental dimension (Elkington 1997; Jeurissen 2000). This was referred to as triple bottom line reporting (TBL).  TBL has been promoted by the Global Reporting Initiative (Beatty 2006) and KPMG reported that in 2011 more than 90% of the 250 largest multinational enterprises were reporting using the TBL approach (KPMG 2011). Elkington felt that the TBL could be used for all types of undertakings that need to report to its stakeholders hence included businesses, not for profit organisations and government bodies(Elkington 1997).

Reasons for Reporting Non-Financial Information

The concept of sustainability has become an accepted principle for corporations.  The TBL approach to sustainability has been to have corporations report on aspects of economy, environmental and social responsibility as they affect the corporation(Tschopp and Nastanski 2014).  The approach drew criticism from Nobel laureate Milton Friedman who said that the "business of business is business" and issues such as social responsibility should be the role of government, not the corporation(Friedman 1970).   However, the commercial reality is that many corporations are now multinational corporations seeking to do business in a number of other countries.  The fact that corporations can have objectives other wealth maximisation was identified by Glavis and Mish . Failure to have a social responsibility philosophy may result in a lessening of opportunities (Glavas and Mish 2015). For example, many African countries will only deal with multinational Enterprises (MNEs) that have corporate social responsibility as part of their corporate goals. The Californian Government Pension Fund will only invest in corporations that show a commitment to corporate social responsibility(CalPERS 2015).  Some Ethical investment funds will only invest in corporations that show a commitment to improving their environmental impact.

KPMG reported that in 2011 more than 90% of the largest MNEs were reporting using the GRI TBL guidelines (KPMG 2011).  Norman observed that organisations are actively promoting the fact they use TBL and have websites specifically devoted to it (Norman and Macdonald 2004).  It would appear therefore that one of the reasons for reporting non financial information is to avoid being at a competitive disadvantage rather than trying to gain a competitive advantage.

Results and Findings

The majority of research looks at the success, or otherwise, of corporations currently using TBL and makes observations about the role of TBL in the reporting regime.   Cummings and Doh identified that one of the principle reasons for corporations using TBL was to gain a competitive advantage(Cummings and Doh 2000). Tschopp points out that there are two reasons that companies prepare TBL reports.  Firstly it is to meet what is required by investors and secondly it is to gain some recognition for some deed that the corporation has done.  He cites Shell and Nike as being two companies that used the TBL for this purpose(Tschopp 2003). In some cases the TBL process is driven by stakeholders who require a greater amount of information than is provided by the traditional reporting process (MacDermott 2003). The Institute of Sustainability in Switzerland undertook a study to determine the criteria used for the selection of variables and the quality of subsequent reporting but did not question the efficacy of the reporting.  (Daub 2007). Venkatraman considers the three TBL factors and the relationship between them (Venkatraman and Nayak 2015b)

A more far reaching study was a series of interviews with CEOs to see what they considered to be the benefits of TBL and what next steps could be taken in terms of non financial reporting (Sridhar 2011). The overall finding of the study indicated that some corporations were perceived that there was the requirement to produce a report for stakeholders that included economic, environmental and social responsibility and the use of the TBL satisfied this need.  However, the majority of organisations studied indicated that there was no consideration of them going further than meeting what was, similar to the financial reporting requirement, of providing the minimum TBL whilst not looking to enhance that reporting.  Sridhar concludes that while organisations provide the appearance of being a "good corporate citizen" through the use of the TBL they can choose the metrics that are most beneficial to promote their cause (Sridhar 2011).  There is therefore, very little incentive for them to go beyond the TBL information to seek additional non-financial reporting issues

Directive 2014/95/EU of the European Commission mandates that certain large organisations and groups disclose in their management reports a range of information in relation to "environmental matters, social and employee aspects, respect for human rights, anticorruption and bribery issues and diversity in their boards of directors" (ECBF 2015).  These regulations only apply to large companies as well as financial institutions and a few select others. 


The body of literature has tended to concentrate on the implementation and use of the TBL concept with the obvious inference that the TBL is considered to be an end in itself. It is evident that many corporations, in addition to the multinational enterprises have actively adopted the TBL.  However, it would appear that few have taken further steps to increase the amount of non-financial information for shareholders.   A review was undertaken of academic articles dealing with the subject of TBL and other academic papers, websites and articles dealing with other information provided to shareholders, such as, the company's return on its use of its intellectual capital.  The relevant articles were then considered from the viewpoint of whether they were able to make a contribution to the objective of establishing the use of new initiatives.


The European Directive covers some of the areas covered by TBL and also introduces some areas extending beyond TBL when it considers anticorruption and bribery issues.  However, it is recommended that this information be presented either in, or part of, the management report, which typically is in a narrative form and possibly one that can be easily overlooked.

Although important in the context of the information that is required to be provided one of the shortcomings of the Directive is that it allows too much latitude in the way the information can be presented and provides too little guidance as to the actual content of the information.  Another shortcoming is that the Directive only applies to certain companies therefore discriminates against shareholders in publicly accountable entities with less than 50 employees.

The preceding discussions reinforce the acceptance of TBL as a concept both nationally and internationally.  There are many papers and publications discussing various aspects of the TBL concept.  The overall thrust of the literature is that TBL is a good thing which results in corporations gaining greater acceptance in some jurisdictions, for example in Africa, where corporations have been able to demonstrate their social responsibility. 

The TBL is beneficial, probably to the reporting entity itself and to the stakeholders, seems to be accepted as a given.  However, if we accept that the role of the reporting entity is to provide information that is useful for decision-making purposes it is apparent that there is greater scope for providing non-financial information.  Importantly TBL does not address a number of important non-financial areas such as levels of bribery and corruption although there are no mandates other than Directive 95, which is applicable to the EU.  Nor is there any attempt by TBL to report on areas such as the organisation's use and maintenance of intellectual capital and the risk associated with the potential loss of that intellectual capital.

Given that there are no firm directives to corporations as to what should be included in non-financial reports the majority of reports and hence papers prepared based on the published data the majority of papers are positive.  However, it is quite possible that corporations only "cherry pick" information which will show themselves in positive light and neglect the negative factors which could be considered as being the equivalent of "massaging" the financial statements.


Most of the body of research that is available tends to concentrate on the success and impact of the current use of TBL by reporting entities rather looking at additional measures that could be introduced.  If the objective of providing information, both financial and non financial, that is useful for decision making purposes then the body of literature available falls significantly short of analysing this objective.   It consistently looks at the reported, usually positive, aspects of TBL rather than addressing the potential deficiencies in the approach.  Similarly, the obvious shortcomings of the research into aspects other than TBL in terms of non-financial reporting appear to be overlooked by researchers. There is significant opportunity for researchers to look at these areas.


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