Analyze Nonfinancial Information And Their Impact On The Economies

Question: Discuss about the Nonfinancial Information And Their Impact On The Economies. Answer: Introduction The process of business reporting is an important aspect for the business organizations as it helps the stakeholders of the organizations know about the business operatic and financial position about the companies (Council, 2014). During the past two decades, several initiatives have been taken to improve the process of business reporting for the businesses. One such step is to disclose more nonfinancial information of the organizations in the annual report. The reason of doing so is that investors all over the world are considering the nonfinancial information of the organizations at the time of investments (Dhaliwal et al., 2012).). Hence, one cannot ignore the growing importance of nonfinancial information of the business organizations. It can be seen that there are different kinds of nonfinancial information in the business organizations that have significant impact on the economic aspects of the businesses. The main aim of this report is to analyze and evaluate the various aspec ts of nonfinancial information and their impact on the economies. Identification and Discussion of the Nature of Nonfinancial Information In the business era of twenty-first centuries, Nonfinancial Reporting is one of the major concepts. Nonfinancial Reporting, commonly known as Sustainability Reporting refers to the process of disclosing the nonfinancial data and information of the business organizations. In a business organization, different kinds of nonfinancial information are there. They are corporate social responsibility reporting; environment, social and governance (ESG) reporting: environmental reporting: social reporting: green banking disclosures and others. The nature of these aspects is discussed under: Corporate Social Responsibility refers to a specific corporate management approach that helps in the application of various sustainability values in the business organizations. The main objective of corporate social responsibility reporting or CSR reporting is the promotion of social welfare in the business organizations and outside the business organizations. The process of corporate social responsibility in the organizations assists in the employment of various ethical business concepts and supports in the preservation of the nature in which the business organizations operate (Cheng, Ioannou Serafeim, 2014). Another important nonfinancial reporting factor is Environmental, Social and Governance Reporting (ESG Reporting). As per the recent tread all over the world, the investor all over the globe are considering the environmental, social and governing factors in the annual reports of the organizations as material factors in the process of investment decision-making. ESG deals with a wide range of impacts on the investment factors. Some of the major issues that ESG deals with are change in the business regulations, various business ethics, operational strategies and many others (Murphy McGrath, 2013). The next nonfinancial factor is the process of environmental reporting. Environmental reporting refers to the production of narrative as well as enumerative information on the different kinds of environmental initiatives of the business organizations. The narrative information in the process of environmental reporting is used to provide explanations and reasons to fail in the environmental initiatives against the previous years (Bouten, Everaert Roberts, 2012). On the other hand, numerical environmental disclosure is needed for the reporting of various types of environmental initiatives. Another most important aspect is the process of social reporting. Social reporting is the process of the reporting of some major activities of the business organizations that have significant effects on the society and environment. On a more precise note, social reporting is the process of reporting and measuring the information that has impact on the society (Hys Hawrysz, 2012). There are differen t kinds of business activities of the businesses that have negative impacts on the society. Hence, it is the responsibility of the business organizations to report all these activities along with the impact of them in the annual reports. Another important aspect is the process of green banking disclosures. The main objective of the policy of green banking is to protect the earth from various environmental calamities like global warming, increase in carbon emission, scarcity of natural resources and others. The policy of green banking has become vastly popular all over the world (Bahl, 2012). Identification and Discussion of the Nature of Economic Consequences In the business organizations, both financial and nonfinancial information have their own significance. In this process, one can simply not ignore the impact of nonfinancial information on the economic factors like the debt market and the capital market. There is a deep relationship between the stock prices and the sentiment of the investors. Various nonfinancial events affect both the capital and debt market like macroeconomic releases, environmental changes all over the globe and many others. It has been seen that inventors all over the world are considering the various news of the companies regarding the nonfinancial information at the time of making the investment-decision (Cohen et al., 2012). The investors are