Exploring integrated thinking in integrated reporting – an exploratory study in Australia
| DOI | https://doi.org/10.1108/JIC-06-2016-0068 |
| Date | 10 April 2017 |
| Pages | 330-353 |
| Published date | 10 April 2017 |
| Author | Tianyuan Feng,Lorne Cummings,Dale Tweedie |
| Subject Matter | Information & knowledge management,Knowledge management,HR & organizational behaviour,Organizational structure/dynamics,Accounting & Finance,Accounting/accountancy,Behavioural accounting |
Exploring integrated thinking
in integrated reporting –an
exploratory study in Australia
Tianyuan Feng, Lorne Cummings and Dale Tweedie
Department of Accounting and Corporate Governance,
Macquarie University, Sydney, Australia
Abstract
Purpose –Integrated thinking is central to the International Integrated Reporting Council’s (IIRC’s)
integrated reporting (IR) framework, which is in turn is related to a potential resurgence of intellectual capital
(IC) reporting. However, it remains unclear how key IR stakeholders understand this concept in theory
or practice. The purpose of this paper is to explore how key stakeholders interpret integrated thinking; and
how pilot organizations are applying integrated thinking in practice.
Design/methodology/approach –The study involved in-depth semi-structured interviews with key IR
stakeholders in Australia, including two IR pilot organizations, one professional association, an accounting
professional body, an accounting firm and two IIRC officials.
Findings –First, the IIRC has not fully defined and articulated the concept of integrated thinking, and there
is no shared consensus among practitioners. Second, there is evidence of an evolving understanding of
integrated thinking within practice. What remains unclear is how this understanding will develop over time.
Research limitations/implications –Since interviews were conducted with a relatively small sample of
participants in Australia, the results may not be generalizable across different contexts. The study
emphasizes the need to interpret carefully IR’s potential contribution to organizational practice through either
reporting in general, or IC reporting in particular.
Originality/value –Despite the centrality of integrated thinking to IR, there has been limited
research to date on the concept. Clarifying what integrated thinking means in practice can improve
our understanding of a key IR concept, and can advance our understanding of IR’s potential to improve
IC reporting and research.
Keywords Sustainability, Accounting, Integrated reporting, Integrated thinking
Paper type Research paper
1. Introduction
The International Integrated Reporting Council’s (IIRC’s) framework for integrated
reporting (IR) has attracted academic attention in both mainstream corporate reporting and
intellectual capital (IC) research. The IIRC was originally founded by two sustainability
reporting organizations –the Global Reporting Initiative (GRI) and the Prince’s Accounting
for Sustainability (A4S) project –in 2010. According to the IIRC, IR aims to provide a more
holistic and concise depiction of how a company creates and sustains value (International
Integrated Reporting Council (IIRC), 2011, 2013a). The IIRC’s version of IR requires
organizations to report their performance against six distinct types of capital (including
financial, social and relationship, intellectual, manufactured, and human and natural
capital), and to explain how these capitals are interconnected in the organization’s value
creation strategy (IIRC, 2013a). Although the IIRC’s version of IR has been influenced by
prior frameworks, it retains a distinct reporting agenda (Dumay et al., 2016; Tweedie and
Martinov-Bennie, 2015).
Journal of Intellectual Capital
Vol. 18 No. 2, 2017
pp. 330-353
© Emerald PublishingLimited
1469-1930
DOI 10.1108/JIC-06-2016-0068
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1469-1930.htm
The authors thank the a nonymous reviewer s for their detailed com mentary, which sub stantially
improved the manusc ript. The authors ar e also especially gra teful to Associate P rofessor John
Dumay and Assistan t Professor Rosa Lomb ardi for their constr uctive feedback and e xpertise in
helping to finaliz e this paper. Their excellent and patient editoria l assistance was invaluable acro ss
the review process .
330
JIC
18,2
For corporate reporting theorists, IR offers potential to address perceived
shortcomings in mainstream corporate reporting (Strong, 2014; Owen, 2013). These
shortcomings include claims that financial and sustainability reports are too complex
(IIRC, 2013a; Eccles and Saltzman, 2011), and that too many disparate reporting
frameworks clutter the reporting market (Rowbottom and Locke, 2016). Extant financial
reporting has also been criticized for being neither timely nor relevant (Adams, 2015;
Krzus, 2011). According to IR’s proponents, the traditional backward-looking information
financial statements provides, and the absence of comprehensive intangible assets
information, is of limited use to investors seeking to evaluate a company’slong-term
prospects (IIRC, 2011; Adams and Simnett, 2011; Hampton, 2012). From the IIRC’s
perspective, the more important critique is that current corporate reporting does not
capture “critical interdependencies between strategy, governance, operations and
financial and non-financial performance”(IIRC,2011,p.2).
At the same time, many IC practitioners and researchers also see IR as one way to
advance IC reporting. IR requires organizations to report on three key IC capitals: human
capital, relational capital and structural capital (Dumay, 2016, p. 175; see also Dumay
et al., 2016). Whilst some scholars argue that IC reporting and research is suffering
diminishing practitioner engagement and impact, many also view IR as a way of
continuing IC research through other means (Dumay, 2016). The World Intellectual
Capital Initiative (WICI) has also been working closely with the IIRC to ensure that
IR recognizes “IC”as a critical source of an organization’s value creation. As the IIRC’s
version of IC only refers to “organizational, knowledge-based intangibles”(IIRC, 2013a, p.
12), WICI has extended “IC”to three categories including: organizational capital, human
capital and relationship capital (WICI, 2016). IR and IC also share a common focus on
value creation (Dumay, 2016). IR’s purpose is to connect a corporation’s strategy,
governance, business model and capitals and communicate value creation to
stakeholders. IC reporting also focuses on value creation, albeit within a more limited
domain of intangible resources. Consequently, IR’s success or failure has implications for
IC research, especially for third-stage research into how concrete IC reporting strategies
or processes impact organizations (Dumay, 2013; Dumay et al., 2016).
This paper focuses on one underexplored aspect of IR, integrated thinking, which is a
core concept of the IR framework (IIRC, 2013a; Tweedie and Martinov-Bennie, 2015). In
this framework, the IIRC (2013a, p. 2) defines integrated thinking as an “active
consideration of the relationship between different factors affecting the company’s
value-creation processes,”(p. 2), and claims that IR is “a process founded on integrated
thinking”(p.33).AccordingtotheIIRC,adopting IR should encourage a shift in
managerial mindset from “silo thinking”to “integrated thinking,”in which senior
managers actively re-think their strategy, business model and corporate governance (p.
33). Integrated thinking is also a core concept in the IIRC’s long-term agenda to establish
“a world in which integrated thinking is embedded within mainstream business practice”
(emphasis added) (p. 3). Purported benefits of this shift include more effective use of
available capital and resources in business strategy (Tilley, 2014), aligning the interests
of disparate stakeholders (Perego et al., 2016) and greater awareness of sustainability
concerns (The Princes’Accounting for Sustainability Project (A4S), 2010a, b).
However, despite the centrality of integrated thinking to the IIRC’s reporting agenda, the
IIRC has provided relatively little explanation of the integrated thinking concept
(IIRC, 2013a; WICI, 2013). While some early discussions are emerging in the academic
literature (Oliver et al., 2016), the integrated thinking concept has had very little systematic
analysis in either mainstream corporate reporting or IC academic research,
especially relative to its centrality in the IIRC’s framework and agenda (see e.g. Velte and
Stawinoga, 2016). With limited practical guidance by the IIRC and academic research, it is
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Exploring
integrated
thinking in IR
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