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1 – 10 of 28A.M.I. Lakshan, Mary Low and Charl de Villiers
The international integrated reporting framework encourages organisations to disclose material information that affects their ability to create value. This paper aims to…
Abstract
Purpose
The international integrated reporting framework encourages organisations to disclose material information that affects their ability to create value. This paper aims to investigate the challenges and techniques preparers of integrated reports use to determine the materiality of non-financial information.
Design/methodology/approach
This paper uses an exploratory interpretive thematic analysis and an archival research approach. Qualitative semi-structured interviews were conducted with 55 integrated reporting (IR) preparers in 12 publicly listed companies, supported by the perusal of the companies’ integrated annual reports over a three-year period.
Findings
IR preparers find materiality determination for non-financial information challenging. This study found that preparers convert challenges into opportunities by using materiality disclosures as image-enhancing marketing tools, which causes concerns regarding weak accountability and a deviation from the International Integrated Reporting Council’s objective of improving information quality. This study found that IR preparers use various techniques in conjunction to determine materiality levels, as well as whether to disclose non-financial information in their integrated reports. The institutional isomorphism lens used in the study highlighted the issues IR preparers faced in their determined efforts of IR materiality levels under mimetic and normative isomorphism pressures.
Research limitations/implications
The challenges and techniques identified can contribute to the development of a framework for materiality level determination for non-financial information.
Practical implications
Regulators who are concerned with ensuring sufficient information to improve investor decision-making will be interested in the techniques IR preparers use to determine materiality levels for non-financial information, to improve their regulations and frameworks.
Originality/value
This study contributes to the literature regarding challenges with materiality level determination in integrated reports and techniques used by IR preparers. The application of an institutional isomorphism lens led to greater insight and understanding of IR preparers’ challenges and techniques in materiality determination. This paper makes a number of significant contributions to the IR literature. First, it identifies the usefulness of material information for decision-making and the influence stakeholders have on the materiality determination of non-financial information, which have not been mentioned in the prior literature. Second, the literature is silent on how organisations relate materiality to value creation for the purposes of determining the materiality content of an integrated report; this research provides empirical evidence of the use of value creation criteria in materiality determination. Third, the study highlights that materiality is a combination of efforts that involves everyone in an organisation. Further, the strategy should be linked to IR and preparers have indicated that integrated thinking is required for materiality determination.
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A.M.I. Lakshan, Mary Low and Charl de Villiers
Integrated reporting (IR) promotes the disclosure of future-oriented information to enable financial stakeholders to make better-informed decisions. However, the downside to this…
Abstract
Purpose
Integrated reporting (IR) promotes the disclosure of future-oriented information to enable financial stakeholders to make better-informed decisions. However, the downside to this type of disclosure is the risk to management of disclosing such future-oriented information. This paper aims to explore how IR preparers manage the risk of disclosing future-oriented information in companies’ integrated reports.
Design/methodology/approach
This study represents an exploratory interpretative thematic analysis of 33 semi-structured interviews with managers involved in IR in eight Sri Lankan companies representing various industries. The thematic analysis is informed by the research literature and prior studies on IR.
Findings
This paper provides evidence of various strategies to manage the risk associated with the disclosure of future-oriented information in integrated reports. These strategies include making non-specific predictions; increasing the accuracy of the predictions; linking performance management to disclosed targets, thus ensuring individual responsibility for target achievement; disclosing ex post explanations for not achieving previously disclosed targets; and linking disclosed targets to the company’s risk management procedures. However, these strategies can cause managers to provide conservative future-oriented information, rather than “best estimate” future-oriented information.
Practical implications
The study describes the strategies that managers use to mitigate the risks involved in disclosing future-oriented information. These strategies can provide support or raise concerns, for managers in deciding how to deal with such risks. Regulators tasked with investor protection, as well as stock exchanges interested in the transparency and accountability of listed companies’ activities should be aware of these strategies. Furthermore, the International Integrated Reporting Council (IIRC) should be interested in the implications of this study because some of the identified strategies could undermine the usefulness of integrated reports to stakeholders. This is a significant concern given that the IIRC envisages integrated reporting and thinking as vehicles that could align capital allocation and corporate behaviour with wider sustainable development goals.
Social implications
The trend of future-oriented information moving from being used only in organisations’ internal management systems to being externally reported in integrated reports has implications for stakeholder groups interested in the reported targets. This study reveals management strategies that could affect future-oriented information reliability and reduce their usefulness for users of integrated reports.
