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 Page 107

ACCOUNTING MAJORS' PERCEPTIONS OF THE

ADVANTAGES AND DISADVANTAGES OF
SUSTAINABILITY AND INTEGRATED REPORTING
Marianne L. James, California State University, Los Angeles

ABSTRACT

Investor demand for information, regulatory requirements, and continually developing

high-quality reporting standards has led to a globally growing trend toward formal
sustainability reporting. Integrated reporting, which combines financial and sustainability

-
related information into one report is also emerging. Accounting professionals' increasing
involvement complements and enhances this trend. Their attitudes toward and support of
sustainabilityreportingwill influence the incidence and quality of reporting. Accounting majors
are the future accountingprofessionals; thus, theirperceptionsare important.
This study deals with the current status of sustainability and integrated reporting,
discusses related regulatory requirements and sustainability reporting standards, and
investigates students' perceptions regarding the potential advantages and disadvantages of
sustainability and integrated reporting. This study found that accounting majors support
sustainability and integrated reporting and perceive the positive effect on a company's
reputation, increased profit, and customer loyalty as the most important advantages of
reporting. In addition, the study found that accounting majors perceive short-term reporting
costs as the most important disadvantage.Findingsfrom this study provide insights into future
accounting professionals' perceptions regarding the advantages and disadvantages of
sustainability reporting, which helps assess their support of this important global reporting
trend.

INTRODUCTION

Sustainability reporting provides information about organizations' impact on natural

resources, employees, and the community. This information may assist stakeholders in assessing
organizations' long-term creation of value beyond the products and services they provide and the
profit they generate. Some global companies combine sustainability reporting with financial
reporting in one integrated or linked report.
In the U.S., sustainability and integrated reporting are largely voluntary. However,
globally a trend toward mandatory reporting has emerged. Accounting professionals play an
important role in supporting this trend and also likely will play a continually increasing role in
the day-to-day compiling, analyzing, and reporting of unbiased relevant sustainability
information. In addition, accounting professionals may play an increasing role in the planning
and strategic implementation of sustainability-related activities. The American Institute of
Certified Public Accountants (AICPA) views CPA's function with regards to sustainability
accounting and reporting as follows: "Members in business, industry and government can add
value within their organizations by serving in an integrative role in the value creation process,
linking company strategy to sustainability, evaluating risks and opportunities, and providing
measurement, accounting and reporting skills." (AICPA, n.d., n.p). opportunities, and providing

Journal ofLegal, Ethical and Regulatory Issues, Volume 18, Number 2, 2015
Page 108

measurement, accounting and reporting skills." (AICPA, n.d., n.p).

For the sustainability and integrated reporting trend to continue to thrive, companies must
be willing to expend resources necessary for high-quality comparable reporting. Companies that
decide to report on sustainability will tend to consider carefully the benefits and challenges
of reporting. Accounting professionals provide important input regarding the reporting
decisions and implementation. Accounting majors are the future accounting professionals and
hence will be affected by sustainability reporting. If they are convinced that the benefits are
consistent with their company's mission, they may be more inclined to support sustainability or
integrated reporting. An earlier study (James, 2015) found that overall, accounting majors
support sustainability reporting of environmental and social sustainability issues. Thus, their
perceptions regarding the benefits and challenges of sustainability and integrated reporting are
very important.
This study found that accounting majors tend to support integrated reporting for public
companies and would support mandatory reporting. Accounting majors perceived that the most
important advantages of sustainability reporting were the positive effects on the company's
reputation, increased profit, and customer loyalty. Accounting majors perceived that the most
important disadvantages were short-term reporting costs and concerns about the accuracy and
completeness of the information. This study provides information regarding future accounting
professionals' perceptions of the potential advantages and disadvantages of sustainability
reporting which may affect their influence on and support of sustainability and integrated
reporting and help shape their involvement with such activities.

BACKGROUND

The Brundtland Commission's definition of sustainability development (U.N., 1987, 41),

which states that it is a "development that meets the needs of the present without compromising
the ability of future generations to meet their own needs," is well-known and frequently cited in
the literature. In the context of corporate sustainability, it generally relates to companies' ability
to create value in the long-run while minimizing their negative impact on the environment,
people, and natural resources. Thus, the term "sustainability" includes not only environmental
issues such as clean air, water, and the preservation of natural resources; but also the
wellbeing of companies' workforce, the community in which they operate, as well as their
effect on other stakeholders.
Today, examples of sustainability-related programs and practices are diverse and
for some organizations quite comprehensive and extensive. Some companies tend to primarily
focus their efforts on environmental sustainability, which may include recycling programs,
clean air and water initiatives, energy efficiency and renewable energy, and minimization of
waste; others may focus on community-related issues. For example, a survey of 178 executives
involved with corporate sustainability initiatives found that 84.8% of them were involved with
environmental initiatives (Ballou et al. 2012). Social programs, including those that enhance
employee wellbeing also tend to be very important. Ballou et al. (2012) found that the second
most frequently reported sustainability-related initiatives consisted of social programs, with
70.2% of the executives reporting that they were involved with such initiative.
Some companies that have implemented extensive sustainability programs in their own
organization also require that those that are closely associated with them adhere to minimum
standards to preserve energy, minimize negative effects of their operations, respect human

