Preparing for Integrated Report: The Vietnamese Enterprises Need to Improve the Quality of Annual Reports

- Preparing for Integrated Report: The Vietnamese Enterprises Need to Improve the Quality of Annual Reports.
- Integrated report is a new topic that concerned in many countries over the world because of the benefits that brings to businesses, communities, and the sustainable development of each country..
- Integrated report demonstrates how an organization think, plan, and tell their business stories.
- To make the integrated report is not easy to any business.
- In order to preparing for an integrated report in the future, businesses needs to make a good financial reports, annual reports and sustainable reports.
- This study focuses on the annual report, especially the corporate responsibility disclosure in the annual reports of Vietnam listed companies after Vietnam issued the Circular No.155/2015 guiding disclosure on the stock market.
- Data collected from 162 listed companies, they prepared annual reports in 2015, before promulgating the Circular No.155/2015, and annual reports in after this Circular took effect.
- In the current economic and social context, many companies are now disclosing voluntary corporate social responsibility or sustainability reports that highlight environmental, social and governance issues related to their business and industry.
- An integrated report has also been referred to as ‘One Report’ by Eccles and Krzus (Eccles &.
- Integrated report brings together financial and non-financial measure in one piece of the report, linking among financial and non-financial performance metrics (Hoque, 2017,.
- Integrated Report brings together the material information about an organization’s strategy, governance, performance and prospects in a way that reflects the commercial, social and environmental context within which it operates (IIRC, 2011).
- One of the important reasons driving the implementation of Integrated Report is the need of stakeholders, especially the providers of capital, following the 2007-2008 financial crisis.
- It has also been recognized that the external environment has always had a strong impact on the performance of the business, in addition to increasing concerns about environmental and social sustainability.
- Integrated report can help solve these problems..
- Over the past few years, the Vietnam State Securities Commission (VSSC) together with international organizations such as IFC, PwC, IIRC have been trying to introduce the methodology of integrated report to listed companies, as a means to dramatically improve the quality of annual reports..
- Integrated report plays an important role for companies in terms of their operations towards sustainable development.
- First of all, they need to improve the quality of the reports, especially the annual reports.
- So, this paper focuses on studying the current status of annual reports of Vietnamese listed companies in order to consider an integrated report preparation in next time.
- There is a large amount of information provided in the annual reports.
- However, this study does not assess all content of the annual reports but focuses mainly on the disclosure of environmental and social sustainability in accordance with Appendix 04 of Circular No.
- Theoretical Framework of Sustainable Development and Integrated Report 2.1.
- Sustainable Development.
- The desired result is a state where living conditions and resources continue to meet human needs without undermining the integrity and stability of the natural system.
- development can be classified as development that meets the needs of the present without compromising the ability of future generations sustainable development the Brundtland Commission of the United Nations in 1987.
- Managers are not just representatives of shareholders but protectors of the company, responsible for the existence and growth of the enterprise, for the benefit of the community, enterprises must be responsible for the social responsibility (Suojanen, 1954).
- Sustainability report first appeared during the 1970s with the publishing of the first wave of social reports, mainly in the USA and Western Europe (Kolk, 2010).
- While the practice had faded out by the 1980s, environmental report emerged in the late 1980s (Kolk, 2010).
- KPMG (2011) shows that non-financial report by large multinational corporations increased rapidly, over 95 per cent of the 250 largest companies in the world and 69 percent of companies which are largest 100 companies by revenue in 34 countries, disclose their.
- sustainability performance in the 1990s (KPMG, 2011).
- Integrated Report.
- Integrated report is the latest reporting innovation, emerging in 2010 with the formation of the International Integrated Reporting Council.
- Framework to establish guiding principles and content elements that govern the overall content of an integrated report.
- However, an integrated report is not presented as the next generation of sustainability report but as an attempt to promote “a more cohesive and efficient approach to corporate reporting that draws on different reporting strands” (IIRC, 2013).
- An integrated report aims to bring together detailed financial information, operational data and sustainability information to focus only on those matters.
- “that have a material bearing on theability to create value in the short, medium and long term” (IIRC, 2013).
