The dynamics of financial information and non-financial environmental, social and governance information in the strategic decision-making process

Martin Esch (EBS Universitat fur Wirtschaft und Recht – EBS Business School, Oestrich-Winkel, Germany)
Mike Schulze (European Management School, Mainz, Germany)
Andreas Wald (University of Agder, Kristiansand, Norway)

Journal of Strategy and Management

ISSN: 1755-425X

Article publication date: 14 May 2019

Issue publication date: 8 August 2019



The purpose of this paper is to link the fields of research on strategic decision (SD) making and integrated reporting (IR) and advances knowledge of the concept of integrated thinking by describing how financial information and non-financial environmental, social and governance (ESG) information are used in different phases of the strategic decision-making process (SDMP).


In total, 15 senior executives from twelve different industries were asked about the importance of different types of information within SDMPs. The data were analyzed by means of content analysis.


The authors derive a four-phase model and explicate the utilization of financial information and non-financial ESG information within each phase. The findings show that both types of information affect SDMPs, but the importance of each type differs among the phases.

Practical implications

This study offers practitioners a yardstick against which to compare how they use different types of information throughout the SDMP.


This paper provides a conceptual model of integrated thinking in SD making by connecting two separate fields of research. This connection will permit deeper study of the field of information and its implications for SD making. The present investigation shows that IR can promote integrated thinking in companies, as the broader range of information at hand allows companies to form a holistic picture of internal management questions and incorporate information that has not been previously prepared or associated with existing information.



Esch, M., Schulze, M. and Wald, A. (2019), "The dynamics of financial information and non-financial environmental, social and governance information in the strategic decision-making process", Journal of Strategy and Management, Vol. 12 No. 3, pp. 314-329.



Emerald Publishing Limited

Copyright © 2019, Emerald Publishing Limited

1. Introduction

Strategic decisions (SDs) are a fundamental part of business execution and determine a firm’s future (Eisenhardt and Zbaracki, 1992; Dean and Sharfman, 1993). SDs are shaped not only by the strategic objectives of a company but also by external factors. Uncertainties and imperfect information are the starting point of each SD making process (SDMP), and enterprises strive to support decisions in the best possible way. As improving decision-making will ultimately have a significant impact on the success of an organization, studies of the factors that influence SDs have been at the forefront of research in strategic management.

SDs are usually based on both financial and non-financial information (Frishammar, 2003), and firms use internal management control tools to provide and utilize both types of information (Henri, 2006). However, research on the use of different types of information in the different phases of SDMPs is scarce. More recently, external reports have begun providing non-financial information in addition to financial information to external stakeholders seeking to assess the environmental, social and governance (ESG) performance of firms (Cohen et al., 2012). This development has resulted in the creation of a new reporting format: integrated reporting (IR). IR builds on the concept of integrated thinking and aims to provide a comprehensive view of the value creation of a company (Dumay et al., 2016). In contrast to the information provided by internal performance measurement tools such as the Balanced Scorecard, the information in integrated reports does not include detailed key performance indicators for strategy implementation. Instead, an integrated report depicts how an organization’s strategy creates value by considering financial, governance, environmental and social implications. Although originally developed to satisfy the increased information needs of investors (Briem and Wald, 2018), the literature on IR argues that the provision of integrated information (financial and non-financial ESG) can also play an important role in SD making (Steyn, 2014; Krzus, 2011). Integrated information is essential for integrated decision-making processes and actions (also referred to as “integrated thinking”), which consider “the connectivity and interdependencies between the range of factors that affect an organization’s ability to create value over time” (IIRC, 2013; Rinaldi et al., 2018). The right balance of integrated information is supposed to reduce information deficits and prevent negative SDs.

However, empirical research on the benefits of integrated thinking is scarce. Simnett and Huggins (2015) emphasize that future research should investigate the explicit steps through which organizations can attain benefits when executing integrated thinking and, in turn, foster integrated decision-making. Oliver et al. (2016) highlight the need to explicitly investigate how these two dimensions are considered and evaluated alongside each other. Burke and Clark (2016) reveal several internal benefits, such as better resource allocation and an increase in data quality for internal decision-making. Despite this focus on the importance of integrated thinking, organizational processes and communication, studies explicitly connecting internal decision-making to the usage of integrated information are lacking. As an exception, Esch et al. (2019) used an experimental design to demonstrate that the provision of additional non-financial information and the integration of financial information and non-financial ESG information alters the decision-making behavior of managers when facing strategic investment decisions.