Originality/value
This study provides unique insights into the emerging area of how managers deal with the risks involved in disclosing future-oriented IR information.
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Riccardo Stacchezzini, Cristina Florio, Alice Francesca Sproviero and Silvano Corbella
This paper aims to explore the reporting challenges and related organisational mechanisms of change associated with disclosing corporate risks within integrated reports.
Abstract
Purpose
This paper aims to explore the reporting challenges and related organisational mechanisms of change associated with disclosing corporate risks within integrated reports.
Design/methodology/approach
This paper adopts a Latourian performative approach to explore the organisational mechanisms of change in terms of networks of actors, both “human” and “non-human”, involved in the preparation of risk-related disclosure. Empirical evidence is collected by means of in-depth interviews with the preparers of an integrated reporting pioneer company.
Findings
Preparing disclosure on corporate risks in the context of integrated reporting demands close interaction among several actors. When disclosure shifts from listing key risks to providing information on how these risks are managed or connect with corporate strategy and value creation, departments not usually involved in corporate reporting play an active role and external stakeholders offer pertinent insights, benchmarks and feedback. Integrated reporting and risk management frameworks are the “non-human” actors that facilitate the engagement of diverse “human” actors.
Practical implications
Preparers should be aware that risk disclosure within integrated reports requires collaboration among (“human”) actors belonging to different departments and the engagement of external stakeholders. Preparers should consider the frameworks of integrated reporting and risk management as facilitators of cross-departmental discussions and dialogue, rather than mere contributors of guidelines and recommendations.
Originality/value
This study enriches the scant literature on organisational mechanisms of change made in response to integrated reporting challenges, showing subsequent advancements in the organisational process underlying the preparation of risk disclosure.
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Cristiano Busco, Fabrizio Granà and Maria Federica Izzo
Although accounting and reporting visualisations (i.e. graphs, maps and grids) are often used to veil organisations’ untransparent actions, these practices perform irrespectively…
Abstract
Purpose
Although accounting and reporting visualisations (i.e. graphs, maps and grids) are often used to veil organisations’ untransparent actions, these practices perform irrespectively of their ability to represent facts. In this research, the authors explore accounting and reporting visualisations beyond their persuasive and representational purpose.
Design/methodology/approach
By building on previous research on the rhetoric of visualisations, the authors illustrate how the design of accounting visualisations within integrated reports engages managers in a recursive process of knowledge construction, interrogation, reflection and speculation on what sustainable value creation means. The authors articulate the theoretical framework by developing a longitudinal field study in International Fashion Company, a medium-sized company operating in the fashion industry.
Findings
This research shows that accounting and reporting visualisations do not only contribute to creating unclear and often contradicting representations of organisations’ sustainable performance but, at the same time, “open up” and support managers’ unfolding search for “sustainable value” by reducing its unknown meaning into known and understandable categories. The inconsistencies and imperfections that accounting and reporting visualisations leave constitute the conditions of possibility for the interrogation of the unknown to happen in practice, thus augmenting managers’ questioning, reflections and speculation on what sustainable value means.
Originality/value
This study shows that accounting and reporting visualisations can represent good practices (the authors are not saying a “solution”) through which managers can re-appreciate the complexities of measuring and defining something that is intrinsically unknown and unknowable, especially in contexts where best practices have not yet consolidated into a norm. Topics such as climate change and sustainable development are out there and cannot be ignored, cannot be reduced through persuasive accounts and, therefore, need to be embraced.
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Joanna Dyczkowska and Justyna Fijałkowska
This longitudinal research paper is based on a case study analysis of two Danish life science companies. The general purpose of the paper is to uncover changes in the reporting…
Abstract
Purpose
This longitudinal research paper is based on a case study analysis of two Danish life science companies. The general purpose of the paper is to uncover changes in the reporting practices of experienced integrated reporting (IR) reporters. In order to meet that objective, a pragmatic constructivist paradigm was applied to make a better understanding of factors affecting disclosure decisions in the integrated reports.
Design/methodology/approach
The research uses a qualitative methodological approach. It is based on content and discourse analyses of the written documents, including the integrated reports, auditors' statements and independent assurance reports.
Findings
The model developed in this study reflects a real phenomenon related to the development of IR practices. The pragmatic constructivist paradigm explains how practitioners perceive business reality, act in the face of changing facts and values and make decisions regarding material disclosures.
Research limitations/implications
The investigation of only two companies may be perceived as a limitation of this study. However, a small number of life science companies have prepared integrated reports for a long time. The selected organisations are the pioneers in that field and have drawn up integrated reports since 2002 or 2004.
