Integrated Thinking in Australia

Journal of Intellectual Capital
Exploring integrated thinking in integrated reporting – an exploratory study in

Australia
Tianyuan Feng, Lorne Cummings, Dale Tweedie,
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JIC
18,2 Exploring integrated thinking
in integrated reporting – an
exploratory study in Australia
330 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).
The authors thank the anonymous reviewers for their detailed commentary, which substantially
Journal of Intellectual Capital improved the manuscript. The authors are also especially grateful to Associate Professor John
Vol. 18 No. 2, 2017
pp. 330-353 Dumay and Assistant Professor Rosa Lombardi for their constructive feedback and expertise in
© Emerald Publishing Limited helping to finalize this paper. Their excellent and patient editorial assistance was invaluable across
1469-1930
DOI 10.1108/JIC-06-2016-0068 the review process.
For corporate reporting theorists, IR offers potential to address perceived Exploring
shortcomings in mainstream corporate reporting (Strong, 2014; Owen, 2013). These integrated
shortcomings include claims that financial and sustainability reports are too complex thinking in IR
(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 331
financial statements provides, and the absence of comprehensive intangible assets
information, is of limited use to investors seeking to evaluate a company’s long-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). According to the IIRC, 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
JIC not surprising that this concept is still obscure to many practitioners. This could lead to a
18,2 costly failed reporting exercise for organizations using IR, and confuse stakeholders about
the content and purpose of the information organizations report.
This study aims to help clarify what integrated thinking means, and to provide an
initial exploration of how far integrated thinking is being achieved in practice.
To achieve this aim, the paper addresses two key research issues. First, it examines what
332 integrated thinking means to key IR stakeholders, including how closely stakeholder
and practitioner interpretations of integrated thinking align with the IIRC’s own
definition. Second, the paper explores how, if at all, practitioners are implementing
integrated thinking. The study finds that the IIRC is still clarifying what integrated
thinking means, and that the meaning of integrated thinking is fluid and evolving
amongst reporting organizations and key IR actors. Inter alia, the study then highlights
the potential gap between these interpretations and the IIRC’s agenda. The IIRC
(2011) intends IR to provide a more effective reporting regime for organizations to adapt
to a twenty-first century environment. However, it is not apparent that the core
integrated thinking concept driving this agenda is either clear enough, or well
developed enough in practice, to realize this agenda. In turn, this finding raises further
questions about IR’s capacity to help genuinely embed IC ideas or reporting within
practitioner organizations.
The paper makes two main contributions to prior research. First, the paper
contributes to the growing literature on IR (see Dumay et al., 2016; Velte and Stawinoga,
2016), by investigating the meaning of a critical but underexplored IR concept. Second,
the paper provides an initial exploration of the issues organizations face in attempting to
operationalize this sometimes opaque and fluid concept. Insofar as scholars perceive IR
as one way of advancing IC reporting and research (Dumay et al., 2016; Dumay, 2016),
this analysis contributes to prior research on how to enact IC concepts. More precisely,
insofar as IR is one form of IC reporting, the study contributes to what Guthrie et al.
(2012) term third-stage IC research, which aims to develop “a critical and performance
analysis of IC” (p. 69) practices in action. Specifically, this study brings together
representatives of the IIRC, key players in the IR field and reporting organizations to
interrogate their views of integrated thinking and IR, and to assess the extent to which
these abstract reporting concepts can be realized in practice.
The remainder of the paper is structured as follows. Section 2 explores the emergence of,
and precedents for, IR and integrated thinking, including South Africa’s IR and Eccles and
Krzus’s One Report. However, the paper emphasizes that the IIRC’s version of IR has
a distinctive reporting approach and agenda. Section 3 outlines the research methods,
including subject selection, interview structure and data analysis. Section 4 and 5 analyze
the interview data across two main thematic areas: how different IR stakeholders interpret
integrated thinking; and how practitioners operationalize integrated thinking at different
organizational levels. This analysis highlights key differences or gaps between the IIRC’s
expectation of integrated thinking and how stakeholders interpret and enact this concept.
The conclusion highlights the study’s primary implications and contributions, and identifies
directions for future research.
2. IR and integrated thinking: precursors and precedents

2.1 IR
The IIRC’s reporting agenda must be understood against the background of three different
IR models[1] that preceded it (see also Dumay et al., 2016; Tweedie and Martinov-Bennie, 2015).
One early exposition of the IR concept was Eccles and Krzus’s (2010) One Report: Integrated
Reporting for a Sustainable Strategy. In common with the IIRC, Eccles and Krzus (2010) describe
IR as linking financial and non-financial information to communicate with stakeholders.
However, while Eccles and Krzus’s (2014; see also Eccles and Serafeim, 2015) recent work is Exploring
more focused on the IIRC’s version of IR, their original approach had distinctive elements. For integrated
example, where the IIRC primarily aims to report to investors, Eccles and Krzus’s (2010) version thinking in IR
of IR attempts to clarify each stakeholder’s interests and how they “complement […] and
compete against each other” (Eccles and Krzus, 2010, p. 11). Eccles and Krzus’s approach also
aimed to incorporate online web tools into mainstream reporting, in order to create an up to date
platform that all stakeholders could access and customize to their needs. The IIRC and King III 333
also support using technology (IIRC, 2011; Institution directors of Southern Africa (IDSA), 2009),
but with much less emphasis and prominence.
The IIRC’s main practical precedent is the Institute of Directors in South Africa’s
(IDSA’s) third report on governance in South Africa. The IDSA’s (2009, p.108) report defines
IR as “a holistic and integrated representation of the company’s performance in terms of
both its finance and sustainability.” While the IIRC focuses on ensuring long-term financial
sustainability, a distinctive feature of the South African model is its broader agenda
for organizations to report on social and environmental sustainability (Tweedie and
Martinov-Bennie, 2015). The South African IR model also has the broader social objective of
helping South Africa shift toward a stakeholder society that integrates social and
environmental issues into company operations. In contrast to Eccles and Krzus (2010),
the Institution Directors of Southern Africa (2016) envisaged IR as primarily a tool for
organizations to improve their corporate governance. With the recent release of the King IV
report (2016), the IDSA has made several revisions to its King III iteration, including moving
from “apply or explain” (King III) to “apply and explain,” and endorsing the IIRC’s version of
IR (Deloitte, 2016). These developments provide evidence of convergence between the
South African King report series and the IIRC’s IR concept.
Although the IIRC only initiated its own IR version in 2010, the IIRC’s framework has
quickly become a dominant global player. In the IIRC’s narrative, IR is an independent
reporting regime that has evolved out of limitations of existing corporate reporting
frameworks, and aims to overcome the inherent disadvantages of these frameworks
(IIRC, 2013a). To describe how organizations create value, the IIRC’s distinctive approach is
to report on multiple capitals that present “stocks of value […] that are increased, decreased
or transformed through the organization’s business activities and outputs” (IIRC, 2013a,
p. 33). The IIRC distinguishes six categories of capital – financial, manufactured, intellectual,
human, social and relationship, and natural – to explain how the external environment,
relationships and resources interact (IIRC, 2013a). The IIRC states that IR should be both
concise and reliable, by focusing on only material matters and by balancing positive and
negative perspectives (IIRC, 2013a). IR should also demonstrate how a company’s strategy
affects its use of capitals and its ability to create value in the short, medium and longer term
(IIRC, 2013a).
A key feature of the IIRC’s IR concept is that the reporting process is meant to create
wider changes in business practice, rather than simply changing reporting mechanisms
themselves. This interventionist reporting agenda is evident in the distinction the
IIRC (2013a) draws in its IR framework between the terms integrated reporting and
integrated report. The IIRC (2013a, p. 33) defines an integrated report as:
[…] a concise communication about how an organization’s strategy, governance, performance and
prospects, in the context of its external environment, lead to the creation of value over the short,
medium and long term.
By contrast, the IIRC (2013a, p. 34) defines integrated reporting as:
[…] a process founded on integrated thinking that results in a periodic integrated report by an
organization about value creation over time and related communications regarding aspects of value
creation (emphasis added).
JIC In the IIRC’s view, therefore, IR should result in deeper internal changes within
18,2 organizations than simply preparing one more report.
Despite the IIRC’s growth, IR has been critiqued in both IC and other accounting
literature (Dumay et al., 2016). Social and environmental accountants have extensively
criticized the perceived failure of the IIRC’s IR framework to promote genuine
sustainability (e.g. Flower, 2015; Thomson, 2015; Milne and Gray, 2013), or even to
334 substantially change early adopters’ reporting practices (e.g. Stubbs and Higgins, 2014).
Empirical studies have also found that managers are still unsure when and how to adopt
IR, let alone integrated thinking (Sierra-Garcia et al., 2013; Jensen and Berg, 2012). In IC
research, Dumay (2016) argues that IR continues what he terms the “wealth creation
myth,” in which IC reporting is (erroneously) thought to “discipline management and
boards with positive economic consequences” (Bismuth and Tojo, 2008; cited in Dumay,
2016, p. 171). Consistent with other critical IR research, Dumay (2016) argues that IR is in
fact following the path of prior IC reporting initiatives in failing to gain substantive
traction with practitioners, investors and other key stakeholders outside of internal
academic discourse.
2.2 Integrated thinking