Churet and Eccles (2014) summarized the need to further investigate the internal benefits of IR comprehensively by stating that “[…] integrated reporting is only the tip of the iceberg.” It is the visible part of what is happening below the surface – namely “integrated thinking” and “integrated decision-making.” Taken together, these studies suggest that the relatively new phenomenon of integrated information is likely to play an important role in SDMP. Accordingly, this paper seeks to address the following two research questions:


How and to what extent is non-financial ESG information considered alongside financial information in each phase of an SDMP?


What are the dynamics of these two types of information?

To answer these research questions, 15 senior executives were interviewed to explore how they evaluate the importance of integrated information in their most recent decision-making processes. One aim of this paper is to uncover the extent to which decision-makers use different sets of information in various phases, thus contributing to assessments of whether the information changes offered by IR have the potential to facilitate SD making. The contributions of this paper are twofold: first, it adds to the ongoing discussion on integrated thinking and its importance for SDMP; second, it provides insights on how senior executives use non-financial ESG information alongside financial information.

The remainder of the paper is structured as follows. Section 2 presents an overview of the existing literature on SD making and IR. Section 3 describes the details of the methodological approach, including the data collection and analysis processes. Section 4 presents the results and the derived model. Section 5 discusses and reflects on the results. Finally, we point out the limitations of the study and conclude with suggestions for future research.

2. Theoretical background

2.1 SD making processes

Mintzberg et al. (1976) suggested a framework of SDMPs that includes three phases and seven subroutines: identification, development and selection (see also Schwenk, 1995). The first phase consists of two subroutines and involves the identification of opportunities and problems triggering decisional activity as well as the initial collection of information relevant to their clarification and specification. The second phase also consists of two subroutines and involves the generation, modification and possible redefinition of choice alternatives that enable resolution of the decision matter. Finally, in the third phase, which includes three subroutines, excess choice alternatives are sorted out, and a final decision is made among the viable choice alternatives profound analysis, bargaining among decision-makers, and additional further activities that may evolve throughout the process and are necessary for the decision to be made (see Figure 1).

Each phase of an SDMP is influenced by a multitude of determinants and contextual factors (Papadakis et al., 1998). Shepherd and Rudd (2014) deduce four categories of context variables that substantially influence decision-making outcomes: top management teams, SD-specific characteristics, the external environment and specific firm characteristics. However, little research has been conducted on the role and nature of information provided for SDs (Citroen, 2011).

Information is an indispensable resource for every decision (Meadow and Yuan, 1997). In SDMPs, information helps reduce uncertainties pertaining to the selection of alternatives (Citroen, 2011; Choo, 1996), especially in the second and third phases of the process (Citroen, 2011). Decision-makers need to identify and collect enough information (Meadow and Yuan, 1997), and assessing the adequacy, accuracy and reliability of information is a time-consuming process (Schwenk, 1995). Information on internal and external issues accessed through internal systems and procedures as well as external channels can trigger decisional activity. Frishammar (2003) pointed out that the SDMPs always employ a combination of different dimensions of information. The information obtained is sought by decision-makers to frame and specify choice alternatives, sort out excess alternatives, assess remaining alternatives, and finally decide on one choice alternative to be pursued (Citroen, 2011). Despite its relevance as a factor impacting SDMP characteristics and SD outcomes, research on SD making has largely neglected the role of information, presumably because information is often regarded as a readily available input (Citroen, 2011). The way in which decision-makers choose, retrieve, and process information alters the procedural setup of SDMPs and, in turn, their characteristic traits. As a consequence, the interplay and reciprocal effects among SD context, SDMPs, and SD outcomes will be influenced by informational factors.

