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Procedia - Social and Behavioral Sciences 92 (2013) 275 279

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2013)

The Integrated Reporting Initiative from an Institutional

Perspective: Emergent Factors
Ioana- Maria Dragu a, Adriana Tiron-Tudor b*
a
Accounting and Audit Department, Faculty of Economics and Business Administration, Babes-Bolyai University, Cluj-Napoca 3400,
Romania
b
Accounting and Audit Department, Faculty of Economics and Business Administration, Babes-Bolyai University, Cluj-Napoca 3400,
Romania

Abstract

The financial crisis and its negative effects upon the global economy emerged in demand for corporate reporting transparency.
This can be attained by issuing integrated reports in which financial and sustainability reporting interrelate. In contrast to
traditional reporting where corporate responsibility or environmental reports were separate documents from the annual
financial report, by integration, the report gains commitment to the environment, social recognition, and a more efficient
management system. In 2011, the International Integrated Reporting Committee was submitting its first document on
integrated reports. Since then, the organization has been the main driver for integrated reporting practices. The IIRC has
initiated a pilot program for corporations willing to adopt integrated reporting. This initiative has gained the interest of more
than 75 worldwide organizations that decided to submit for this programme. We argue that the emerging determinants of the
voluntary adoption of an integrated reporting system are the political, cultural, and economic factors. We build the research
design on institutional theory and involves a content analysis on the reports issued by the corporations in the IIRC pilot
programme. The problem statement of this paper involves the determination of the emergent factors for integrated reporting-
from an institutional perspective. The main scope of the research is to investigate whether we can find a correlation between
the voluntary adoption of integrated reporting and the external political, cultural and economic factors as argued according to
the institutional theory. The applied research methodology implies content analysis and SPSS data processing. The findings
bring evidence that the political, cultural, and economic factor, are influencing the release of integrated reports.

2013 The Authors. Published by Elsevier Ltd.

2013 The Authors. Published by Elsevier Ltd. Open access under CC BY-NC-ND license.
Selection and/or peer-review under responsibility of Lumen Research Center in Social and Humanistic Sciences, Asociatia
Selection and/or peer-review under responsibility of Lumen Research Center in Social and Humanistic Sciences, Asociatia Lumen.
Lumen.

Keywords: integrated reporting, institutional theory, emerging factors, voluntary adoption, pilot programme;

* Corresponding author. Tel.: +0740037759;

E-mail address: ioana.dragu@econ.ubbcluj.ro

1877-0428 2013 The Authors. Published by Elsevier Ltd. Open access under CC BY-NC-ND license.
Selection and/or peer-review under responsibility of Lumen Research Center in Social and Humanistic Sciences, Asociatia Lumen.
doi:10.1016/j.sbspro.2013.08.672
276 Ioana- Maria Dragu and Adriana Tiron-Tudor / Procedia - Social and Behavioral Sciences 92 (2013) 275 279

1. Introduction

The financial crises demonstrated the need for a transparent reporting system in which financial and non-
financial elements interrelate. In a world dominated by climate change, resource scarcity, poverty, inequality, we
argue for the opportunity of integrated reporting that provides economic, social, and environmental stability for
stakeholders. This research brings a contribution to the implication of integrated reporting for international
standards, by investigating the emergent factors that determine the disclosure of integrated reports.

2. Review of Literature

2.1. Non-financial reporting initiatives

In 2009, an estimated number of 1,400 organizations were disclosing non-financial reports, while in 2010 this
number has met progress from a 29% increase. Therefore, we can expect that reporting would eventually shift to
a mixture of financial and non-financial elements, being presented in an integrated form (Eccles et. al, 2010). The
UN Global Compact Leaders Summit that in 2010 was discussing the effects of the crises for the global
economy, stating very cleat the need for a sustainable approach when rebalancing the economy (UN Global
Compact-Accenture, 2010).

