The Routledge Handbook of Integrated Reporting

Charl de Villiers, Pei-Chi Hsiao, Warren Maroun, Charl de Villiers, Pei-Chi Kelly Hsiao, Warren Maroun, Pei-Chi Hsiao, Charl de Villiers, Pei-Chi Kelly Hsiao, Warren Maroun

• Publisher: Routledge
• Year: 2020
• Print ISBN: 9780367233853
• eBook ISBN: 9781000071344
• Edition: 1
• Topic: Business
• Subtopic: Business Ethics
• Index: Business

This timely handbook provides a current and comprehensive examination of integrated reporting, both practical and research-based. It offers insights and different perspectives from more than 60 authors, including representatives of the International Integrated Reporting Council, Integrated Reporting Committee of South Africa, professional bodies and audit firms, as well as leading academics in the fields of integrated reporting, sustainability reporting and corporate social responsibility.

This collected work provides an in-depth review of the development of integrated reporting, with a focus on the interpretation and guidance provided by the International Integrated Reporting Council. It encourages the development of new thinking and research topics in the area of integrated reporting (such as links between integrated reporting and reports focused on financial and corporate social responsibility matters), as well as showcasing how integrated reporting issues are seen and practiced in different parts of the world. The chapters include reviews of the most recent research, practitioner viewpoints, conceptual pieces, case studies and disclosure analyses.

Accessible and engaging, this handbook will be an invaluable overview for those new to the field or those who are interested in ensuring they are up to date with its developments, as well as those who are concerned with how to construct an integrated report.

1

Introduction to the Routledge Handbook of Integrated Reporting

An overview of integrated reporting and this book, which entails different perspectives on a maturing field and a framework for future research

Charl de Villiers

The University of Auckland, and University of Pretoria

Pei-Chi Kelly Hsiao

The University of Waikato

Warren Maroun

University of the Witwatersrand

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Abstract

This chapter provides a brief overview of integrated reporting (IR). An integrated report should be a concise account of an organization’s future value creation story, including information on financial and non-financial capitals, and referencing the organization’s strategy and business model. Integrated reporting started in practice and was later formalized, first in the influential King Report on Corporate Governance, then by the Integrated Reporting Committee of South Africa (IRCSA), and the International Integrated Reporting Council (IIRC). Integrated reporting is now promoted by these institutions, the accounting profession, regulators and other bodies around the world who espouse the theoretical advantages of IR. There is empirical evidence for some of these claims, but IR’s critics lament its neoliberal foundations and its potentially negative consequences. These differing viewpoints are reflected in this book. We summarise the range of opinions in this lead chapter, while providing some frameworks for the different perspectives and causal links involved.

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Introduction

Integrated reporting (IR) sought to address deficiencies with existing reporting frameworks, which were either dedicated to dealing with financial issues or failed to make the interconnections between economic, environmental and social capitals sufficiently clear. As explained by Mervyn King, in his foreword to the discussion paper by the Integrated Reporting Committee of South Africa (IRCSA):

[A] string of corporate collapses over the past decade has led many stakeholders to question the relevance and reliability of annual financial reports as a basis for making decisions about an organisation. Reports based largely on financial information do not provide sufficient insight to enable stakeholders to form a comprehensive picture of the organisation’s performance and of its ability to create and sustain value, especially in the context of growing environmental, social and economic challenges. Sustainability reports have similarly suffered weaknesses, usually appearing disconnected from the organisation’s financial reports, generally providing a backward-looking review of performance, and almost always failing to make the link between sustainability issues and the organisation’s core strategy. For the most part, these reports have failed to address the lingering distrust among civil society of the intentions and practices of business. Stakeholders today want forward-looking information that will enable them to more effectively assess the total economic value of an organisation.

(IRCSA, 2011, p. 1)

An integrated report is meant to follow a process of integrated thinking within the organization, suggesting that leadership and governance should be aware of the interrelated nature of the financial and non-financial capitals the organization uses to create value (De Villiers and Hsiao, 2018).