One difficulty in interpreting integrated thinking is the absence of clear precedents in
reporting contexts. Martin and Austen (1999) introduce the concept of “integrative
thinking” as part of a decision-making model (the choice cascade model) in the business
leadership literature. Their integrative model sought to enable managers to solve the
tension between two (often conflicting) choices of profit maximization and social and
environmental sustainability. Oliver et al. (2016) view integrated thinking as a method of
solving the tension between (p. 299). Following systems thinking literature, Oliver et al.
(2016) assume that integrated thinking is directly linked with sustainability.
This assumption is similar to the concept of integrated thinking in two other papers
that relate IR to long-term financial performance (Churet and Eccles, 2014; Knauer and
Serafeim, 2014).
The closest precedent to the IIRC’s integrated thinking concept is used by its
founder, the A4S project – although this version is still different to that of the IIRC.
A4S defines integrated thinking as “embedding sustainability into decision-making and
strategy” (A4S, 2010a, Para 1). A4S focuses its programs on promoting environmental
sustainability within the finance, accounting and investment community.
A4S subsequently used case studies of how organizations embed sustainability to
develop a ten-step model for integrating natural and social and relationship capital into
mainstream decision-making and strategy.
Yet despite these semantically related concepts, there is no clear evidence that prior
integrated thinking concepts have influenced the IIRC’s own approach. From the IIRC’s
perspective, integrated thinking is primarily about organizations creating value using six
capital types, rather than about addressing social and environmental sustainability in
particular (Tweedie and Martinov-Bennie, 2015; see also IIRC, 2012a). Consequently,
although A4S (2010a, b) sees strategic benefits in integrated thinking, the IIRC’s notion of IR
has a distinctive meaning that focuses on strategic organizational goals (e.g. IIRC, 2012b).
The IIRC (2013a, p. 2) defines integrated thinking as the:
[…] active consideration by an organization of the relationships between its various operating and
functional units and the capitals that the organization uses or affects.
According to this definition, integrated thinking aims to “break down silos” between
different organizational functions and units, making information flows smoother or more
efficient and improving internal communication (IIRC, 2013a).
The IIRC’s background paper on connectivity (WICI, 2013) provides one illustration Exploring
of the intended relationship between integrated thinking and IR (see Figure 1), in which IR is integrated
meant to make corporate reporting more transparent by making internal management thinking in IR
processes evident to external audiences. The IIRC (2013a) further distinguishes four
elements or aspects of the integrated thinking process:
(1) how an organization uses, affects and makes trade-offs in relation to the six
categories of capitals; 335
(2) clear analysis of the organizations’ capacity to respond to the legitimate needs and
interests of key stakeholders (including shareholders);
(3) how an organization structures its business model and strategy to deal with
challenges from its external environment, including the risks and opportunities
it faces; and
(4) the past, present and future activities, performances and outcomes in relation to the
six capitals.
According to the IIRC, integrated thinking’s primary purpose is to assist an organization’s
management and board to identify and understand all the important factors that influence
the business model, and thereby to help generate strategies that ensure businesses create
value over the short, medium and long term (The South African Institute of Chartered
Accountants (SAICA), 2015).
The King IV report, which is the latest development in the IR field, describes
integrated thinking as its “underpinning philosophy” (Institution Directors of Southern Africa,
2016, p. 23). Recent external analysis (Deloitte, 2016) also claims that an integrated thinking
philosophy is deeply embedded throughout the King IV code. However, despite the ongoing
centrality of integrated thinking to IR, and the confusing variety of integrated thinking
concepts in various fields, there has been relatively little targeted exploration of this concept in
the growing IR literature (see Perego et al., 2016; Dumay et al., 2016). Such targeted exploration
is especially critical if IR is to move to what Dumay et al. (2016, p. 178) term, adapting
Guthrie et al. (2012), “third-stage” IR research which “focuses on performative IR.” Inter alia,
Dumay and Dai’s (forthcoming) study raises practical issues surrounding IR and integrated
INTEGRATED THINKING
Connecting
strategy, Connecting
governance, past functional
performance and departments
future prospects
INTEGRATED REPORTING
what information how information

is connected is connected
Figure 1.
Integrated thinking
and integrated
reporting
Source: World Intellectual Capital Initiative (2013)
JIC thinking. For example, insofar as integrated thinking functions as a management control, it
18,2 might not always have a role to play in all organizations, especially those with a strong
organizational culture. More broadly, performative IR research should focus on
practitioners’ perspective if the perceived gap between IR practice and academic research
is to be bridged.
Insofar as IR is one potential way of advancing IC reporting, understanding what
336 integrated thinking means in IR is also one way of extending third-stage IC reporting by
assessing the extent to which IC reporting could meaningfully employ integrated thinking.
In IR, “integrated thinking” requires an active consideration of both tangible and intangible
resources and the interconnections between strategy, governance and the business model
(IIRC, 2013a). In IC reporting, “integrated thinking” might be applied to actively consider
intangibles and businesses’ value creation processes. In the WICI’s latest framework (2016),
“intangibles” refer to “non-physical resources which, either alone or in conjunction with
other tangible or intangibles resources, can generate a positive or negative effect on the
value of the organization in the short, medium and long term” (p. 13). Therefore, further
investigating how key stakeholders interpret or operationalize “integrated thinking”
can contribute to evaluating the capacity of both IR and IC reporting to bridge the gap
between academic research and practice that Dumay et al. (2016) and others observe.
2.3 Key research questions