Journalof Legal, Ethical and Regulatory Issues, Volume 18, Number 2, 2015
 Page 109

rights, and adhere to a high level of ethical conduct. For example, Apple Company requires
that its suppliers sign and comply with their supplier code of conduct, audits companies'
compliance with the code, maintains a supplier responsibility website, and publishes an annual
supplier responsibility report (Apple, n.d.). During 2014, the company also launched a supplier
environment, health, and safety academy, which represents more than 270,000 workers
worldwide (Apple, n.d.). According to its 2014 supplier responsibility report, during 2014, the
company called 30,000 workers to ascertain that their employers (Apple's suppliers) complied
with their rights (Apple, n.d.). Similarly, Wal-Mart, the world's largest retailer, requires that its
suppliers comply with their ethical standards, which consists of 13 fundamental standards (Wal-
Mart, n.d.).
Apple's and Wal-Mart's extensive commitment to sustainability, which extends to its
suppliers, are not exceptions but rather reflect a global trend, especially among large companies.
A recent global survey of 500 manufacturing and service industry companies, revealed that 81%
of survey respondents who rated sustainability as important also preferred to collaborate with
their suppliers in order to generate a "responsible supply chain footprint" that is consistent with
sustainability (PwC, 2013).

Incentives for Sustainability

Organizations implement sustainability programs for different reasons; these may include
a desire to support the wellbeing of current and future generations, to remain competitive or gain
a competitive advantage in markets where sustainability and responsibility are expected and
highly valued by consumers and clients, to comply with federal and local regulatory
requirements, and many more. Another incentive for implementing sustainability programs is
expected cost savings, which should result in higher profits. A survey of executives at large
companies found that of the 274 survey respondents, 74% identified cutting costs among the
determining factors for their companies' sustainability agendas during the next two years (Ernst
and Young and GreenBiz Group, 2011). However, another study (Blazovich et al. 2013) did
not find that "green" companies reported significantly higher financial performance.
United Parcel Service (UPS) represents an important example of how sustainability-
related activities save natural resources and yield significant cost savings. UPS utilizes a
proprietary IT system that it refers to as ORION, which optimizes pick-up and delivery routes.
For example, using ORION, most turns that drivers take are right-hand turns which save
time and fuel, and reduce emissions. According to UPS's 2013 sustainability report, during
2014, use of ORION is expected to reduce fuel consumption by 1.5 million gallons and CO2
emissions by 14,000 metric tons (UPS, 2014). The company estimates that if each of its
drivers drives one mile less per day, it could save up to $50 million in costs per year (UPS,
2014). In addition to ORION, UPS utilizes other extensive programs that reduce greenhouse gas
emissions, save fuel, and ultimately costs.
Some sustainability-related programs are motivated by laws and regulations. In the U.S.
and many other countries, regulations related to environmental as well as social issues are
extensive. For example, in 1963, the U.S. passed the Clean Air Act, which provided funding for
research designed to monitor and control air quality (EPA, n.d.). Over the past five decades, a
series of new legislation and amendments to the Clean Air Act included extensive requirements
for improving air quality. For example, a 1990 amendment included a program for phasing-out
ozone-depleting chemicals (EPA, n.d.). Similarly, the Clean Water Act, which was first passed in

Journal ofLegal, Ethical and Regulatory Issues, Volume 18, Number 2, 2015
Page 110

1970 and regulates the discharge of pollution into water sources was amended several times
(EPA Summary, n.d.). Furthermore, the Department of Labor sets forth requirements and
legislation pertinent to employers and employees in the private sector (U.S. DOL, n.d.). For
example, specific rules and regulations specify the amount of time that must be granted for meals
and rest periods between long shifts; prohibit child labor; require safe working conditions, and
provide for family leave with job security.
Individual states and municipalities also regularly impose restrictions and may regulate
the consumption of water and energy. For example, after experiencing several years of
severe drought, in 2014, California passed regulation that restricts the use of potable water. For
example, the regulation specifies that drinking water may not be used to wash drive-ways and
sidewalks (California Environmental Protection Agency, 2014). In addition, in compliance with
the California Governor's request to reduce water consumption by 20%, actual use during
December 2014 reportedly decreased by 22% (California Water Boards Media Release, 2015).
In other countries, regulation may be more or less extensive than in the U.S. For example
in Germany, according to the federal "Mutterschutz" (maternity protection) law, expectant
mothers may not be dismissed from their employment starting from the fourth week of
pregnancy; must be granted paid leave six weeks prior and eight weeks after giving birth; and
may return to work if they chose to do so (How to Germany, n.d.). Family leave in Germany is
also quite generous and covers both parents.
Some countries are just starting to make sustainability a priority. In 2013, the
Chinese government published air pollution reductions targets focusing especially on specific
high- pollution area. Specifically, China committed to a reduction in ambient air quality
concentration of PM1 o by 10%, SO 2 by 10%, NO 2 by 7 %, and PM 2.5 by 5 %. In addition, three
high pollution regions - Beijing-Tianjin-Hebei, Yangtze River Delta, Pearl River Delta - must
reduce PM 2.5 by 6% by the end of 2015 (China Clean Air Policy Briefing, 2013). China's five
year plan also includes long-range targets.