- The IIRC expect integrated report to become the “corporate reporting norm.
- An integrated report is a report that integrates fully quantified information into specific indicators on the financial, managerial, environmental and social aspects, giving a holistic view about the operation of the business.
- With integrated report, businesses use it as a tool to engage and communicate with stakeholders in a clear way about strategies, plans, and how resources are used (finance, production, intellectural property, human, social relationship, and nature) and values are created in the context of the external environment in which the organization is dominant.
- Components based on the integrated report model include: strategy and resource allocation, external and organizational overview, business model, governance, opportunity and risk, prospects activity rate.
- And more importantly, all this must be presented in a way that leads to creating value in the short, medium and long term for the business..
- With such an approach, integrated report requires the enterprise to have an integrated thinking, for example, take a proactive and holistic view of the relationship between the business's activities and functions.
- The resources are used or influential, in the end of orientation is to create value.
- Thus, integrated report focuses more on strategies and future directions.
- Obviously, this can help to overcome the limitations of traditional corporate financial reports that present a lot of past activity, while analyzing and forecasting new prospects that have a strong impact on expectations and the decision of the investor..
- Experts say integrated report is more than just a combination of three reports: annual report, sustainability report, and corporate financial report but an innovative integration of information to convey a story business.
- collecting and disclosing material social, environmental and economic information before preparing an integrated report..
- The breakthrough in the issuance of legal documents on corporate responsibility reporting has included the issuance of Circular No.155/2015/TT-BTC of the Ministry of Finance on disclosure of information on the stock market.
- This is an area that international investors are very interested in, as the company's long-term development prospects will be presented in the annual report through sustainable development goals,.
- Responsible and sustainable investment is becoming one of the most important investment criteria in the world.
- Thus, from the perspective of state management, Vietnam has no legal documents on environmental cost and social responsibility cost accounting, but only on the disclosure of responsibility information in the annual reports, sustainable development reports of listed companies..
- To consider the disclosure of environmental liabilities, this paper studies the annual reports of 262 listed companies, before Circular No.155/2015 was issued in 2015 and in two years after the Circular No.155/2015 took effect.
- The purpose of the review the data of listed companies in 2015 is to assess the level of their responsibility disclosure without compulsory government regulations.
- score will be given to the company when any responsibility information is available in the annual report and "0".
- if no responsibility information is available in the annual report (Chau &.
- score will be given to companies if they have any responsibility information in annual reports and "0".
- if no responsibility information is available in the annual reports..
- The level of disclosure of the information studied is based on the attributes of the information, including reliability of information, the objectivity of information, timeliness of information and comprehensiveness of information..
- Of the 226 companies selected survey in five areas above, 162 companies reported responsibility information in account for 71.7%, 64 firms without responsibility accounted for 28.3%.
- This study focuses on 162 companies to assess the level of disclosure of responsibility information and evaluate the quality of the annual report in terms of disclosure of responsibility information.
- Although Vietnam did not require companies to reporting information relating to environmental and social responsibility of the company in 2015 but according to the authors' compilation from the companies’ 2015 annual reports, the number of companies reporting on the management of raw materials, energy consumption, and water consumption was at around 46.3.
- material used for the manufacture and packaging of the products as well as services of the.
- The percentage of materials recycled to produce products and services of the organization.
- consumption of business activities in the year).
- (Source: Comprehensive Authors from Annual Report of Listed firms in An In-depth study about annual reports of 162 listed companies which disclosed the responsibility information following to the Circular No.155/2015/TT-BTC shows that the.
- The number of pages which has from 1 to 2 pages in annual reports accounts from 70% to 82%..
- Figure 1- The combined results of the number of pages of responsibility reporting in the annual report of the surveyed companies..
- (Source: Compiled by the Annual Report of Listed Firms The content presented in the report is rather sketchy, lack of evidence with data on the environmental impact assessment.
- Some companies even reported about 30 pages related impact of the company on the environment and society but only disclosed responsibilities to the local communities through the volunteer program, sponsorship and did not disclose about resource management.