This paper’s research questions aim to address Dumay et al.’s (2016) call for more “critical and
performative” IR research. In articulating this call, Dumay et al. (2016) identify key parallels
between IR and IC research. After elucidating four distinct research stages in IC research
(Petty and Guthrie, 2000; Guthrie et al., 2012; Dumay and Garanina, 2013), Dumay et al.
(2016) argue that IR research occupies a comparably research arc, but is comparatively
underdeveloped. Specifically, Dumay et al. (2016) argue that IR research currently occupies the
middle ground between second (assessing impact) and third (critical and performative) stage
academic research. This study especially contributes to the third stage of IR research by
exploring how different stakeholders conceptualize and enact integrated thinking in practice.
The study investigates two research questions:
RQ1. How do key stakeholders interpret integrated thinking?
RQ2. To what extent do practitioners achieve “integrated thinking” in practice?
This paper will study what integrated thinking means to key stakeholders, and what
organizations are, or could be, doing to enact integrated thinking. By examining the views
and experiences of key stakeholders, including professional groups, large accounting firms
and other interest groups, this study explores the attitudes of those who have both an
interest in IR and a critical role in determining whether IR succeeds. In investigating these
stakeholders’ experiences and views, the study particularly aims to investigate any
differences or gaps between how various participants interpret and enact integrated
thinking, focusing on how organizations apply this concept in practice.
3. Research methodology
3.1 Research design
This study uses in-depth, semi-structured interviews to interrogate what integrated
thinking means to key IR stakeholders, and to identify how – if at all – organizations
implement IR in practice. An in-depth study of a small number of instances is well suited for
understanding concepts or aspects of human behavior that are contested or unclear
(Morgan and Smircich, 1980). Since the study aims to explore what integrated thinking
means to multiple stakeholders, it includes a cross-section of IR stakeholders rather than a
single case or participant group. The interview method enables a more detailed and Exploring
deeper response from interviewees without limiting their answers to particular choices integrated
(Mack et al., 2005). This study entailed seven semi-structured interviews of 45-60 minutes thinking in IR
duration. While this is a relatively small sample, it is appropriate for an initial exploratory
study of a concept that has seen so little systematic research, and which is part of a
framework that is also at a relatively early stage. The sample in this study includes two
managers/CFOs from two Australian organizations that have been members of the IIRC’s 337
Pilot Program since 2012, two directors/managers from an accounting professional body,
a Big 4 accounting firm and two director/senior managers from the IIRC (Table I).
All participants are familiar with the IR concept and are directly engaged with their
organization’s IR processes. Although a small group of interviewees, their responses are
able to help researchers develop deeper insights into integrated thinking practices, including
generating theoretical propositions for further research (see also Yin, 2014).
Interviews were conducted between July and August 2014, either face-to-face at the
interviewees’ work premises or via telephone. This study adopted a “localist” approach to
conducting interviews (Qu and Dumay, 2011, p. 247). This technique enables researchers to
modify interview questions according to interviewees’ responses, and to adjust the terms
they use, with the aim of capturing the interviewees’ own world-view. The initial interview
questions were structured around IR practices that might indicate integrated thinking,
rather than alerting interviewees to the study’s focus by directly asking about integrated
thinking early in the interview. This approach assumes that interviewees might not use the
term “integrated thinking,” yet may behave in a way consistent with the concept.
Interviewees might also naturally outline examples of integrated thinking in IR processes,
as opposed to following the interviewer’s prompts to highlight their specific view of
“integrated thinking” during the interview. This approach aimed to ensure that interviewees
displayed a degree of self-awareness about what integrated thinking was, rather than being
led by the interviewer. Only at the end of interview did the researchers directly ask all
interviewees “what is integrated thinking?”
One difficulty in constructing the interview strategy and questions was the lack of a clear
concept of integrated thinking in the IIRC’s own framework. To identify key themes, the
researchers initially searched the IIRC’s publications for all references to integrated thinking
in their own publications[2]. While these references indicate what integrated thinking is
meant to achieve, they are not clear enough to formulate an interview approach.
Hence, the paper developed a composite list of nine potential aspects of integrated thinking
across the IIRC’s and A4S’s various discussions (see the IR framework and A4S’s 10 main
steps to integrated thinking). This analysis found common features or “markers”
of integrated thinking in the IIRC’s and A4S’s publications, despite each framework’s
different intent. These features are: Board and senior management involvement,
departmental/divisional involvement, middle management involvement, individual
responsibility and engagement, how capitals affect business value creation, monitoring,
Pseudonym Positions Organization Perspectives
P1 Manager Pilot organization 1 (PO1) Practitioners’ view

P2 Deputy CFO Pilot organization 2 (PO2)
PA1 Director Professional association (PA)
PB1 Director Professional body (PB) Other key interest groups’ view
A1 Manager Accounting firm (AF) Table I.
I1 Director IIRC Official view Summary of
I2 Senior Manager IIRC interviewees
JIC benchmarking and reporting, integrating key elements into business strategy, performance
18,2 evaluation related to IR and education and training.
The initial objectives of the interviews were then to explore the extent to which these
aspects captured participants’ own understanding of integrated thinking, and the extent to
which this was actually occurring. Since the IIRC’s (2013a) model of integrated thinking
could include myriad variables, the interviews particularly focused on the application of
338 integrated thinking to two capital types: natural capital; and, social and relationship capital.
Since these capitals have been used in social and environmental reporting for many years,
it was anticipated that participants would have a more developed understanding of natural
capital and social and relationship capitals than other capital types (excluding financial
capital). The interview questions for pilot organizations, and for key players in IR and the
IIRC, respectively, were divided into two parts. Part 1 concerned what organizations should
do to implement each aspect of integrated thinking. Part 2 concerned what organizations

actually do. Dividing the questions into these two parts enabled the researchers to capture
any differences or gaps between what key stakeholders interpret integrated thinking to
be and how pilot reporting organizations enact IR and integrated thinking in practice.
3.2 Data analysis

The principal researcher recorded and transcribed all interviews, and then open-coded all
interview transcripts to identify shared themes. Although not following a grounded theory
methodology, the research analysis used standard open-coding methods to initially identify
shared themes from the interviews, and then to construct over-arching codes or themes
across each category (see Corbin and Strauss, 1990; Flick, 2013). One limitation of this
coding approach is an inherent subjectivity, since different researchers might
extract different meanings from the same research data. This paper accepts the
hermeneutic-interpretivist postulate that all research requires some subjectivity (see Taylor,
1985; Tweedie and Martinov-Bennie, 2015). Nonetheless, to minimize substantive
misinterpretations of the interview transcripts, all researchers reviewed the shared
themes, and discussed and resolved differences.
4. Findings
Following the two research questions identified above, this section identifies how
participants interpret integrated thinking and how, if at all, they operationalized
the concept. Although multiple themes emerged from the coding and analysis process, the
section focuses on four key themes that most directly address the key research questions.
As outlined, further below, Themes 1 and 2 indicate that integrated thinking is still an
unclear and evolving concept. These two themes directly answer the first research question:
Theme 3 and 4 address the second research question:
These two themes show that although there are some indicative signs of integrated thinking
in practice, there is also evidence of substantive barriers to implementing some form of
integrated thinking in organizations.
4.1 Theme 1 – no consensus concept of integrated thinking