2.2 Integrated reporting information

IR is associated with far-reaching consequences not only for accounting practices but also for (internal) management control. Among the main advantages of engagement in IR are higher degrees of communication and collaboration as well as the possibility of integrating non-financial matters into corporate strategies (Simnett and Huggins, 2015). Such additional non-financial information about a company’s performance has been widely categorized as ESG information. This ESG information is considered the second dimension of integrated information after traditional financial information. The provision of a detailed and diverse set of information is supposed to contribute to a company’s performance in the long term (Druckman and Fries, 2010). Parrot and Tierney (2012) noted that the possibility of linking financial information with ESG information will result in a higher degree of social investment, as financial, environmental and social aspects can be taken into account equally for corporate decision-making. In the same vein, Burke and Clark (2016) stated that a consideration of both dimensions (non-financial ESG and financial) facilitates decisions, thereby reducing both costs and reputational risks. This effect is of particular relevance for SDs, which are crucial for a company’s success and often involve high risks (Cheng et al., 2014). Furthermore, many companies are evaluated based on not only financial targets but also non-financial targets (Cohen et al., 2011). Thus, the quality of decisions can be improved when decision-makers simultaneously consider financial information and non-financial ESG information (Hampton, 2012).

Dumay et al. (2016) called for further research shedding light on this interplay, which was designated the principle of integrated thinking by the International Integrated Reporting Council (IIRC) in the International Integrated Reporting Framework (IIRC, 2013) and considered one of the major aims of IR. Coulson et al. (2015) added that integrated thinking can be viewed as the promotion of internal “decision-making that recognizes the relationships between the six capitals” mentioned by the IIRC. As integrated thinking becomes embedded in an organization, the interrelations between non-financial and financial metrics are expected to become clearer, and integrated information presented in integrated reports and serving as a basis for corporate decisions (e.g. investment decisions) will become more valuable for investors and managers (Atkins and Maroun, 2015). Investors are already urging companies to provide more and more non-financial information, and thus it is inevitable that this information will become relevant within internal communication, managerial control and decision-making processes. After interviewing several pilot companies, Druckman and Fries (2010) verified this point and revealed that integrated thinking drives collaboration between different departments (particularly finance) and leads to the incorporation of non-financial issues into decision-making.

Both literature streams, SD making and IR, have developed separately with sparsely overlapping research approaches. However, it seems obvious that integrated information can influence SD making. Eccles and Krzus (2010) suggested that amending and modifying information processes in the utilization of integrated information to gather and process information effectively will lead to an information set of higher quality and comprehensiveness. Although there is consensus that SDs are backed by both financial information and non-financial ESG information, the individual importance of these information types throughout the decision process has not been studied in detail. More recently, Esch et al. (2019) presented an experimental study on the effects of different scenarios of information – financial only, financial and non-financial, and integrated information – on the outcome of strategic investment decisions. They showed that the provision of integrated information (including financial information and ESG information) ceteris paribus leads to decisions with higher sustainable value creation. Although their experimental design did not consider the variety of internal and external determining factors that usually influence SDs, their results clearly indicate that non-financial ESG information is of high importance for SD makers.

However, how managers evaluate the importance of each of the two associated dimensions (financial and non-financial ESG), the steps in an SDMP in which one dimension might outweigh the other, and how the provision of substantially new integrated information alters recent decision-making processes remain unknown.

3. Methodology

As IR is a nascent research field, an inductive approach was adopted (Patton, 2002). The decision to implement IR has an important impact on an organization, especially on complex organizational processes and thus a qualitative research approach is appropriate (Eisenhardt and Graebner, 2007). The strength of a qualitative approach is the deep and realistic insights it enables, which make it suitable for this research setting, as this study sets out to uncover perceptions of senior executives and explore how they use integrated information to substantiate upcoming SDs. Taking into account that there is only limited research on the interconnections between the research fields of IR and SD making, our paper is exploratory in nature. Relying on the strengths of qualitative interviews we attempted to understand the points of view of 15 senior executives from twelve different industries (Kvale, 1996). We used semi-structured interviews as they are the most useful in investigating opinions or complex behaviors (Clifford et al., 2016). We also decided to conduct face-to-face interviews only (Opdenakker, 2006).