Stakeholder Demand for Sustainability

Many consumers expect that companies behave responsibly and produce and distribute
products that are consistent with social and environmental sustainability. A recent global survey
of 30,000 consumers found that more than half of them reported that they were willing to pay a
premium for products and services provided by socially and environmentally responsible
organizations (Nielson, 2014). Another survey (Deloitte, 2009) found that 54% of the
respondents considered sustainability as one of the factors influencing their purchasing decisions.
Organizations tend to be aware of the positive effect of providing stakeholders' with
Sustainability-related information as is evident in the prevalence of promotional type of
'reporting.' A study investigating the perceptions of 18-23 year olds (referred to as millennials)
revealed that millennials tend to recommend products to their friends that they perceive as
environmentally friendly as well as economical and that they tend to recommend products that
utilize recycled materials (Smith, 2010). In addition, nearly 90% of the study participants
associated a recycling symbol with an environmentally friendly product (Smith, 2010).

Reporting Trends

In the past, the primary focus of formal reporting was on financial/economic aspects of
a company's activities. However, a number of studies (for example, Holder-Webb et al.

Journalof Legal, Ethical and Regulatory Issues, Volume 18, Number 2, 2015
 Page 111

2009) found that non-financial measures provide investors with a better understanding of
corporate performance. Today, stakeholders, including employees, customers, investors,
governmental agencies, and regulators are interested in the sustainability-related activities of
business organizations.
Thus, formal reporting is gaining momentum. A study by Ernst & Young (one of the
worlds' largest public accounting and consulting firms) and Boston College Center of Corporate
Citizenship (2013) found that of the global 250 companies, 95% currently issue sustainability
reports; in addition, the study found that 53% of the S&P 500 companies are currently issuing
sustainability reports (EY & Boston College Center for Corporate Citizenship, 2013).
Other studies support these findings. A study of the 100 largest companies in each of 41
countries revealed that during the 2012-2013 reporting period, 86% of U.S. companies and 79%
of the Canadian companies reported on sustainability (KPMG, 2013). Furthermore, 88% of the
largest Brazilian companies reported on sustainability. In Europe, companies based in the U.K,
France, and Denmark most frequently reported about sustainability. The reporting rates of the
100-largest companies in those countries were 100% in the U.K, 9 4 % in France, and 9 1% in
Denmark (KPMG, 2013). The highest reporting rates by large companies based in Asia-Pacific
countries were found in Japan, China, and Australia. Specifically, 99% of the Japanese
companies, 59% of the Chinese companies, and 57% of the Australian companies reported on
sustainability. In the Middle East and Africa, of the largest companies, 97 percent of South-
African companies and 68% of Nigerian companies reported on sustainability (KPMG et al.
2013). In addition, the survey found that overall more than half (51%) of the 4100 companies
reported formally reported on sustainability in their annual reports, most of them in a separate
section. This represents a dramatic increase. In their prior comparable surveys KPMG found that
in 2008 only 4%, and in 2011 only 20% of the largest global companies reported on
sustainability in their annual financial statements (KPMG et al. 2013).
Some companies issue multiple reports. For example, Apple Company issues an annual
environmental sustainability report, as well as a separate supplier responsibility report. For 2014,
its 40-page supplier responsibility report contained information related to the following
categories: educating and empowering workers; labor and human rights; health and safety;
environment, accountability; and audit results (Apple, n.d.).
Sustainability reporting tends to be motivated by investor expectations. According to the
US SIF (also referred to as the Forum of Sustainable and Responsible Investment), investors
placed $3 trillion dollars in sustainability and corporate responsibility-related funds (US
SIF, 2012); this implies that investors support and reward companies that behave in a
responsible and sustainable manner. This likely contributed to a trend toward formal and
informal sustainability reporting.

Benefits of Sustainability and Integrated Reporting

Sustainability and integrated reporting may be very beneficial to the reporting company.
A study by Ernst and Young and the Boston College of Corporate Citizenship (2013)
investigated the perceived benefits of sustainability reporting by public and private companies.
When asked to indicate ways in which sustainability reporting provided value to their
organization, the most frequently mentioned value was the positive effect on the company's
reputation; specifically, nearly 60% of the respondents indicated that sustainability reporting
improved their company's reputation. The second most frequently mentioned benefit was
increased employee loyalty with more than 37% indicating that sustainability reporting had a

