Journal of Strategy and Management

The dynamics of financial information and non-financial environmental, social and

governance information in the strategic decision-making process
Martin Esch, Mike Schulze, Andreas Wald,
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financial environmental, social and governance information in the strategic decision-making process",
Journal of Strategy and Management, https://doi.org/10.1108/JSMA-05-2018-0043
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The dynamics
The dynamics of financial of financial and
information and non-financial non-financial
information
environmental, social and
governance information in the
strategic decision-making process Received 18 May 2018
Revised 27 January 2019
7 March 2019
Martin Esch Accepted 10 March 2019

EBS Universitat fur Wirtschaft und Recht – EBS Business School,

Oestrich-Winkel, Germany
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Mike Schulze
European Management School, Mainz, Germany, and
Andreas Wald
University of Agder, Kristiansand, Norway

Abstract
Purpose – The purpose of this paper is to link the fields of research on strategic decision (SD) making and
integrated reporting (IR) and advances knowledge of the concept of integrated thinking by describing how
financial information and non-financial environmental, social and governance (ESG) information are used in
different phases of the strategic decision-making process (SDMP).
Design/methodology/approach – In total, 15 senior executives from twelve different industries were
asked about the importance of different types of information within SDMPs. The data were analyzed by
means of content analysis.
Findings – The authors derive a four-phase model and explicate the utilization of financial information and
non-financial ESG information within each phase. The findings show that both types of information affect
SDMPs, but the importance of each type differs among the phases.
Practical implications – This study offers practitioners a yardstick against which to compare how they
use different types of information throughout the SDMP.
Originality/value – This paper provides a conceptual model of integrated thinking in SD making by
connecting two separate fields of research. This connection will permit deeper study of the field of information
and its implications for SD making. The present investigation shows that IR can promote integrated thinking
in companies, as the broader range of information at hand allows companies to form a holistic picture of
internal management questions and incorporate information that has not been previously prepared or
associated with existing information.
Keywords Integrated reporting, Integrated thinking, Strategic decision-making, Integrated information
Paper type Research paper

1. Introduction
Strategic decisions (SDs) are a fundamental part of business execution and determine a
firm’s future (Eisenhardt and Zbaracki, 1992; Dean and Sharfman, 1993). SDs are shaped
not only by the strategic objectives of a company but also by external factors.
Uncertainties and imperfect information are the starting point of each SD making process
(SDMP), and enterprises strive to support decisions in the best possible way. As
improving decision-making will ultimately have a significant impact on the success of an
organization, studies of the factors that influence SDs have been at the forefront of
research in strategic management. Journal of Strategy and
Management
SDs are usually based on both financial and non-financial information (Frishammar, © Emerald Publishing Limited
1755-425X
2003), and firms use internal management control tools to provide and utilize both types of DOI 10.1108/JSMA-05-2018-0043
 JSMA information (Henri, 2006). However, research on the use of different types of information in
the different phases of SDMPs is scarce. More recently, external reports have begun
providing non-financial information in addition to financial information to external
stakeholders seeking to assess the environmental, social and governance (ESG) performance
of firms (Cohen et al., 2012). This development has resulted in the creation of a new reporting
format: integrated reporting (IR). IR builds on the concept of integrated thinking and aims to
provide a comprehensive view of the value creation of a company (Dumay et al., 2016). In
contrast to the information provided by internal performance measurement tools such as the
Balanced Scorecard, the information in integrated reports does not include detailed key
performance indicators for strategy implementation. Instead, an integrated report depicts
how an organization’s strategy creates value by considering financial, governance,
environmental and social implications. Although originally developed to satisfy the
increased information needs of investors (Briem and Wald, 2018), the literature on IR argues
that the provision of integrated information (financial and non-financial ESG) can also play
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an important role in SD making (Steyn, 2014; Krzus, 2011). Integrated information is