4.1.1 IIRC officials’ view. Consistent with the lack of clarity in prior research, the empirical
study found no consensus on what the integrated thinking concept means or entails.
IIRC officials (I1 and I2) conceded that although the IR framework formally defines
integrated thinking, the IIRC does not explain this concept well. Although both officials Exploring
explain integrated thinking in similar terms, their shared explanations were largely derived integrated
from IIRC publications, rather than fully developed philosophies. For example, I1 – a senior thinking in IR
IIRC director – described integrated thinking as “actively break[ing] down the silos within
organizations” and enabling “better communication between different operating units.”
The IIRC manager (I2), described integrated thinking as more about “a holistic understanding
of all aspects of business” (I2). In turn, she viewed the IR framework as a useful tool to help 339
organizations achieve this type of “holistic understanding.” For her, the IR framework
“examines whether the organization has gone through the full processes to determine which
capitals are not material [to the business] before stakeholders raise the questions” (I2).
Both I1 and I2 also viewed engaging employees as critical to integrated thinking, since the
IIRC expects the organization to “speak with one voice” (I1) on integrated thinking.
Yet beyond implementing the framework and engaging stakeholders, there was little further
indication of integrating thinking’s defining ideas, commitments or principles.
4.1.2 Practitioners and other stakeholders’ view. At the same time, practitioners and other
key IR actors found integrated thinking an unclear and “challenging” (PA1, P2) concept.
Due to this lack of clarity, stakeholders tended to link integrated thinking to more familiar
concepts or “institutional templates” (Ahrens and Chapman, 2000), such as those drawn from
prior sustainability reporting. The director from the professional body (PB1) conceptualized
integrated thinking as a measurable way of “controlling” IR. The manager of pilot
organization 1 (P1) interpreted integrated thinking more in terms of organizational culture.
From his perspective, integrated thinking is when individuals habitually consider how their
own decisions affect other business units and stakeholders. The accounting firm manager
(A1) held a similar view. Insofar as practitioners and other stakeholders interpret integrated
thinking in light of the organization’s particular circumstances, how integrated thinking is
both conceptualized and operationalized is likely to depend in part on local contextual factors.
For example, P2 argues that integrated thinking requires a deep understanding and
experience of a specific business context, rather than a broad and abstract concept alone.
Other interviewees challenged the IIRC’s current definition of integrated thinking.
The professional association director (PA1) is ambivalent about the IIRC’s stated agenda to
use integrated thinking to break down organizational silos, since “silos have a role to play”
in organizations. The professional body director (PB1) questioned whether it is possible to
extract a shared concept of integrated thinking from disparate organizational actors; asking:
“whose integrated thinking is reflected in IR? The board? Middle management?
As integrated thinking is an attitude, a way of looking, it should be different between
people.” Given the IIRC’s limited guidance, the deputy CFO (P2) is concerned that genuinely
appreciating integrated thinking’s value requires a “far better understanding of different
[corporate reporting] frameworks.” These views shows that not only is the IIRC’s concept of
IR unclear and diverse, external practitioners and stakeholders also contest those aspects
of integrated thinking that are relatively widely understood within the IIRC’s
internal-institutional discourse.
4.2 Theme 2 – an evolution of integrated thinking praxis

Although Theme 1 emphasizes the disparate interpretations of integrated thinking, there
was some evidence that IIRC and practitioner discourse was beginning to coalesce around
several elements that integrated thinking may entail in practice. At the same time, IIRC
representatives stated that the IIRC is working toward providing more practical guidance.
These findings suggest that a lack of conceptual clarity, especially from the IIRC, may not
itself prevent a more operational understanding of integrated thinking emerging through
reporting discourse or praxis. Five elements of this understanding are outlined below.
JIC First, both the IIRC and other respondents emphasized that the board must be involved
18,2 in any substantive integrated thinking agenda. Several participants believed that, as the
head of the organization, the board should have “automatic responsibility” (PB1, I2) for the
integrated report. The accounting firm manager (A1) recommends that the board “needs to
be visually leading and supporting” the IR process. The director (I1) recommends that the
person who “owns” IR should be the one “who actually owns the relationship with the
340 providers of financial capital and in a long-term strategy [with] the business” which “has to
be the board.” The IIRC manager (I2) suggested that the board should allocate “at least […]
one board member who is involved with [the] steering committee” to IR right from the
reporting planning process” and that “this person is able to communicate with the rest of the
board.” Therefore, the IIRC officials stated that IR processes should “trigger discussion
between board members” (I1) about the organization’s strategy. Only with complete board
commitment will the organization be able to embed “integrated thinking […] [into] […] the
actual culture of organization” (I2).