Journal ofLegal, Ethical and Regulatory Issues, Volume 18, Number 2, 2015
Page 112

positive effect on employee loyalty. The ability to reduce inaccurate information about a
company's social performance and helping to refine the company's corporate strategies and
mission were the third and fourth most frequently mentioned benefits.
Sustainability reporting and especially integrated reporting may assist a company in
improving its long-term creation of value. Integrated reporting necessitates that decision makers
consider the comprehensive impact of their plans and actions. This includes consideration of not
only financial aspects, but also of the short-term, intermediate-term and long-term effects on the
community in which they operate, the company's workforce, the environment, the impact on the
future availability of natural resources - in short, the wellbeing of future generations. In a recent
speech, His Royal Highness (HRH) the Prince of Wales emphasized the importance of
organizations adopting integrated reporting and the underlying vital "integrated approach to
management" as soon as possible (HRH the Prince of Wales, Dec 5, 2013). According to HRH
the Prince of Wales, the potential value of integrated reporting is that it helps organizations and
their decision makers focus not only on financial, but also human and natural capital; that it
challenges the historical perspective of accounting information; and focuses on the long-term
effect of organizations' decisions and actions (HRH, 2013). Integrated reporting according to
HRH is a starting point that enables companies to recognize and communicate their effect on
natural capital (HRH, 2013).
Mervyn King, Chairman of the International Integrated Reporting Council (IIRC), links
integrated reporting with 'integrated thinking,' which according to Mr. King, "deals with value
creation short, medium and long term and the integrated report tells the story of this value
creation in clear, concise and understandable language" (King, 2013, 5). According to PwC, the
global accounting firm, 'integrated thinking' can contribute to strategic insights on long-term
success, alignment of key business priorities, and more meaningful communications
internally and with external stakeholders" (PwC, 2013, Point of view).
While expectations of investors and other stakeholders contribute to the demand for
voluntary sustainability reporting, and the value of perceived benefits encourage reporting,
regulation provides the necessary incentives and structure for reporting practices in some
countries.

Reporting Regulation

In the U.S., SEC Regulation S-K, which public SEC reporting companies must comply
with, requires consideration and reporting of risks associated with climate change regulation
(SEC, 2010). Specifically, section 101 of SEC regulation S-K requires that registrants provide a
description of their business and in subsection 101(c)(1)(xii) stipulates that:

"Appropriate disclosure also shall be made as to the material effects that compliance with
Federal, State and local provisions which have been enacted or adopted regulating the discharge of
materials into the environment, or otherwise relating to the protection of the environment, may have upon
the capital expenditures, earnings and competitive position of the registrantand its subsidiaries. The
registrantsshall disclose any material estimated capital expendituresfor environmental control facilities
for the remainder of its currentfiscal year and its succeedingfiscal year and for such further periods as
the registrantmay deem materials"(SEC, 2010, 13).

Furthermore, reporting is required with respect to conflict minerals. Specifically under section
1502 of the Dodd-Frank Act of 2010, SEC reporting companies must disclose their use of

Journalof Legal, Ethical and Regulatory Issues, Volume 18, Number 2, 2015
 Page 113
conflict minerals if they are needed for the "functionality or production" (SEC, n.d.). In
addition, provisions under the Clean Air and Clean Water Acts require various reporting
requirements. Companies required to comply with the Clean Air Act (e.g., automobile
manufacturers) must explain risks and compliance in the "business" section of their 10-K
statements filed with the SEC. For example, in its 2010 annual report, Ford Motor Company
made 17 references to the Clean Air Act (Ford Motor Company, 2010).
Thus, in the U.S., reporting tends to focus on specific issues and industries. This is
starting to change. The global financial exchange company - NASDAQ OMX - which includes
the NASDAQ stock exchange, strongly encourages sustainability reporting (NASDAQ QMX,
n.d.). The CERES Institute supports this recommendation and advocates that other major U.S.
stock exchanges require corporate disclosures about ten sustainability-related categories. The ten
categories are: governance and ethical oversight, environmental impact, government relations,
climate change, diversity, human rights, employee relations, the impact of products and services;
and integrity, supply chain, and community relations (CERES, 2014).
In Europe, the EU Modernization Directive of 2003 requires that public companies
include information about environmental and employee-related issues in their annual and
consolidated reports (KPMG et al. 2013). In addition, an amendment to the directive requires
that listed companies report annually on corporate governance (KPMG et al. 2013).
While the majority of large global companies already report on sustainability, most of
them issue a standalone report that is not integrated with their annual (financial) reporting; this is
especially the case for U.S. companies. According to the KPMG survey of the 4100 large
companies in 41 countries, only ten percent indicated that they reported on sustainability in an
integrated format (KPMG et al. 2013).
Reporting rules and regulations in some countries strongly encourage or require
integrated reporting by stock exchange listed companies. For example, the South African Code
of Corporate Governance (King III) requires that companies listed on the Johannesburg Stock
Exchange must issue an integrated report (IIRC, 2013). In 2012, Brazil's BM&FBOVESPA
exchange adopted a "report-or-explain" approach, requiring that companies report sustainability-
related information in their annual report, or explain why they are not reporting (PwC, 2012).
In Europe, the Danish Financial Statements Act requires that large public companies
provide in their annual report information about their corporate social responsibility-related
activities (CSRgov, n.d.); and France's article 225 of 'Grenelle II' (a 2010 law) requires that
stock exchange listed companies include sustainability-related information in their annual report
(PwC, 2012, How France).
While financial reporting rules in a few countries require sustainability or even integrated
reporting, in the U.S. and in many other nations, sustainability and integrated reporting are
voluntary and the nature, extent and quality of the reporting varies considerably, resulting in a
lack of comparability. Reporting standards are necessary to support comprehensive, high quality
and comparable sustainability reporting. The continued efforts of global standard setters to
develop reporting standards may help improve comparability and hence the usefulness of the
reported information.