essential for integrated decision-making processes and actions (also referred to as
“integrated thinking”), which consider “the connectivity and interdependencies between the
range of factors that affect an organization’s ability to create value over time” (IIRC, 2013;
Rinaldi et al., 2018). The right balance of integrated information is supposed to reduce
information deficits and prevent negative SDs.
However, empirical research on the benefits of integrated thinking is scarce. Simnett
and Huggins (2015) emphasize that future research should investigate the explicit steps
through which organizations can attain benefits when executing integrated thinking and, in
turn, foster integrated decision-making. Oliver et al. (2016) highlight the need to explicitly
investigate how these two dimensions are considered and evaluated alongside each other.
Burke and Clark (2016) reveal several internal benefits, such as better resource allocation
and an increase in data quality for internal decision-making. Despite this focus on the
importance of integrated thinking, organizational processes and communication, studies
explicitly connecting internal decision-making to the usage of integrated information are
lacking. As an exception, Esch et al. (2019) used an experimental design to demonstrate that
the provision of additional non-financial information and the integration of financial
information and non-financial ESG information alters the decision-making behavior of
managers when facing strategic investment decisions.
Churet and Eccles (2014) summarized the need to further investigate the internal benefits
of IR comprehensively by stating that “[…] integrated reporting is only the tip of the
iceberg.” It is the visible part of what is happening below the surface – namely “integrated
thinking” and “integrated decision-making.” Taken together, these studies suggest that the
relatively new phenomenon of integrated information is likely to play an important role in
SDMP. Accordingly, this paper seeks to address the following two research questions:
RQ1. How and to what extent is non-financial ESG information considered alongside
financial information in each phase of an SDMP?
RQ2. What are the dynamics of these two types of information?
To answer these research questions, 15 senior executives were interviewed to explore how
they evaluate the importance of integrated information in their most recent decision-making
processes. One aim of this paper is to uncover the extent to which decision-makers use
different sets of information in various phases, thus contributing to assessments of whether
the information changes offered by IR have the potential to facilitate SD making. The
contributions of this paper are twofold: first, it adds to the ongoing discussion on integrated
thinking and its importance for SDMP; second, it provides insights on how senior executives
use non-financial ESG information alongside financial information.
 The remainder of the paper is structured as follows. Section 2 presents an overview The dynamics
of the existing literature on SD making and IR. Section 3 describes the details of of financial and
the methodological approach, including the data collection and analysis processes. Section non-financial
4 presents the results and the derived model. Section 5 discusses and reflects on the
results. Finally, we point out the limitations of the study and conclude with suggestions information
for future research.

2. Theoretical background
2.1 SD making processes
Mintzberg et al. (1976) suggested a framework of SDMPs that includes three phases and
seven subroutines: identification, development and selection (see also Schwenk, 1995). The
first phase consists of two subroutines and involves the identification of opportunities and
problems triggering decisional activity as well as the initial collection of information
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relevant to their clarification and specification. The second phase also consists of two
subroutines and involves the generation, modification and possible redefinition of choice
alternatives that enable resolution of the decision matter. Finally, in the third phase, which
includes three subroutines, excess choice alternatives are sorted out, and a final decision is
made among the viable choice alternatives profound analysis, bargaining among decision-
makers, and additional further activities that may evolve throughout the process and are
necessary for the decision to be made (see Figure 1).
Each phase of an SDMP is influenced by a multitude of determinants and contextual
factors (Papadakis et al., 1998). Shepherd and Rudd (2014) deduce four categories of context
variables that substantially influence decision-making outcomes: top management teams,
SD-specific characteristics, the external environment and specific firm characteristics.
However, little research has been conducted on the role and nature of information provided
for SDs (Citroen, 2011).
Information is an indispensable resource for every decision (Meadow and Yuan, 1997).
In SDMPs, information helps reduce uncertainties pertaining to the selection of alternatives
(Citroen, 2011; Choo, 1996), especially in the second and third phases of the process (Citroen,
2011). Decision-makers need to identify and collect enough information (Meadow and Yuan,
1997), and assessing the adequacy, accuracy and reliability of information is a time-
consuming process (Schwenk, 1995). Information on internal and external issues accessed
through internal systems and procedures as well as external channels can trigger decisional
activity. Frishammar (2003) pointed out that the SDMPs always employ a combination of
different dimensions of information. The information obtained is sought by decision-makers
to frame and specify choice alternatives, sort out excess alternatives, assess remaining
alternatives, and finally decide on one choice alternative to be pursued (Citroen, 2011).
Despite its relevance as a factor impacting SDMP characteristics and SD outcomes, research
on SD making has largely neglected the role of information, presumably because

Phases I Identification II Development III Selection

1 Decision Recognition Routine 3 Search Routine 5 Screen Routine

Sub- 2 Diagnosis Routine 4 Design Routine 6 Evaluation-Choice Routine Figure 1.

Routines The strategic decision-
making process and
7 Authorization Routine its subroutines
 JSMA information is often regarded as a readily available input (Citroen, 2011). The way in which
decision-makers choose, retrieve, and process information alters the procedural setup of
SDMPs and, in turn, their characteristic traits. As a consequence, the interplay and
reciprocal effects among SD context, SDMPs, and SD outcomes will be influenced by
informational factors.