Some of the world’s leading organizations have been implementing IR practices and disclosure in anticipation of IR becoming a global norm. For example, KPMG (2017) finds that IR has been gaining momentum following the release of the International Integrated Reporting Council’s (IIRC) Framework, the International Integrated Reporting Framework (IIRC Framework), in several jurisdictions, including South Africa, Japan, Spain, the Netherlands, Brazil, the United Kingdom, Sweden and Poland. More broadly, the release of at least some form of corporate social responsibility report to complement conventional financial reporting has become generally accepted internationally for both large and mid-cap companies (KPMG, 2012, 2013, 2015, 2017). Emerging economies, in particular, have been devoting considerable attention to expanding their reporting models to address issues such as climate change, human rights and sustainable development (KPMG, 2017). Corporate responsibility reporting and, more recently, IR, is seen as offering an opportunity to attract foreign investment, signal the quality of underlying corporate governance systems, and demonstrate the credibility of these jurisdictions to the international capital market (KPMG, 2017; De Villiers and Maroun, 2018). At the same time, it is hoped that IR will promote a more responsible approach to doing business, which considers stakeholder interests and the importance of protecting the environment (King, 2018). Used in conjunction with existing reporting guidelines, governance systems and management practices, IR has the potential to drive positive organizational change and help with the realization of the United Nations’ Sustainable Development Goals (Guthrie et al., 2017; Al-Htaybat and von Alberti-alhtaybat, 2018; McNally and Maroun, 2018).

There are, however, a number of limitations and detractors. As discussed in more detail in Parts II to V of this book, the IIRC may be over-emphasizing financial capital providers to the detriment of stakeholder-centrism and long-term sustainability (see also Flower, 2015; Thomson, 2015). Despite efforts to develop a multi-capital reporting model, conceptualizations of value and value-creation continue to be constrained by economic imperatives (Brown and Dillard, 2014). The possibility of IR forming part of an impression management strategy, which simply obscures unsustainable business practices, cannot be precluded (Haji and Anifowose, 2016; du Toit et al., 2017) while the practical challenges of internalizing and applying the IIRC Framework should not be overlooked (Dumay et al., 2017; McNally et al., 2017).

Consequently, IR is best described as being in a developmental stage (De Villiers et al., 2014; Rinaldi et al., 2018). There is significant variability in how the IIRC Framework is being interpreted and applied, leading to differences in the content, format and structure of even the most recent examples from industry leaders (PwC, 2015; EY, 2018). Rather than ‘crystallizing’ into a standard reporting typology, IR remains an ambiguous concept, which requires cross-disciplinary advances to support full implementation and realise its potential for promoting long-term value-creation and sustainability.

Given these differences in perspective on, and practice of, IR, The Routledge Handbook of Integrated Reporting provides the most current and comprehensive examination of IR at a time when the disparate views on IR could be a sign of a maturing field. The book includes insights from more than 60 authors, provided in 30 chapters. It includes authors who represent the IIRC, IRCSA, professional bodies and audit firms, as well as leading academics in the fields of IR, environmental, corporate social responsibility and sustainability reporting. The councils and professionals mostly promote IR, while the academics fall into different camps, some providing (seemingly) balanced empirical insights, while others provide insights on specialized areas, and yet others critique various aspects of the promotion and implementation of IR. Giving voice to these differing perspectives is a unique feature of this book, because of its openness to the inclusion of these differing perspectives.

The collected work provides an in-depth review of the development of IR, with a focus on the interpretation and guidance provided by the IIRC. The chapters include a detailed discussion on the potential of IR to promote financial stability and holistic value creation. They offer multiple perspectives on this emerging form of reporting and provide insights on current implementation and assurance strategies, the impacts of IR on management and disclosure practices and the relationship between IR and sustainable development. The chapters include reviews of the most recent research, practitioner viewpoints, conceptual pieces, case studies and disclosure analyses. The chapters in the book are written in accessible language; therefore, this handbook is suitable for all readers, regardless of their perspective or level of background knowledge on IR.

Overview of the handbook

The handbook is composed of seven parts, each of which deals with a different aspect of the development, application and future of IR and related practices. Figure 1.1 provides an overview.

