Journal of Environmental Management 280 (2021) 111833

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Journal of Environmental Management

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Research article

Integrated reporting in public sector organisations: A study of Australian

local councils
Belinda Williams a, Sumit Lodhia b, *
a
University of Tasmania, Hobart, Australia
b
University of South Australia (UniSA) Business, UniSA, Australia

A B S T R A C T

Integrated reporting is a voluntary reporting approach that has the potential to transform corporate reporting. This reporting approach involves integrating financial
information with sustainability information and requires a coordinated approach by all organisational departments to address social and environmental issues
affecting an organisation, a process referred to as integrated thinking. This paper builds on existing research on public sector organisations and explores the current
status and motivations for integrated reporting by Australian local councils and the resulting potential organisational change leading to integrated thinking. The
findings reveal that while integrated reporting is emerging in Australian local councils, the external motivations for integrated reporting have led to a limited level of
organisational change, leading to a low level of integrated thinking in councils. To enable integrated reporting practices to transform and drive change in organ­
isational practices, this paper considers top level managerial support and a strategic vision for this approach is required.

1. Introduction International Integrated Reporting Framework <IRF> (de Villiers et al.,

The organisational landscape has rapidly changed with the dawn of
the new millennium, bringing new challenges, uncertainty and
complexity to reporting practices. Organisations are increasingly
required to account for their social, environmental and governance
impacts alongside their financial impacts. However, traditional forms of
reporting are struggling to respond to meet these challenges (Adams and
Simnett, 2011; Farneti and Guthrie, 2009). Voluntary reporting ap­
proaches have risen to meet this challenge (Siew, 2015), with integrated
reporting (IR) being the latest innovation to an ever-expanding toolkit,
ranging from for example, social accounting, Triple Bottom Line
reporting, social, environmental and sustainability reporting. However,
while sustainability reporting was initially perceived as having potential
to assist with organisational accountability (Unerman et al., 2007), this
approach to reporting has raised numerous concerns to the point it is
now considered as contributing to un-sustainability (Milne and Gray,
2013; Milne et al., 2008, 2009).
IR is considered a potential solution to other reporting approach
concerns (Lodhia, 2015) focusing on integrating the different organ­
isational elements including social and environmental issues. This
approach has gained prominence since establishment in 2010 of the
International Integrated Reporting Committee (International Integrated
Reporting Council from 2012) (IIRC). Organisational practices and
public policy have developed rapidly following adoption in 2013 of the
2014). The <IRF> has clear advantages over other voluntary reporting
mechanisms in that this approach seeks to go beyond simply disclosure
to focusing on integrated thinking within the wider organisation leading
to integrated decision-making, actions and connectivity (IIRC, 2013). An
integrated approach is required in organisations to navigate the
complexity and multi-layered approach of today’s world. This form of
reporting can be utilised to assist at the organisational level to bring an
integrated focus to an organisations strategy, environmental, social and
governance practices and its financial performance.
While the private sector has taken up the voluntary reporting
agenda, the same cannot be said for the public sector (Guthrie et al.,
2017), being described as ‘patchy’ and an emerging field (Ball, 2004).
Representing approximately one third of global gross domestic product,
the public sector is a complex interrelationship among social re­
sponsibilities, public accountabilities and social justice (Lapsley and
Skærbæk, 2012). With arguably higher accountability expectations (Ball
et al., 2014), the sector requires the necessary reporting tools to effec­
tively communicate accountability and transparency to its stakeholders.
Evidence suggests voluntary reporting is starting to be considered by the
public sector (Biondi and Bracci, 2018; Guthrie et al., 2017), albeit at
different levels. However, the need for more integrated approaches in
the public sector has long been argued as the sector has predominantly
focused on operating within a narrow, siloed approach (Ramos et al.,
2007; Ryan and Walsh, 2004). In light of this, the current study extends

* Corresponding author.
E-mail addresses: Belinda.Williams@utas.edu.au (B. Williams), sumit.lodhia@unisa.edu.au (S. Lodhia).