2.2 Integrated reporting information

IR is associated with far-reaching consequences not only for accounting practices but also
for (internal) management control. Among the main advantages of engagement in IR are
higher degrees of communication and collaboration as well as the possibility of integrating
non-financial matters into corporate strategies (Simnett and Huggins, 2015). Such additional
non-financial information about a company’s performance has been widely categorized as
ESG information. This ESG information is considered the second dimension of integrated
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information after traditional financial information. The provision of a detailed and diverse
set of information is supposed to contribute to a company’s performance in the long term
(Druckman and Fries, 2010). Parrot and Tierney (2012) noted that the possibility of linking
financial information with ESG information will result in a higher degree of social
investment, as financial, environmental and social aspects can be taken into account equally
for corporate decision-making. In the same vein, Burke and Clark (2016) stated that a
consideration of both dimensions (non-financial ESG and financial) facilitates decisions,
thereby reducing both costs and reputational risks. This effect is of particular relevance for
SDs, which are crucial for a company’s success and often involve high risks (Cheng et al.,
2014). Furthermore, many companies are evaluated based on not only financial targets but
also non-financial targets (Cohen et al., 2011). Thus, the quality of decisions can be improved
when decision-makers simultaneously consider financial information and non-financial ESG
information (Hampton, 2012).
Dumay et al. (2016) called for further research shedding light on this interplay, which was
designated the principle of integrated thinking by the International Integrated Reporting
Council (IIRC) in the International Integrated Reporting Framework (IIRC, 2013) and
considered one of the major aims of IR. Coulson et al. (2015) added that integrated thinking
can be viewed as the promotion of internal “decision-making that recognizes the
relationships between the six capitals” mentioned by the IIRC. As integrated thinking
becomes embedded in an organization, the interrelations between non-financial and
financial metrics are expected to become clearer, and integrated information presented in
integrated reports and serving as a basis for corporate decisions (e.g. investment decisions)
will become more valuable for investors and managers (Atkins and Maroun, 2015). Investors
are already urging companies to provide more and more non-financial information, and thus
it is inevitable that this information will become relevant within internal communication,
managerial control and decision-making processes. After interviewing several pilot
companies, Druckman and Fries (2010) verified this point and revealed that integrated
thinking drives collaboration between different departments (particularly finance) and leads
to the incorporation of non-financial issues into decision-making.
Both literature streams, SD making and IR, have developed separately with sparsely
overlapping research approaches. However, it seems obvious that integrated information
can influence SD making. Eccles and Krzus (2010) suggested that amending and modifying
information processes in the utilization of integrated information to gather and process
information effectively will lead to an information set of higher quality and
comprehensiveness. Although there is consensus that SDs are backed by both financial
information and non-financial ESG information, the individual importance of these
information types throughout the decision process has not been studied in detail. More
recently, Esch et al. (2019) presented an experimental study on the effects of different
 scenarios of information – financial only, financial and non-financial, and integrated The dynamics
information – on the outcome of strategic investment decisions. They showed that the of financial and
provision of integrated information (including financial information and ESG information) non-financial
ceteris paribus leads to decisions with higher sustainable value creation. Although their
experimental design did not consider the variety of internal and external determining information
factors that usually influence SDs, their results clearly indicate that non-financial ESG
information is of high importance for SD makers.
However, how managers evaluate the importance of each of the two associated
dimensions (financial and non-financial ESG), the steps in an SDMP in which one dimension
might outweigh the other, and how the provision of substantially new integrated
information alters recent decision-making processes remain unknown.

