What does materiality mean to integrated reporting preparers? An empirical exploration

Purpose—This paper seeks to understand how the principle of materiality gets implemented in integrated reporting contexts. Design/methodology/approach—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 integrated reporting materiality and to whom the integrated report (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. Findings—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 CFO. Research limitations/implications—In an IR context, materiality is intimately connected to the function that preparers assign to the report. Originality/value—This novel research opens the “black box” of the process by which materiality gets defined and then practically implemented in an IR context

Integrated reporting and narrative accountability: the role of preparers

Purpose: The International Integrated Reporting Council claims that integrated reporting (IR) can enhance corporate accountability, yet critical and interpretative studies have contested this outcome. Insufficient empirical research details how preparers experience accountability while constructing IR; to fill this gap, the purpose of this paper is to analyse how the preparers’ mode of cognition influences the patterns of accountability associated with IR. Design/methodology/approach: A functionalist approach to narratives helps elucidate the role that the IR preparers’ narrative mode of cognition plays on accountability towards stakeholders. The empirical analysis particularly benefits from in-depth interviews with the IR preparers of a global insurer that has used IR since 2013. Findings: The preparers’ narrative mode of cognition facilitates dialogue with IR users. It addresses accountability tensions by revealing the company’s value creation process. Preparers’ efforts to establish a meaningful dialogue with a growing variety of stakeholders through broader and plainer messages reveals the potential of IR as a narrative source of a socializing form of accountability. However, financial stakeholders remain the primary addressees of the reports. Research limitations/implications: This paper focusses on preparers’ views; further research should integrate users’ accountability expectations. Originality/value: This paper offers new insights for dealing with corporate reporting and accountability in a novel IR setting

Saying more with less? Disclosure conciseness, completeness and balance in Integrated Reports

The Integrated Reporting Framework of 2013 represents the latest international attempt to connect a firm’s financial and sustainability (i.e., environmental, social and governance) performance in one company report. An Integrated Report (IR) should communicate “concisely” about how a firm’s strategy, governance, performance and prospects, in the context of its external environment, lead to the creation of sustainable value. At the same time, an IR needs to be “complete and balanced”, i.e., broadly including all material matters, both positive and negative, in a balanced way. Drawing on impression management studies, we examine a selection of performance determinants to gain insights into the factors associated with conciseness, completeness and balance in IR. The results from a sample of IR early adopters show that in the presence of a firm’s weak financial performance, the IR tends to be significantly longer and less readable (i.e., less concise), and more optimistic (i.e., less balanced). We additionally find that firms with worse social performance provide reports that are foggier (i.e., less concise) and with less information on their sustainability performance (i.e., less complete). Our evidence implies that IR early adopters employ quantity and syntactical reading ease manipulation as well as thematic content and verbal tone manipulation as impression management strategies. The results also suggest that such strategies depend not only on the level of firms’ performance but also on the type of performance (financial versus nonfinancial/sustainability). This paper adds to the limited literature on IR in sustainability accounting as well as to the research in mainstream financial accounting that examines disclosure quality using textual analysis

Disclosing Business Model in the "Integrated Report": Evidence from European Early Adopters

The rising emphasis on the business model (BM) as a reportable element reflects the view it constitutes one of the key starting point for investors\u2019 analysis. In spite of this, recent academic and professional studies describe current reporting on BM as \u201cinadequate\u201d advancing the most heated critics for the presence of a so-called \u201cboilerplate\u201d disclosure.The IASB has thus embarked on a new initiative with the International Integrated Reporting Council to promote BM disclosure by mean of a particular reporting format called \u201cIntegrated Report\u201d (IR). An IR is as a clear and concise representation of how organization creates and sustains value, and BM constitutes a fundamental issue of disclosure. The paper aims to understand whether IR is apt to offer informative disclosure on firm\u2019s BM. Drawing on previous studies on voluntary disclosure, the paper purposes a \u201cframework of analysis\u201d to assess the quality of BM disclosure with specific regards to extensiveness and spread of covered topics and to three specific language attributes: type of information (quantitative vs. non-quantitative), tone (positive vs. non positive) and time orientation (forward looking vs. non-forward looking). By performing an in-depth manual content analysis, we apply our \u201cframework of analysis\u201d to all the European early-adopters and we find that their BM disclosure is substantially informative. Our findings have relevant implications in corroborating the role of IR project in improving reporting on BM