Second, where the board’s role is to establish strategy and provide “general governance”
(A1) on IR, interviewees see middle management as responsible for “increasing
communication across the silos” (A1) during the “day-to-day critical business decisions”
(PB1). Since organizations historically have been structured around functional silos,
“many of those business decisions are [made] in isolation of understanding the wider
impact[s] [on the] organization” (PB1). A1 believes that integrated thinking should improve
management practice by enabling a wider range of issues to be incorporated into business
decision making, ultimately making middle management more responsible for the
outcomes of these decisions. On this view, middle management “is where the idea of
integrated thinking has the most residence” (PB1). The director of the professional body
reported that his organization has benefited from integrated thinking in this operational
sense at the middle management level. He describes, for example, how the work of
“capital investment appraisals”:
[…] typically sits within the organization either around [the] management accounting function or
around [the] treasury function. By taking [an] integrated thinking approach, [it] helps us to look
beyond the financial matrix we use and understand a wider range of issues associated with our
capital investment appraisal decisions (PB1 – Director).
The two senior managers from the IIRC (I1, I2) presented similar arguments. From their
perspective, “middle management can be helped by thinking beyond their department and
thinking about [the] implications of their work on other divisions” (I2). The IIRC officials
also attribute a key role to middle management in communicating vertically through the
organization. For example, as I1 described, if middle management “spotted something
strategic and [any] risks and opportunities,” middle management’s responsibility is to use
IR processes to communicate this message to senior management to enable correct
decision making.
Third, although participants contested the normative ideal that IR should break down
organizational silos, IIRC representatives argued that producing an integrated report forces
different departments to contribute and participate in the reporting process in practice.
That is, the practical requirements of producing an integrated report necessitate involving
a team of people “across all departments” (A1). This view is broadly consistent with I2’s
experience, where “Organization A’s annual review steering committee have [the] right
representatives from all different departments across the business” and they “sit and they
work with that document together.” However, I2 also acknowledges that in most
organizations, “IR is driven by the sustainability function.” I2 attributes sustainability
reporters’ leading role to their greater understanding of the “broader implications of
non-financial information across business.” An alternative explanation is that IR is itself
siloed within sustainability functions (Stubbs and Higgins, 2014). In either case though, Exploring
there is an evolving understanding that integrated thinking should encourage financial integrated
departments and sustainability teams to collaborate. In the IIRC’s view, IR eventually thinking in IR
“forces [financial personnel] to broaden their view of operations to embrace a holistic view”
(I2), albeit as part of an evolving process or “journey.”
Fourth, the two IIRC interviewees (I1, I2) also emphasize the centrality of the materiality
process to integrated thinking in practice, rather than reporting on all six capitals. The IIRC 341
intends to see “the full processes that go into materiality determination, and how the capitals
actually relate to them” (I2). The director of the IIRC (I1) argues that non-financial capitals
increasingly contribute to business value creation, as:
[…] increasingly business became too aware [of] the fact that they operate within [a] boundary,
therefore, [the business] has to understand the natural resources and their ability to manage those
[resources] (I1 – Director).
He also emphasizes social and relationship capital, adding that “collaborations and
relationships between companies in the same sector” (I1) “create value” for the whole sector.
He offers a collaborative mix of a pharmaceutical company, a biotech company and a
university within a research park as a paradigmatic example. Despite their lack of
consensus on internal integration, other interviewees shared a similar perspective on the
value of this broader integration of capital types to “value-creation.” Although participants
did not strongly address time-horizons, some stakeholders did indicate the importance of
thinking about different capital types over the longer-term horizon that IR intends to
emphasize (Tweedie and Martinov-Bennie, 2015). For example, the professional body
director’s (PB1) view is that as “different types of organizations will have different
dependencies and impacts upon natural capital” (PB1), the organization should take a wider
view or “a longer-term time horizon” to look at future impacts and dependencies.
Fifth and finally, the IIRC and accounting firm participants had similar views about
how integrated thinking links capitals to strategy. The IR framework states that
integrated thinking “takes into account the connectivity and interdependencies between
the range of factors that affect an organization’s ability to create value over time”
including: “capitals that the organization uses or affects” and “how [an] organization
tailors its […] strategy to respond to its […] risks and opportunities it faces” (IIRC, 2013a,
p. 2). Three interviewees (I1, I2, A1) suggested that their organization should articulate
their strategy first, and subsequently decide whether managing a particular capital is the
key strategic issue in light of this strategy. The IIRC’s director (I1) recommends that
organization’s first “articulate strategy,” then make sure “the different operating units
within the business” are “aware of what strategy is,” and “speak to each other” to achieve
the “process of connectivity.”
Despite these shared themes about implementing IR, there were also disagreements at
the practical level. For example, some stakeholder groups thought that integrated thinking
should encompass performance measurement of the range of capitals IR incorporates.
By contrast, the IIRC’s representatives were concerned that linking integrated thinking to
performance measures or targets could be counter-productive:
Whatever you choose to measure will influence the outcome of what has been measured […]. There
is a negative […] outcome that you didn’t foresee when you implemented […] the framework.
This statement reflects how some practitioners’ may implement IR in ways that partially
outstrip the IIRC’s own agenda. Nonetheless, other interviewees urged caution in linking
integrated thinking to tangible performance measures, by emphasizing the need to initially
educate boards, senior and middle management about what IR entails and to engage
other stakeholders.
JIC 4.3 Theme 3 – aspects of integrated thinking are occurring in practice
18,2 So far, this section has shown that while the concept of integrated thinking is unclear, several
shared themes about how integrated thinking might be implemented are emerging in practical
discourse. This section reviews how far these “practical” aspects of integrated thinking are
actually evident in participants’ organizations. Despite unclear and divergent interpretations,
the study found indicators of at least proto-integrating thinking practices in three areas: active
342 board and management involvement in IR, cross-organizational teams being responsible for
integrated reports, and more integrated links between capitals and strategy in IR.
4.3.1 Active board and management involvement. First, three practitioner participants
provided evidence that their board and senior management are more actively involved in IR
processes. Pilot organization 1 (PO1) appointed a sustainability manager to coordinate
the IR information, and placed a middle manager with over ten years’ experience in the
organization in charge of the IR processes. Their board “does play a role in setting
the broader objectives of the business” (PI) whilst senior managers “recommend [an] IR
approach to the board” (P1). In pilot organization 2 (PO2), the IR team includes both the
deputy CFO from a finance background and the manager of risk and planning.
The relationship between the board and senior management entails that “senior
management need to […] guide the board in setting the expectations of the board” (P2).
The professional association (PA), which is smaller, has one senior manager leading the IR
process, who consults with the board regarding the IR processes. PA1 described her
organization’s planning of IR as follows:
[…] […] [At the] start of the meeting with the CEO, our CFO and all of our directors and heads of
our units basically are sitting around this table, having a discussion about what did we think our
integrated report would be […].
It is notable that practitioners offered a more thorough account of who should lead IR than the
IIRC’s representatives. Inter alia, all three practitioners focused more strongly on involving the
board in IR through a team-based approach with senior management. Practitioners also
emphasized that people leading the IR process need in-depth business knowledge, including
“long-term work experience with their organization” (P2-deputy CFO), the “ability to think
about the whole business” (P2-deputy CFO) and the “right skills” (PA1-director).
4.3.2 Establishing cross-organizational teams for IR. Another indication of aspects of
integrated thinking in practice is organizations’ use of cross-organizational teams.
Consistent with the IIRC’s guidance, PO1 and the PA involved all departments in their IR
processes. There are, however, slight differences in how each organization manages the
reporting team. PO1 has appointed the sustainability manager to lead the IR team, who then
allocates tasks to each member. PA involves all managers in several rounds of discussions
on the integrated report before drafting an initial report. While the PA instigates dialogue
between all managers, executives and board members to decide on their integrated report’s
purpose and content, PO2 relies more on certain members of the reporting team to determine
key IR issues. Each department head then follows the IR working team’s instructions and
reports back the relevant data:
Through myself, [the] risk manager, [and] two COOs of the organization, we determined, from the
available IIRC framework aspects, what is material. Then we validate that through our key
stakeholders-employees, members and suppliers […]. After we have done that process, we
determined materiality within different areas of the business and asked [each department] to begin
collecting data that will represent our report and align with what is material (P2 – Deputy CFO).
Several practitioners found it difficult to break inter-departmental silos. For example, the
director of the professional association (PA1) struggled to “find the common language” to
enable different departments – especially financial and sustainability staff – to understand
each other. Nonetheless, there was indicative evidence that the IR process instigated Exploring
dialogue or collaboration between departments, albeit far from seamless. integrated
Compared to wider IR stakeholders, interviewees from reporting organizations viewed thinking in IR
management processes as more important to IR and integrated thinking. Among the three
reporting organizations, two (PO2 and PA) have significantly changed their management
processes since commencing IR, leading to further changes in applying their information
systems. PA1 emphasized the need to reassess “the information collecting system” in order 343
to allow the organization to report on the existing data in an easier way. The systems
organizations required also depended on their broader organizational agenda or narrative.
Since PA1’s mission is to “assist members through their professional [development
throughout their career],” the organization especially considered “how do we report back to
members on how the [organization] supports them as a professional.” As a result, PA1
emphasized reporting to members on how it develops members’ professional practice, where