3. Methodology
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As IR is a nascent research field, an inductive approach was adopted (Patton, 2002). The
decision to implement IR has an important impact on an organization, especially on complex
organizational processes and thus a qualitative research approach is appropriate
(Eisenhardt and Graebner, 2007). The strength of a qualitative approach is the deep and
realistic insights it enables, which make it suitable for this research setting, as this study
sets out to uncover perceptions of senior executives and explore how they use integrated
information to substantiate upcoming SDs. Taking into account that there is only limited
research on the interconnections between the research fields of IR and SD making, our paper
is exploratory in nature. Relying on the strengths of qualitative interviews we attempted to
understand the points of view of 15 senior executives from twelve different industries
(Kvale, 1996). We used semi-structured interviews as they are the most useful in
investigating opinions or complex behaviors (Clifford et al., 2016). We also decided to
conduct face-to-face interviews only (Opdenakker, 2006).
Our sampling strategy relied on a purposive sampling approach (Eisenhardt, 1989)
coupled with maximum variation sampling (Glaser and Strauss, 2009). We applied five
criteria. First, we chose interviewees from companies with more than €500m in revenue
and more than 2,500 employees to exclude small firms with a less formalized approach
to SD making. Second, we chose chief financial officers and heads of controlling
departments as interviewees, as these individuals have responsibility for decision support
within a corporation. We expected that holders of these positions have extensive
knowledge not only on how corporate decision-making is conducted but also on how and
with which kind (financial or non-financial) of information the decision-making process is
supported. Third, to avoid a too-narrow focus, we allowed a certain degree of variation
regarding the positions of the respondents. Accordingly, our sample included managers
with more global or regional focuses (e.g. Head of Finance, Germany). Fourth, to avoid a
potential industry bias we studied multiple industries. Fifth, we chose a sample consisting
of companies engaging in IR, companies that are planning to implement IR, and
companies that are not committed to an IR approach. In particular, we expected that
companies that are not yet engaged in IR would provide information on the potential of
ESG information for SDs.
Following a pre-test of the interview guide, the questions were organized in an easy-to-
follow structure for the interviewees that focused on the importance of non-financial
information in every decision step. Overall, the interview guide was composed of three
different sections containing 16 open-ended questions (see Appendix). A final question was
included and was asked if some important issues were missing. The homogeneous interview
content combined with the high degree of expertise of our interviewees “offers
comprehensive information from smaller interview samples” (Guest et al., 2006). Table I
gives an overview of the participating companies and the interviewees.
 JSMA Company Sector Interviewees Integrated reporting Revenue

A Pharmaceuticals Head of controlling Not in place W €1bn

B Chemicals Subsidiary chief financial officer In place W €25bn
C Machinery and Plant Chief financial officer Implementation planned W €1bn
Engineering
D Automation Head of global reporting Not in place W €5bn
Engineering
E Steel Trade and Metal Chief financial officer In place W €5bn
Processing
F Automation Chief financial officer Not in place W €1bn
Engineering
G Lighting Technology Chief financial officer Implementation planned W €1bn
H Auditing Head of finance Germany Not in place W €25bn
I Financial Services Head of capital resolution Not in place W €10bn
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J Energy Supply Head of controlling In place W €25bn

K Pharmaceuticals Head of finance and accounting In place W €25bn
Table I. L Software Senior finance specialist In place W €10bn
Sample of companies M Communications VP Control/VP Planning Europe Not in place W €25bn
and interviewees N Software Head of business solutions Not in place W €5bn

3.1 Data collection

We first approached potential interviewees via e-mail. Over a period of two weeks, we
contacted more than 30 companies and asked for interviews. After the contacted persons
agreed to a face-to-face interview, we sent out a teaser to provide a brief overview of the most
important characteristics we were interested in. Overall, 14 senior executives in 14 companies
were interviewed. The interviews took place between December 2016 and April 2017 and
lasted 60–90 min each. Following Patton (2002), who suggested a risk of bias when different
interviewers possess different skill levels, we relied on our own capabilities and insights
developed during the four-month research phase and conducted the interviews ourselves. To
ease the situation, we asked for explicit permission to record before the start of each interview,
which also limited misinterpretation between the conversation partners (Eisenhardt, 1989).
After each interview, we discussed the outcome and refined the questions slightly if necessary
(Spiggle, 1994). This process resulted in an increased focus, and we reached a point of
theoretical saturation after 12 interviews, as the last three executives almost entirely replicated
or solely verified statements mentioned in previous interviews (Glaser and Strauss, 2009).

3.2 Data analysis

All interviews were recorded and transcribed by a professional transcription agency
(for a similar proceeding, see, e.g. Mantere, 2008). More than 350 pages of transcribed
interviews provided by the interviewees were analyzed. To ensure an accurate and reliable
coding process, two researchers independently analyzed the interviews using the software
MaxQDA. Considering grounded theory (Glaser, 1992; Corbin and Strauss, 2008), we used
an open coding approach in which text passages were marked with a tentative code. In a
second step, we engaged in an axial coding process by re-reading the interviews and
identifying subordinate concepts as well as relationships between and among the previously
determined superordinate categories (Corbin and Strauss, 2008).
Discrepancies at the end of the coding process were discussed between the researchers
until consensus was reached (Bryman, 2016). At the final stage, the experiences gleaned
were discussed within a four-person team, and essential statements and views on the
decision-making processes were derived. Following Gioia et al. (2010), findings were only
incorporated if they were corroborated by multiple informants.
 4. Results The dynamics
During the interviews, the managers recapitulated the course of SDs they had taken in the of financial and
recent past. Several interviewees mentioned important phases in the process and non-financial
explained which information was crucial to complete each of these phases. From these
findings, we derived the linkage between the individual phases and concluded on their information
sequence within the decision process. These phases constitute the central element of our
model: non-financial determining factors; execution; ESG matching; and reporting.
The four phases represent the predominant sequence of the SDMP, i.e. each phase usually
follows the preceding phase once the relevant information has been processed. However,
our interviewees also reported that there can be an overlap of the phases and
decision-makers may also go back to earlier phases if the decision requires more
information to be processed.
The findings that enabled the identification of these overarching schemes are described
in detail in the following. Special emphasis is placed on the dynamics between non-financial
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and financial information and their importance in each of the four steps. The model is
illustrated in Figure 2.