https://doi.org/10.1016/j.jenvman.2020.111833
Received 25 August 2020; Received in revised form 19 October 2020; Accepted 10 December 2020
Available online 23 December 2020
0301-4797/© 2020 Elsevier Ltd. All rights reserved.
B. Williams and S. Lodhia
the IR research agenda to the public sector focusing from an Australian
context due to its established interest in voluntary reporting in com­
parison to other worldwide public agencies (Kaur and Lodhia, 2018).
The objective of this research is to determine the current status of IR
in the public sector and how this reporting is leading to organisational
change. This research is significant in that it will potentially provide
lessons to the public sector worldwide and highlight the benefits of this
reporting approach leading to enhanced accountability and integrated
connectivity including the potential embedding of social and environ­
mental impacts into mainstream business activities. Specifically, this
research emphasises the Australian local government sector due to its
well-established responsibilities and accountabilities to the wider com­
munity (Williams et al., 2011).
The current status of IR in the local government sector is critiqued
through three research questions:
RQ1: Are local councils reporting in an integrated manner and what
mechanisms are used to report integrated information?
RQ2: What are the motivations for undertaking IR in local councils?
RQ3: Is organisational change occurring through IR and integrated
thinking?
This study makes several contributions. Firstly, it extends the aca­
demic literature by providing deeper understanding of the potential of
IR in the public sector. At a theoretical level, the study contributes by
gaining understandings of the associated implementation complexities
through engaging at the reporting level (Parker, 2005; de Villiers et al.,
2014). Various theoretical insights provide a basis to empirically
examine the drivers of IR. This is achieved through a mail survey sent to
the chief financial officers (CFO) in Australian local councils. The
research provides practical contributions to management by high­
lighting the potential of this reporting approach in assisting the public
sector towards viewing organisational complexities through an inte­
grated approach. This includes incorporating different organisational
elements including social and environmental aspects into everyday
business decision-making. Further, with increasing concern raised
around sustainability reporting practices, the study contributes by
providing insights through contrasting this research with some key
studies, such as Domingues et al. (2017) that have examined previously
sustainability reporting in public sector organisations.
1.1. Prior literature
1.1.1. The public sector and voluntary reporting
The public sector has a significant economic, social and environ­
mental impact (Broadbent and Guthrie, 2008) and is increasingly being
called to account for their actions (Guthrie et al., 2017). As a result, the
public sector has higher levels of accountabilities to those they serve and
perceived as critical to providing evidence of delivery of sustainable
outcomes, effective resource allocations and creation of value (Guthrie
et al., 2010). With traditional financial reports not meeting the infor­
mation needs of stakeholders, voluntary forms of reporting have arisen
to meet this challenge (Birney et al., 2010; Broadbent and Guthrie,
2008).
Academic research on voluntary reporting practices in the public
sector has begun to evolve with research primarily centered on sus­
tainability reporting (Domingues et al., 2017; Farneti and Guthrie,
2009). Research attention has been on sustainability disclosure (Guthrie
and Farneti, 2008; Williams et al., 2011), with consensus that disclosure
levels are low and unless reporting is mandated, this will continue.
Other literature has focused on internal and external drivers for
reporting (Domingues et al., 2017; Bellringer et al., 2011), stakeholder
engagement practices (Kaur and Lodhia, 2014, 2019), and particular
reporting foci (Marcuccio and Steccolini, 2005).
However, in recent years, concerns have been raised over sustain­
ability reporting (Milne et al., 2008, 2009). These concerns have
2
Journal of Environmental Management 280 (2021) 111833
included for example, the disconnect between sustainability reporting
and sustainability of the planet (Milne et al., 2009), lack of completeness
and quality of reporting in applying reporting guidelines and related
indicators (Domingues et al., 2017; Guthrie and Farneti, 2008).
1.1.2. IR
Noting these criticisms, IR has emerged in recent years and provides
a wider view of a business’s performance by creating value over time
through focusing on organisational strategy, governance and perfor­
mance (Lodhia, 2015; IIRC, 2013). With its focus on sustainability, IR is
also considered an amalgam of financial and sustainability reporting
(van Bommel, 2014). This form of reporting gained initial prominence
through the regulatory initiative for companies listed on the Johan­
nesburg Securities Exchange. Subsequently, the Global Reporting
Initiative (GRI) and the Prince’s Accounting for Sustainability Project
combined to establish the International Integrated Reporting Committee
(IIRC), with the principles-based <IRF> subsequently developed in
2013.
The <IRF> supports integrated thinking across six capitals (finan­
cial, manufactured, intellectual, human, social and relationship, and
natural). While an integrated report is not a sustainability report (IIRC,
2013: 8), its focus is on sustainable longer-term value creation with its
reporting seeking to extend the traditional financial report (Kings and
Roberts, 2013). Advocates of the IR approach argue this approach assists
in integrating the different elements of organisational performance,
including social and environmental concerns into mainstream business
activities (Lodhia, 2015; Abeysekera, 2013), providing forward-looking
information (Adams and Simnett, 2011), facilitating integrated
thinking, better decision making and higher levels of accountability
(Perego et al., 2016). However, there are dissenting voices to this dis­
cussion concerned about the overriding business case (Brown and Dil­
lard, 2014) with IR being primarily considered as investor focused with
little to do with sustainability (Milne and Gray, 2013 p. 20). While
private business and investors are considered to be the main focus of the
<IRF> (Dumay et al., 2016), application to the public sector is argued
by the IIRC through application and adaptation of the framework (IIRC,
2013 p. 4), thus providing a potential space for the public sector to
engage with IR.
1.1.3. IR in the public sector
With adoption of IR in its early stages, there is a move towards this
form of reporting at a corporate level, but evidence is currently lacking
within the public sphere (Montecalvo et al., 2018; Guthrie et al., 2017).
From a research perspective, this trend is not new, with most voluntary
reporting research historically being geared towards the private sector
(Ball, 2004). Of what public sector IR research has been conducted,
research has been primarily focused on disclosure patterns and types.
For example, Monetcalvo et al. (2018) and Farneti et al. (2019) analysed
IR disclosures in state-owned enterprises in relation to the IIRC Frame­
work, noting the potential of this form of reporting to lead to more
meaningful reporting practices and higher levels of stakeholder
engagement in the public sector. Other studies though have noted lim­
itations; for example, Veltri and Silvestri (2015) who examined the in­
tegrated report of a South African public university noting the lack of
depth in reporting specifically interconnectedness, stakeholder re­
lationships and creation of value. Further, in a study of early adopters,
Manes-Rossi (2018), concluded that the <IR> Framework is not suffi­
cient for public sector organisations and further effort is required.
Manes-Rossi and Orelli (2019) found similar findings in a comparison of
three local government council IR practices. Other studies have focused
on the levels of change in adopting IR, with Guthrie et al. (2017) and
