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Integrated Thinking Informs Sustainable Development

INTEGRATED THINKING INFORMS SUSTAINABLE DEVELOPMENT: Conceptualising the contemporary corporate value creation process

Organisations use Integrated Reporting (IR) to communicate a clear, concise, integrated story that explains how all of their resources are creating value.

It helps businesses to think holistically about their strategy and plans, make informed decisions and manage key risks to build investor and stakeholder confidence and improve future performance. IR is shaped by a diverse coalition including business leaders and investors to drive a global evolution in corporate reporting.

To investigate and explain integrated thinking – the complex interrelationships which influence the ability of firms to create value for their providers of finance and other stakeholders - Professor Carol Adams, undertook a study to explore the interrelationships between: Environmental, Social and Governance (ESG) risk; delivering on corporate strategy; non-financial corporate reporting; and board oversight.

This study is ‘Conceptualising the contemporary corporate value creation process’ Adams, CA (2017), Accounting Auditing and Accountability Journal 30(4): 906-93. To gather the information, a number of interviews took place with Board Chairs and Non-Executive Directors of large listed companies on the Johannesburg Stock Exchange (JSE - where Boards are required to have a Social and Ethics sub-committee and approve integrated reports which have been mandatory since 2010), and the Australian Stock Exchange (ASX - where Board Directors’ liability legislation results in Boards being reluctant to adopt integrated reporting which is voluntary).

The study found integrated reporting processes, and in particular, those set out in the King III Code 2 and the International Integrated Reporting Framework 3, influences how information should best be presented to the Board enhancing Board oversight and assisting organisations in managing complexity. This results in increased awareness of the impact of environmental and social issues and governance processes together with a broader view of value creation despite investor disinterest.

The practical implications are that this research can assist in the development of practice and policy by articulating and enhancing our understanding of linkages, which loosely fall under the vague practitioner term ‘integrated thinking’.

The conceptualisation of these linkages can also inform national and global discussions on the appropriateness of corporate reporting and governance models to contribute to the sustainable development goals.

As this study was conducted across two countries, the cross country comparison allows an assessment of the extent to which different national social contexts with differing governance and reporting frameworks lead to different perspectives on, and approaches to, value creation.

Linked to this work, Carol is now working on a project with the International Integrated Reporting Council (IIRC) and the Institute of Chartered Accountants of Scotland (ICAS) highlighting how reporting on the Sustainable Development Goals (SDGs) can be facilitated by Integrated Reporting. This, in turn, can lead to an enhanced understanding of a) the risks and opportunities presented by sustainable development issues; and b) how companies can contribute to the achievement of the SDGs.

1. Definition from
2. The King Report on Corporate Governance are guidelines for the governance structures and operation of companies in South Africa.
3. The International Integrated Reporting Framework are guiding principles and content elements that govern the overall content of an integrated report, and to explain the fundamental concepts that underpin them.

Article first published in IMPACT Magazine in June 2017

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