Adoption of IR Principles by Woolworths Limited
The essay is based on contemporary corporate report conducted by KMP in Australia in the year 2014 as reported by (Atkins & Maroun, 2015). According to KMP report is that more than quarter of the biggest companies in Australia are currently using integrated reporting principles in their annual reports. The companies are focusing on how to create long-term values of IR rather than the short term and medium term values and earning associated with integrated reporting principles. Hence, Woolworths Limited which is a major company in Australian Stock Exchange or ASX will be used as an example in this essay. Woolworths Limited has been listed in the stock exchange for over twenty years, with a good ranking compared to other companies in the stock exchange market (Beck, Dumay & Frost, 2017).
According to the fourth edition of Australian ASX Corporate Reporting, there is a significant increase on the number of companies using IR principles. Such a company is Woolworths Limited that is doing away with the outdated methods of detailing its financial performance reports (Beck, Dumay & Frost, 2017). Woolworths Limited is being described as a company that has been using the integrated reporting principles in its boards and managerial systems which created its suitable working values for both investors, shareholders and numerous stakeholders. By using the integrated reporting the Woolworths Limited has cut down its costs related to creation of financial reports. It is because IR removes irrelevant information and then restructuring the reports by making it clear to different users, which is a great advantage of IRF to Woolworths Limited.
The report from ASX Corporate that was published by Beck, Dumay and Frost (2017), outline that in 2017 there was a steady and rapid progress on the adoption of the principles of IR by twenty-five percent in Australia compared to fourteen percent in the past years. From the ASK Corporate report it is deduced that Woolworths Limited was among the companies that was involve in the steady and rapid adoption of the IR principles because of its key advantages. In addition, there has been a great upsurge movements of IR in Australian for the last twelve years such as the AICD who are currently in support of the adoption of the principles by the Woolworths Limited. The steady adoption of integrated reporting in Australia by company like Woolworths Limited has been the result of their international counterparts who have recognize the significant of IR allocations of capital decisions (Sierra-García, Zorio?Grima & García?Benau, 2015). Hence, G100 which is a leading Australian CFOs and ACSI understand the market trends and opportunity of business that are related with IRF and, it is in support of Woolworths Limited for adopting the integrated reporting principles in their annual reports.
Benefits of IR Principles for Woolworths Limited
In addition, Woolworths Australian Limited is providing the evidence of improvement on its internal strategic alignments as well as the better and appropriate engagement with clients, workers and other publics including stakeholders and shareholders which is arising in their integrated reporting of every year (Atkins & Maroun, 2015). Although, Australian companies like Woolworths Limited is a good examples that indicating that IR principles are in progress in the country. Despite of the positive sign of improvement, Australia still as long way to go because in the globe it is approximately one thousand six hundred companies which have adopted the integrated reporting.
Under IR Woolworths Limited has been able to provide information on the health of the company and problematic or problems which are challenging the company as well as the opportunity it will face in the future (Simnett & Huggins, 2015). The integrated reporting has help the company to avoid focusing in the examination of past years financial results but rather on the future results. These including more focusing on the active governance, use of resource as well as exposure, strategic performance of the company and in the administration of the material risks to produce and preserve their creation values. Adams (2015), explained that Woolworths Limited company traditional annual reports did not have more information in comparison to the current report which has the more information and data. The current information in the company reports is sufficient for fully assess of the organization’s ability in execution of its strategies in the future as well as if the previous earning will be sustainable in either of the medium or long-term (Sierra-García, Zorio?Grima & García?Benau, 2015).
In the Woolworths Limited reports there is an indication that the company has move to a sustainable financial position and performance, and it is currently including narration disclosures on the non-financial organization performance. But this is without connecting the company strategic planning and objectives. By using integrated reporting principles the company has also been able to show performance versus targets and budgets using its measurable Key Performance Indicators or KPIs (Simnett & Huggins, 2015). The company has improved it level of strategies from its reports since, the reports indicates where the organization is going and where it has come from, either by short term, medium term or long term. Woolworths Limited discloses its specific ambitions which were underpin by the company high-level of strategy by giving an appropriate insight of what they are intending to do in order to deploy the strategy accordingly (Ruiz-Lozano & Tirado-Valencia, 2016). Woolworths Limited is currently able to identify its material risk as well as the explanations of how the company is being managed, which has been attained by connecting the risks associated to the company strategies and objectives, key drivers as well as the future outlook in Woolworths Limited reports.
Integrated Framework Used by Woolworths Limited
The KMP report published by Beck, Dumay and Frost (2017), stated that while companies in Australia are adopting the IR principles, company such as Woolworths Limited is still behind other main capital markets values. For instance, there are perspectives of the leaders of the organizations and other investment companies like Woolworths Limited who have realised the benefit of integrated reporting principles within the company (Reuter & Messner, 2015). However, the same benefits they have shared with their key stakeholders and shareholders. They have identify IR as the driving clarity of the organization as well as its alignment all across the company. Thus, Woolworths Limited has seen integrated reporting as what is significant in the creation value and preservation of long term business values because it is a drive to better business practices (Flower, 2015).
