This Master Thesis was written by Valerie Sydry, MSc Global Business and Sustainability Rotterdam School of Management.


Executive Summary: As organisations acknowledge that they operate within a broader social and biophysical environment, and need to embrace a wider system of sustainability concerns, accordingly, their reporting practices need to change. In response, integrated reporting, a new reporting practice encompassing financial and nonfinancial (environmental, social and governance) performance in a single document (Eccles & Krzus, 2010) formally emerged with the creation of the Integrated Reporting Framework by the International Integrated Reporting Council (IIRC) in 2013 (IIRC, 2013).

Integrated reporting demonstrates how an organisation creates societal value by highlighting the environmental and social impacts of its actions. This helps to shed light on the relationship between financial and nonfinancial performance to identify the sources of long-term value creation (EY, 2014). Integrated reporting stimulates organisations to adopt a more holistic thinking perspective, which can act as a catalyst to more sustainable outcomes. Some experts argue that it can act as a major driver behind organisational change (Eccles and Krzus, 2010).

Few researchers have studied the relationship between integrated reporting and internal change and as such, managers may not be aware of whether and in what way integrated reporting can serve as a tool to drive change. The purpose of this thesis is to investigate how integrated reporting can act as an internal change mechanism. It analyses the integrated reporting practices of Dutch organisations to delineate the dynamics that foster or impede this mechanism.

This exploratory research paper utilises an interpretive mode of inquiry. It aims to build up an understanding of how integrated reporting can act as an internal change mechanism. The analysis is grounded in empirical data to explore how this mechanism influences change in organisations. The sample consists of 16 interviews conducted with representatives of large organisations, integrated reporting assurance providers and consultants working in this field. While these interviews revealed large variations in the maturity of the Dutch integrated reporting practices, it can in general be said that integrated reporting is relatively well developed in The Netherlands.

The data collection and simultaneous content analysis for the internal change mechanisms sparked by integrated reporting crystallised into the following four key themes: i) coordinating function, ii) connecting and aligning departments, iii) integrated thinking, and iv) integrated decision-making. The findings suggest that integrated reporting can act as an internal change mechanism in these four aspects. First, it provides organisations with the tools to coordinate the organisation’s business strategy with materiality, stakeholders and value creation. Second, it connects and aligns departments due to the input needed for the compilation of the report and articulating an integrated story of the organisation. Third and fourth, it sparks integrated thinking throughout the organisation, which in turn stimulates integrated decision-making.

The findings of the interviews suggest that integrated reporting has the potential to foster organisational change. Contrary to the findings of Stubbs and Higgins (2014), this thesis identified changes to the interpretive schemes of an organisation, i.e. its core values, beliefs or structures. One organisation has transformed its mission and business strategy entirely, implying that integrated reporting can stimulate profound changes within an organisation. In addition, this thesis uncovered novel insights: integrated thinking and integrated decision-making initiated by the practice of integrated reporting. Although this is consistent with the IIRC (2013, 2016), which denotes integrated thinking as the engine or philosophical backbone of integrated reporting and recognises the cyclical nature of integrated thinking and reporting, there is no empirical evidence to support this connection.

The contribution of this research paper is not exclusive to academic literature. First, it may serve as a guide for managers that intend to commence with integrated reporting. Contrary to the beliefs of Eccles and Krzus (2010), the findings of this thesis suggest that integrated thinking is not a prerequisite for starting the integrated reporting journey due to their cyclical nature (IIRC, 2016). Moreover, in several cases integrated reporting was the driving force behind the integrated thinking process. Second, this thesis gives managers insights into the integrated reporting practices of other organisations in The Netherlands by distilling the factors that have intensified their internal integration and alignment. The broad range of industries represented in this thesis demonstrates the ability of integrated reporting to even initiate internal change in the ‘inherently unsustainable’ industries, which is exemplified by the construction organisation represented in this thesis.

The single-country focus and limited sample of the organisations present the major limitations of this thesis. While the single-country focus provides an in-depth analysis of the integrated reporting practices in The Netherlands, it limits transferability of results to other contexts. With regards to the sample, the majority of interviewees were representatives of the sustainability departments of the organisations, which gives a one-sided perspective on internal change. In addition, the sample consisted of almost exclusively large organisations, whilst 97% of organisations worldwide are SMEs (NEMACC, 2013), which severely limits the transferability of the findings to SMEs. Finally, qualitative interviews could potentially threaten the credibility of the findings due to their susceptibility to bias and inaccuracy (Crane, 1999)…”

Download the full thesis here.