Our sampling strategy relied on a purposive sampling approach (Eisenhardt, 1989) coupled with maximum variation sampling (Glaser and Strauss, 2009). We applied five criteria. First, we chose interviewees from companies with more than €500m in revenue and more than 2,500 employees to exclude small firms with a less formalized approach to SD making. Second, we chose chief financial officers and heads of controlling departments as interviewees, as these individuals have responsibility for decision support within a corporation. We expected that holders of these positions have extensive knowledge not only on how corporate decision-making is conducted but also on how and with which kind (financial or non-financial) of information the decision-making process is supported. Third, to avoid a too-narrow focus, we allowed a certain degree of variation regarding the positions of the respondents. Accordingly, our sample included managers with more global or regional focuses (e.g. Head of Finance, Germany). Fourth, to avoid a potential industry bias we studied multiple industries. Fifth, we chose a sample consisting of companies engaging in IR, companies that are planning to implement IR, and companies that are not committed to an IR approach. In particular, we expected that companies that are not yet engaged in IR would provide information on the potential of ESG information for SDs.

Following a pre-test of the interview guide, the questions were organized in an easy-to-follow structure for the interviewees that focused on the importance of non-financial information in every decision step. Overall, the interview guide was composed of three different sections containing 16 open-ended questions (see Appendix). A final question was included and was asked if some important issues were missing. The homogeneous interview content combined with the high degree of expertise of our interviewees “offers comprehensive information from smaller interview samples” (Guest et al., 2006). Table I gives an overview of the participating companies and the interviewees.

3.1 Data collection

We first approached potential interviewees via e-mail. Over a period of two weeks, we contacted more than 30 companies and asked for interviews. After the contacted persons agreed to a face-to-face interview, we sent out a teaser to provide a brief overview of the most important characteristics we were interested in. Overall, 14 senior executives in 14 companies were interviewed. The interviews took place between December 2016 and April 2017 and lasted 60–90 min each. Following Patton (2002), who suggested a risk of bias when different interviewers possess different skill levels, we relied on our own capabilities and insights developed during the four-month research phase and conducted the interviews ourselves. To ease the situation, we asked for explicit permission to record before the start of each interview, which also limited misinterpretation between the conversation partners (Eisenhardt, 1989). After each interview, we discussed the outcome and refined the questions slightly if necessary (Spiggle, 1994). This process resulted in an increased focus, and we reached a point of theoretical saturation after 12 interviews, as the last three executives almost entirely replicated or solely verified statements mentioned in previous interviews (Glaser and Strauss, 2009).

3.2 Data analysis

All interviews were recorded and transcribed by a professional transcription agency (for a similar proceeding, see, e.g. Mantere, 2008). More than 350 pages of transcribed interviews provided by the interviewees were analyzed. To ensure an accurate and reliable coding process, two researchers independently analyzed the interviews using the software MaxQDA. Considering grounded theory (Glaser, 1992; Corbin and Strauss, 2008), we used an open coding approach in which text passages were marked with a tentative code. In a second step, we engaged in an axial coding process by re-reading the interviews and identifying subordinate concepts as well as relationships between and among the previously determined superordinate categories (Corbin and Strauss, 2008).

Discrepancies at the end of the coding process were discussed between the researchers until consensus was reached (Bryman, 2016). At the final stage, the experiences gleaned were discussed within a four-person team, and essential statements and views on the decision-making processes were derived. Following Gioia et al. (2010), findings were only incorporated if they were corroborated by multiple informants.

4. Results

During the interviews, the managers recapitulated the course of SDs they had taken in the recent past. Several interviewees mentioned important phases in the process and explained which information was crucial to complete each of these phases. From these findings, we derived the linkage between the individual phases and concluded on their sequence within the decision process. These phases constitute the central element of our model: non-financial determining factors; execution; ESG matching; and reporting. The four phases represent the predominant sequence of the SDMP, i.e. each phase usually follows the preceding phase once the relevant information has been processed. However, our interviewees also reported that there can be an overlap of the phases and decision-makers may also go back to earlier phases if the decision requires more information to be processed.

The findings that enabled the identification of these overarching schemes are described in detail in the following. Special emphasis is placed on the dynamics between non-financial and financial information and their importance in each of the four steps. The model is illustrated in Figure 2.

4.1 Non-financial determining factors

A recurrent theme in the interviews was a sense among the interviewees that each SD is framed by a variety of non-financial determining factors. Such factors come into play before an SDMP starts and may pre-empt its initiation from the outset. As one participant put it:

For every strategic decision, there is a set of framework conditions, each with its underlying assumptions that need to be fulfilled for the decision to come into being. Consider the following example: to realize our digital strategy we are forced to recruit hundreds of IT experts. If we fail to do so, we will not even need to consider what our digital strategy might look like

(Company D, CFO).

