A potential investor should search for adequate information on a company's financial and non-financial information to make an appropriate investment decision. One should not only look at the financial metrics but also other issues, including the strategies of the company, its governance, corporate social responsibility, and other performance parameters. Concern should not be on the profitability alone, but a company that has a strong management team that is determined to meet the varied needs of its stakeholders (Erol & Demirel, 2016). Any investment must be guided by the way a target company creates value and the way they operate hence be able to meet the ever-changing market needs.
The conventional approach of financial reporting fails to meet the expectation of the investors. Integrated reporting, therefore, presents adequate information on sustainability and other aspects not captured by financial reporting (Erol & Demirel, 2016; Prosic, 2015). It offers a comprehensive picture of the activities of a company by incorporating financial and non-financial data and how the same impact the human capital, environment, and society.
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Integrated reporting lacks a standard format, and presenting all information can be time-consuming and cumbersome to the company. Similarly, too much information can be used against you by competitors, and therefore, financial reporting should be applied. Additionally, the company incurs additional costs using integrated reporting (Erol & Demirel, 2016; Prosic, 2015). Stakeholders focus more on the financial performance of a company. Investors, for example, are interested in the returns they will get when they invest their capital. Non-financial information, in this case, is secondary and does not alter their investment.
As a majority shareholder, spending a considerable amount of money in integrated reporting can increase overall operational costs and reduce the profits of the company. Similarly, there are drawbacks to this approach, as highlighted earlier. However, integrated reporting is the way to go since it focuses more on sustainability. As a majority shareholder, it is imperative to know that a company can guarantee sustained returns over a long time as opposed to focusing on short term profitability. Integrated reporting is, therefore, the best approach, even if it results in additional costs.
References
Erol, I., & Demirel, B. (2016). Investigation of Integrated Reporting As a New Approach of Corporate Reporting. International Journal Of Business And Social Research , 6 (10), 32. doi: 10.18533/ijbsr.v6i10.1002
Prosic, D. (2015). Integrated reporting: A new approach to corporate reporting and management. Bankarstvo , 44 (4), 62-87. doi: 10.5937/bankarstvo1504062p