- Most of the companies were at weak level, accounted for 66% in 2015, 59% in 2016 and 55% in 2017.
- Figure 2- Quality evaluation results of responsibility reporting in the annual report of surveyed companies.
- The case study of BMP shows that BMP is the company that has disclosed integrated responsibility information in its annual reports since 2015, before the effective date of Circular No.155/2015/TT-BTC.
- In the case of content disclosure, environmental and social responsibility accounts for up to 50% of the sustainable development report (about 60 pages).
- With just a few pages to disclose all corporate responsibility information required following to the Circular No.155/2015 is difficult to assess that quality of their annual reports.
- An anual report is good to make the foundation for conversion to integrated report.
- With such limited capacity, basically, companies only disclose very general indicators of the regulations, have not many voluntary disclosures.
- We interviewed some experts and managers about responsibility information disclosure in the annual report.
- “Companies have not really paid much attention to social and environmental responsibility disclosure in both the mandatory and voluntary because the managers are not aware of the benefits of disclosure.
- We are also interested in releasing information about social and environmental responsibility, reporting sustainability, and even preparing integrated report, but it's too hard for us to do in the current stage and conditions.
- I think that in the future we will have to aim for all that but to do it we have to prepare a lot of other things”.
- Pham and Do (2015) investigate the factors affecting the extent of voluntary disclosure by examining the annual reports of 205 listed industrial and manufacturing companies listing.
- evidence from that study suggests are companies with high foreign ownership have a high level of voluntary disclosure and the company size is an important factor related to the increased level of voluntary disclosure in annual reports of Vietnamese listed companies (D.
- Another study by Dang (2018) for 289 listed Vietnamese firms found that there are three factors that influence the level of disclosure of corporate social responsibility information, sustainable development in the annual report of the enterprises are profitability, business size and independent auditing (Dang et al., 2018).
- However, this study does not have access to factors influencing the disclosure of corporate responsibility on the annual reports of Vietnamese listed companies..
- Integrated report is a new trend in many countries, the benefits that integrated report brings to business is undeniable, especially in today's context as businesses are looking to sustainable development.
- Integrated report and sustainable development is still new concepts for the Vietnamese companies.
- There are a number of issues that Vietnamese public companies need to accomplish in order to obtain an annual report in the true meaning of a complete, formal document that provides investors with an honest view of the status as well as the future of the business..
- Vietnamese listed companies implement different regulations and as a result, the quality of annual reports among public companies is very different.
- It is easy to see that companies in the financial and banking sectors such as Bao Viet, Vietcombank,… are highly internationalized and understand the value of the annual report so they make annual reports relatively professionally.
- The quality of corporate responsibility disclosure after the issuance of the Circular No.155/2015 has changed, however, the change is negligible, before the Circular No..
- Companies need to be more aware of their responsibilities in making annual reports as well as better recognition of the benefits that annual reports bring rather than in accordance with legal obligations of the law..
- To address the above limitations, the state management agencies should study the promulgation of legal regulations on annual report, integrated report including regulations on increasing transparency, developing policies addressing environmental, social and economic issues, maintaining an understanding of regulations on performance measurement, reporting, monitoring, testing, and interpretation of information related to impact social, environmental and economic.
- In addition, it is necessary to strengthen the auditor's monitoring of the disclosure of information by enterprises.
- Raising awareness of the business about improving the quality of annual reports to towards to implement integrated report in the future, such as: organizing more conferences relating to information disclosure.
- Limitations of this study is only review a content related to general social responsibility disclosure of an annual report and does not cover all contents of annual reports..
- Evaluations of the quality of disclosures base on the subjective view of readers, who see annual report, that does not base on clear measurement criteria..
- Disclosure in the corporate annual reports of Swedish companies.
- Voluntary disclosure in the annual reports of New Zealand companies.
- Towards Integrated Reporting: Communicating Value in the 21st Century.
- Interim financial reporting in the asia-pacific region.
- Firm-specific determinants of the comprehensiveness of mandatory disclosure in the corporate annual reports of firms listed on the stock exchange of Hong Kong

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