4.1 Non-financial determining factors

A recurrent theme in the interviews was a sense among the interviewees that each
SD is framed by a variety of non-financial determining factors. Such factors come into
play before an SDMP starts and may pre-empt its initiation from the outset. As one
participant put it:
For every strategic decision, there is a set of framework conditions, each with its underlying
assumptions that need to be fulfilled for the decision to come into being. Consider the
following example: to realize our digital strategy we are forced to recruit hundreds of IT experts.
If we fail to do so, we will not even need to consider what our digital strategy might look like
(Company D, CFO).
Another respondent confirmed this insight:
I believe that there are many non-financial restricting factors that merit consideration prior to a
detailed evaluation of a strategic decision, among them transaction certainty and reputational risk
(Company C, CFO).

The Strategic Decision-Making Process

I Non-Financial II III IV
Open Coding Execution Period ESG-Matching Reporting
Determining Factors

1st Dimension
External vs
Conveyance Internal Environmental
information
Reputational Risk Factors
Financial Reporting
Social Factors
Transaction Security
Axial Coding 2nd Dimension
Governance Factors
... Qualitative vs Integrated
Integrated Reporting
Quantitative Information
information

3rd Dimension Sustainability Reporting

Financial vs Non-
financial
information

Figure 2.
Use of financial
information
Low High Moderate to high Moderate The strategic decision-
Use of non- making process and
High Low Moderate to high High
financial ESG information its four elements
 JSMA One interviewee emphasized the role of reputational considerations in selecting
prospective clients:
[p]rior to every decision to take on a new mandate, we scrutinize prospective clients in two
dimensions. Can we justify doing business with that particular client, and are there any
reputational risks attached to them? (Company H, Head of Finance).
Another respondent provided an example in the same vein:
We use a simplified five-question yes-check procedure to make sure that ESG standards are
adhered to on all management levels (Company I, Head of Capital Resolution).
Another executive pointed out the importance of organizational know-how as an internal
determining factor:
If we do not have the capabilities for setting up a new software tool, there will be no need for a
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detailed quantitative analysis to back up a decision (Company N, Head of Business Solutions).

Collectively, all interviewees agreed that non-financial determining factors such as
the ability to convey an SD internally and externally and reputational and
transactional risks are of vital importance. Such non-financial information obtained by
analyzing determining factors, if non-preemptive, may be quantified and used in the
subsequent SDMP.
These findings provide support for the premise that non-financial determining factors
exert considerable impact in initiating or forbearing SDMPs. Such factors are fixed and
static in nature, meaning that they are presumed to be non-modifiable within the time frame
and regarding the (contextual) characteristics of the SD to be made.