Climate change reporting: a commentary on key issues

Firms are more and more considered key actors for the attainment of sustainable development goals, including climate change (CC) action. Corporate reporting on carbon emissions and CC related issues is considered fundamental not only to evaluate companies’ contributions to CC mitigation, but also to assess how CC affects organizations and how they are adapting to it. The importance of CC reporting has been acknowledged by the Financial Stability Board who has established, in 2015, the Task Force on Climate related Financial Disclosure (TCFD) to promote and set recommendations for an effective CC disclosure. Existing research documents conflicting results on the factors facilitating the implementation of CC reporting. In this commentary, I review prior literature on CC related disclosure with a particular focus on the most recent findings on the significant economic and ecological factors associated with it. I highlight that size bias, involvement of governance, relationship with emissions activity, integration in corporate reporting and assurance represent the key issues in such domain. I corroborate such findings in lights of early evidence on the TCFD implementation which points at the same factors representing challenges for an effective CC disclosure. This analysis could be of interest for academics, to develop future research on relevant although controversial areas, and for firms, policy makers and other stakeholders to unveil critical issues to be considered in the implementation of CC reporting

Integrated Reporting: disclosure practices and determinants of the adoption

Un integrated report (IR) \ue8 un unico documento il cui scopo primario \ue8 quello di spiegare come un'organizzazione crea valore nel tempo. IR rappresenta una forma innovativa di informativa societaria in quanto manifesta caratteristiche distintive che lo distinguono dalle forme tradizionali di reporting finanziario e non finanziario. I sostenitori di IR ritengono che porter\ue0 maggiore trasparenza sull'impegno delle imprese verso la sostenibilit\ue0. Nonostante questo, gli studi precedenti dimostrano che la reportistica volontaria sulla sostenibilit\ue0 viene utilizzata come "pratica simbolica" per modificare la percezione del pubblico sul comportamento delle imprese e alcuni studiosi sostengono che IR \ue8 probabile che sia lo stesso. Lo scopo della tesi \ue8 quello di capire se IR \ue8 concepito come una strategia di comunicazione per promuovere l'immagine aziendale. La ricerca si basa su due livelli di analisi: in primo luogo, analizza le determinanti della sua adozione allo scopo di avvallare (o rifiutare) i risultati dei precedenti studi della letteratura che dimostrano che l\u2019adozione volontaria di varie forme di reportistica di sostenibilit\ue0 \ue8 riconducibile ad esigenze di legittimazione; in secondo luogo, si analizzano le pratiche di reportistica delle imprese che attualmente adottando IR per capire se le aziende utilizzano IR opportunisticamente per alterare la percezione pubblica del proprio comportamento. La raccolta dei dati si basa su informazioni pubbliche. In particolare, i dati sulle caratteristiche aziendali sono stati raccolti da Bloomberg mentre i dati sulle pratiche di reportistica sono stati raccolti manualmente dai report disponibili nel database ufficiale su IR. Il metodo di analisi dei dati \ue8 quantitativo e basato su modelli di regressione statistica multivariata. I risultati dimostrano che l'adozione di IR non \ue8 una questione di legittimazione semplicemente attribuibile alle pressioni derivanti dall'ambiente esterno. Tuttavia le pratiche di reportistica di coloro che adottando IR mostrano che IR viene utilizzato per manipolare l\u2019immagine aziendale. Nel complesso, risultati sono coerenti con l'idea che essendo IR una forma di comunicazione volontaria con poche eccezioni (cfr Sud Africa), da un lato le imprese non partecipano al progetto IIRC far fronte a minacce di legittimit\ue0 derivanti da una percezione negativa del pubblico del loro comportamento; tuttavia, una volta che hanno preso parte al progetto, approfittano del loro elevato grado di discrezionalit\ue0, comunicando informazioni che enfatizza i propri interessi con il fine di alterare l\u2019immagine pubblica del loro comportamento.An Integrated Report (IR) is a single document whose primary purpose is to explain how an organization creates value over time. IR represents an innovative form of corporate disclosure as it manifests distinctive features that distinguish it from traditional form of financial and non-financial reporting. The supporters of IR believe that it will bring greater transparency on firms\u2019 commitment toward sustainability. In spite of this, previous studies show that voluntary disclosure on sustainability is used as a \u201csymbolic practice\u201d to alter public perception on corporate behavior and some scholars argue that IR is likely to be the same. The purpose of the thesis is to understand if IR is conceived as a reporting strategy to advance corporate image. The research is based on two level of analysis: firstly, it analyzes the determinants of its adoption to support (or reject) previous findings of the accounting literature ascribing the voluntary reporting on sustainability to legitimacy needs; secondly, it analyzes the disclosure practices of early adopters to understand if firms use the IR disclosure opportunistically to alter public perceptions of firms behaviors. Data collection is based on public information. In particular, archival data on corporate characteristics have been collected from Bloomberg Database whilst data on disclosure characteristics have been manually collected from the reports available in the official IR database. Data analysis method is quantitative and based on multivariate statistical regression models. The results revel that the adoption of IR is not a matter of legitimation merely ascribing to pressures arising from the external environment. However the disclosure practices of early adopters show that IR is used to advance corporate image. Overall, we interpret these results as consistent with the idea that being IR a form of voluntary disclosure with few exceptions (cf. South Africa) firms do not participate to the IIRC project to face legitimacy threats arising from a negative public perception of their behavior; however, once that they got in the IIRC project , they take advantage of their high degree of discretion by reporting information that emphasizes their own best interests