Katsikas et al. (2017) finding potential of IR in bringing internal change
in public sector organisations through integrated thinking and
interconnectedness.
Given the lack of understanding in the public sector area, this paper
focuses on the extent and type of mechanisms used for IR
B. Williams and S. Lodhia
implementation and the motivations for reporting using this approach.
Similar to Domingues et al. (2017), the paper also explores whether the
transition to IR is leading to change in organisational practices through
integrated thinking in local councils.
1.1.4. Theoretical perspective
There have been various theoretical perspectives that have been used
to explain the motivations for reporting on environmental and social
information. These perspectives can be applied to IR, given the overlap
between sustainability reporting and IR. However, given the focus on
integrated thinking in IR, there is potential to explore a number of other
factors that could explain IR practices. In sustainability reporting
research, the motivations for such disclosure have been linked to
external drivers. Two commonly used approaches are legitimacy theory
(drawing upon the importance of stakeholders from stakeholder theory)
and institutional theory.
Legitimacy theory (Lindblom, 1994; Deegan, 2002) is based on the
fundamental premise that organisations have an implicit “social con­
tract” with society and therefore must legitmise their existence to their
stakeholders. This theory states that organisations that are highly visible
to their stakeholders (such as the public sector) will need to ensure that
there is not a legitimacy gap with these external constituents. Often,
organisations will disclose social and environmental information in
order to appear legitimate to their stakeholders. In relation to IR, this
could relate to the disclosure of the six capitals.
Alternatively, institutional theory (Meyer and Rowan, 1977; Di
Maggio and Powell, 1983) suggests that external pressures will lead to
organisations adopting sustainability reporting practices. This could be
in relation to coercive pressures (such as for example, regulation) which
compel organisations to disclose information, mimetic pressures where
organisations mimic what other organisations in the industry are doing,
and normative forces whereby professionalisation and networks form to
provide specialized knowledge that could encourage reporting practices
(such as guidelines for reporting).
Adams (2002) has suggested that in addition to external motivations,
it is critical that sustainability reporting research consider internal
organisational factors as drivers of sustainability reporting. These can
include attitudes towards social and environmental issues as well as
organisational processes and systems that address such information.
This study adopts a multi-theoretical research framework to establish
the motivations for IR where both external and internal motivations for
IR are explored. The study will seek to establish whether the motivations
for undertaking IR are linked to legitimacy considerations, institutional
influences, internal organisational factors or a combination of these.
Furthermore, the study links the motivations to action by addressing
whether IR leads to internal organization change through integrated
thinking.
2. Method
2.1. Survey development and distribution
To determine the extent of IR at the local level in Australia, a mail
survey approach was utilised. The survey document consisted of 25
questions separated into five distinct sections with this research focused
on the exploration of the IR process in local councils. Survey questions
incorporated multiple choice questions, yes/no responses, five-point
Likert scale and open-ended questions to allow for further clarifica­
tion1. Survey participants were provided a definition of IR (incorpo­
rating the IIRC definition but adapted to the local level) as follows:
“.. is a form of reporting that integrates information about an orga­
nisation’s strategy, environmental, social and governance practices, and
its financial performance. This type of reporting is forward looking and
seeks to report how an organisation creates value for its stakeholders
through the flow of its capitals in the short, medium and long term”
(IIRC, 2013, p. 7).
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Journal of Environmental Management 280 (2021) 111833
Definitions were also included in the survey document for each of the
six capitals (financial, manufacturing, intellectual, human, social and
relationship and natural) associated with IR as follows:
A pilot study stage was conducted involving 30 councils to identify
any problems with understandability and formatting of questions with
no statistical differences found. With ethics approval received, the sur­
vey was forwarded to the Chief Financial Officer (CFO) of all local
councils in Australia (n = 507) using the online Research Electronic Data
Capture (REDCap) survey system. Prior research has indicated that the
CFO position has oversight within the organisation of both internal and
external reporting perspectives (Pilcher and Dean, 2009; Williams et al.,
2011); thus, was considered ideally placed to provide insights into this
current research. The final survey was emailed out to 507 local councils
in 2017 with follow-up reminder emails sent out after two weeks and
five weeks. Ten surveys were returned due to incorrect email addresses,
providing a net sample of 497 potential respondents. The survey
included a covering email explaining the purpose of the mail survey
inviting participation via a link to the survey software. A total of 129
useable surveys were returned, providing a response rate of 25.90%
which is consistent with prior studies in the local government area
(Williams et al., 2011).
2.2. Survey analysis approach
The Statistical Package for the Social Sciences (SPSS) was used to
analyse data, utilising a range of analytical tests. Descriptive and t-test
analysis was conducted using Likert-type scaled responses ranging from
1 to 5. This allowed respondents to indicate how strongly they agreed or
disagreed with specific statements (Saunders et al., 2012) with 1 rep­
resenting categories including ‘very unimportant’ or ‘never’ or ‘very
insignificant’ and 5 representing categories including ‘important’ or
‘always’ or ‘very significant’. Both independent sample t-tests and
ANOVA testing was conducted examining for differences in council
sizing, reporting type, capital type (Table 1) and type of reporter.
2.3. Respondent details
Respondent descriptive data provide annual turnover and classifi­
cation of respondents using the Australian Classification of Local Gov­
ernment (ACLG) scheme (Table 2). Highest survey response rates were
received from councils in the $20M- $50M (31.8%) annual turnover
category and those with a turnover greater than $100M (29.5%). Re­
spondents were evenly distributed between urban and rural
Table 1
Capitals
Type of Reporting Definition
Financial Capital ‘The pool of funds that is available to an organisation for
use in the production of goods or the delivery of services’
(IIRC, 2013 p.13).
Manufactured Capital Buildings, equipment and infrastructure available for use
by an organisation in the production of goods or delivery
of services (IIRC, 2013, p.11).
Intellectual Capital Patents, copyrights, software, rights and licences, and
organisational capital including systems, procedures and
protocol (IIRC, 2013, p.12).
Human Capital Competencies, capabilities and experience and
motivation to innovate, align and support the
organisational goals, strategies and ethical values (IIRC,
2013, p.12).
Social and Relationship Relationships within and between communities, groups
capital of stakeholders and other networks, and the ability to
share information to enhance individual and collective
well-being (IIRC, 2013, p.12).
Natural Capital ‘Renewable and non-renewable environmental resources
and processes that support the past, present or future
prosperity of an organisation … including air, water,
land, minerals, forest biodiversity’ (IIRC, 2013, p.12).
B. Williams and S. Lodhia Journal of Environmental Management 280 (2021) 111833