4.2 Execution period

Once the contingent impacts of non-financial determining factors have been evaluated and
an SDMP has been initiated, decision-makers draw on a combination of externally and
internally oriented, qualitative and quantitative, and financial and non-financial information
to support decision-making. Therefore, companies are urged to continuously gather
information about themselves and their competitive environment. This was underpinned by
one executive, who remarked:
We continuously collect external data about key industries and competitors, as well as
macroeconomic data about our operating markets. They are crucial elements for our strategic
decision-making (Company D, CFO).
He proceeded to explain that in these processes, qualitative and non-financial assumptions
may serve as a basis for quantitative, financial modeling and analysis:
Every strategic decision rests upon a construct of two evaluation models: a financial model, and a
model that consists of qualitative, strategic assumptions. Both dimensions need to be assessed and
reassessed in a chronological order that allows for their mutual impacts on each other to be
considered (Company D, CFO).
Executives agreed on the general importance of the dualism of financial and non-financial
information. However, they pointed out that the individual importance of these two types of
information varies with the decision context:
Non-financial indicators are important for us as a professional services firm, especially the quality
of our work and our client relationships. Nevertheless, the weighting of non-financial information
differs from one service to the next. […] Under particular circumstances, financial success expected
from one mandate can stand back behind its reputational value and impact on market share
(Company H, Head of Finance).
 This impression was confirmed by another executive, who stressed the following: The dynamics
[…] [w]orkforce-related non-financial information can be of utmost strategic importance. Workforce of financial and
diversification, for instance, can open up much broader perspectives to strategic decisions non-financial
(Company G, CFO). information
Having clarified the importance of non-financial information in SD making, how such
information is incorporated in the process and what challenges might emerge from its
utilization were explored. Several executives highlighted the necessity of using scenario
modeling for implementing integrated thinking in business practices. Qualitative,
non-financial information is incorporated in such modeling in the form of presumptions
underlying scenarios. Regarding this, one interviewee told us:
The higher the level of a strategic decision, the more necessary is scenario-based thinking.
The most important thing to appreciate is that the figures obtained in a strategic plan are
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backed by qualitative assumptions and that those assumptions need to be fully understood
(Company G, CFO).

This view was echoed by another executive, who stated:

For business cases we rely on different electricity price scenarios, which are derived from
fundamental qualitative assumptions (Company J, Head of Controlling).

One executive raised the point that qualitative considerations may gain the upper hand if
certain quantitative preconditions are fulfilled satisfactorily:
Our financial evaluation is based on scenario modelling: if profitability exceeds a minimum
threshold, soft factors outweigh financial information (Company M, Vice President Controlling).
The examples discussed above demonstrate that both qualitative and quantitative as well
as financial and non-financial information must be used in combination. This conclusion
received strong support in a statement by one executive:
You need to make sure that qualitative and quantitative information are in harmony with each
other. An overly qualitative evaluation that neglects a truly quantitative subject matter oftentimes
leads to great risk. On the other hand, if you are too quantitatively oriented, you probably will not
reach the strategic breakthrough that truly leads to growth and competitive impetus. You need a
dualism of both (Company D, CFO).
Turning now to the challenges in incorporating integrated information, one executive drew
attention to the fact that quantitative information may be less indicative of the real
implications of a scenario assumption than qualitative information, due to the subjectivity of
processing and evaluating information:
A major challenge involved when including non-financial information into our scenario
modelling is the gap between the publicly perceived and actual risk of certain events occurring. If
we were to build a new nuclear plant, there is a risk of it blowing up. The probability of this
happening is close to zero, and so is the expected value in my business case. But this might be
perceived entirely differently by the public, which would then make it a soft factor (Company J,
Head of Controlling).

4.3 ESG matching

For the execution period, we found that the interplay between non-financial and financial
information is of crucial importance in SD making. However, the points raised thus far have
focused on the internal usage of integrated information without particular reference to the
implications of ESG information disclosed to the public through integrated reports.
 JSMA Decision-makers must ensure that every SD is congruent with ESG information pertaining
to externally oriented targets communicated to the public. As one interviewee phrased it:
We provide non-financial figures to the financial market, such as the rate of LTE net extension,
indoor and outdoor network connectivity quality. But, if non-financial information is published in
corporate reports, managers are forced to consider these factors in their strategic decision-making,
which finally makes it a balanced decision (Company M, Vice President Planning Europe).
This argument received further support from another executive:
Non-financial information is important for strategic decision-making in so far as it is related to
targets communicated publicly (Company E, CFO).
Despite general agreement among interviewees about the role of such information, they
noted that its relevance varies across differing contexts:
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The importance of ESG information for SD is highly industry-specific. For instance, for us as a
mechanical and plant engineering firm, health and safety issues are preponderant (Company C, CFO).
Another interviewee supported this view by stating the following:
If I am working in the automotive industry, my products and their image speak on my behalf.
Pharmaceuticals producers have a genuinely different appearance in the perception of the public.
This requires us to communicate way more intensely as to the qualitative characteristics of our
products and their implications, which is something we as a finance department have been doing
for several years and keep on supporting (Company K, Head of Finance and Accounting).
These statements highlight that pure ESG information differs in nature and importance
depending on the industry a company operates in, whereas broader restricting factors, as
described earlier, exist uniformly across industries. Moreover, traditional ESG information,
in the context of integrated thinking, addresses mainly external issues and is therefore
considered constraining rather than beneficial in nature, as the requirements that
accompany the acquisition of ESG information are often viewed as the originator forcing
companies to think about more complex, targeted and differentiated strategies.