Figure 1.1 Outline of The Routledge Handbook of Integrated Reporting

Evolution and aspirations of integrated reporting

Part I, ‘Evolution and aspirations of integrated reporting’, provides a detailed overview of the development of IR, what it is meant to be, and what it is intended to achieve. The chapters in this section are from practitioners’ perspectives and they discuss the events that led up to the formation and development of the IRC, the IIRC and the IIRC Framework. The future of these initiatives is also examined.

Chapter 2 focuses on the IIRC and the IIRC Framework. Bray and Prescott provide a historical overview of the IIRC’s developments, its current progress, and its short-, medium- and long-term agendas to achieve global adoption by 2025. Chapter 3 presents an introduction to another key player in the IR movement, the IRC of South Africa. Roberts and colleagues introduce the ten key considerations for a balanced report and provide examples of best practice for each consideration. The guidance offered in this chapter is of interest to both current and prospective integrated report preparers.

Chapters 4 to 6 focus on professional accountancy bodies’ advocacy for IR and their contribution to the development of reporting discourse and practice. From the KPMG perspective, in Chapter 4 Bray and Ridehalgh trace the evolution of IR through the four waves of business and accounting, illustrating how the focuses of business and corporate disclosure simultaneously changed across time. The authors share first-hand insights on KPMG’s involvement in IR and their plans to support clients through IR implementation and assurance.

Topazio and colleagues present the views of members of the Chartered Institute of Management Accountants (CIMA) on IR and the IIRC Framework in Chapter 5. Emphasis is placed on the potential benefits of adopting the IIRC Framework, which include better understanding of the sources of value creation and enhanced organizational trust and reputation. The chapter highlights the CIMA’s involvement with and advocacy for IR and details the latest IR developments. Similarly, from CPA Australia’s perspective, in Chapter 6 Purcell advocates for the adoption of the IIRC Framework and integrated thinking for all forms of business organizations. The author describes CPA Australia’s IR journey and its research, which supports the preparation of integrated reports.

Critical reflections on the development of integrated reporting

Part II, ‘Critical reflections on the development of integrated reporting’, challenges some of the perspectives presented by the professional accounting community. Academic contributors reflect on the focus and content of the IIRC Framework and discuss concerns relating to the IIRC having apparently abandoned accountability and sustainability.

The section opens with Deegan’s discussion of the accountability notion and the application of a four-step model of accountability to evaluate the IIRC Framework (Chapter 7). Despite the potential to improve reporting practices, the author argues that IIRC falls short of promoting accountability to broad stakeholder groups. Aspects such as the restricted focus on financial capital providers, a defined reporting boundary and the adoption of a weak sustainability perspective undermines the framework’s suitability for promoting meaningful reporting. Flower echoes these concerns in Chapter 8 which reflects on the development of the IIRC and its Framework and argues that the organization has abandoned the concept of sustainability. The author suggests that regulatory capture and the need for acceptance have resulted in the IIRC Framework deviating from the original intention of a framework supporting accounting for sustainability. The IIRC is criticised for advocating weak sustainability practices and promoting a business-as-usual attitude.

Brown and colleagues argue that, due to the dominating business case perspective that privileges financial capital providers, the current framing of IR fails to take into account broad stakeholder interests. Chapter 9 re-envisions IR through a critical dialogic accounting and accountability lens to propose a broader reporting initiative, which addresses the need for accountability and sustainability.

Chapters 10 and 11 discuss the similarities of the IIRC Framework with the International Financial Reporting Standards (IFRS) and intellectual capital reporting. Both point to a bleak future for the IIRC Framework. In Chapter 10, Barker and Teixeira discuss whether the IIRC and the International Accounting Standards Board (IASB) have pr...

Table of contents

• Cover
• Half Title
• Endorsements
• Title Page
• Copyright Page
• Table of Contents
• List of figures
• List of tables
• Notes on contributors
• 1. Introduction to The Routledge Handbook of Integrated Reporting: an overview of integrated reporting and this book, which entails different perspectives on a maturing field and a framework for future research
• PART I: Evolution and aspirations of integrated reporting
• PART II: Critical reflections on the development of integrated reporting
• PART III: Current integrated reporting knowledge and future research opportunities
• PART IV: Implementation of IT and IR
• PART V: The content of integrated reports
• PART VI: Assurance and investors’ perspectives on integrated reporting
• PART VII: Sustainable development and integrated reporting