Another respondent confirmed this insight:

I believe that there are many non-financial restricting factors that merit consideration prior to a detailed evaluation of a strategic decision, among them transaction certainty and reputational risk

(Company C, CFO).

One interviewee emphasized the role of reputational considerations in selecting prospective clients:

[p]rior to every decision to take on a new mandate, we scrutinize prospective clients in two dimensions. Can we justify doing business with that particular client, and are there any reputational risks attached to them?

(Company H, Head of Finance).

Another respondent provided an example in the same vein:

We use a simplified five-question yes-check procedure to make sure that ESG standards are adhered to on all management levels

(Company I, Head of Capital Resolution).

Another executive pointed out the importance of organizational know-how as an internal determining factor:

If we do not have the capabilities for setting up a new software tool, there will be no need for a detailed quantitative analysis to back up a decision

(Company N, Head of Business Solutions).

Collectively, all interviewees agreed that non-financial determining factors such as the ability to convey an SD internally and externally and reputational and transactional risks are of vital importance. Such non-financial information obtained by analyzing determining factors, if non-preemptive, may be quantified and used in the subsequent SDMP.

These findings provide support for the premise that non-financial determining factors exert considerable impact in initiating or forbearing SDMPs. Such factors are fixed and static in nature, meaning that they are presumed to be non-modifiable within the time frame and regarding the (contextual) characteristics of the SD to be made.

4.2 Execution period

Once the contingent impacts of non-financial determining factors have been evaluated and an SDMP has been initiated, decision-makers draw on a combination of externally and internally oriented, qualitative and quantitative, and financial and non-financial information to support decision-making. Therefore, companies are urged to continuously gather information about themselves and their competitive environment. This was underpinned by one executive, who remarked:

We continuously collect external data about key industries and competitors, as well as macroeconomic data about our operating markets. They are crucial elements for our strategic decision-making

(Company D, CFO).

He proceeded to explain that in these processes, qualitative and non-financial assumptions may serve as a basis for quantitative, financial modeling and analysis:

Every strategic decision rests upon a construct of two evaluation models: a financial model, and a model that consists of qualitative, strategic assumptions. Both dimensions need to be assessed and reassessed in a chronological order that allows for their mutual impacts on each other to be considered

(Company D, CFO).

Executives agreed on the general importance of the dualism of financial and non-financial information. However, they pointed out that the individual importance of these two types of information varies with the decision context:

Non-financial indicators are important for us as a professional services firm, especially the quality of our work and our client relationships. Nevertheless, the weighting of non-financial information differs from one service to the next. […] Under particular circumstances, financial success expected from one mandate can stand back behind its reputational value and impact on market share

(Company H, Head of Finance).

This impression was confirmed by another executive, who stressed the following:

[…] [w]orkforce-related non-financial information can be of utmost strategic importance. Workforce diversification, for instance, can open up much broader perspectives to strategic decisions

(Company G, CFO).

Having clarified the importance of non-financial information in SD making, how such information is incorporated in the process and what challenges might emerge from its utilization were explored. Several executives highlighted the necessity of using scenario modeling for implementing integrated thinking in business practices. Qualitative, non-financial information is incorporated in such modeling in the form of presumptions underlying scenarios. Regarding this, one interviewee told us:

The higher the level of a strategic decision, the more necessary is scenario-based thinking. The most important thing to appreciate is that the figures obtained in a strategic plan are backed by qualitative assumptions and that those assumptions need to be fully understood

(Company G, CFO).

This view was echoed by another executive, who stated:

For business cases we rely on different electricity price scenarios, which are derived from fundamental qualitative assumptions

(Company J, Head of Controlling).

One executive raised the point that qualitative considerations may gain the upper hand if certain quantitative preconditions are fulfilled satisfactorily:

Our financial evaluation is based on scenario modelling: if profitability exceeds a minimum threshold, soft factors outweigh financial information

(Company M, Vice President Controlling).