4.4 Reporting
Whereas ESG matching focuses on how companies need to adapt due to changes in external
reporting requirements, this section is concerned with the nature of these changes themselves. It
was commonly appreciated by the interviewees that existing non-financial external reporting
requirements, such as CSR reports and sustainability reports, must be adhered to. As stressed
by one executive, however, companies also face external pressure from their investors, which
obliges them to apply comprehensive corporate reporting systems and processes:
There certainly are investors who require us to fulfil particular non-financial criteria, for instance,
sustainability-related ones, who will not invest in our company if we do not stick to these
requirements (Company G, CFO).
A similar view was taken by another interviewee, who stated:
Non-financial information matters primarily for public perception, unless internal guidelines
prescribe non-financial investment criteria such as CO2 emission limits (Company E, CFO).
Although all participants agreed on the need to meet external reporting requirements,
a particular aspect that remains to be considered is the nature of targets defined and
reported publicly:
The question is: do we set absolute or relative non-financial targets? (Company J, Head
of Controlling).
 This distinction is relevant from both internal and external perspectives. Absolute targets The dynamics
increase the degree of pressure imposed by external communication because they evoke of financial and
expectations among stakeholders that might not be fulfilled as satisfactorily as relative targets. non-financial
information
5. Discussion and conclusion
The literature on IR has repeatedly claimed that integrated information, which was
originally developed for external reporting, can also be useful for (internal) SDs (Burke
and Clark, 2016; Mio et al., 2016; Feng et al., 2017). The integration of financial information
and non-financial ESG information provides higher information quality for SD makers
and results in decisions that enhance the long-term performance of firms ( Jensen and
Berg, 2012). Linking both types of information will help decision-makers understand the
combined financial and ESG implications of strategies and thus foster integrated thinking
(Feng et al., 2017).
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Recent experimental research has shown that the provision of integrated financial
information and non-financial ESG information changes the decision-making behavior
of individual decision-makers and leads to SDs with higher sustainable value creation
(Esch et al., 2019). This was shown in an experimental setting with simplified scenarios of
SDs. However, research thus far has not considered how SD makers in a real-world setting
use financial information and non-financial ESG information throughout the different
phases of an SDMP. Following a call for research on the internal benefits of IR and
integrated thinking (Churet and Eccles, 2014), in the present paper we aimed to answer two
related research questions:
RQ1. How and to what extent is non-financial ESG information considered alongside
financial information in each phase of an SDMP?
RQ2. What are the dynamics of these two types of information?
Regarding the first question, we found that both financial information and non-financial
ESG information are perceived as crucial resources for SDMPs. We also found that the
dynamics of financial information and non-financial ESG information is complex, as the
relative importance of information varies throughout the decision process (see Figure 2).
While non-financial information takes precedence in the first phase of the decision process,
its importance significantly decreases in the execution period. At this stage, financial
information is considered almost exclusively. In the third and fourth phases of the decision
process, the importance of non-financial information increases again as companies ensure
that contingent effects associated with the decision are in line with externally communicated
objectives. Accordingly, the importance of financial information diminishes at this stage of
the process. This analysis also shows that solely focusing on the interplay between financial
and non-financial information is delimiting in scope. The challenges of SD making discussed
earlier show that the interplay between quantitative and qualitative information and the
interplay between internal and external data are also important. Both need to be considered
and are constituents of integrated information, which plays a vital role in practice. Our
findings provide empirical support for the repeated claim that integrated financial
information and non-financial ESG information can also be useful for internal decision-
making (Burke and Clark, 2016; Mio et al., 2016; Vaz et al., 2016; Feng et al., 2017).
Another important finding in this context is that the use of financial information and
non-financial ESG information was reported by all types of firms, i.e., firms that have
already implemented IR, firms that are currently implementing IR and firms that have not
yet implemented IR. Likewise, both types of information are used in all phases of the SDMP
although to varying degrees (see Figure 2). This finding challenges the commonly held
assumption that the implementation of IR promotes the development of integrated thinking
 JSMA (Feng et al., 2017). It rather supports the assumption of a reversed causality. As recently
portrayed by Al-Htaybat and von Alberti-Alhtaybat (2018), integrated thinking can also be
a precursor of IR.
Considering the second research question, our results reveal a differentiated picture of
the dynamics of financial information and non-financial ESG information in the SDMP. This
complements previous research which investigated the role and consequences of the use of
integrated information in other management functions such as management control
systems (Mio et al., 2016). From our interview material, a categorization emerged along the
dimensions of the data’s source (internal or external), its nature (quantitative or qualitative),
and the type of data (financial or non-financial). When asked about non-financial ESG
information, executives tended to speak also about qualitative information in general, and
vice versa. Figure 3 provides an overview of the three identified dimensions.
Our research reveals that the principle of integrated thinking incorporates not only ESG
information but also important aspects such as non-financial determining factors, which, in
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combination with the different types of information, constrain decision-makers’ scope of