Table 2
Descriptive results – annual turnover and ACLG classification.
Annual Frequency Percent ACLG Frequency Percent
Turnover Classification

Less than 11 8.5 Urban

$5M
$5M - $10M 8 6.2 Capital City 1 .8
$10M + 1 - 11 8.5 Metropolitan 30 23.3
$20M Developed
$20M + 1 - 41 31.8 Regional Town/ 26 20.2
$50M City
$50M + 1 - 20 15.5 Fringe 6 4.7
$100M
> $100M 38 29.5 Rural
Significant 7 5.4
Growth
Agricultural 44 34.1
Remote 15 11.6 Fig. 1. Type of capital - level of reporting.

classifications (51%–49%) with the most common classification being
the Rural – Agricultural (34.1%) classification, followed by Urban –
Metropolitan Developed (23.3%) and Urban – Regional Town/City
(20.2%).
3. Results
3.1. Are councils reporting in an integrated manner?
Respondents were asked to indicate level of priority local councils
are placing on IR in Australia. Only 5.7% (7 respondents) considered it
very unimportant or unimportant with 72.1% of respondents specifying
this form of reporting as either important or very important (93 re­
spondents). These results indicate IR is on the radar in Australian local
councils.
Details were sought from the respondents on the type of capital
reporting their local council is disclosing to stakeholders. Results were
initially separated into two categories: those reporting (classified as
sometimes, fairly often and always responses) and those not reporting
(classified as almost never and never responses). The highest proportion
of respondents were those reporting on all six capitals (29.5%) followed
by four capitals (20.2%) (Table 3, column 3). However, with some ev­
idence arguing the presence of a mid-point can produce result distortion
(Garland, 1991), the mid-range ‘sometimes’ value was removed from
analysis. This provided different results with the highest proportion of
respondents indicated that they were reporting on only two capitals
(31.78%), with a total of 45.73% respondents reporting on less than
three capitals. Further, with 9.3% of respondents (12) indicated they
reported no capitals at all (Table 3, column 5), this provides possible
indication of a lack of understanding as to the type of current reporting.
From the perspective of councils that were considered as reporters
(either sometimes, fairly often or always), financial capital and
manufacturing capital type were the most frequently reported (Fig. 1)
(96.2% and 89.2% report sometimes, fairly often, always) whereas the
least reported capitals were intellectual and natural (41.1% and 55.1%).
To explore the impact of council size on level of reporting, one-way-
between-groups ANOVA testing was conducted. Results were signifi­
cant at the p < .05 level for intellectual capital reporting (F (5, 128) =
5.231, p < .05) and human capital reporting (F (5, 128) = 3.731, p <
.05). Post-hoc comparisons using the Tukey HSD test indicated there
were significant differences in level of intellectual capital reporting
between those in the $20M-$50M (M = 2.024, SD = 1.0837) and
>$100M grouping (M = 3.026, SD = 1.2409). For human capital
reporting, results were significant (F (5, 128) = 3.731, p < .05) with
post-hoc comparisons indicating significant differences between coun­
cils that had a turnover of $10M-$20M and greater than $100M.
Results were then combined into two categories: those councils that
always or fairly often report and those councils that almost never or
never report. Based on prior reasoning, with the mid-range ‘sometimes’
value removed, this provided a clearer picture of reporters and non-
reporters (Fig. 2), indicating that most councils report on financial
(95.7%) and manufacturing (87.2%) capital, with reporting on human
and social/relationship capitals at approximately the 50% level. Intel­
lectual and natural capital were least reported, with 79.2% not reporting
on intellectual and 66.7% not reporting on natural.
Respondents were asked to explain the primary reason for intellec­
tual capital non-reporting. This included statements such as, ‘we do not
believe we have any of this capital’, ‘we have relatively little intellectual
capital’, ‘we use the intellectual capital of other councils’, ‘council has no
intellectual capital’, ‘we are not in the software business’ and ‘council does
not have any customized software or patents’. For councils not reporting
natural capital, two main reasons were put forward focusing on non-
availability of data/systems/processes and no legislated requirement
to report. This included statements such as ‘we do not have established
systems to capture and report this data’, ‘data is not available’, ‘some of this