The examples discussed above demonstrate that both qualitative and quantitative as well as financial and non-financial information must be used in combination. This conclusion received strong support in a statement by one executive:

You need to make sure that qualitative and quantitative information are in harmony with each other. An overly qualitative evaluation that neglects a truly quantitative subject matter oftentimes leads to great risk. On the other hand, if you are too quantitatively oriented, you probably will not reach the strategic breakthrough that truly leads to growth and competitive impetus. You need a dualism of both

(Company D, CFO).

Turning now to the challenges in incorporating integrated information, one executive drew attention to the fact that quantitative information may be less indicative of the real implications of a scenario assumption than qualitative information, due to the subjectivity of processing and evaluating information:

A major challenge involved when including non-financial information into our scenario modelling is the gap between the publicly perceived and actual risk of certain events occurring. If we were to build a new nuclear plant, there is a risk of it blowing up. The probability of this happening is close to zero, and so is the expected value in my business case. But this might be perceived entirely differently by the public, which would then make it a soft factor

(Company J, Head of Controlling).

4.3 ESG matching

For the execution period, we found that the interplay between non-financial and financial information is of crucial importance in SD making. However, the points raised thus far have focused on the internal usage of integrated information without particular reference to the implications of ESG information disclosed to the public through integrated reports. Decision-makers must ensure that every SD is congruent with ESG information pertaining to externally oriented targets communicated to the public. As one interviewee phrased it:

We provide non-financial figures to the financial market, such as the rate of LTE net extension, indoor and outdoor network connectivity quality. But, if non-financial information is published in corporate reports, managers are forced to consider these factors in their strategic decision-making, which finally makes it a balanced decision

(Company M, Vice President Planning Europe).

This argument received further support from another executive:

Non-financial information is important for strategic decision-making in so far as it is related to targets communicated publicly

(Company E, CFO).

Despite general agreement among interviewees about the role of such information, they noted that its relevance varies across differing contexts:

The importance of ESG information for SD is highly industry-specific. For instance, for us as a mechanical and plant engineering firm, health and safety issues are preponderant

(Company C, CFO).

Another interviewee supported this view by stating the following:

If I am working in the automotive industry, my products and their image speak on my behalf. Pharmaceuticals producers have a genuinely different appearance in the perception of the public. This requires us to communicate way more intensely as to the qualitative characteristics of our products and their implications, which is something we as a finance department have been doing for several years and keep on supporting

(Company K, Head of Finance and Accounting).

These statements highlight that pure ESG information differs in nature and importance depending on the industry a company operates in, whereas broader restricting factors, as described earlier, exist uniformly across industries. Moreover, traditional ESG information, in the context of integrated thinking, addresses mainly external issues and is therefore considered constraining rather than beneficial in nature, as the requirements that accompany the acquisition of ESG information are often viewed as the originator forcing companies to think about more complex, targeted and differentiated strategies.

4.4 Reporting

Whereas ESG matching focuses on how companies need to adapt due to changes in external reporting requirements, this section is concerned with the nature of these changes themselves. It was commonly appreciated by the interviewees that existing non-financial external reporting requirements, such as CSR reports and sustainability reports, must be adhered to. As stressed by one executive, however, companies also face external pressure from their investors, which obliges them to apply comprehensive corporate reporting systems and processes:

There certainly are investors who require us to fulfil particular non-financial criteria, for instance, sustainability-related ones, who will not invest in our company if we do not stick to these requirements

(Company G, CFO).

A similar view was taken by another interviewee, who stated:

Non-financial information matters primarily for public perception, unless internal guidelines prescribe non-financial investment criteria such as CO2 emission limits

(Company E, CFO).

Although all participants agreed on the need to meet external reporting requirements, a particular aspect that remains to be considered is the nature of targets defined and reported publicly:

The question is: do we set absolute or relative non-financial targets?

(Company J, Head of Controlling).

This distinction is relevant from both internal and external perspectives. Absolute targets increase the degree of pressure imposed by external communication because they evoke expectations among stakeholders that might not be fulfilled as satisfactorily as relative targets.

5. Discussion and conclusion

The literature on IR has repeatedly claimed that integrated information, which was originally developed for external reporting, can also be useful for (internal) SDs (Burke and Clark, 2016; Mio et al., 2016; Feng et al., 2017). The integration of financial information and non-financial ESG information provides higher information quality for SD makers and results in decisions that enhance the long-term performance of firms (Jensen and Berg, 2012). Linking both types of information will help decision-makers understand the combined financial and ESG implications of strategies and thus foster integrated thinking (Feng et al., 2017).

