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The purpose of this paper is to develop guidelines of what award winning companies, leading practice in integrated reporting (IR) disclose in their integrated reports about material issues and their materiality determination processes. Also, to provide insight into what they disclose about their perception of materiality.

A content analysis was conducted to investigate what the top 10 South African companies of the 2015 Ernst and Young Excellence in Integrated Reporting Awards disclosed in their 2014 and 2015 integrated reports about their materiality determination processes, material issues and what materiality means to them. Thematic analyses were conducted in developing guidelines.

All except one company applied the International Integrated Reporting Framework. The materiality determination processes, material issues and companies’ descriptions of materiality are diverse. Material issues most companies identified relate to employees, social and environmental issues, customers and sustainable performance.

The proposed guidelines will provide useful strategies for organisations embarking on the IR journey about what issues could be considered as material and therefore included in integrated reports. It also proposes activities companies can undertake to identify, evaluate and prioritise material issues and execute their materiality determination process.

This paper is the first to develop guidelines of material matters and materiality determination processes. It also adds to existing literature on IR practice and the application of materiality.

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.

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.

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.

The challenges and techniques identified can contribute to the development of a framework for materiality level determination for non-financial information.

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.

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.

Academics, practitioners, and standard setters have highlighted the importance of focusing on the relevance of nonfinancial reporting disclosures, calling for a debate on how best to develop corporative communicative skills with different stakeholders to conduct proper materiality analysis. To this end, the need for an inclusive process is widely acknowledged, where engagement and close relationships between an organization and its various stakeholders are crucial to identifying the main issues that the company should consider in a materiality analysis. In this chapter, an analysis of integrated reporting (IR) will be performed as an innovative corporate communication instrument that offers a complete picture of corporate performance and the important role of the concept of materiality. Then, the concept of the materiality process will be explored in a set of Spanish early adopters of IR, which will help us understand IR technology within the organizational realm and will shed some light on the materiality determination process as a communicative tool. The study revealed five main themes connected to the materiality determination process: materiality conceptualization, sources of evidence on materiality, prioritization of stakeholder engagement, the perceived advantages of the process, and its problems. The final section will set out the future challenges of IR engagement and the research opportunities that are associated with this innovative form of communicative reporting.

Part VI illustrates different approaches concerning the processes and methods that an entity can establish to determine materiality. Given the highly subjective nature of materiality assessments, proper processes, systems, and methodologies are at the forefront of the recent and future developments in this area.

The part divides the processes analyzed into four groups: (1) those that derive from accounting approaches, including the recent IASB’s four-step approach; (2) audit-derived models, generally elaborated from techniques to detect material misstatements; (3) risk-based approaches employed in risk management or in internal control over financial reporting; and (4) approaches derived from larger models involving financial, management, environmental, and corporate responsibility factors.

Finally, two sections deal with the disclosure of materiality determination, one concerning the process employed by an entity, and the second concerning general model disclosures of material matters.

This paper aims to understand how the principle of materiality gets implemented in integrated reporting (IR) contexts.

Drawing on an interpretation of materiality as a social construction, this research explores the meaning that practitioners attach to the principle during their implementation of it. Following an existing framework for exploring materiality in corporate reporting, this study investigates the meaning by focusing on who participates in determining IR materiality and to whom the IR is addressed. This analysis benefits from in-depth interviews with persons involved in the preparation of IR for a firm that pioneered this form of reporting.

In IR preparers’ view, the meaning of materiality corresponds with the company strategy: The IR describes strategic priorities and related actions and results. Capital providers are the primary intended addressees of the material information. Although several actors engage in IR preparation, the materiality determination process is governed by a specific “IR hub” in strict collaboration with and dependence on the chief financial officer.

In an IR context, materiality is intimately connected to the function that preparers assign to the report.

This novel research opens the “black box” of the process by which materiality gets defined and then practically implemented in an IR context.

This paper aims to assess the disclosure of the materiality process in the preparation of sustainability reports of state-owned enterprises (SOEs). This paper also explores the effects of regulation mandating that SOEs prepare sustainability reports. In the specific case of port authorities, the study analyses the influence of a sector guideline that determines what should be included and the structure of the report. Another aim of this paper is to delve into SOE's motivations for disclosing information on materiality assessments, using the assumptions of the different theories to explain their reporting practices.