Originality/value
This paper develops an original model of IR “concept in practice”. It considers the regulatory framework regarding materiality in IR through the prism of facts that form a basis for practical work. It also emphasises an impact of a value system and social context on disclosure decisions in integrated reports. In that way, a link between the constructivist paradigm and IR is created.
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Neelam Setia, Subhash Abhayawansa, Mahesh Joshi and Nandana Wasantha Pathiranage
Integrated reporting enhances the meaningfulness of non-financial information, but whether this enhancement is progressive or regressive from a sustainability perspective is…
Abstract
Purpose
Integrated reporting enhances the meaningfulness of non-financial information, but whether this enhancement is progressive or regressive from a sustainability perspective is unknown. This study aims to examine the influence of the Integrated Reporting (<IR>) Framework on the disclosure of financial- and impact-material sustainability-related information in integrated reports.
Design/methodology/approach
Using a disclosure index constructed from the Global Reporting Initiative’s G4 Guidelines and UN Sustainable Development Goals, the authors content analysed integrated reports of 40 companies from the International Integrated Reporting Council’s Pilot Programme Business Network published between 2015 and 2017. The content analysis distinguished between financial- and impact-material sustainability-related information.
Findings
The extent of sustainability-related disclosures in integrated reports remained more or less constant over the study period. Impact-material disclosures were more prominent than financial material ones. Impact-material disclosures mainly related to environmental aspects, while labour practices-related disclosures were predominantly financially material. The balance between financially- and impact-material sustainability-related disclosures varied based on factors such as industry environmental sensitivity and country-specific characteristics, such as the country’s legal system and development status.
Research limitations/implications
The paper presents a unique disclosure index to distinguish between financially- and impact-material sustainability-related disclosures. Researchers can use this disclosure index to critically examine the nature of sustainability-related disclosure in corporate reports.
Practical implications
This study offers an in-depth understanding of the influence of non-financial reporting frameworks, such as the <IR> Framework that uses a financial materiality perspective, on sustainability reporting. The findings reveal that the practical implementation of the <IR> Framework resulted in sustainability reporting outcomes that deviated from theoretical expectations. Exploring the materiality concept that underscores sustainability-related disclosures by companies using the <IR> Framework is useful for predicting the effects of adopting the Sustainability Disclosure Standards issued by the International Sustainability Standards Board, which also emphasises financial materiality.
Social implications
Despite an emphasis on financial materiality in the <IR> Framework, companies continue to offer substantial impact-material information, implying the potential for companies to balance both financial and broader societal concerns in their reporting.
Originality/value
While prior research has delved into the practices of regulated integrated reporting, especially in the unique context of South Africa, this study focuses on voluntary adoption, attributing observed practices to intrinsic company motivations. To the best of the authors’ knowledge, it is the first study to explicitly explore the nature of materiality in sustainability-related disclosure. The research also introduces a nuanced understanding of contextual factors influencing sustainability reporting.
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Arash Arianpoor, Imad Taher Lamloom, Hameed Mohsin Khayoon and Ali Shakir Zaidan
This study aims to assess the effect of material internal control weaknesses (MICW) on the relationship between ownership structures and future-oriented disclosure.
Abstract
Purpose
This study aims to assess the effect of material internal control weaknesses (MICW) on the relationship between ownership structures and future-oriented disclosure.
Design/methodology/approach
A total number of 197 firms were assessed in this study during 2014–2021. Two measures were used for MICW. First, the number of existing MICW was assessed in independent auditors’ reports. In Iran, the maximum number of weaknesses is 13. Second, the scoring (0 or 1) method was used as a dummy variable, 1 for a firm with MICW and otherwise 0. Moreover, the scoring (0 or 1) method was used to measure the level of future-oriented disclosure of 13 indicators.
Findings
The findings showed that institutional ownership and managerial ownership have a significant positive effect on future-oriented disclosure, whereas the MICW have a significant negative effect on future-oriented disclosure. In addition, MICW played a moderator role in the relationship between ownership structures and future-oriented disclosure. The robustness checks confirmed the results.
Originality/value
As the studies conducted on future-oriented disclosure and the contributing factors are limited, and also the effect of MICW on future-oriented disclosure is not explored, the present findings can show the importance of the study, and fill the gap in this field. This study offers theoretical and practical implications to drive policymakers and managers to the effectiveness of internal control and future-oriented transparency.