In addition, Woolworths Limited as also been using the international integrated framework that was launched in the year 2013, with is main objective of changing the communication mind-set in the company (Flower, 2015). By, applying this principle of IR the Woolworths Limited has improved its explanation to financial providers in the capital market by showing how it is planning to create the value by moving forward (Simnett & Huggins, 2015). The IR adopted by Woolworths Limited goes beyond normal organization financial reporting needs to an extent that it can require the providence of insights in the company resources. It also provides the relationships of the influence which the creation of value have over the short term, medium term and long term on the strategies of Woolworths Limited.
In consideration to efficiency gain and balance of the cost, Woolworths Limited has implemented the IR because it existing futures such as easier system and protocols (Thomson, 2015). The system and protocols of the integrated reporting enabled Woolworths Limited to reduce it cost in making of annual reports. The fact is that IR is built around to look the connectivity between various elements which creates capital in an organization. IR also under the control and directions of the business model of reporting that include invariable, incremental in costs which are associated with the setting up procedures of the integrated report of the company (Islam & Islam, 2018). Despite of invariables and cost incremental the establishment of IR by Woolworths Limited has been of beneficial, because it lead to efficient and even less costly creation of reports. Woolworths Limited Australian Company to thrive in the stock exchange ranking because of the business case of doing IR that improves the quality of the company reporting as well as leading to a better business governance.
Efficiency Gains and Balance of Costs
The integrated reporting framework applied by Woolworths Limited constitutes of the six different components of the capital value that effectively describes the activities and outputs of the Woolworths Limited (Islam & Islam, 2018). The six capital values include financials values such as funds availability in the company, manufactured values such as plant as well as equipment, intellectual values which include trademarks, copyright, systems, licences as well as patents (Thomson, 2015). Human values including capabilities, standards and experience, social and relations like communities and the stakeholder or shareholder linkages, and the final capital values used and has been consider by Woolworths Limited is the natural which constitutes of both renewable and non-renewable environmental resources. Despite of capital market boarder reporting, it has been able to provide Woolworths Limited with great and clear value of creation all around the organization and towards the move of processing its objectives and building of the company trust (Kundu, 2017). By, embracing the IR principles Woolworths Limited as been able to increase the value of its thinking and reporting that are related to six capital.
References
Adams, C. A. (2015). The international integrated reporting council: a call to action. Critical Perspectives on Accounting, 27, 23-28.
Atkins, J., & Maroun, W. (2015). Integrated reporting in South Africa in 2012: Perspectives from South African institutional investors and KMP in Australia. Meditari Accountancy Research, 23(2), 197-221.
Beck, C., Dumay, J., & Frost, G. (2017). In pursuit of a ‘single source of truth’: from threatened legitimacy to integrated reporting. Journal of Business Ethics, 141(1), 191-205.
Dumay, J., Bernardi, C., Guthrie, J., & Demartini, P. (2016). Integrated reporting: a structured literature review. In Accounting Forum (Vol. 40, No. 3, pp. 166-185). Elsevier.
Flower, J. (2015). The international integrated reporting council: a story of failure. Critical Perspectives on Accounting, 27, 1-17.
Islam, R., & Islam, M. R. (2018). Insights the Practice of Integrated Reporting: A Study on MNCs in Bangladesh on the Degree of Adherence to the Reporting Framework. Open Journal of Business and Management, 6(03), 733.
Kundu, B. (2017). Analyzing Value Creation through Six Capitals of Integrated Reporting-A Case Study of Tata Steel Ltd. Review of Professional Management, 15(1), 30-41.
Reuter, M., & Messner, M. (2015). Lobbying on the integrated reporting framework: an analysis of comment letters to the 2011 discussion paper of the IIRC and fourth edition of Australian ASX Corporate Reporting. Accounting, Auditing & Accountability Journal, 28(3), 365-402.
Ruiz-Lozano, M., & Tirado-Valencia, P. (2016). Do industrial companies respond to the guiding principles of the Integrated Reporting framework? A preliminary study on the first companies joined to the initiative. Revista de Contabilidad, 19(2), 252-260.
Sierra?García, L., Zorio?Grima, A., & García?Benau, M. A. (2015). Stakeholder engagement, corporate social responsibility and integrated reporting: An exploratory study. Corporate Social Responsibility and Environmental Management, 22(5), 286-304.
Simnett, R., & Huggins, A. L. (2015). Integrated reporting and assurance: where can research add value? Sustainability Accounting, Management and Policy Journal, 6(1), 29-53.
Thomson, I. (2015). ‘But does sustainability need capitalism or an integrated report’a commentary on ‘The International Integrated Reporting Council: A story of failure’by Flower, J. Critical Perspectives on Accounting, 27, 18-22.
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