Value creation, CEO incentives and remuneration: evidence from integrated reporting adopters

This study is motivated by the growing importance of Integrated Reporting as an innovative reporting initiative to foster representation of sustainable value creation over time. Focusing on the International Integrated Reporting Council’s (IIRC) framework on Integrated Reporting , it examines: whether adoption is associated with Integrated Thinking, conceived as a long-term and broad concept of value creation focused on financial and nonfinancial capitals (e.g. human, natural, social, or intellectual), as well as with Integrated Performance, a balanced view of results based on economic, environmental, social, and governance (ESG) pillars. To capture Integrated Thinking, it looks at nonfinancial and long-term targets in CEO compensation and the presence of ‘integrated’ strategy and management, while it considers the combined economic, environmental, social and governance scores, as proxies of Integrated Performance. Evidence shows that, compared to non-adopters, adopters (as identified in the IIRC’s website) are more likely to embrace Integrated Thinking by linking CEO compensation to non-financial targets (human, intellectual, social, and natural) and to the ability to create value in the long term. Furthermore, such firms achieve superior Integrated Performance and better ESG results. Finally, they are also transparent about executives’ incentive and remuneration and their link with value creation by mean of the capitals, disclosing such information through the . Overall, these results shed light on the potential of to increase Integrated Thinking and performance measured both in financial and non-financial terms and also show that plays a role in fostering transparency for remuneration, and more generally for incentives policies

Intellectual capital disclosure in integrated reporting: an impression management analysis