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Simona Fiandrino, Alberto Tonelli and Alain Devalle
This systematic literature review (SLR) aims to examine the extent of academic knowledge of sustainability materiality research. There is no academic review of this field;…
Abstract
Purpose
This systematic literature review (SLR) aims to examine the extent of academic knowledge of sustainability materiality research. There is no academic review of this field; therefore, this study aims to close this research gap.
Design/methodology/approach
The paper systematically reviews the existing literature on sustainability materiality research. Papers were qualitatively classified and analysed in accordance with the theoretical underpinning, research methods and academic themes of sustainability materiality research.
Findings
The findings of the review show that scholarly work on sustainability materiality has increased exponentially since the 2010s. In terms of research methods, scholars have examined sustainability using content analysis techniques and qualitative approaches. A common theoretical foundation was missing, but an increasing number of articles have been anchored to stakeholder theory. The academic themes have progressively enriched empirical evidence on the evaluation of materiality in sustainability information.
Research limitations/implications
This review can be useful as an academic basis to open avenues for strengthening theoretical and empirical research on new emerging issues regarding double materiality and dynamic materiality.
Originality/value
This paper conducts the first SLR of academic knowledge on sustainability materiality research. Eight academic themes are proposed to classify sustainability materiality. Thus, it is an aid to future research in this area.
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Giacomo Pigatto, Lino Cinquini, Andrea Tenucci and John Dumay
This study is an analysis that aims to understand the rationale behind the concept of value creation contained in the integrated reporting (IR) framework. As such, the authors…
Abstract
Purpose
This study is an analysis that aims to understand the rationale behind the concept of value creation contained in the integrated reporting (IR) framework. As such, the authors examined the quality of the disclosures made in integrated reports by measuring the level to which the six capitals (6Cs) have been integrated into disclosures on value creation.
Design/methodology/approach
The IR framework’s value creation model focuses on six content elements and three guiding principles. Hence, the present analysis combines content analysis with quantitative measures in the form of a bespoke Integrated Disclosure Index. The index measures the level of integration found in the disclosures instead of the mere presence or absence of mentioned capitals, content elements and guiding principles in isolation. The present sample comprised the 2016 integrated/sustainability reports for 184 listed companies sourced from the Integrated Reporting Examples Database.
Findings
The 6Cs are well disclosed in form but only partially disclosed in substance. Further, overall levels of integration between the capitals, the content elements and the guiding principles are higher than average. Disclosures on materiality, business models and stakeholder relationships are somewhat lacking, as are the related medium- and long-term disclosures on outlook.
Practical implications
The paper contributes to the academic debate on IR by building a case for holistically assessing the substance of integrated reports. Considering that the IR value creation model can underpin and align with the 17 UN sustainable development goals, the authors show how the fundamental concept of the 6Cs sustaining value creation is understood and implemented differently across the various elements and principles of the IR framework.
Social implications
This research also provides guidance for overcoming some of the practical hurdles associated with assessing the quality of reports because the authors provide tools for spotlighting the substance of disclosures over their form.
Originality/value
This paper delves into the substance of integrated reports by assessing how well the 6Cs have been integrated into disclosures on the content elements and guiding principles of the IR framework. In contrast to previous IR research that has mainly analysed capital, elements and principles in isolation, the authors develop an index assessing the integration of these three fundamental concepts of IR.
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Charl de Villiers, Pei-Chi Kelly Hsiao, Stefano Zambon and Elisabetta Magnaghi
This paper aims to develop a conceptual framework for extended external reporting (EER) influences (EERI), including sustainability, non-financial, integrated and value reporting…
Abstract
Purpose
This paper aims to develop a conceptual framework for extended external reporting (EER) influences (EERI), including sustainability, non-financial, integrated and value reporting. Using the Environmental Legitimacy, Accountability, and Proactivity (ELAP) framework as the base, we modify its proposed concepts and linkages using relevant conceptual models, prior reviews and findings of recent studies on EER. This paper presents contributions of the special issue on “non-financial and integrated reporting, governance and value creation” and avenues for future research.
Design/methodology/approach
Drawing on relevant conceptual models, prior reviews and recent EER studies, we reframed the ELAP framework into a framework that theorises the factors that affects, or are affected by, EER.
Findings
The EERI framework poses relationships between and within proactivity, external verification, accountability and legitimacy. It also consolidates possible determinants and consequences of EER. The papers published in this special issue contribute further insights on factors that influence reporting practices, processes and suggestions for capturing and communicating value creation information, and the value of integrated reports and assurance to capital providers.
Originality/value
Along with the insights provided by papers in this special issue, the conceptual framework can be used to theorise influences of EER and guide future research.
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