Commerce and Management

Purpose This study aims to offer empirical evidence on how integrated thinking affects the integrated reporting (IR) practice and how integrated thinking originates from board and management involvement, cross-functional integration and integral link between capitals and strategies. Design/methodology/approach This study is cross-sectional and uses a mixed-method approach. The empirical data for the quantitative approach were collected from the 129 public companies listed on Colombo Stock Exchange in Sri Lanka. The personale responsible for preparing the annual report are selected as the respondents of this study. This study used partial least square modelling to test the hypotheses. The quantitative approach results are triangulated across a qualitative research approach in semi-structural interviews with ten responsible officers of integrated reporting practices. Findings The central finding of this study is the significant positive relationship between integrated thinking and integrated reporting practice. The qualitative results supported the quantitative findings and show that board and management involvement, cross-functional integration and integral link between capital and strategy enhance the integrated reporting practice. Top management and board management have positive beliefs about the integrated reporting practice; they initiate, encourage, influence, involve and support it. Furthermore, all company departments are involved with the integrated reporting led by the finance department and practice good coordination, communication and collaboration between departments. Moreover, it also evidenced their concern about the linkage between capital and strategy and how they do it in their organisation when practising integrated reporting. Research limitations/implications The firms which intend to practice or enhance integrated reporting will be benefited from this study. Hence, this research assists in constructing IT through the direct role of the board and senior leadership, breaking down silos to diffuse IR throughout structures and processes, and concentrating on strategies while managing their capitals and relationships over the long term. Originality/value This study provides the initial quantitative empirical evidence on the impact of integrated thinking on integrated reporting practice. To the best of the authors’ knowledge, this study is the first to operationalise both integrated thinking and integrated reporting based on a questionnaire that developed and tested both constructs as higher-order reflective formative and on the relationship between integrated thinking and integrated reporting. The mixed-method approach to examine the relationship between integrated thinking and integrated reporting provides additional insights into the existing literature.

Traditional corporate reporting focuses on financial outcome and is criticized against its less attention on non-financial aspects, which have implications on sustainability of a business firm. As a result of continued studies and debates an integrated reporting framework has been issued by the International Integrated Reporting Council by 2013. Sri Lanka has adopted it. However, practitioners of integrated reporting are still vague on this. This paper attempts to understand the possible reasons for this situation. The research is carried out by with not fieldwork, but analyzing the current version of integrated reporting framework in the context of a theoretical framework. This benefits from Stakeholder theory and stakeholder-agency theory. The analysis reveals that the current practice of integrated reporting based on IIRC’s integrated reporting framework, including initiatives suggested by the Integrated Reporting Council of SrI Lanka are not in the direction of satisfying intentions of reporting on sustainability of a business firm. The paper suggests a path for improving integrated reporting practice.

Commerce and Management

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