Table 3
Number of capitals being reported.
Number of Number Reported Percent Number Reported Percent
Reporting (Sometimes to (Fairly often to
areas Always) Always)

Zero 4 3.1 12 9.3

One 3 2.3 17 13.18
Two 20 15.5 41 31.78
Three 13 10.1 18 13.95
Four 26 20.2 16 12.40
Five 25 19.4 16 12.40
Six 38 29.5 9 6.98
129 100 129 100
Fig. 2. Type of capital - reporters & non-reporters.

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B. Williams and S. Lodhia Journal of Environmental Management 280 (2021) 111833

would be vaguely touched on in the annual report but it’s in no way organised below). Independent group t-testing indicated a number of significant
or of any use or informative’, ‘not a legislative requirement’ and ‘very differences highlighting a higher proportion of councils reported in an
difficult to capture when not captured for any other purpose’. A further integrated manner through these reporting mechanisms: annual report (t
additional reason put forward by some councils was that there was ‘no = 2.197, p <. 05), corporate/strategic reports (t = 3.287, p < .05), oper­
appetite from the community for this information’. This is a concerning ational plans (t = 4.397, p < .001), state of environment reports (t = 2.561,
finding, given that environmental issues are critical matters for local p < .05), budget statements (t = 3.688, p < .001), web-site (t = 4.757, p <
councils and their stakeholders. The lack of disclosure on natural capital .001) and policy documents (t = 4.620, p < .001).
highlights that accountability for environmental issues appears to be
quite limited.
3.3. What are the motivations for local councils for undertaking IR?
Further testing was conducted using independent sample t-testing
comparing reporting type by importance of IR. Respondents were
Respondents were asked to indicate why they choose to report cap­
separated into two groups, those reporting at an integrated level and
ital information (Table 5). The most important reasons were focused on
those non-reporting at an integrated level (with integrated reporters
four key areas: improving engagement with key stakeholders (88.4% of
categorised as those councils that always or fairly often report on at least
respondents considered this either an important or very important fac­
5 or 6 capitals, Group 1 with non-integrated reporters categoriesed as 4
tor), to demonstrate progress towards the councils vision, strategies and goals
or less, Group 2). Results indicated a significant difference between the
(87.6%), to improve accountability and transparency of reporting (85.3%)
two groups and level of importance they place on IR (t = 4.188, p = .000)
and to improve the councils public image/reputation (82.1%). Least
with mean scores of 4.553 (Group 1) and 3.821 (Group 2) indicating that
important factors were other councils are reporting this way (27.9%),
those who are reporting on IR can see its relevance and importance.
pressure from management (29.5%) and indicate alignment to national and
global concerns (42.7%). It can therefore be observed that the motiva­
tions for IR are related to legitimacy considerations with the emphasis
3.2. Where is capital information being reported?
on management of stakeholders and enhancing reputation. Institutional
influences and internal organisational factors were less prominent in
To provide further context into the reporting of integrated infor­
explaining the need for undertaking IR.
mation, and with prior research into local government voluntary
Analysis was undertaken as to why local councils report on IR by
reporting practices indicating a range of media being utilised (for
integrated reporters/non-integrated reporters (integrated reporters
example, Williams et al., 2011; Farneti and Guthrie, 2009), respondents
categorised as those that are reporting on at least 5 or 6 capitals always
were asked to indicate reporting media that was being used to report
or fairly often to those non-integrated reporters categorised as reporting
integrated information. Following Williams et al. (2011), a listing of
4 or less capitals always or fairly often) via independent sample t-testing.
reporting media, both internally and externally focused were provided
Results indicate in Table 5 some key differences with all integrated re­
to recipients. Consistent with prior research, reporting of integrated
porters scoring higher mean values than non-integrated reporters. There
information was found to be across a range of media with the most
were a number of reasons that were not originally considered important
common external report being the annual report (89.15% of respondents
but when separated into the two groupings, some key differences were
used this reporting mechanism) (Table 4). Other commonly utilised
indicated highlighting a desire for organisational change: to assist tran­
reports were management reports (62.64%), budget statements
sition to more sustainable business practices (t = 2.287, p < .05); to
(71.32%), operational plans (61.62%) and council minutes (62.02%).
streamline reporting processes (t = 2.874, p = .005), to integrate the different
Similar to the findings of Williams et al. (2011) but focusing on IR,
aspects of council (t = 3.538, p = .001), to facilitate a future mindset (t =
the stand-alone integrated report was one of the least utilised with 38
2.392, p = .018) and to break down silos in council (t = 2.150, p = .033).
councils (29.46%) reporting through a separate integrated report. It was
interesting to note, thirty-two (84.2%) of these councils reported on 4 or
more capitals with the most reported capital being either financial or 3.4. Does IR lead to organisational change in the form of integrated
manufacturing. To examine for differences in type of reporting by re­ thinking in local councils?
porters, respondents were then separated into two groups; those
reporting in an integrated manner (that is, reported either 5 or 6 capi­ Respondents were then asked to consider what is hindering organ­
tals) and those reporting in a non-integrated manner (4 capitals and isational change through integrated thinking within the local

