FinTech As The Future of Integrated Reporting

Dr Firdous Mohd Farouk

The rapid deployment of FinTech to be one of the major disruptors and a catalyst for major transformative efforts in the realm of integrated reporting. Unlike traditional financial reporting which focuses solely on financial metrics, integrated reporting (IR) is a holistic approach that combines financial statements with environmental, social and governance (ESG) factors to provide a more comprehensive picture of a company’s overall health and long-term viability. IR incorporates both qualitative and quantitative information about a company’s strategy, governance, performance and potential within the context of its external environment.

To achieve the objectives of IR and to meet the industries’ and regulatory bodies’ emphasis on transparency, sustainability and accountability, FinTech is emerging as a crucial enabler in revolutionising how companies report their performance. Advanced data analytics tools powered by artificial intelligence (AI) and the Internet of Things (IoT) are enabling companies to collect, process and analyse vast amounts of data more effectively and efficiently. These technologies allow for real-time monitoring and reporting of ESG metrics.

This remarkable impact can be visualised in the farm-to-table journey within the agriculture and food production industries. The farm-to-table movement emphasises the direct relationship between agricultural production and consumers, aiming to promote local food sourcing, reduce carbon footprints, and ensure food safety and quality. IoT devices such as soil sensors, weather stations, wearable livestock devices and GPS-enabled equipment monitor and optimise farming conditions. By improving crop and livestock yields and reducing resource usage, these technologies directly impact financial performance.

These tools and devices not only impact financial performance but also cater to the specific needs of sustainability performance and reporting. Tools that track carbon footprints, resource usage, and social impact are becoming increasingly sophisticated, enabling companies to better measure and report on their sustainability initiatives. Integration of these tools in the business processes also leads the way in robotic process automation (RPA) that streamlines the preparation of integrated reports. RPA can handle repetitive tasks such as data entry, validation, and reconciliation, significantly reducing the time and effort required for report generation. This automation not only improves efficiency but also minimises human errors, leading to more accurate reporting.

Furthermore, leveraging blockchain technology ensures accuracy, traceability and transparency of reported data. For example, in the farm-to-table journey, integration of blockchain technology ensures supply chain transparency and traceability throughout the food supply chain of transportation, storage and distribution. Real-time tracking of produce helps maintain freshness and quality, reducing food waste and associated costs. By creating a secure and transparent ledger of all transactions and reporting activities, blockchain helps mitigate the risks of data manipulation and fraud, thereby enhancing the credibility of integrated reports.

While increased transparency is one of the main essences of IR, enhanced stakeholder engagement is the other. FinTech platforms create avenues to enhance stakeholder engagement by providing interactive and accessible reporting interfaces. These platforms allow stakeholders, including investors, customers, and regulators, to explore detailed reports, customise data views, and obtain insights that are most relevant to their interests. This increased accessibility fosters greater inclusivity and trust. The technology-driven integrated reporting extends to the consumer level through interactive labels and mobile applications, fostering consumer trust and loyalty. The increased customer loyalty and trust can potentially lead to increased sales and revenue growth. Financial reports can highlight these engagement metrics as indicators of market competitiveness and customer satisfaction.

While the integration of FinTech into reporting processes presents significant advantages, it also poses certain challenges. Data privacy and security concerns are paramount, especially when handling sensitive ESG data. Additionally, the lack of standardisation in FinTech solutions poses a constraint in ensuring consistency and comparability of reports across different organisations and sectors. However, the opportunities far outweigh the challenges. As FinTech continues to evolve, it will drive further innovations in integrated reporting, making it more robust, transparent, and reflective of a company’s true performance and impact. Companies that embrace these technologies will be better positioned to meet the demands of a wide range of stakeholders, from investors seeking long-term value to regulators enforcing stringent reporting standards.

Dr Firdous Mohd Farouk is a Lecturer for the School of Accounting and Finance at Taylor’s Business School, Faculty of Business and Law, Taylor’s University. Taylor’s Business School is the leading private business school in Southeast Asia for Business and Management Studies based on the 2024 QS World University Rankings by Subject and has received the Association to Advance Collegiate Schools of Business (AACSB) accreditation.