2.2. Institutional Theory

We intend to justify the research on the grounds of the institutional theory. Apostolakou and Jackson (2010),
Matten & Moon (2008), Granovetter (2000), and Granovetter (1985) claim that institutions of economic, cultural,
educational, financial, and political nature maintain a significant influence upon worldwide organizations. Berg
and Jensen (2011) study integrated reporting from an intuitional approach. In an attempt to find the main
determinants for traditional sustainability reporting in contrast with integrated reporting, the scholars conduct an
empirical research upon 309 corporations selected from various sources, namely GRI reports list, GRI dataset
with best traditional sustainability reports, CRRA Reporting Award 2010. Results show that integrated reporting
correlates with the stage of economic development, national corporate responsibility, countries values system,
trade unions, private expenditure of tertiary education, ownership dispersion. The authors failed to prove the
influence of the political factor, underlining the inconsistency of data regarding the years for which we collected
information, given the fact that the analysis does not consider the presumption of major changes in the political
system. Therefore, the current research completes previous empirical studies. We aim to demonstrate the political
pressure over corporate reporting and bring evidence for both economic and cultural influence upon reporting
trends. In addition, the paper represents an update of the sample tested by Berg & Jensen (2011) as it consists of
corporations dedicated to the concept of the integrated report- as part of the pilot programme initiated by the
IIRC.

2.3. Prior research

Academic research demonstrates high interest for integrated reports. A recent ACCA report (ACCA, 2011)
presents an Australian case study of integrated reporting regarding financial and non-financial reporting trends
for ASX 50 listed companies. The report finds empirical evidence for integration of non-financial information
among annual, and sustainability reports, as well as websites- mainly all the available online information-. UK,
Germany and Spain are the most representative states that pursue on integrated reports initiatives, according to a
report released by the Harvard Business School (Eccles et al., 2012). The study involved a sample of 2,255 firms
 Ioana- Maria Dragu and Adriana Tiron-Tudor / Procedia - Social and Behavioral Sciences 92 (2013) 275 279 277

from 23 countries. The authors analyzed the stage of integrated reporting by employing measurements of index
raking and key performance indicators.

3. Methodology

The research methodology involves content analysis, disclosure index computation, SPSS data processing.
The sample consists of the 58 companies from the IIRC pilot programme. We will enroll in a content analysis of
the annual integrated reports for the period of 2010-2012. Scholars and academics use content analysis technique
in corporate disclosure studies (Mirfazli, 2008; Thompson & Zakaria, 2004; Vuontisjarvi, 2006; Perrini, 2006),
environmental data analysis (Parker, 2005; Thomson, 2007) or sustainability research (Azcarate et al., 2011). In
order to demonstrate the implications of the current study, we have formulated the research question regarding
the voluntary adoption of integrated reporting, and its emerging factors: Which are the emerging factors for
voluntary adoption of integrated reporting?. Berg & Jensen (2011) mentioned this research gap in corporate
reporting literature. In view of institutional theory, we claim first of all the political pressure. The influence of the
political factor upon domestic regulation and reporting practice is very much debated in the international
literature (Bushman & Piotroski, 2006; Ferner, 1997; Berg & Jensen, 2011). We argue that the political system
determines integrated reporting. Jensen & Berg (2011) noted that countries with a civil law political system have
an extended approach towards stakeholders while encouraging social- environmental information (Kolk &
Perego, 2010; Kolk et al., 2001). On the other hand, the common law system is much more shareholder oriented
(Kolk & Perego, 2010; Ball et al., 2000; La Porta et al., 1998). We classify common and civil law variables
according to La Porta et al (1998). Therefore, the first hypothesis takes the following form:
H1: Corporations with headquarters in civil law political system countries tend to report in an integrated
manner.
We add that we gather the data regarding common or civil law classification from the set of information made
public by the sample companies from the IIRC pilot programme, and considering their countries of origin. We
compute a disclosure index for integrated reporting, based on the component elements and principles mentioned
by the IIRC in their exposure drafts: strategic focus; connectivity of information; future orientation;
responsiveness and stakeholder inclusiveness; conciseness, reliability and materiality; organizational overview
and business model; operating context, including risks and opportunities; strategic objectives and strategies to
achieve" those objectives; governance and remuneration; performance; future outlook (IIRC, 2011).
DIIR = (di effectively disclosed)/ (di all possible cases of disclosure)
The institutional theory outlines cultural pressure as an indicator for corporate reporting (Jensen & Berg,
2011). Kolk & Perego (2010) investigated the role of the National Corporate Responsibility Index (NCRI) for
corporate social and environmental reporting. They claim that NCRI is lower in US than in Sweden. Scholars and
academics show that social and environmental disclosure is very much affected by NCRI (Kolk & Perego, 2010;
Sotorro & Snchez, 2008). When determining the NCRI level, we consider the data presented in Kolk & Perego
(2010) and AccountAbility (2005). In view of the evidence from previous research, we extend the hypothesis
issued by Jensen & Berg (2011):
H12: Corporations from countries with high responsibility index tend to report in an integrated manner.
Research on corporate disclosure reveals that companies operating in developing countries are more eager to
present information on a voluntary basis (Deegan and Islam, 2008), especially of non-financial nature (Neumayer
& Perkins, 2004; Belal, 2000), than the ones in less developed countries. In the light of the previous statements,
we particularize the assumption studied by Berg & Jensen (2011) from a different analysis perspective:
H13: Corporations from countries with a strong economy tend to report in an integrated manner.
Also, we intend to measure the economic development stage by computing an indicator previously used by
Berg & Jensen (2011), Gross National Income per capita.
278 Ioana- Maria Dragu and Adriana Tiron-Tudor / Procedia - Social and Behavioral Sciences 92 (2013) 275 279