Table 4
Reporting Media- Most and least utilised.
Number (%) of councils Type of Capital – Number of councils

Financial Manufact-uring Intellectual Capital Human Social Natural

Most utilised 115 100 88 18 46 46 29

Annual report 89.15%
Budget statements 92 82 76 16 39 40 24
71.32%
Council minutes 80 71 62 13 38 37 23
62.02%
Operational plans 79 70 64 15 36 38 23
61.24%
Management reports 79 69 61 15 32 26 22
62.24%
Least utilised 44 41 35 8 20 21 15
Community report 34.11%
Stand-alone integrated report 38 34 28 8 19 20 12
29.46%
State of environment report 27 25 22 8 13 15 10
20.93%
Stand-alone sustainability report 17 15 12 3 8 10 6
13.18%

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B. Williams and S. Lodhia Journal of Environmental Management 280 (2021) 111833

Table 5
Why local councils report capital information.
Very Unimportant/ Percent Important/Very Percent t-test df Sig. (2
Unimportant important tailed)

Most important reasons 2 1.6% 114 88.4% 3.753 127 .000

Improve stakeholder engagement
To demonstrate progress towards councils vision, strategies 2 1.6% 113 87.6% 1.398 127 .165
and goals
To improve accountability and transparency 3 110 85.3% 1.368 127 .174
Improve councils image/reputation 3 2.3% 106 82.1% 3.182 127 .002
Least important reasons 22 17.1% 36 27.9% 1.358 127 .177
Other councils are reporting this way
Pressure from management 18 14% 38 29.5% 2.212 127 .029
Indicate alignment to national/global concerns 19 14.7% 55 42.7% 3.211 127 .002
Other reasons 8 6.3% 94 72.9% 2.287 127 .024
To assist transition to more sustainable business practices
To educate and change community attitudes 5 3.9% 102 79.1% 1.280 127 .203
To streamline reporting processes 10 7.8% 80 62% 2.874 127 .005
To integrate the different aspects of council 5 3.9% 90 69.7% 3.538 127 .001
To facilitate a ‘future orientated’ mindset 6 4.7% 95 73.6% 2.392 127 .018
To break down operational/reporting silos in the council 12 9.3% 70 54.3% 2.150 127 .033

