Finance

Corporate Accountability Reporting

September 5, 2013

For centuries the evolution of corporate (financial) reporting has been linked to the business context. In the 20th century, the traditional financial reports were mainly targeted at the financial resource providers, such as banks and equity shareholders. Financial standards were developed to reflect a firms’ assets and liabilities and the periodic accrual-based profit number. The particular accounting rules were shaped by supply and demand for (financial) information.

The financial and economic crisis that started in 2008 has made clear that the traditional financial reports are not sufficient to reflect a firm’s risks and profits. Financial reports are less useful to assess whether a firm has a sustainable future and pursues a sustainable strategy. Traditional corporate disclosures do not provide sufficient information for key stakeholders such as employees, customers, suppliers, local communities, NGOs etc. On the other hand, performance on environmental (e.g., C02 emissions), social (e.g., employee engagement) and governance (e.g., fair management compensation and effective controls) dimensions (ESG) seems to be key to understand whether a firm’s has a sustainable future and drives shareholder value. In recent years, some firms have started disclosing Corporate Social Responsibility (CSR) reports. Although the intention is to provide relevant information to both financial and non-financial stakeholders, companies face issues on consistency, measurability, and peer-group comparability.

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Verantwoordelijke bedrijfsrapportage, Joos (2013) - in Dutch

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