Using a sample of SOEs sustainability reports, a content analysis is undertaken. The methodology involves the analysis of the information disclosed by SOEs in Spain and the development of a materiality disclosure index. This index enables sampled entities to be classified on a scale of 0–5, based on the extent of their disclosures of the materiality determination process. This study also identifies several variables that explain differences in these disclosures.

A low rate of information disclosed about the materiality process can be attributed to the desire of SOEs to create symbolic legitimacy. In a context where the disclosure of sustainability information is mandatory, only few organisations apply the principle of materiality to define the content of their sustainability reports. These results highlight that institutional isomorphism has only had a limited effect on the materiality process.

Limitations associated with the sample size and composition of the sample by sector apply.

This research shows that generally accepted reporting guidelines constitute a reference framework for sustainability reporting but that the principles underpinning these frameworks are not always implemented.

This study extends the literature on the implementation of the principle of materiality and uses disclosure theories to explain the actual reporting by SOEs of their materiality process.

This paper aims to contribute to the development of the European Union (EU) regulatory environment for sustainability reporting by analyzing how materiality is defined in the Non-Financial Reporting Directive (NFRD) and Corporate Sustainability Reporting Directive (CSRD) and by examining the added value and challenges of legalizing reporting and materiality requirements from both regulatory and practical company perspectives. It provides insights on whether this is reflected by EU pharmaceutical companies and to what extent companies report information on their materiality analysis process.

Doctrinal analysis was used to examine regulatory instruments. Qualitative document analysis was used to analyze companies’ reports. The added value and challenges were examined using a governance approach. It focused on legalizing reporting and materiality requirements, with a brief extension to corporate management and organization studies.

Materiality has evolved from a vague concept in the NFRD toward double materiality in the CSRD. This was reflected by the industry, but reports revealed inconsistencies in materiality definitions and reported information. Challenges include lack of self-reflection and company-centric perceptions of materiality. Companies should explain how they identify relevant stakeholders and how input is considered in decision-making.

Managers must consider how they conduct materiality assessments to meet society’s expectations. The underlying processes should be explained to increase the credibility of reports. Sustainability reporting should be seen as a corporate governance tool.

This work contributes to the literature on materiality in sustainability reporting and to the debate on the need for a holistic, society-centric approach to enhance the sustainability of companies.

Part V analyzes the details of how to assess materiality. It first tackles qualitative versus quantitative criteria and the role of professional judgment. It then analyzes the selection of quantitative threshold, to expand to the choice of benchmarks. It contrasts the whole financial statements with subaggregates, line items, and components.

Specific sections contrast IASB, FASB, SEC, and other guidance on materiality applied to comparative information, interim reporting, and segment reporting.

The section on estimates mingles complex guidance coming from accounting, auditing, and internal control over financial reporting to explain how the management can improve its assessment of materiality concerning estimates.

After explaining the techniques to move from individual to cumulative misstatements, the part tackles verification ex post, and finally summarizes the intricacies of whether immaterial misstatements are permissible and their consequences.

This paper aims to assess the disclosure on materiality analysis in sustainability and integrated reports through the lenses of legitimacy and stakeholder theory. The following three research questions are addressed: to what extent do companies report on their materiality analysis, what are the methods used for the analysis of the stakeholders and their topics/aspects and is there a higher disclosure of information of materiality assessment because of G4.

The paper uses an archival research approach and deploys content analysis. Thus, a binary disclosure index was developed that indicates whether materiality related information are mentioned and explained in detail. The sample contains 132 reports from 33 companies of the German 110 HDAX stock market index between 2014 and 2017.

The paper reveals that materiality analysis is a growing phenomenon. Nevertheless, companies disclose only a small amount of related information and fail to explain the methods for the stakeholder and topics/aspects identification. Thus, the underlying processes to define the report content remains unclear. Through the lenses of legitimacy theory, the study indicates that materiality analysis can strategically be misused to define report content without considering the interests of legitimized stakeholder groups and thus, does not improve the reports to those groups.

Managers are urged to regard the importance of reporting about ongoing materiality assessments, as otherwise, concerns about the overall reliability of the information presented may arise.

Poor reporting about materiality assessments might lead to potential conflicts with stakeholders that do see their important topics not sufficiently reflected in the sustainability or integrated report.

This study contributes to the literature regarding materiality in sustainability and integrated reporting and uses the assumptions of disclosure theories to evaluate the disclosure of a specific disclosure item.