Purpose: – Intellectual capital (IC) is fundamental to understanding how firms create value; however, current IC disclosure (ICD) has been described as inadequate due to the lack of an established IC framework and companies’ actual commitment to report IC information. The International Integrated Reporting Council aims to foster ICD by means of integrated reporting (IR); such a report should display how IC and other forms of capital (e.g. financial) contribute to value creation over time. Drawing on impression management (IM) studies, the purpose of this paper is to assess the quality of ICD offered in IR. Design/methodology/approach: – A manual content analysis of all the reports available in the International Integrated Reporting Council web site is run considering both the content of ICD and specific linguistic attributes (evidence, time orientation and tone). In addition, the study tests the relationship between the positive ICD tone and specific characteristics that may incentive managers to manipulate their disclosure to determine whether firms use ICD to manage public perceptions of corporate behaviour. Findings: – The results of the content analysis show that majority of ICD is focused on relational capital, with limited quantitative and forward-looking information. Additionally, compared to non-ICD, ICD is significantly more optimistic. Furthermore, the positive tone of ICD is significantly associated with declining performance, bigger size and higher level of intangibles supporting the use of ICD as an IM strategy. Originality/value: – The research contributes to the literature offering evidence of the quality of the ICD offered in the IR and demonstrating that ICD offered in the IR is used by managers opportunistically to advance their image

Integrated Thinking in Action

Compared to non-adopters, Integrated Reporting (IR) adopters are more likely to embrace Integrated Thinking (IT) by linking CEO compensation to non-financial targets and to the ability to create long term value. They also achieve superior combined financial and non-financial performance and better ESG (environmental, social and governance) result

INTEGRATED REPORTING E RISK DISCLOSURE: PRIME EVIDENZE DAL \u201cPROGETTO PILOTA\u201d DELL\u2019IIRC

\uc8 considerazione ormai condivisa che le imprese siano sempre pi\uf9 spesso spronate ad allestire sistemi \u201cintegrati\u201d di governo dei rischi, in grado di cogliere e di gestire condizioni di rischio potenzialmente pervasive (Coso, 2004). Allo stesso modo le imprese sono chiamate a dare conto dei rischi a cui si espongono e dei sistemi di risk management che attivano, secondo modalit\ue0 che spaziano dall\u2019informativa obbligatoria a quella volontaria. La \u201cdemand of risk disclosure\u201d \ue8 infatti in progressivo aumento (Icaew, 2011).Il presente contributo analizza la risk disclosure (RD) offerta nell\u2019ambito della reportistica volta ad offrire una visione \u201cintegrata\u201d del processo di creazione di valore: l\u2019integrated reporting (IR). Tra gli obiettivi dell\u2019IR, di cui si forniscono di seguito alcuni elementi di inquadramento, vi \ue8 infatti quello di rispondere al seguente interrogativo: \u201cquali sono i rischi specifici che influiscono sulla capacit\ue0 dell\u2019impresa di creare valore a breve, medio o lungo termine e in che modo vengono gestiti dall\u2019impresa?\u201d.Tale interrogativo \ue8 qui assunto a riferimento per indagare la qualit\ue0 dell\u2019informativa in ordine ai fattori di rischio (nella letteratura internazionale, risk factors), alle modalit\ue0 di gestione dei rischi (risk management) e alle previsioni in ordine alla manifestazione dei rischi (risk forecasts). La prospettiva secondo la quale si procede nell\u2019analisi \ue8 quella del Financial Accounting e, pi\uf9 in particolare, del filone di ricerca che apprezza la qualit\ue0 della narrative disclosure verificando la presenza di \u201cbias\u201d (\u201cdistorsioni informative\u201d) riconducibili all\u2019esigenza dell\u2019accountor di controllare le impressioni dell\u2019accountee (Leary e Kowalski, 1990; Neu, 1991; Neu et al., 1998).Raccogliendo lo stimolo ad indagare i termini secondo cui l\u2019IR favorisce la \u201cridefinizione\u201d della corporate accountability (Busco et al., 2013), anche mediante un approccio \u201cintegrato\u201d al risk management (Quarchioni e Trovarelli, 2013), la ricerca amplia le conoscenze in ordine ai connotati della reportistica integrata e alle motivazioni sottostanti il suo impiego (Lai et al., 2013a e 2013b)