The (r)evolution of integrated reporting

Abstract

Since the foundation of the International Integrated Reporting Council (IIRC) in 2010, the concept of integrated reporting (IR) has gained widespread attention. The IR Framework as first published by the IIRC in 2013 aims to fulfil stakeholders’ demands by providing an overview in which all strands of information, and their attendant impact on the value creation process, are connected in the integrated report. Although the integrated report is an important outcome of IR, this product should ultimately be based on the process of integrated thinking. Integrated thinking fulfils a pivotal role in the integrated reporting process, but most of the attention has been given to the report as a product rather than to integrated thinking as a key internal process. The impact of IR adoption on the organisation internally, and the degree to which integrated thinking becomes visible in the organisation, has thus far remained underexposed. This dissertation studies the extent to which IR affects the observable presence of integrated thinking within performance management systems (PMSs). Through recourse to legitimacy theory and management fashion theory, a preliminary assessment of the development of IR is provided. The uncovered genealogy of claims about potential benefits of IR are explored in more detail by administering a survey among Dutch supervisory board members (SBMs). Both the perceived benefits of IR and the factors that influence the motives of SBMs to advocate for a change towards IR implementation are explored. The results also stress the iterative process that is taking place between IR and integrated thinking practices. Some of the claims about IR pertained to topics such as: the breaking down of silos within organisations, improved decision-making, better alignment between financial and non-financial information, and an overall more holistic business approach. These claims describe aspects which can be encompassed under the umbrella of integrated thinking. In this dissertation, integrated thinking is approached from a management control perspective. Through conducting case studies with four Dutch companies that have multiple years of experience with publishing integrated reports, it becomes apparent that each of the organisations experienced changes in their PMSs due to IR. The results of this dissertation show that due to IR implementation, integrated thinking is becoming visible in the PMSs, because PMSs are becoming more integrated with respect to financials and non-financials. This study also shows the iterative process between the concepts of IR and integrated thinking. These changing PMSs are in alignment (at least partially) with the espoused benefits of IR outlined in literature. Such an overview of the IR journey is expedient for both academics studying the concept of IR, and practitioners seeking a more complete understanding of what they can expect from IR implementation and what they can learn about the impact of IR and use of integrated thinking in practice. It also helps standard setters’, regulators’ and consultants’ attempts to provide more guidance to companies aiming to better understand the phenomenon of integrated thinking.