government sector (Table 6). Respondents identified a number of in­ level. This research is important as IR could potentially assist with the
ternal factors ranging from lack of existing systems/processes (48.9% of embedding of environmental impacts into mainstream business
respondents considered this either a significant or very significant fac­ activities.
tor), lack of expertise and understanding (46.50%), lack of funding and
lack of adequate data (43.40% respectively). To provide clarity on the
4.1. Research questions
limiting factors, independent group t-testing was conducted separating
results into two groupings: integrated reporters and non-integrated re­
This study contributes to the literature by answering three questions.
porters. In doing this, results highlighted non-integrated reporters
The first research question, RQ1, was focused on: Are local councils
indicated the following internal reasons as being significant in hindering
reporting in an integrated manner and what mechanisms are used to
organisational change: lack of support from management and councillors
report integrated information? This study found that IR at the Australian
(t = − 3.053, p = .003; t = − 2.241, p = .027), lack of expertise and un­
local level is at initial stages and is consistent with previous research
derstanding (t = − 2.626, p = .010) and not addressed in the corporate/
including Montecalvo et al. (2018) and Guthrie et al. (2017). Results
strategic plan (t = − 2.397, p = .018). It is interesting to note external
indicate 45.73% of local government respondents report on less than
factors such as community interest or relevance to stakeholders were not
three capitals and only 6.98% reported on all six capitals while 9.3%
considered significant issues, indicating internal factors are limiting
indicated they report on none of the capitals. Not surprisingly, the most
development of integrated thinking in local councils.
common capitals areas were financial and manufacturing capital with
low reporting levels for intellectual and natural capital. Further testing
4. Discussion
highlighted the linkage between those councils reporting in an inte­
grated manner and the level of importance they place on IR, highlighting
IR is a new form of voluntary reporting focusing on the integration of
reporting councils can see the relevance and importance of such
an organisations social, environmental and governance impacts along­
reporting. Results also indicated for local councils that are reporting,
side their strategic and financial impacts. It has advantages over other
they are choosing to report integrated information through a range of
forms of voluntary reporting approaches due to its focus on integrated
mechanisms, with the annual report utilised the most, with other reports
thinking. While voluntary reporting has been taken up in the private
including management reports, budget statements, operational plans
sector, with arguably higher public accountabilities and social and
and council minutes. These results align with other public sector
environmental responsibilities, the public sector is slowly starting to
research into voluntary reporting such as Williams et al. (2011) and
respond. The objective of this research was to determine the current
Farneti and Guthrie (2009). Noting the level of importance being placed
status of IR in the Australian public sector, in particular the local council
on IR (72.1% of respondents considered IR as either important or very

Table 6
What is preventing organisational change through integrated thinking in your local council?.
Very insignificant/ Percent Significant/very Percent t-test df Sig. (2
insignificant significant tailed)

Most significant reasons 23 17.8% 63 48.9% − 1.092 114 .277

Existing systems and processes
Expertise and understanding 26 20.2% 60 46.5% − 2.626 114 .010
Funding 27 21% 56 43.4% 1.000 114 .319
Adequate data 25 19.4% 56 43.4% -.887 114 .377
Least significant reasons 70 51.5% 10 7.8% − 1.182 114 .240
Reluctance by council to disclose future related
information
Not addressed in the strategic/corporate plan 51 37.3% 22 17% − 2.397 114 .018
Support from senior management 56 43.5% 22 17.1% − 3.053 114 .003
Support from councillors 53 41.1% 22 17% − 2.241 114 .027
Other reasons 31 24.1% 28 21.7% − 1.702 114 .091
Community interest
Relevance to external stakeholders 38 29.4% 27 21% -.907 114 .366