4. Results

The results of the SPSS analysis show that the political, economic, and cultural emergent factors explain
integrated reporting disclosure in a percentage of 8.1% (see table no. 1).
Table 1. Model Summary
Adjusted R Std. Error of the
Model R R Square
Square Estimate
,034 ,284 ,081 ,1434
Source: SPSS data processing

The correlation between the emergent factors- political, economic, and social, and the degree in which
organizations disclose elements and principles from the IIRC draft can be explored through the following
econometric model (according to the table no. 2):
DIIR = 0,769 -8,559E-03 x NCRI + 3,441E-06 x GNI_CAP + 9,833E-02 x LAW,
where DIIR disclosure index of elements and principles issued by the IIRC;
NCRI National Corporate Responsibility Index;
GNI_CAP Gross National Income per Capita;
LAW Legal origin of the country: common / civil law.

The model indicates that both political and economic factor maintain a positive correlation while surprisingly,
a higher National Corporate Responsibility Index matches lower interest for reporting in an integrated manner.
However, we have to admit that the presented model might have some limitation, starting from the sample- we
analysed only 58 integrated reports-, or even the reports aggregation- we could have included other companies
that were not in IIRC pilot programme and are not adopting IR in order to compare the results. In addition, these
could be subject for further research.
Table 2. Coefficients

Coefficients
Unstandardized Coefficients Standardized
Coefficients t Sig.
Std.
B Beta
Error
(Constant) ,769 ,271 2,834 ,006
NCRI -8,559E-03 ,005 -,398 -1,699 ,095
GNI_CAP 3,441E-06 ,000 ,441 1,982 ,052
LAW 9,833E-02 ,051 ,296 1,938 ,057
Source: SPSS data processing

5. Final Remarks

This paper addresses the issue of integrated reports, namely the emergent factors of IR adoption. On behalf of
institutional theory, we claimed that the political, economic, and cultural factors maintain an influence upon the
disclosure of IR elements and principles. The findings suggest that these emergent factors have a small influence
of 8.1% on IR disclosure. Further on, statistical tests show both positive and negative correlations between IR
and its determinants- political, economic, and cultural.
The current paper brings new insights on the IIRC perspective for developing international standards on
integrated reports. The emergent literature from the area of IR compresses and mentions a series of research gaps.
 Ioana- Maria Dragu and Adriana Tiron-Tudor / Procedia - Social and Behavioral Sciences 92 (2013) 275 279 279

We believe that finding the emerging factors for IR adoption represents the most important one. In addition, this
can be further on developed by extending the analyzed sample and bringing more arguments for the institutional
theory.

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