considering the fact that this nonfinancial information has the power to affect the debt as well as capital market. There is not any place to doubt the fact that financial reporting has a significant importance on the economic factors of the organizations. However, lookin g at the growing importance of the various sustainable and environmental factors, the nonfinancial information and the nonfinancial reporting are playing significant part in the economic aspects of both the investors and the companies. It can be seen that business organizations having effective sustainable reporting procedures have shares with higher prices and their shares are trading on an effective basis. The reason is that people all over the world have started taking the various environmental aspects seriously. Hence, it can be said that nonfinancial information has impacts on the economic aspects like the capital and debt market (Dhaliwal et al., 2012). Reporting Procedures of Nonfinancial Information Business organizations need to follow certain structure, framework and regulations at the time of the reporting of nonfinancial information. GRI is one of the major frameworks that is followed all over the globe for the reporting of nonfinancial information. Another major principle that is followed at the time of reporting the nonfinancial information is the Account Ability AA1000 Principle Standards 2008 (AA1000APS). It can be seen that there is an important update in the GRI framework and it has converted to GRI-G3 framework. This latest framework has been useful for the organizations to support the sustainability reporting of them. Apart from the GRI framework, certain principles are there for the reporting of nonfinancial information. The principle of inclusivity states that the business organizations should be accountable to the stakeholders for disclosing all the nonfinancial information of the business organizations. In this regard, AA1000APS is an important aspect. The next p rinciple if materiality (Bhaduri Selarka, 2016). The materiality principles state that the nonfinancial information need to be material and hence, they should influence the in the process of investment decision-making. As per the principle of responsiveness, it is the responsibility of the organizations to provide accurate and dependable nonfinancial information to its stakeholders. As per the principle of completeness as per GRI-G3, the provided nonfinancial information to the stakeholders of the organizations needs to be complete in nature. Apart from the principles, another most important aspect is assurance. As per ISAE 3000 and AA1000APS 2008, the nonfinancial information needs two types of assurance (Simnett, 2012). They are reasonable or high assurance and limited or moderate assurance. Based on the nature of the nonfinancial information, the level of assurance is provided. These are the major components of nonfinancial information reporting that are needed in the reporting process. Integration The above discussion states that the disclosure of nonfinancial information has become a major requirement for the business organization. There are different procedures of disclosing the nonfinancial information of a business organization; they are corporate social responsibility reporting; environment, social and governance (ESG) reporting: environmental reporting: social reporting: green banking disclosures and other. The main objective behind all these reporting procedures is to properly disclosed the nonfinancial information of the organizations. All this nonfinancial information has massive impact on different economic factious like the debt market, capital market and others. It can be seen that the investor of the companies put a close view on the sustainability reporting of the business organization as the nonfinancial information plays an important role on their investment decision-making process. This is the reason the share prices of the organizations depends on the disclos ure of the nonfinancial information. Hence, it is the responsibility of the business organizations to follow all the required principles and framework at the time of reporting the nonfinancial information. The organizations need to follow the GRI-G3 and AA1000APS 2008 framework for the reporting of nonfinancial information. The required principles in this regard are inclusivity, materiality, responsiveness, completeness and others along with necessary assurance. Conclusion From the above discussion, it can be said that the process of the reporting of nonfinancial information for the business organizations is a major aspect that has impact on the economic factors of the organizations. It is the responsibility of the organizations to disclose all the nonfinancial information to the potential investors as they play an integral part on the investment decision of the investors. Hence, the business organizations need to comply with all the principles and with the necessary framework for the reporting of nonfinancial information. This process is beneficial for both the organizations and their stakeholders. References Bahl, S. (2012). Green banking-The new strategic imperative.Asian Journal of Research in Business Economics and Management,2(2), 176-185. Bhaduri, S. N., Selarka, E. (2016). Corporate Social ResponsibilityGuidelines and Best Practices. InCorporate Governance and Corporate Social Responsibility of Indian Companies(pp. 33-42). 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