Shifting perspectives: unveiling the dual nature of sustainability materiality in integrated reports
Authors: Setia Neelam , Abhayawansa Subhash , Joshi Mahesh , Wasantha Pathiranage Nandana 
Published: February 2024

Purpose
Integrated reporting enhances the meaningfulness of non-financial information, but whether this enhancement is progressive or regressive from a sustainability perspective is unknown. This study aims to examine the influence of the Integrated Reporting (<IR>) Framework on the disclosure of financial- and impact-material sustainability-related information in integrated reports.

Design/methodology/approach
Using a disclosure index constructed from the Global Reporting Initiative’s G4 Guidelines and UN Sustainable Development Goals, the authors content analysed integrated reports of 40 companies from the International Integrated Reporting Council’s Pilot Programme Business Network published between 2015 and 2017. The content analysis distinguished between financial- and impact-material sustainability-related information.

Findings
The extent of sustainability-related disclosures in integrated reports remained more or less constant over the study period. Impact-material disclosures were more prominent than financial material ones. Impact-material disclosures mainly related to environmental aspects, while labour practices-related disclosures were predominantly financially material. The balance between financially- and impact-material sustainability-related disclosures varied based on factors such as industry environmental sensitivity and country-specific characteristics, such as the country’s legal system and development status.

Research limitations/implications
The paper presents a unique disclosure index to distinguish between financially- and impact-material sustainability-related disclosures. Researchers can use this disclosure index to critically examine the nature of sustainability-related disclosure in corporate reports.

Practical implications
This study offers an in-depth understanding of the influence of non-financial reporting frameworks, such as the <IR> Framework that uses a financial materiality perspective, on sustainability reporting. The findings reveal that the practical implementation of the <IR> Framework resulted in sustainability reporting outcomes that deviated from theoretical expectations. Exploring the materiality concept that underscores sustainability-related disclosures by companies using the <IR> Framework is useful for predicting the effects of adopting the Sustainability Disclosure Standards issued by the International Sustainability Standards Board, which also emphasises financial materiality.

Social implications
Despite an emphasis on financial materiality in the <IR> Framework, companies continue to offer substantial impact-material information, implying the potential for companies to balance both financial and broader societal concerns in their reporting.

Originality/value
While prior research has delved into the practices of regulated integrated reporting, especially in the unique context of South Africa, this study focuses on voluntary adoption, attributing observed practices to intrinsic company motivations. To the best of the authors’ knowledge, it is the first study to explicitly explore the nature of materiality in sustainability-related disclosure. The research also introduces a nuanced understanding of contextual factors influencing sustainability reporting.