Exploring integrated reporting in the banking industry: the multiple capitals approach
| DOI | https://doi.org/10.1108/JIC-11-2017-0146 |
| Pages | 165-188 |
| Published date | 11 February 2019 |
| Date | 11 February 2019 |
| Author | Federica Doni,Mikkel Larsen,Silvio Bianchi Martini,Antonio Corvino |
| Subject Matter | Behavioural accounting,Information & knowledge management,Accounting/accountancy,Hr & organizational behaviour,Knowledge management |
Exploring integrated reporting in
the banking industry: the multiple
capitals approach
Federica Doni
Department of Business and Law, University of Milano-Bicocca, Milano, Italy
Mikkel Larsen
Department of Group Finance, Group Tax and Accounting Policy,
DBS Group, Singapore
Silvio Bianchi Martini
Department of Economics and Management, University of Pisa, Pisa, Italy, and
Antonio Corvino
Department of Economics, University of Foggia, Foggia, Italy
Abstract
Purpose –The purpose of this paper is to investigate the engagement with integrated reporting (IR)
of the Development Bank of Singapore (DBS), as one of the banks that pioneered IR. Banking industry
members face critical sector-specific issues regarding the use of capitals, especially the disclosure of
relational and natural capital-related information, and reporting of the outcomes of capitals. This study
examines an innovative approach to accounting for multiple capitals adopted by DBS during its journey
toward IR.
Design/methodology/approach –This empirical research follows the case study method, using
semi-structured interviews with DBS’s managers, and analyzing reports and other documentation.
Findings –The authors find that DBS re-conceptualizes, re-categorizes and measures multiple capitals as a
form of non-financial value using the balance sheet approach to make visible the interactions and potential
tensions (trade-offs) among capitals.
Research limitations/implications –Case studies are best used to understand a specific context, so the
findings of this study cannot be generalized statistically. However, the study does provide insights into
the banking industry that may be applicable to other organizations.
Practical implications –The categorization and reporting of multiple capitals using the balance sheet
approach and the integration of the balanced scorecard are innovative operationalizations of the International
oIRWFramework.
Originality/value –This study provides an innovative approach to the categorization and
measurement of multiple capitals. It represents a step toward reducing the gap between research and
practice on IR.
Keywords Case studies, Categorization, Multiple capitals, Integrated reporting, Business model,
Banking industry
Paper type Case study
Journal of Intellectual Capital
Vol. 20 No. 1, 2019
pp. 165-188
© Emerald PublishingLimited
1469-1930
DOI 10.1108/JIC-11-2017-0146
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1469-1930.htm
JEL Classification —M14, M20, M41
Erratum: It has been brought to the attention of the publisher that the article “Exploring integrated
reporting in the banking industry: the multiple capitals approach”Doni, F., Larsen, M., Bianchi, M.S.
and Corvino, A. (2019), published in Journal of Intellectual Capital, was excluded from the special issue
“Extending intellectual capital through integrated reporting”due to an editorial error.
The article has now been included in Journal of Intellectual Capital, Vol. 20, Issue 1. When citing the
article, the citation should be given as Federica Doni, Mikkel Larsen, Silvio Bianchi Martini and
Antonio Corvino, (2019) “Exploring integrated reporting in the banking industry: the multiple capitals
approach”,Journal of Intellectual Capital, Vol. 20 No. 1, https://doi.org/10.1108/JIC-11-2017-0146.
Emerald sincerely apologises to the authors for any inconvenience caused.
165
The multiple
capitals
approach
1. Introduction
The integrated reporting (IR) approach to corporate reporting, with its emphasis on going
beyond financialresults, has increasinglygained prominence and been widely debatedamong
both scholars and practitioners. This growing interest emphasizes the need to assess best
practice models (Eccles et al., 2015), and to highlight the most important issues for this
innovative form of reporting. In 2013, the International Integrated Reporting Council (IIRC)
issued the International oIR WFramework (IIRC, 2013a, b), but it remains unclear how
companies can implement its Guiding Principles and Content Elements operationally
(de Villiers et al., 2015) and whether this process can lead to innovative changes in
corporate reporting. Over recent decades, there have been several attempts to integrate
different typesof information into reports, withmixed success ( Jose and Lee,2007; Tilt, 2008).
The development of IR is strongly linked to business sustainability (A4S The Prince’s
Accounting for Sustainability Project, 2013; Churet and Eccles, 2014; Knauer and Serafeim,
2014; Vesty et al., 2015) because it is a way toshow how an organization createsand sustains
value (IIRC,2013b; Eccles and Krzus, 2010;Eccles et al., 2014; Adams, C.A., 2015).IR combines
economic, social and environmental considerations, addressing factors that arguably led to
the recent global financial crisis (ISSD, UNEP FI, The Blended Group, 2012) and addressing
the call for greater transparency in corporate reporting. IR is also likely to change
management approaches to business strategy and value creation, and provides an effective
way to communicate with stakeholders and the community.
To date, most empirical studies on IR have adopted a supra-national/international or
national perspective (Ayoola and Olasanmi, 2013; Stubbs and Higgins, 2014), across general,
industry or organizational sub-categories (Dumay et al., 2016). Only a few studies have
focused on a single organization (Parrot and Tierney, 2012; Busco et al., 2013, Dumay and Xi
Dai, 2014; Lodhia, 2015; Vorster and Marais, 2014; Lueg et al., 2016). Some scholars have
suggested that a case study approach (de Villiers et al., 2014, 2015) might help to better
understand how organizations adapt IR to their needs.
In the banking industry, some critical, sector-specific issues require more attention to be
paid to managing non-financial capitals. Traditionally, banks have been more focused on
financial and human capital, but increasing challenges, such as digitalization and
disintermediation, have increased the importance of other forms (IIRC, 2015a). At present,
human, intellectual and social and relational capitals are arguably the most critical forms of
capital for banks. Several developments in the banking industry have been combining to
create strong incentives for banks to report how they manage these forms of capital:
(1) the introduction of consumer companies intensifies the competitive landscape for banks;
(2) new technology has led the industry to fundamentally revisit its value proposition to
address the challenges of digitalization and disintermediation;
(3) reputational damage to the banking industry in the wake of the 2008 financial crisis
led to some cases of price/bookvalues being below those of many othersectors[1]; and
(4) awareness that, in a competitive arena, talented human capital may become scarce.
Acknowledging these trends and developments in the banking industry, the IIRC (2015a, 2016)
recently issued two documents clarifying the application of the IR concepts of capitals
(especially social and relational capital) and outcomes. Most forms of non-financial capitals
cannot immediately be captured on a traditional balance sheet. For instance, investments in
new technology may provide future financial returns but might also create immediate
intellectual and human capital. Banks have to manage several causal (linear and non-linear)
relationships and potential trade-offs between the different forms of capital. Against this
background, it is perhaps surprising that an i ndustry study by the IIRC Banking Industry
Group[2] found that little more than half (55 percent) of banks disclosed information on capital
166
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