previously the organization “never actually reported on that before to members in that
holistic way.” In this case, shifting to IR required reconceptualizing the over-arching intent
and narrative of their report, in order to give members “a very clear and transparent picture
of how we do things” (PA1). Pilot organization 1 sees the “system as one of the things where
[the organization] is always looking to improve areas for internal development” (P1).
4.3.3 More integral links between capitals and strategy. The third indication of integrated
thinking in IR practice is in the assessment of natural and social and relationship capital during
the IR cycle. The two pilot organizations have considered the role of natural capital, and social
and relationship capitals, in their organizations through their IR processes. PO1 devotes a
substantial proportion of their report to natural capital, which reflects their belief that there is
a strategic link between economy, environment and society. For example, the “Conservation
Landbank” (P1) represents property the organization bought to offset damages to the
environment resulting from the new homes and cars it finances. Through this land deposit, the
organization aims to achieve its commitment to operational carbon neutrality. This example
illustrates one way that organizations can link their financial activities to natural capital, and
also how organizations’ business culture and strategy can influence IR processes. Another
project relating to social and relationship capital is the “Community Investment Program” (P1),
which aims to use a certain percentage of annual after-tax profits to develop a more resilient
community. These reporting initiatives may well fall short of the stronger link between
financial and sustainability practices that critics of the IIRC’s strategic approach to
sustainability advocate (e.g. Flower, 2015; Milne and Gray, 2013). Nonetheless, they are at least
indicative of a more integrated approach within the IIRC’s broad framework and logic.
PO2 described a similar approach to natural and social and relationship capitals in the
PA. In a finding likely to exacerbate critics’ concerns about IR’s relatively narrow
sustainability scope, the organization concluded that natural capital is not material to their
business[3]. However, the organization does view social and relationship capital as material,
and reports on this basis:
Social and relationship capital is fundamental to our ability to create value and is one of the most
important inputs into our business model – without the relationships we form and the trust in
our brand, designation and the work our members do, we would not be able to operate effectively
(P2 – Deputy CFO).
PA1, the third practitioner, describes how her organization determined that natural capital
was not material as follows:
We had a good look at [natural capital], [and] we don’t really have an environmental footprint […]
[…] we had a very clear conversation right from the beginning. We say that in our report. We don’t
report on this because it’s not really material to what we do (PA1 – Director).
JIC In contrast, she saw social capital as highly material, which she related closely to the
18,2 organization’s strategy:
[…] […] social capital is quite important to us about how we manage our stakeholder relationships
and again that’s part of what we are going to report on, how we develop those stakeholder
relationships and the value that we place on them (PA1 – Director).
The different attitudes of the PA to each of the two capitals were derived from the
344 organization’s materiality determination process, which – consistent with the IIRC’s stated
agenda – actively considers the impact of capitals to business value creation.
A fourth indicator of integrated thinking was where IR prompted members and employees
to be more engaged in the reporting or disclosure processes, at least in member-based
organizations. Since both PO2 and PA are member-based, members and employees are their
primary stakeholders. Yet the PA’s data collection about social and relationship capital as part
of IR processes revealed a gap in their employment engagement practices:
One of the things [that] came up for us was that we realized we probably don’t do enough in
training […] and develop[ing] our own staff as we could do. Because we came to report on them,
[we found] that we don’t have lots to report here. So we are acting on that now (PA1 – Director).
This organization also viewed IR as an accountability mechanism, since stakeholders could
examine “whether that engagement is actually just rhetoric or whether there was something
that actually was real and you are articulating its outcomes and engagement” (PA1).
Pilot organization 2 (PO2) faced a different problem. For PO2, a significant issue was
conducting materiality reviews with its suppliers, staff and members, who seemed to have
little awareness or understanding of IR:
Across all of those suppliers we interviewed, [there was] very much a lack of understanding about
what IR was […] […] Also staff […] who are involved, understand [IR] more broadly, but they don’t
understand the concept […] [It is the same for members]. We have got lots of members; 15,400
members. Typically, they are not that keen on responding to surveys and providing input [into the
integrated report] (P2 – Deputy CFO).
Stakeholders’ lack of knowledge of IR, and their reluctance to share their views with
reporting organizations, can affect IR’s capacity to generate integrated thinking by
impairing a rigorous understanding of other stakeholder needs. Nonetheless, since all three
IR practitioners viewed social and relationship capital as material to their businesses, all
three organizations saw a tight connection between strategy and at least this capital type.
4.4 Theme 4 – difficulties implementing integrated thinking

