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Article Summary This paper presents a review of the article by John Flower, 2013, “ The International Integrated Reporting Council: A Story of Failure, ” Critical Perspectives on Accounting, vol. 27, no. 2015, pp. 1 – 17. The article presents an account of the International Integrated Reporting Council (IIRC) since its formation in 2010. In 2011 the IIRC published its first discussion paper that broadly outlined its mandate. The IIRC offered a broad definition of integrated reporting and introduced the concept of the capitals. The core point was the IIRC indication that the “ main output of integrated reporting is an integrated report … that will become an organization’ s primary report. ”   Another key point is the IIRC’ s approach to integrated reporting is the concept of the capitals that outlines “ six different categories of ‘ capital: financial capital, manufactured capital, human capital, intellectual capital, natural capital and social capital. ” Flower starts his attack on the concept of capitals.

John argues that the concept on which most of the classes of capital are founded is sensibly clear, but points out that the borders between the different capitals are not well-defined.

John states that the IIRC’ s concept of ‘ capitals’ covers not only the firm’ s capital in the traditional logic, but also the capital of society, and therefore states that most of the capitals incorporated in the integrated report do not belong to the firm. Besides, John does not see any connexion between sustainability and the capitals approach. Moreover, John points out that the integrated report should cover the impact of the capitals on the firm as envisaged by the IIRC. However, IIRC’ s 2013 framework takes away the requirement for firms to state their influence on the capitals even if they do not affect their operations.

This weakens the desire for sustainability accounting. Also John states that if the IIRC had embraced a broader concept of value, such as ‘ value to society’ then it would have been compulsory for the firm to report on the bearing of its activities on all capitals. He also suggests that financial capital must not be counted in the IIRC’ s list of capitals since it is not a constituent of global capital. John argues that the trade-off between capitals does not have real meaning.

He feels that the IIRC established the idea of different capitals as a way of facilitating firms to substantiate their harm on the environment. By and large, John argues that over time, the IIRC has abandoned its push for sustainable accounting. He even goes further to show that the use of the term sustainability went down from thirteen when the IIRC’ s first discussion paper in 2011 to just once in the 2013 framework, which is an even bigger document. He also indicates that the IIRC is unwilling to place any heavy reporting onuses on the firm’ s management given that it does not necessitate firms to report on any particular key performance indicators (KPIs).

He presents his criticism regarding IIRC in a constructive way. Analysis/Critique John points out that the formation of IIRC was driven by two organisations that are leaders in the area of accounting for sustainability: the Prince’ s Accounting for Sustainability Project (A4S) and the Global Reporting Initiative (GRI). The Prince of Wales hinted to the formation of this body through a speech he delivered in December 2009 and by August 2010 IIRC was formed.

The A4S project leads the way in the battle against the 21st century challenges, such as climate change, inadequate clean water, and over-exploitation of the limited natural resources. These are pertinent issues in the current world and touch on virtually all elements of humanity including financial reporting and accounting. The GRI is a global organisation that leads the campaign for sustainability reporting. The institution has provided guidelines including the G3 and G4 principles that any organisation on earth ought to follow in preparing sustainability reports.

This is particularly aimed at enhancing comparability in sustainability accounting. The article is based on the triple bottom line or three p’ s (profit, people, and the planet). This is an issue that is hotly debated. Indeed there are instances where companies destroy the environment and disobey human rights simply to earn a profit. John feels that the mandate on the IIRC is offering guidance on fair reporting on a company’ s actions against the three p’ s that have not been realized. Companies are more conscious of the profitability of their ventures and the creation of shareholder value.

That’ s why John raises the aspect of ‘ value for investors’ that IIRC seems to support rather than striving to realize ‘ value for society’ that is what it is supposed to do. The author has successfully realized his objective for publishing the article. His objective is on the attack of the IIRC’ s integrated framework on four key areas: single report, sustainability, stakeholders, and lack of impact. The author’ s argument is also based on legal foundations. John argues that the IIRC’ s 2013 framework's lack of compulsion for organizations to offer supplementary reporting is not supported under British law.

Even though the company laws indicate that an organization's core mandate is to the shareholders, it provides room for other parties to be addressed as well. John supports his work through proper referencing on the crucial areas of the IIRC’ s publications. Each element under the publication is coherently addressed. John also supports his opinion with other works that have been done in the area of corporate social responsibility, stakeholder theory, ethics, and social and environmental accounting. The referenced works date from as back as 1984 to the latest articles in 2013. The structure of the article cannot be accepted in the academic field since articles in this field have to follow a structure.

They should have an introduction, literature review, methodology, findings, conclusion, and references including appendices. It can generally be viewed as a secondary review of the publications of IIRC. However, the article by John is the first of its kind to attack the IIRC. There was a need for sufficient research to be conducted on the issue so as to get a wider opinion on the issues.

This is because the author presents a subjective view that is generally his own opinion and not a generally accepted or not accepted school of thought. The article does not have any hypothesis to guide a proper presentation of results and findings. There is no data that was collected through any means such as interviews or questionnaires or otherwise to offer logical support for the hypothesis. This flouts the structure of a generally accepted and professional journal article that should present information that has been well researched on.

Further, the author does not state if there is any need for further or detailed research on the IIRC to certify if it truly has failed in its mandate of supporting sustainability accounting. The article is of great importance to the accounting profession as it raises a fundamental concern in the contemporary world, that is, sustainability accounting. The concept of integrated reporting has been widely accepted since it advocates for sustainability. It is an initiative that supports organizational concern for the surrounding environment.

Also, companies have got to show concern for the communities in which they conduct their operations. To ensure accountability, there should be a proper framework under which proper reporting ought to be facilitated. Moreover, the article raises key concerns that ought to be debated within the wider accounting theory. Of particular importance is the composition of regulatory bodies. One key concern for John that limits the IIRC’ s capacity to come tough on integrated reporting is the composition of its council. John states that the IIRC’ s council when it was formed remarkably incorporated influential characters including “ the heads of the IASB, FASB, IFAC and IOSCO, the CEOs of the ‘ Big Four’ , the heads of the major British professional accountancy bodies, and the CFOs of major multi-internationals, such as Nestle´ , Tata and HSBC. ” According to John, this is a manifestation of the councils’ domination by the traditional accounting professionals, preparers and regulators, who take up over half of the membership.

The traditionalists greatly outstrip the representatives of the organizations advocating for social and environmental accounting. This presents some form of ambiguity regarding whether there is an authentic interest to reform financial reporting or the old-styled accounting professional desire to control a novel initiative that endangers their customary position. Recommendation and Conclusion John successfully argues his own opinion.

It is clear that the IIRC has some serious issues that point to a weakness in its composition. The chronology of its publications shows a desire for the arguments to be researched further. A proper review of the organization needs to be done. Therefore, primary research should be conducted involving all interested parties, such as accountants, regulators, companies, and environmentalists.

This will pave way for a wider opinion of how the IIRC has fared so far in addressing its key mandate for which it was formed: sustainability accounting.

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