6
B. Williams and S. Lodhia
important), with reporting at early stages of implementation in the
public sector, this points to an opportunity for the IIRC going forward to
become more involved in proving support for public sector organisations
in transitioning to IR using a consistent approach.
In answering RQ2: What are the motivations for undertaking IR in
local councils?, external factors were found to be of most importance,
focused on stakeholder engagement, progress reporting, accountability,
transparency and reputation. There was an emphasis on legitimacy
rather than institutional influences or internal organisational factors. It
appears that appeasing stakeholders and enhancing the organisational
reputation is fundamental to the local councils. There is understandably
a lack of coercive pressure in the absence of regulation to encourage
integrated reporting. Similarly, very few councils are engaged in inte­
grated reporting and there seems to be a reluctance to mimic the prac­
tices of corporates in relation to the disclosure of the six capitals. What is
most disappointing is that there is scant evidence of professionalisation
and networks in relation to integrated reporting. Moreover, the attitudes
and systems and processes are not focused on integrating reporting. This
suggest that the transition to integrated thinking is a long way off in
these councils.
However, when integrated reporter responses were compared to
non-integrated responses, results highlighted the importance of internal
factors for those reporting, such as assisting transition to more sustain­
able business practices, streamlining reporting practices, integration of
the different aspects of council and breaking down silos. This indicates
that while IR is limited, councils that are choosing to take up IR consider
both internal and external factors as important but non-reporters are
focused primarily on external factors, primarily legitimacy consider­
ations. This result differs from that of Domingues et al. (2017), who
found internal motivations were the main reasons for publishing sus­
tainability reports (p. 295). However, it was also noted that increased
transparency was an important purpose of sustainability reporting
which has both internal and external implications. These results provide
initial evidence reporters of IR are motivated by a number of different
factors, requiring further research to understand this more fully.
If integrated reporters are cognizant of the internal organisational
change that can potentially occur through IR, the issue is, why are not
more local councils reporting using this approach? This issue was
addressed via RQ3: Is organisational change occurring through IR and
integrated thinking? Through examination of the limitations on inte­
grated thinking at a local level, a number of internal factors were raised.
These included system and data issues, lack of expertise and funding as
key reasons. It was further interesting to note non-IRs put more
emphasis on [lack of] management support, IR expertise and lack of
strategic focus as reasons preventing the expansion of IR. Results were
similar when compared to the findings of Domingues et al. (2017), who
indicated lack of management support, data collection issues and lack of
training as constraints to sustainability reporting. This indicates internal
organisational issues are preventing the uptake of IR and the potential
wider organisational change flowing from this. It could also be observed
that an emphasis on legitimacy and an external focus has prevented the
councils from addressing the internal organisational dynamics required
to bring about organisational change. For IR to be successful, there is a
need for integrated thinking to accompany the disclosure of the six
capitals so that effective change in the transition to sustainability
practices is achieved. Attitudes, and systems and processes (Adams,
2002) need to be geared towards integrated thinking so the full potential
of integrated reporting is realised. Similarly, there needs to be coercive
pressures through regulation and a need to mimic successful practices in
integrated reporting, even if these are associated with corporations. The
development of professional networks within councils to share inte­
grated reporting and thinking knowledge will also enable the develop­
ment of integrated reporting.
One key difference noted between this current research and that of
the work of Domingues and others, was the focus placed on streamlining
and breaking down of operational and reporting silo approaches. The
7
Journal of Environmental Management 280 (2021) 111833
siloed approach to sustainability reporting has been found in prior
research (see for example, Farneti and Guthrie, 2009) and other research
has also noted the risk of compartmentalizing the voluntary reporting
process if one department is exclusively responsible (for example,
Schaltegger and Wagner 2006). However, with voluntary reporting
moving to an integrated approach in recent years, this has assisted in a
wider understanding of this barrier, noted by Guthrie et al. (2017), who
found the use of cross-functional departments a key mechanism for
success to IR in the public sector. This has also been found in other IR
research, being a key mechanism in implementing integrated thinking
(Stubbs and Higgins, 2014). However, as Stubbs and Higgins (2014)
point out, to obtain lasting change, there is a need for support by
management, noted as a limitation in this research for non-integrated
reporters in moving to IR.
5. Conclusion
5.1. Contributions of this study
This study makes important contributions to theory and practice, and
has policy and societal implications. Through the use of a multi-
theoretical research framework, this study has empirically examined a
wide range of factors that could explain the adoption of the IR practice in
local councils. The study highlights that a mere emphasis on legitimacy
is not sufficient in bringing about change in practices that could led to
integrated thinking in local councils. The applicability of legitimacy and
institutional theory coupled with internal organisational factors has
been extended through this study into integrated reporting and thinking
in Australian local councils.
The public sector has a significant economic, social and environ­
mental impact (Broadbent and Guthrie, 2008) which brings higher
accountability expectations (Ball et al., 2014). While some researchers
(Dumay et al., 2016; Milne and Gray, 2013) argue the <IRF> use is
primarily for the private sector, this study extends the literature by
demonstrating the public sector is beginning to engage with IR albeit at
different levels. Thus, this study expands the literature on integrated
reporting through its findings of Australian local councils.
The research also provides practical evidence indicating limited
organisational change, leading to low levels of integrated thinking in
local councils. This study provides guidance to local council manage­
ment, both in Australia and globally who are currently considering un­
dertaking IR, as to the potential this reporting approach could provide in
assisting them in moving from a siloed approach to a more integrated
approach incorporating social and environmental issues into everyday
business decisions. Stakeholders of councils can also gain insights into
current IR practices in councils and encourage councils to transition to
sustainable practices, given the emphasis placed on stakeholders as
indicated by this study’s findings.
Policy implications arise in relation to the need for further education
to assist management in understanding the possibilities of this reporting
approach and the need for further training to increase the pool of
expertise in the public sector. The possible development of mandatory
guidelines that could regulate IR practices in councils could provide a
coercive influence that would compel councils to engage more exten­
sively in IR and thinking. The IIRC could play an instrumental role in
encouraging the adoption of integrated reporting and thinking in the
public sector through guidelines and public sector integrated reporting
knowledge networks.
Societal implications also arise in relation to this study. The goal of
IR and integrated thinking is to encourage the transition to sustainable
practices by organisations on this planet and this is particularly relevant
for local councils who are not driven by the profitability motive of
corporations. As the level of governance closest to the grassroot, local
councils can not only provide their accountability over the six capitals
but also ensure that internal processes and systems address critical
capitals such as natural and societal capitals. Local councils can be the
B. Williams and S. Lodhia
drivers of the transformation to sustainable development envisioned by
global leaders and be the initial changemakers for sustainability that
provide exemplars for other organisations such as corporations.
5.2. Limitations of this study and research opportunities
In concluding this article, we acknowledge the limitations of survey
research and the need to verify these results through other methodolo­
gies such as interviews or content analysis approach. As an extension of
this research, future research could focus on the reporting quality for
those public sector entities that are engaging in IR to assist in providing a
reporting framework for IR in the public sector. Further research could
investigate external stakeholders of councils, providing further insights
into council reporting practices and highlighting awareness of how
accountability could be improved through this new form of reporting.
Such studies could be extended to councils globally as well as to the
Australian public sector more widely.
Declaration of competing interest
The authors declare that they have no known competing financial
interests or personal relationships that could have appeared to influence
the work reported in this paper.
Appendix A. Supplementary data
Supplementary data to this article can be found online at https://doi.
org/10.1016/j.jenvman.2020.111833.
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