Comparing the responses from the IIRC, other interest groups and practitioners reveals two
main issues that organizations face in implementing integrated thinking into practice.
First, despite a shared emphasis on engaging employees in IR and some limited success,
there were clear barriers to deep employee engagement in IR processes. This challenges the
idea that IR could be, or is becoming, a whole of organization change in mindset or
orientation. Several interviewees stated that employees are one of the most important
internal stakeholders for the organization, and also the primary readers of integrated
reports. The director of the professional body (PB1) saw employees and providers of
financial capital as equally important. The accounting firm manager (A1) similarly
described an important role for employees:
I think for many employees, conceptually thinking about the […] integrated report […] might
not have too much impact on them. [however] through the report, and through the reporting
processes, [they] might become more aware of what the IR colleagues in another department are
doing (A1 – Manager).
The director of the professional association (PA1) also notes that employees, as report Exploring
readers, tend to provide a more critical view of the integrated report. Her organization integrated
made a conscious effort to engage employees by having “staff meetings a few times a year thinking in IR
when [the] CEO talks to the entire staff […] about [the] integrated report both in [terms of
the] processes of developing it, but also after its published.” However, not only is this
method of engaging employees in IR a fairly limited and top-down model, it might not be
practical in larger organizations with substantially more employees. The deputy CFO 345
from PO2 argued that “[…] employees get the real value if they do actually take their time
to read the [integrated] report, better understand the organization and what the
organization stands for, and how it creates value.” Yet there was no evidence that this was
actually happening.
The IIRC representatives were especially concerned about the board’s engagement
with employees to “promote IR and integrated thinking” (I2) throughout the entire
organization. One key issue is how well the organization communicates its strategy to
employees. I2 pointed out that “the board level understands strategy very well, but that
doesn’t mean that [understanding] flows down to employees” (I2). This is consistent with
the finding above that employees are not especially engaged in IR, particularly in larger
organizations. From the PB’s point of view, employees need education and training to
engage with IR because integrated thinking challenges conventional thinking, including
established work routines. Yet there is no evidence that organizations are implementing
such an ambitious agenda to train and challenge employees. This lack of employee
engagement might partially reflect limitations of a top-down, managerial approach to
integrated thinking, rather than a more iterative approach to employee engagement as the
process develops.
Second, consistent with prior research by Stubbs and Higgins (2014), another limitation
to integrated thinking is due to how IR is still tightly linked to sustainability reporting in
both concept and organizational execution. The three reporting organizations appeared to
view IR as different to sustainability or financial reporting. For example, the director from
professional association (PA1) was concerned that if IR is:
[…] driven purely by someone from sustainability or purely someone from financial reporting,
there is a risk that you are going to get a view [of] things that are already deeply familiar, and
[it] might be hard for them to shift out of that mode into a broader picture.
Nonetheless, despite this concern to differentiate IR from sustainability reporting, the
sustainability reporting team is still heavily involved in framing and driving IR processes.
For example, the deputy CFO of pilot organization 2, who has a finance background, leads the
IR working team alongside managers from the sustainability department. This CFO explained
how his organization learnt non-financial reporting through sustainability reporting, and
applied similar mechanisms when constructing their first integrated report. In pilot
organization 1, the “sustainability people” mainly drive IR, with the finance personnel
involved in the cross-functional meetings during the reporting processes. Indeed, managers
with sustainability backgrounds have the lead role in constructing the integrated report in all
three reporting organizations. Hence, even if integrated thinking is meant to have a meaning
or organizational currency outside of sustainability reporting paradigms, in practice it
remains tied to both sustainability themes and organizational actors.
5. Discussion
This section analyses implications of the research results for each of the two research
questions derived from prior IR and IC literature. The analysis of prior literature showed
that while integrated thinking is an essential concept in IR, the IIRC provides only an
abstract definition of this concept. Moreover, there is little precedent for integrated thinking,
JIC and, although IR research has grown, what integrated thinking means remains unclear.
18,2 To address the first research question:
The study found that there is no well-developed concept of, or consensus on, what
integrated thinking means at the conceptual level. In the absence of a solid conceptual
346 foundation, stakeholders have chosen to self-interpret what integrated thinking means in
light of their own experience and context. Consequently, different – and not necessarily
consistent – interpretations of integrated thinking are emerging through organizational
discourse and practice.
This initial finding has implications for extant debates about IR’s meaning and evolution,
and about the extent to which IR offers a compelling path to continue IC reporting. First, a
key strand of more critical IR research has targeted the IIRC’s perceived failure to define key
terms or concepts – most notably sustainability – in the right way, most notably by
privileging shareholders’ interests over other stakeholders (e.g. Flower, 2015; Milne and
Gray, 2013; Thomson, 2015; see also Tweedie and Martinov-Bennie, 2015). Although this
study does not directly address these debates, the findings do illustrate how critiques of the
IR framework could in some cases presume a conceptual coherence to the IIRC’s framework
that is not always evident, including in concepts – like integrated thinking – that putatively
sit at the heart of the IIRC’s framework. Since this study finds that practitioners are
interpreting these concepts for themselves, there is potential scope for IR to influence both
organizations’ reporting and other practices in ways other than how either the IIRC or its
critics envisage by studying the IR framework alone.
Second, the study’s findings also show that IR’s apparent failure – following IC reporting
(Dumay et al., 2016) – to attract a significant audience may also be partly due to
practitioners’ resistance to aspects of the IIRC’s agenda, or at least interpreting this agenda
differently. For example, participants in the study directly challenged integrated thinking’s
rhetorical goal of breaking down organizational silos, arguing – inter alia – that “silos have a
role to play” (PB1) in organizations. Dumay and Dai (forthcoming) raised a similar issue
about whether breaking down organizational silos is either necessary or desirable. Based on
their practice-oriented research, they argued that certain types of silos perform
key organizational functions, such as risk management, that are crucial to organizations’
ongoing existence. From this perspective, practitioners may be resisting IR’s organizational
objectives as well as its perceived strategic utility.
Another issue the literature review raised is that – with few exceptions (Oliver et al., 2016;
Vesty et al., 2015; Churet and Eccles, 2014; Knauer and Serafeim, 2014) – there is limited
research on how integrated thinking is being operationalized. To address the second
research question:
The paper casts light on both how integrated thinking is being operationalized,
and potential limits or barriers to operationalizing integrated thinking either directly
or as a means of advancing IC, in three main areas. First, the study demonstrates
how aspects of integrated thinking are evolving relatively organically in organizations
despite a lack of conceptual clarity. The evidence shows that there is a prototype of
integrated thinking evident in practitioners’ organization, and that different stakeholders
share certain broad ideas about what integrated thinking entails. Although only a small
study, the research also found evidence of at least proto-integrated thinking practices
along the practical axes identified above that appear to be linked to IR. These practices
include boards and senior managers who actively commit to IR, the establishment of
cross-organizational teams, greater sensitivity to key types of non-financial capitals and
closer links between certain types of non-financial capital (e.g. social and relational) and Exploring
organizational strategy. integrated
Nonetheless, and second, the study also found that practitioners are experiencing thinking in IR
various barriers in operationalizing IR, at least some of which a clearer concept of what
integrated thinking entails could help to address. One significant issue is that
sustainability reporting concepts and staff were highly influential in IR processes, even
where IR was not confined to sustainability functions as Stubbs and Higgins (2014) find. 347
This finding suggests that organizations are using their experience with sustainability
reporting to operationalize IR, and in this way drawing on sustainability reporting
concepts to fill gaps in the IR framework. The dominance of sustainability personnel
within the IR team further illustrates this close relationship between sustainability
reporting and IR at the current stage of IR practice. Although numerous scholars criticize
IR for abandoning sustainability (Flower, 2015), the results of this study show that
sustainability reporting is an important transit pathway by which practitioners move
toward IR. Yet clarifying what integrated thinking entails would help further clarify
exactly where this pathway is heading, and might also help IR influence organizational
practices beyond sustainability reporting silos (Stubbs and Higgins, 2014).
Third, the study finds potential limitations of the organizational reach of IR which
may well be linked to ambiguities or limitations in IR’s foundational concepts.
For example, engagement in IR or integrated thinking practices does not appear to
extend much beyond senior directors and management, especially in larger firms.
Moreover, and also consistent with Dumay and Dai (forthcoming), IR is not
influencing either individual employees or their day-to-day work. This lack
of organizational depth in integrated thinking may partly reflect the limited efforts of
organization to engage employees in meaningful ways, such as through more extensive
training or communication strategies. However, it may also have a structural root
in the managerial orientation of IR, which conceptualizes IR as largely a management
strategy to communicate to employees, rather than a more iterative approach that emerges
through ongoing communication and discourse across an entire company. In this respect,
cross-organizational integrated thinking may require a deeper reflection on the underlying
approach of the IR framework.
It is beyond the scope of this study to evaluate the strengths and weakness of particular
aspects of the IR framework in detail. However, the findings do show how, in the absence of
clear guidance, key concepts like integrated thinking can develop meanings and
organizational impacts that may not most directly advance the IIRC’s reporting agenda, or
best serve the interests of IR reporters and users. In this context, the empirical evidence in
this study suggests that the IIRC should re-examine the meaning of integrated thinking not
only at a normative level, but also in light of how different organizations interpret and
operationalize integrated thinking in practice.
6. Conclusion
6.1 Implications for practice
The IIRC currently presents IR as a journey to an ideal destination, but in absence of a
detailed cartographic map. Both reporting practices and how they are conceptualized will
invariably change and develop over time. A key issue is the lack of conceptual or empirical
clarity on how IR will develop. In this case, integrated thinking, as the core concept of
IR, is already in flux through ongoing interaction between practitioners, key players
in IR, and the IIRC. Moreover, organizations intend to improve the reporting process year
by year by learning from prior year experiences. As participants observe, organizations
will invariably develop their reporting processes in light of their own experiences
and interests, especially in the absence of clear guidelines or directions. The question
JIC then becomes whether current concepts and guidance adequately direct this development.
18,2 In the case of IR, the evidence in this study shows that key aspects of IR are confusing,
inconsistent and lack specific metrics. Hence, as an underdeveloped reporting
mechanism, IR still requires further articulation and refinement to guide practitioner
and stakeholder understanding and behavior in ways that advance the intent of
either IR or IC research and practitioners. The paper’s empirical research does not dash
348 the hopes of either research group. However, it does imply that realizing any hopes for IR
requires more careful analysis of both what its key principles mean and of how they are
evolving in practice, especially considering the variety of organization types and activities
(Dumay et al., 2016).
6.2 Implications for policy