Recent experimental research has shown that the provision of integrated financial information and non-financial ESG information changes the decision-making behavior of individual decision-makers and leads to SDs with higher sustainable value creation (Esch et al., 2019). This was shown in an experimental setting with simplified scenarios of SDs. However, research thus far has not considered how SD makers in a real-world setting use financial information and non-financial ESG information throughout the different phases of an SDMP. Following a call for research on the internal benefits of IR and integrated thinking (Churet and Eccles, 2014), in the present paper we aimed to answer two related research questions:


How and to what extent is non-financial ESG information considered alongside financial information in each phase of an SDMP?


What are the dynamics of these two types of information?

Regarding the first question, we found that both financial information and non-financial ESG information are perceived as crucial resources for SDMPs. We also found that the dynamics of financial information and non-financial ESG information is complex, as the relative importance of information varies throughout the decision process (see Figure 2). While non-financial information takes precedence in the first phase of the decision process, its importance significantly decreases in the execution period. At this stage, financial information is considered almost exclusively. In the third and fourth phases of the decision process, the importance of non-financial information increases again as companies ensure that contingent effects associated with the decision are in line with externally communicated objectives. Accordingly, the importance of financial information diminishes at this stage of the process. This analysis also shows that solely focusing on the interplay between financial and non-financial information is delimiting in scope. The challenges of SD making discussed earlier show that the interplay between quantitative and qualitative information and the interplay between internal and external data are also important. Both need to be considered and are constituents of integrated information, which plays a vital role in practice. Our findings provide empirical support for the repeated claim that integrated financial information and non-financial ESG information can also be useful for internal decision-making (Burke and Clark, 2016; Mio et al., 2016; Vaz et al., 2016; Feng et al., 2017).

Another important finding in this context is that the use of financial information and non-financial ESG information was reported by all types of firms, i.e., firms that have already implemented IR, firms that are currently implementing IR and firms that have not yet implemented IR. Likewise, both types of information are used in all phases of the SDMP although to varying degrees (see Figure 2). This finding challenges the commonly held assumption that the implementation of IR promotes the development of integrated thinking (Feng et al., 2017). It rather supports the assumption of a reversed causality. As recently portrayed by Al-Htaybat and von Alberti-Alhtaybat (2018), integrated thinking can also be a precursor of IR.

Considering the second research question, our results reveal a differentiated picture of the dynamics of financial information and non-financial ESG information in the SDMP. This complements previous research which investigated the role and consequences of the use of integrated information in other management functions such as management control systems (Mio et al., 2016). From our interview material, a categorization emerged along the dimensions of the data’s source (internal or external), its nature (quantitative or qualitative), and the type of data (financial or non-financial). When asked about non-financial ESG information, executives tended to speak also about qualitative information in general, and vice versa. Figure 3 provides an overview of the three identified dimensions.

Our research reveals that the principle of integrated thinking incorporates not only ESG information but also important aspects such as non-financial determining factors, which, in combination with the different types of information, constrain decision-makers’ scope of action. Decision-makers tend to perceive non-financial information more as a factor constraining their ability to decide independently. This does not mean that integrated information cannot be of value to decision-makers, especially when taking a holistic view of value creation. Still, it appears from our findings that the value of non-financial information is generally perceived to be lower than that of financial information because it is less conferrable to stakeholders. This attenuates the more optimistic view on the use of non-financial ESG information in the literature on IR (Hampton, 2012; Churet and Eccles, 2014; Steyn, 2014; Burke and Clark, 2016).

For the academic literature, the contributions of this paper are threefold. First, we provide a model of integrated thinking in SD making by connecting two previously separate fields of research. Second, this study advances knowledge of the dynamics and dimensions of integrated information, which can be used as a basis for further scrutiny of the subject area. Third, we point to the necessity of conducting research on the internally and externally oriented implications of IR and integrated thinking simultaneously, as information initially generated for external recipients might also serve as a broader information base for internal processes such as SDs. A similar model of the SDMP was not reported in other publications so far, but there is some overlap with earlier research. Vecchiato (2019) explored how scenario planning contributes to strategic investment decisions in a changing environment. His findings, like our results, suggest an emerging framework which includes environmental changes as first step, followed by cognitive processes of attention and interpretation, and SD making. Furthermore, Calabrese et al. (2019) examined how sustainability is integrated in SDMPs. For that purpose, a fuzzy analytic hierarchy process method was applied to select the sustainability issues most relevant for creating shared value before a SD is made. The results of this research constitute an in-depth investigation of the first phase of our framework.