action. Decision-makers tend to perceive non-financial information more as a factor
constraining their ability to decide independently. This does not mean that integrated
information cannot be of value to decision-makers, especially when taking a holistic view of
value creation. Still, it appears from our findings that the value of non-financial information
is generally perceived to be lower than that of financial information because it is less
conferrable to stakeholders. This attenuates the more optimistic view on the use of non-
financial ESG information in the literature on IR (Hampton, 2012; Churet and Eccles, 2014;
Steyn, 2014; Burke and Clark, 2016).
For the academic literature, the contributions of this paper are threefold. First, we
provide a model of integrated thinking in SD making by connecting two previously separate
fields of research. Second, this study advances knowledge of the dynamics and dimensions
of integrated information, which can be used as a basis for further scrutiny of the subject
area. Third, we point to the necessity of conducting research on the internally and externally
oriented implications of IR and integrated thinking simultaneously, as information initially
generated for external recipients might also serve as a broader information base for internal
processes such as SDs. A similar model of the SDMP was not reported in other publications
so far, but there is some overlap with earlier research. Vecchiato (2019) explored how
scenario planning contributes to strategic investment decisions in a changing environment.

1st Dimension
Refers the interplay between external and
internal information

2nd Dimension
Integrated Information
Refers the interplay between qualitative and
quantitative information

Figure 3. 3rd Dimension

The three Refers the interplay between financial and
dimensions of
non-financial information
integrated information
 His findings, like our results, suggest an emerging framework which includes The dynamics
environmental changes as first step, followed by cognitive processes of attention and of financial and
interpretation, and SD making. Furthermore, Calabrese et al. (2019) examined how non-financial
sustainability is integrated in SDMPs. For that purpose, a fuzzy analytic hierarchy process
method was applied to select the sustainability issues most relevant for creating shared information
value before a SD is made. The results of this research constitute an in-depth investigation
of the first phase of our framework.
For practitioners, the results of this study reveal implications for the design of corporate
information systems. IR increases the complexity of information processing in companies.
New non-financial ESG information must be acquired and linked with existing data.
However, the information contained in reports is often not integrated because of the use of
different data sources and/or different departments to merge and prepare the data. To
ensure the usefulness of integrated information, technological prerequisites must be
fulfilled. Taking into account the complexity and required functionalities of IR, the different
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reports to be made available, and heterogeneous system landscapes in companies, a data

warehouse solution is the most necessary step. The data warehouse can be subsequently
used to aggregate data for reports that will form the information base used by corporate
management in SDMPs.

6. Limitations and future research

The present study is limited in its geographical and cultural focus, as only managers of
German companies were interviewed. Accordingly, the information search process as well
as the incorporation of such integrated information might be shaped by cultural, political
and other issues (e.g. educational background). Additionally, our study was unable to
demonstrate how decision quality is influenced by the inclusion of different types of
information, and further studies could aim to take this aspect into account. The claim that
the use of integrated information and integrated thinking leads to better decisions
(Burke and Clark, 2016) needs further research. Future research should also scrutinize more
deeply the extent to which the Integrated Reporting Framework is able to address the three
dimensions of information considered by decision-makers in a way that enables a transition
from conventional to integrated thinking in SD making. We therefore encourage future
research on how integrated information and information in general is provided or retrieved,
processed, and evaluated in SD making (e.g. Citroen, 2011).

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Appendix
Interview guide:
(1) Company information and background: organization, strategy, individual position, etc.
(2) Which types of (strategic) decision are made based on which data?
(3) Which role does (management) reporting play for these decisions?
(4) Please characterize a typical strategic decision-making process in your company.
(5) For which decisions do you consider integrated information (financial vs non-financial ESG)?
Follow-up: if not, do you think this will change in the future and how?
(6) For which type of decision is it useful to consider integrated information?
(7) Which type of non-financial information is crucial for you? Follow-up: ESG information
in particular?
(8) Do you think that certain types of decisions will gain importance in the future? Which ones?
(9) Within this context: how will the reporting format and contend (e.g. the integration of financial
and non-financial information) change?
(10) How will the integration of information affect strategic management?

Corresponding author
Mike Schulze can be contacted at: m.schulze@ems.de

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