The IIRC’s ongoing agenda for IR to become the corporate reporting norm is evident in
several recent policy developments. For example, although the IIRC does not advocate full
compliance, the growing influence of IR in South Africa is evident in the King IV report
(Institution Directors of Southern Africa, 2016), including King IV’s move from “apply or
explain” (King III) to “apply and explain,” and the report’s affirmation of the IIRC’s version
of IR (Deloitte, 2016). These developments suggest that IIRC’s desire to firmly establish IR
as a required reporting standard, in a similar pattern to how the GRI has recently morphed
into a standard (see The Global Reporting Initiative (GRI), 2016). Other evidence of a move
toward more regulated reporting is found in the EU Directive on Non-Financial Disclosure,
which will became law in the EU in 2017. More notably, preceding the EU Directive
becoming EU law, the EU Directive’s principle architect, Richard Howitt, became the new
CEO of the IIRC on November 1, 2016, after being an “IIRC Ambassador” for more than
five years. Although by no means conclusive, the appointment of Howitt with his political
connections potentially positions the IIRC to attempt to incorporate IR more strongly into
the country-specific laws that implement the EU Directive on non-financial reporting
(Monciardini et al., 2016).
However, the absence of a clear definition of key concepts like integrated thinking is
one key barrier to the IIRC’s policy agenda: How can general IR concepts be implemented
in formal policy if they are not formally defined and commonly understood? Already IR is
arguably failing to attract strong support amongst important stakeholders. Although
there are many possible reasons, one reason the study supports is that abstract constructs
like “integrated thinking” make IR confusing and difficult to implement, potentially
reinforcing perceptions of IR as another reporting burden on participant organizations
(Dumay and Dai, forthcoming). If, IR is not viewed as a robust reporting framework
that can be applied easily and consistently, governments and policy makers will be
reluctant to impose another reporting framework beyond the current EU Directive
(Monciardini et al., 2016).
6.3 Implications for future research

Dumay et al.’s (2016) analysis of the stages of IR research, which is derived from
prior studies of IC (Guthrie et al., 2012) provides one way of identifying directions
for future research. As noted above, Dumay et al. (2016) argue that IR research is in
the first and second stages because key concepts are still developing from a normative
framework into practice, and into a practice-based research agenda. This study
shows that not only practitioners, but also the IIRC itself and other key corporate
reporting players have not yet fully conceptualized how IR and integrated thinking
are interrelated. Since the study highlights how understanding can also evolve
through praxis, this is by no means a fatal flaw. However, further interpretations of
integrated thinking, and its impact on organizational behavior, are needed. This includes
structured analysis and guidance from the IIRC, but also critical academic analysis Exploring
of how the different concepts of IR and integrated thinking affect organizations integrated
and practitioners. thinking in IR
This paper is itself an initial example of IR research that critically examines the
IIRC’s conceptual framework and framing in organizational practice. By identifying
both the lack of clarity in the IIRC’s concept of integrating thinking, and the
emerging – but not always consistent – concepts of integrated thinking in practice, 349
the paper helps moves IR research toward “third stage” practice-based research that
conducts “critical and performative analysis of IC [or IR] practices in action” (Guthrie et al.,
2012, p. 69). However, third-stage IR research is in its infancy, and thus more research
is needed to explore the key issues in different contexts. For example, Japan is a
jurisdiction that is taking up IR more than other countries (IIRC, 2015). However, Japan
has a different political economy than a relatively smaller country like Australia, and a
different cultural context for corporate reporting (Girella and Zambon, 2013). Thus,
Japanese investors, practitioners and scholars will interpret IR and integrated thinking
differently, especially insofar as the meaning of these concepts evolve in practice rather
than through formal framework definitions. This observation also raises the question of
whether or not the IR framework can be applied in the same way in different political
economy contexts.
In summary, the study’s findings have implications for both IR research in general,
and for IC research that views IR as a potential vehicle for advancing IC reporting.
As Dumay (2016) outlines, one key reason for IC researchers’ interest in IR is its
potential to advance IC reporting. Dumay (2016) himself identifies one reason for
caution about this hope, which is the lack of evidence that IR is in fact being widely
adopted by participants. Through a form of third-stage research (Dumay et al., 2016;
Guthrie et al., 2012), this study introduces a second reason for caution about IR:
The absence of concrete specifications or evidence that key IR concepts are sufficiently
well developed or clear to drive robust organizational reflection or reporting. Importantly
for present purposes, this lack of clarity extends to reporting the subset of IR
capitals – human, relational and structural – on which IC research has historically focused
(Dumay, 2016). The study’s findings are ambiguous, however, because the research also
emphasizes the capacity of richer concepts of IR and integrated thinking to evolve
through organizational discourse and praxis. However, in the absence of either clearer
IIRC directives or stronger emergent empirical engagement, IC researchers cannot be
confident that IR is either naturally or inevitably leading organizations to (re)engage with
IC reporting, even if IR eventually attracts a wider corporate engagement than Dumay
et al. (2016) envisage.
6.4 Limitations
The major limitation of this study is the relatively small sample and limited cultural context.
The interviews were conducted within a single country, and within a relatively small
number of organizations. Although the IIRC appears to lack a clear concept of integrated
thinking across its international releases and discourse, integrated thinking may emerge
differently, or have different concepts, in other cultural or organizational contexts
(see Girella and Zambon, 2013). As all the interviewees have worked closely with the IIRC’s
version of IR, with some being pilot organizations who support the current discourse, there
is a risk that their attitudes contain an inherent or embedded ‘bias’ in favor of the IIRC’s
approach (Dumay et al., 2016). Therefore, interviewees from non-pilot organizations,
social and environmental groups and academics are needed to enrich the sample size, and to
examine various alternate views of IR and integrated thinking, including more
critical-sustainability perspectives (e.g. Flower, 2015). Further interviews with a larger
JIC sample of investors and employees would provide a fuller understanding of what integrated
18,2 thinking means, and of its potential role in implementing IR’s objectives to substantially
improve mainstream reporting.
Notes
1. Neither Eccles and Kruzs’s recent work nor King IV’s had been published at the time of this study.
350 Hence, the analysis still distinguishes three forms of integrated reporting, even though there is now
evidence of convergence.
2. Publications include IR framework, IR discussion paper, Basis for conclusions, Summary of
significant issues, Building The Business Case For Integrated Reporting, IR background paper
capitals, IR Background Paper Connectivity, The Pilot Programme 2012 and 2013 Yearbook.
3. Although the PA still reports on natural capital to illustrate to its members what a natural capital
component of an integrated report looks like.
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Corresponding author
Lorne Cummings can be contacted at: lorne.cummings@mq.edu.au
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Journal of Intellectual Capital

Exploring integrated thinking in integrated reporting – an exploratory study in

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financial and non-financial performance” (IIRC, 2011, p. 2).

2. IR and integrated thinking: precursors and precedents

2.2 Integrated thinking

what information how information

2.3 Key research questions

Pseudonym Positions Organization Perspectives

P1 Manager Pilot organization 1 (PO1) Practitioners’ view

do to implement each aspect of integrated thinking. Part 2 concerned what organizations

3.2 Data analysis

4.1 Theme 1 – no consensus concept of integrated thinking

4.2 Theme 2 – an evolution of integrated thinking praxis

actual culture of organization” (I2).

[resources] (I1 – Director).

emphasized reporting to members on how it develops members’ professional practice, where

4.4 Theme 4 – difficulties implementing integrated thinking

6.2 Implications for policy

6.3 Implications for future research

component of an integrated report looks like.

Institution Directors of Southern Africa (2016), “King IV report on corporate governance”,

Management, Vol. 8 No. 3, pp. 238-264.

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