For practitioners, the results of this study reveal implications for the design of corporate information systems. IR increases the complexity of information processing in companies. New non-financial ESG information must be acquired and linked with existing data. However, the information contained in reports is often not integrated because of the use of different data sources and/or different departments to merge and prepare the data. To ensure the usefulness of integrated information, technological prerequisites must be fulfilled. Taking into account the complexity and required functionalities of IR, the different reports to be made available, and heterogeneous system landscapes in companies, a data warehouse solution is the most necessary step. The data warehouse can be subsequently used to aggregate data for reports that will form the information base used by corporate management in SDMPs.

6. Limitations and future research

The present study is limited in its geographical and cultural focus, as only managers of German companies were interviewed. Accordingly, the information search process as well as the incorporation of such integrated information might be shaped by cultural, political and other issues (e.g. educational background). Additionally, our study was unable to demonstrate how decision quality is influenced by the inclusion of different types of information, and further studies could aim to take this aspect into account. The claim that the use of integrated information and integrated thinking leads to better decisions (Burke and Clark, 2016) needs further research. Future research should also scrutinize more deeply the extent to which the Integrated Reporting Framework is able to address the three dimensions of information considered by decision-makers in a way that enables a transition from conventional to integrated thinking in SD making. We therefore encourage future research on how integrated information and information in general is provided or retrieved, processed, and evaluated in SD making (e.g. Citroen, 2011).


The strategic decision-making process and its subroutines

Figure 1

The strategic decision-making process and its subroutines

The strategic decision-making process and its four elements

Figure 2

The strategic decision-making process and its four elements

The three dimensions of integrated information

Figure 3

The three dimensions of integrated information

Sample of companies and interviewees

Company Sector Interviewees Integrated reporting Revenue
A Pharmaceuticals Head of controlling Not in place > €1bn
B Chemicals Subsidiary chief financial officer In place > €25bn
C Machinery and Plant Engineering Chief financial officer Implementation planned > €1bn
D Automation Engineering Head of global reporting Not in place > €5bn
E Steel Trade and Metal Processing Chief financial officer In place > €5bn
F Automation Engineering Chief financial officer Not in place > €1bn
G Lighting Technology Chief financial officer Implementation planned > €1bn
H Auditing Head of finance Germany Not in place > €25bn
I Financial Services Head of capital resolution Not in place > €10bn
J Energy Supply Head of controlling In place > €25bn
K Pharmaceuticals Head of finance and accounting In place > €25bn
L Software Senior finance specialist In place > €10bn
M Communications VP Control/VP Planning Europe Not in place > €25bn
N Software Head of business solutions Not in place > €5bn


Interview guide:

  1. Company information and background: organization, strategy, individual position, etc.

  2. Which types of (strategic) decision are made based on which data?

  3. Which role does (management) reporting play for these decisions?

  4. Please characterize a typical strategic decision-making process in your company.

  5. For which decisions do you consider integrated information (financial vs non-financial ESG)?

    Follow-up: if not, do you think this will change in the future and how?

  6. For which type of decision is it useful to consider integrated information?

  7. Which type of non-financial information is crucial for you? Follow-up: ESG information in particular?

  8. Do you think that certain types of decisions will gain importance in the future? Which ones?

  9. Within this context: how will the reporting format and contend (e.g. the integration of financial and non-financial information) change?

  10. How will the integration of information affect strategic management?


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Further reading

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Zhao, S., Papanastassiou, M., Bassiakos, Y., Sinani, E. and Pearce, R. (2018), “Unfolding the intra-organizational perception gap in decision-making”, in Castellani, D., Narula, R., Nguyen, Q.T.K., Surdu, I. and Walker, J.T. (Eds), Contemporary Issues in International Business. Institutions, Strategy and Performance, Palgrave Macmillan, Cham, pp. 171-189.

Corresponding author

Mike Schulze can be contacted at: