Abstract
Purpose: The objective of this study was to develop an Integrated Report – Credibility-Enhancing Framework (IR-CEF). The IR-CEF could be used by preparers to guide their activities when compiling an integrated report, and by those charged with governance (TCWG) to support their statement of presenting an integrated report with integrity. The framework would also be useful to the primary users of the integrated report in assessing the credibility of published reports when seeking decision-useful information.
Theoretical framework: The study was premised on a multi-theoretical framework using the credibility theory as central to the study. Other supporting theories included the agency theory, signalling theory, stakeholder theory, and legitimacy theory.
Methodology: The research design for the study was to follow a three-phase approach utilising qualitative data collection methods: Phase 1 involved a literature review highlighting credibility-enhancing themes as presented in literature. Phase 2 was a content analysis of Johannesburg Securities Exchange (JSE) listed published integrated reports for 2022 that had been included in the 2023 EY Excellence awards. The content analysis sought to identify the themes, as identified in literature, in published integrated reports. Phase 3 extended the content analysis through interviews with preparers in listed companies, who are considered experts for the purposes of this study. The semi-structured interviews were conducted on Microsoft Teams, then recorded, transcribed, and analysed on ATLAS.ti. The findings of the three phases were documented and used to develop the proposed IR-CEF.
Findings: The study found that research on credibility mechanisms specific to integrated reporting processes are increasing as presented in the literature; however, the disclosure of the credibility mechanisms such as governance structures, materiality determination, stakeholder engagement, and the involvement of internal audit and adopted policies and procedures to support message characteristics remain limited in integrated reports. The findings from the interviews with the preparers, who are considered experts in the implementation of the International Integrated Reporting Framework (International <IR> Framework, showed that there are processes and procedures that organisations apply when preparing integrated reports. However, these processes and procedures are not documented, nor are there policies that are approved by TCWG on the determination of the teams, their qualifications and skills, as well as determination of material matters. The processes are evolving in organisations and remain challenging in the changing landscape of corporate reporting and increasing regulations, standards, and guidelines.
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Contribution of the study: The use of the credibility theory and its application in integrated reporting contributes to theory building for integrated and corporate reporting. This study contributes methodically to the use of multi-method qualitative research in integrated reporting having used three methods of data collection to develop the proposed framework on the implementation of the International <IR> Framework and incorporate practical guidance to support the integrity and credibility of the integrated report. The proposed IR-CEF provides insights that have not been disclosed in integrated reports relating to the use of credibility mechanisms that are employed in practice including identifying the source (preparers) of the report, their characteristics, and related experience and skills. Message characteristics are also proposed relating to materiality determination practices, stakeholder engagement, the importance of governance mechanisms, combined assurance, and documentation of policies and procedures specific to integrated reporting. The proposed framework contributes to guidance for preparers, standard setters, and regulators of the credibility mechanisms implementation of the International <IR> Framework, for consideration in policy and standard setting that will allow for comparability between organisations and provide best practices in listed organisations.
Limitations: The study was conducted in a single jurisdiction being South Africa and using only qualitative techniques, which may not be considered generalisable. It was conducted on selected JSE listed companies in a limited number of sectors in the financial, basic material, and consumer services. These sectors do not represent all sectors of the economy and an extension of the testing of the model in other jurisdictions could be explored.
Areas for future research: Future research can test the use of the proposed model in practice, its implementation, and disclosure of the practices in integrated reports. Studies can be extended to include views of preparers in other sectors of the economy, especially those in unregulated industries. Organisations in jurisdictions other than South Africa could provide further insights into the achievement of credibility and its disclosure in preparation of integrated reports. The involvement and role of the internal audit function could be explored through interviewing chief internal auditors on their involvement and experiences with integrated reporting. The use of mixed methods research design could address the limitations of qualitative methods, which can be prone to subjectivity of the researcher and participants.