Reporting Standards and Guidelines

Several organizations, such as the Global Reporting Initiative (GRI), the U.N. Global
Compact, the Carbon Disclosure Project, and the International Organization for Standardization
provide sustainability-related guidelines. In addition, the IIRC recently issued its first framework

Journal ofLegal, Ethical and Regulatory Issues, Volume 18, Number 2, 2015
Page 114

for integrated reporting (IIRC, 2013). Currently, the most widely used comprehensive guidelines
are provided by GRI, which was founded in 1997 by the U.S.-based not-for-profit organizations
CERES and Telles and is now headquartered in Amsterdam. Since then, their continues efforts to
develop and periodically update their global sustainability reporting guidelines have resulted in
four generations of widely used sustainability reporting standards. At present,
approximately 63% of the S&P 500 companies that issue formal sustainability reports utilize the
guidelines provided by the GRI (E&Y and Boston College, 2013).
In the U.S., the Sustainability Accounting Standards Board (SASB), which is an
independent standard setter founded in 2010 through Harvard University's "Initiative for
Responsible Investment," is developing industry-specific sustainability reporting standards
(SASB, n.d.). SASB's mission is to develop sustainability accounting standards for 80 industries
in ten sectors that can be utilized for disclosures included in reports filed with the SEC, such
as 10-K and 20-F filings (SASB, Vision, n.d.). According to the SASB, "SASB's accounting
standards provide companies with standardized accounting metrics to account for performance
on industry-level sustainability topics. When making disclosure on sustainability topics,
companies adopting SASB's accounting standards will help to ensure that disclosure is
standardized and therefore useful, relevant, comparable, and auditable." (SASB, Services
Download Page, n.d.). As of February 2015, SASB has issued reporting standards for six sectors
- health care, financials, technology and communications, non-renewable resources,
transportation, and services. In addition, several other reporting guidelines are currently in the
public comment stage (SASB, Key Dates, n.d.). A key difference between the SASB and the
GRI standards is that the SASB standards address issues and provide metrics for sustainability
reporting on industry and sector-specific factors.
While currently, most companies issue standalone sustainability reports, some
companies, such as SAP, BASF, Novo Nordisk, and Sony, issue integrated reports. The
integrated reporting framework recently issued by the IIRC may lead to more companies
considering combining their sustainability reports with their annual financial reports. The IIRC
was established in 2010 under the Prince of Wales' Accounting for Sustainability Project
(Accounting for Sustainability, n.d.). After a global consultation period, on December 9, 2013,
the IIRC issued its first framework (IIRC, 2013). The IIRC's efforts enjoy the support of key
professional organizations, such as the American Institute of Certified Public Accountants
(AICPA), which welcomed the issuance of the framework (AICPA, 2013). In addition, the A4S
Accounting Bodies Network, which helps promote accounting for sustainability, supports use of
integrated reporting (Accounting for Sustainability, Accounting Bodies Network, n.d.).

Purpose of Study

As formal sustainability reporting becomes more and more common, accounting

professionals' involvement is expanding. Accounting professionals, who perceive that the
benefits of sustainability reporting coincide with their company's mission, are more likely to
support reporting. In addition, accounting professionals are ideally suited to help companies
explore the benefits of integrated reporting.
Accounting majors, as future accounting professionals, may play an important role in
supporting organizations' sustainability-related activities as well as sustainability and integrated
reporting. Thus, their perceptions regarding the potential advantages and disadvantages of
sustainability and integrated reporting are important. This study was designed to investigate
accounting majors' perceptions.

Journalof Legal, Ethical and Regulatory Issues, Volume 18, Number 2, 2015
 Page 115

METHODOLOGY

Research Instrument

The researcher developed a survey instrument that consisted of three sections. The first
section addressed the overall benefits of voluntary integrated reporting for companies and their
investors, and the need for U.S. regulators to mandate integrated reporting. Study participants
were asked to indicate their level of agreement with several statements utilizing a 5-point Likert
scale, where "5" was defined as strongly agree, "4" as agree, "3" as neutral, "2" as disagree, and
"1" as strongly disagree. The results from this section were used to test for statistically
significant associations between study participants' attitudes toward sustainability and integrated
reporting and their rankings of potential advantages and disadvantages of reporting presented in
section two of the survey instrument.
Section two addressed potential advantages and disadvantages that may arise from
sustainability/integrated reporting. A brief instructional/explanatory paragraph preceded sections
two of the research instrument as follows:

"Assume that you are responsible for external reportingfor a well-established, moderately
profitable public company that manufactures consumer products and has implemented a series of
sustainability programs relating to the environment and natural resources (such as company-wide
recycling, purchasing of energy-efficient equipment, significant investments in renewable energy, etc.);
human capital (such as educational and health-relatedresources and programs); and social programs
(such as community involvement and support)."

Study participants were then asked to consider potential advantages and disadvantages of
formal reporting of their company's sustainability-related efforts in either a separate (standalone)
or integrated report format. With respect to the advantages, students were instructed as follows:

"Indicate your perceptions regarding the potential advantages of formal reporting of your
company's sustainability-relatedefforts in either a separate or integrated report. Rank the potential
benefits in terms of what you perceive as most important to your company's decision to report on its
sustainabilityefforts."

With respect to the potential disadvantages, students were instructed as follows:

"Indicate the potential disadvantages that would be most important to your company in
deciding whether to formally reporton sustainability."

The study participants were asked to rank ten potential advantages of reporting where "1"
was defined as the most important advantage and "10" as the least important advantage. The
participants were also asked to rank five potential disadvantages of reporting sustainability-
related information in either a stand-alone or integrated format. A rank of "1" was defined as the
most important potential disadvantage and "5" as the least important disadvantage.
The ten potential advantages and the five potential disadvantages were adapted from the
survey by E&Y and Boston College of Corporate Citizenship (2013). The potential advantages
that study participants were asked to rank were enhanced reputation, enhanced industry
leadership, increased employee loyalty and recruitment, enhanced customer loyalty, cost savings
arising from more effective and efficient operation, increased profit, enhanced access to financial

Journal ofLegal, Ethical and Regulatory Issues, Volume 18, Number 2, 2015
Page 116

capital, enhanced regulatory compliance, enhanced opportunities for grants, and refinement of
corporate mission and strategies.
The five potential disadvantages of reporting that study participants were asked to rank
were short-term and long-term reporting costs, availability of data, concerns about accuracy and
completeness of information, and concerns about disclosure of proprietary information to
competitors. The study participants were informed that the advantages and disadvantages were
listed in random order; and instructed to review the lists of advantages and disadvantages prior to
ranking them and to assign each rank only once for the list of advantages and once for the
disadvantages. The researcher emphasized that the study participants should address each
question and ranks the advantages and disadvantages solely based on their own personal
perceptions. At the end of section two of the survey, students were asked whether they would
recommend to their company that they adopt sustainability reporting in either a standalone or an
integrated format. The third section of the survey asked students to provide information
about their career aspirations and to provide demographics-type information.
Since awareness and knowledge of significant current and emerging reporting trends
represents one of the learning objectives of each course in which this survey was administered,
participation was voluntary, and responses were anonymous, administration of this survey did
not require TRB approval.

Sample Selection and Administration of Research Instrument

All accounting majors at a Western Region University must complete the Intermediate
Accounting course sequence consisting of Intermediate Financial Accounting and Reporting I

&
II. Furthermore, some students also complete Advanced Financial Accounting and Reporting,
which is an elective course. The fundamental concepts and principles underlying financial
accounting and reporting, accounting and reporting of common transactions, and the major
financial statements and disclosures are discussed in Intermediate Financial Accounting and
Reporting I and II. In Advanced Accounting, advanced financial accounting and reporting topics
including consolidated financial statements are discussed.
In addition to discussions of major financial accounting and reporting issues under U.S.
GAAP and to some extent under International Financial Accounting Standards, current
significant reporting trends are briefly discussed during the Intermediate Accounting course
sequence as well as in the Advanced Accounting course. Furthermore, ethical aspects of
accounting and reporting choices are considered throughout each course with an emphasis on
the importance of the highest level of ethical conduct.
During the Winter, Spring, and Summer 2014 quarters, students enrolled in one section
of Intermediate I, in three sections of Intermediate II, and three sections of Advanced
Accounting participated in the survey. Participation in the survey was voluntary and students'
responses were anonymous. The survey was administered during the ninth instructional
week. One-hundred sixty-five students completed the survey resulting in 151 useable responses.
Surveys that included reused or skipped ranks of advantages and disadvantages were excluded
from the final sample.
Prior to administering the survey, the researcher discussed current and emerging issues
in financial reporting that are currently or will in the future significantly affect the accounting
profession and thus accounting majors' careers. Sustainability and integrated reporting represents
one of the three major issues that were discussed during a class session. Specifically, during one
class session in each course, the instructor discussed current reporting trends, including the

Journalof Legal, Ethical and Regulatory Issues, Volume 18, Number 2, 2015
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globally growing trend toward sustainability reporting and the emerging trend toward integrated
reporting. The instructor provided some statistics on the prevalence of sustainability reporting
among large global companies and briefly discussed the regulatory environment governing
sustainability/integrated reporting in several selected countries, including the U.S.

Demographics

The study participants were asked to indicate their major, academic standing, gender, and
work status. Ninety-eight percent of the students who completed the survey indicated that
accounting was their major, and 2% that accounting was their minor field of study. Twenty-
seven percent of the students indicated that they also minored in another business discipline, with
computer information systems mentioned most frequently. Of the study participants, 24% were
juniors, 67% were seniors, and 9% were graduate students. Sixty-eight percent indicated that
they currently worked, 44% of them in accounting-related positions. Forty-eight percent of the
study participants were female and 52% were male.
The students were also asked open-ended questions about their career aspirations, what
area of accounting they expected to specialize during the next five years, whether they intended
to work for a private or public company, and what professional certifications they expected to
earn. Thirty-nine percent of the study participants indicated that they wished to work in the tax
area, 32% indicated that they wished to work in financial accounting or auditing, 13% that they
wished to work in cost accounting, and 16% indicated multiple areas. Nearly 50% of the study
participants indicated that they wanted to work for a public company, 29% indicated that they
wished to work for a private company, and 21% indicated that they wished to work for a
governmental agency, with the IRS most frequently mentioned. Sixty-six percent expressed a
wish to earn the designation of (Certified Public Accountant) CPA. The second most commonly
mentioned designation was CMA (Certified Management Accountant). Demographic data was
utilized to test for statistically significant associations.

Statistical Tests Utilized

Student responses were summarized and statistically evaluated using Microsoft Excel
statistical tests. The researcher utilized matched sample t-test and test of correlation to
determine significant associations. Means and standard deviations were derived to report
descriptive statistics. The results of the study were evaluated utilizing a 0.05 significance level.

EMPIRICAL RESULTS

The study participants were asked whether in the long-run integrated reporting would
benefit large and midsize companies and their investors and whether integrated reporting
should be mandatory. A 5-point scale with "5" representing "strongly agree" and "1"
representing strongly disagree was used. With respect to the benefit of integrated
reporting, the mean score was 4.30 for large companies and 3.76 for medium size
companies. With respect to integrated reporting benefiting investors, the mean score was
4.13. When asked whether integrated reporting should be mandatory, the mean score was
4.09 for public and 3.54 for private companies.

Journal ofLegal, Ethical and Regulatory Issues, Volume 18, Number 2, 2015
Page 118

Advantages of Sustainability and Integrated Reporting

Study participants were asked to rank ten potential advantages of sustainability

reporting based on the perceived relative importance of each. Table 1 presents the mean
ratings and associated standard deviations for each advantage. A lower numeric mean
indicates a higher perceived importance of a particular advantage.

Table 1
ADVANTAGES OF SUSTAINABILITY REPORTING
Mean rankings Standard
Advantages 1 = most important Deviations
10 = least important
Increased profit 4.54 2.78
Cost savings arising from more efficient and effective 5.06 2.77
operations
Enhanced reputation 5.13 3.37
Enhanced customer loyalty 5.19 3.05
Increased employee loyalty and recruitment 5.29 2.79
Enhanced industry leadership 5.36 2.55
Enhanced access to financing capital 5.81 2.60
Refinement of corporate mission and strategies 6.36 2.92
Enhanced regulatory compliance 6.40 2.81
Enhanced opportunities for grants 6.96 2.62

Thus, on average, the students who participated in the study perceived increased
profit and cost savings as the most important advantages of sustainability reporting. Since
means may not capture in sufficient detail the perceived importance of potential
advantages and disadvantages associated with sustainability reporting, the researcher
calculated frequencies and related percentages of each rank assigned by study
participants to each potential advantage. Table 2 presents the percentage of study
participants who assigned each rank to each specific potential advantage.

Table 2
PERCENTAGE OF STUDENTS WHO ASSIGNED EACH RANK TO REPORTING ADVANTAGES
Ranks Reputation Industry Employee Customer Cost Profit Financing
1= most important N=144 leadership Loyalty Loyalty Savings N = 149 Capital
N=147 N= 148 N=148 N=151 N=151
1 22.22 9.45 8.11 11.49 12.58 17.45 3.31
2 9.72 6.30 12.84 14.19 9.93 14.09 10.60
3 11.11 11.02 9.46 14.19 11.26 9.40 9.93
4 9.03 11.81 12.84 6.08 14.57 12.75 8.61
5 8.33 11.02 13.51 14.19 7.29 12.08 11.26
6 6.94 11.02 11.49 5.41 9.27 9.40 14.57
7 4.17 17.33 10.14 7.43 9.27 7.38 13.25
8 9.03 11.02 6.75 7.43 12.58 8.05 9.93
9 10.42 7.09 6.08 10.14 8.61 6.04 8.61
10 9.03 3.94 8.78 9.45 4.64 3.36 9.93

Journal of Legal, Ethical and Regulatory Issues, Volume 18, Number 2, 2015
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Table 2 - continued
PERCENTAGE OF STUDENTS WHO ASSIGNED
EACH RANK TO REPORTING ADVANTAGES
Ranks Regulatory Grants Corporate
1 = most Compliance N=146 Mission
important N=149 N=151
1 6.04 1.59 7.28
2 6.04 7.14 6.62
3 5.37 4.76 9.93
4 11.41 6.35 5.30
5 10.74 9.52 5.30
6 9.40 9.52 12.58
7 8.72 11.11 9.94
8 10.74 13.49 12.59
9 18.79 15.07 12.58
10 12.75 21.43 17.88

Study participants most frequently ranked "enhanced reputation" as the most important
advantage of sustainability reporting, with 32 (22%) of them ranking it as number one. The
second most frequently top-ranked advantage was "increased profit," with 26 (17%) of the
participants ranking it as number one.
Cumulative scores consisting of the sum of participants who ranked a particular
advantage as the either first, second, or third most important, were also calculated. Based on
cumulative frequencies, 62 (43%) of the participants ranked enhanced reputation among the top
three most important advantages; 61 (41%) ranked increased profit among the top three most
important advantages; and 57 (40%) ranked enhanced customer loyalty among the three most
important advantages.
Students most frequently ranked "refinement of corporate mission and strategy" as
the least important advantage (rank 10). Based on cumulative scores of the most frequently
lowest ranked advantages (ranks 8, 9, 10), enhanced corporate mission and strategies, regulatory
compliance, and enhanced opportunities for grants emerged as the advantages of
sustainability and integrated reporting perceived as least important.

Disadvantages of Sustainability and Integrated Reporting

Students were also asked to rank five potential disadvantages commonly associated with
sustainability reporting, with "1" reflecting the most important potential disadvantage and "5"
reflecting the least important potential disadvantage. Table 3 presents means rankings for the
perceived disadvantages of sustainability reporting.

Journal ofLegal, Ethical and Regulatory Issues, Volume 18, Number 2, 2015
Page 120

Table 3
DISADVANTAGES OF SUSTAINABILITY REPORTING
Mean Ratings Standard
Disadvantages 1 = most important Deviations
5 = least important
Concerns about accuracy and completeness of information 2.83 1.37
Concerns about competition and disclosure of proprietary information 2.92 1.40
Short-term reporting costs 2.99 1.49
Long-term reporting costs 3.07 1.44
Availability of data 3.18 1.38

In terms of potential disadvantages, on average, the students perceived concerns

regarding the accuracy and completeness of reported information and concerns about the
disclosure of proprietary information as the most important disadvantages associated with
sustainability reporting. As with the advantages, the researcher calculated frequencies of each
rank assigned to each perceived potential disadvantage of sustainability and integrated reporting.
Based on these frequencies, percentages were calculated. Table 4 presents the percentage of
study participants who assigned each rank to each specific potential disadvantage.

Table 4
PERCENTAGE OF STUDENTS WHO ASSIGNED EACH RANK TO
REPORTING DISADVANTAGES
Rank Short-term Long-term Data Accuracy and Competition and
1 = most reporting Reporting Availability Completeness Proprietary
important costs Costs of Information Information
N=150 N=150 N= 150 N=150 N=149
1 23.34 18.67 $14.67 22.01 21.33
2 19.33 19.33 $19.33 23.33 20.67
3 13.33 22.67 $24.00 20.00 20.00
4 22.67 15.33 $17.33 19.33 20.67
5 21.33 24.00 $24.67 15.33 17.33

The potential disadvantages of sustainability reporting ranked most frequently as the

most important disadvantage were short-term reporting costs and concerns about the accuracy
and completeness of the information. Based on cumulative frequencies, the potential
disadvantage of sustainability reporting most frequently ranked as first or second most important
were concerns about the accuracy of information and short-term reporting costs, closely followed
by competition and the disclosure of propriety information.

Significant Correlations

The researcher tested for significant correlations utilizing a significance level of 0.05.
Based on this analysis, several statistically significant associations were identified. Specifically,
the perceived advantage of "enhancing the company's reputation" was positively associated with
the perceived advantages of "enhancing employee loyalty and recruitment" and also with
"enhancing customer loyalty." In addition, the perceived advantage of "enhanced customer
loyalty" was highly correlated with "employee loyalty." Furthermore, the perceived advantage
of "access to financing capital" was highly (positively) associated with "enhanced opportunities

Journalof Legal, Ethical and Regulatory Issues, Volume 18, Number 2, 2015
 Page 121
for grants", as were "refinement of corporate mission and strategies" and "regulatory
compliance.
Study participants' perceptions were not statistically significantly associated with
gender, academic standing, career aspiration, or any of the other demographics-related
responses.

SUMMARY AND IMPLICATIONS

Reporting of sustainability-related information is becoming common practice and is

motivated by stakeholder demand for information. Integrated reporting, which combines
sustainability and financial reporting is also beginning to emerge globally. Accounting
professionals' continually expanding involvement supports and complements this trend.
Their understanding of regulatory requirements and reporting standards and their support of
formal reporting are critical to helping companies plan, implement, monitor, and report
sustainability- related information. Accounting majors represent the future accounting
professionals, who during their careers likely will become involved with issues surrounding
sustainability and integrated reporting. Thus, their perceptions are important.
This study found that overall, accounting majors perceived that integrated reporting
would be beneficial and that reporting should be mandated for public companies. The study
participants perceived that the most important benefits arising from sustainability/integrated
reporting were enhanced reputation, increased profit, and enhanced customer loyalty. Study
participants perceived availability of grants, regulatory compliance, and support and
refinement of corporate mission as the least important advantages of sustainability reporting.
The study participants perceived as the most important potential disadvantages of
sustainability reporting concerns about the accuracy and completeness of the reported
information, short-term reporting costs, and competition and disclosure of proprietary
information.
The findings from this study agree in part with those of the E&Y and Boston College
of corporate citizenship survey, which also found that executives perceived the effect on
companies' reputation as the most frequently mentioned benefit of sustainability reporting.
The second most frequently mentioned advantage in their survey was increased employee
loyalty, while in this study the second most important advantage of reporting was customer
loyalty. As accounting majors enter the profession, they likely will become involved with
some aspects of their employers' sustainability-related activities. Their perceptions of the
advantages and disadvantages of reporting may influence their employers' sustainability
reporting practices. Thus, findings from this study provide important insights useful to
multiple stakeholders.

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Journal ofLegal, Ethical and Regulatory Issues, Volume 18, Number 2, 2015