Adoption of integrated reporting and changes to internal mechanisms in Japanese companies

Abstract

The increase in companies' use of integrated reporting (IR) has led to an increase in academic interest in IR. However, IR research from an internal corporate perspective is limited. This study investigates the approaches and internal mechanisms that early adopters use to implement IR. Further, the study examines whether IR drives organisational change at an early stage. A multiple case study was conducted. Data were collected through semi‐structured interviews and email exchanges with the managers responsible for IR in seven Japanese companies. Results showed that the long‐term perspective in Japanese companies might explain the application of IR without negative responses to its introduction, regardless of the approach used to adopt IR. As a first‐order change, the adoption of IR leads to incremental changes in the reporting contents and processes and linkage between financial and non‐financial measures in business strategy. The first‐order change could accelerate the promotion and practice of integrated thinking, thus leading to second‐order changes. However, awareness of integrated thinking needs to be raised not only in management but also in lower levels of the organisation. The use of IR within companies is one possible solution to this problem. This study contributes to new knowledge regarding sustainability and sustainability reporting by focusing on how the application of IR and integrated thinking can promote changes to internal mechanisms and organisational value towards the creation of long‐term value.

Does integrated reporting quality matter to capital markets? Empirical evidence from voluntary adopters

“…In general, previous IR research has dealt primarily with conceptual issues, such as appreciations and criticisms of IR, with normative advice on the implementation of IR practice (Veltri & Silvestri, 2020), or alternatively, with the approaches and internal mechanisms that early adopters use to implement IR (Hosoda, 2021). By contrast, empirical studies in the field are still relatively scarce (Veltri & Silvestri, 2020).…”

Early adopters of institutional creativity in integrated reporting

“…A recent study based on interviews and multiple case studies discovered that the early IR adopters observed accelerated promotion and practiced integrated thinking at the first level (Hosoda, 2022). However, the awareness of integrated thinking was weaker at lower levels of the organization in the Japanese and UK markets (Agarwal and Kallapur, 2018; Hosoda, 2022). These studies observed that the use of integrated thinking can promote changes in internal mechanisms and organizational value toward the creation of long-term value.…”

“…10, 100 or 1,000) (Jørgensen et al , 2022; Abraham and Shrives, 2014; Elshandidy et al , 2018). This issue has impacted risk reporting at extremely low or high numbers, which cannot be linked to integrated thinking (Hosoda, 2022; Adams, 2015; Adams et al , 2007). To handle this challenge, organizations frequently use a reasonable calculation (risk with high probability or frequency) (Mikes, 2011).…”

Why/How are Integrated Reporting Practices Adopted/Diffused? Evidence From Public Listed Companies in Sri Lanka

“…The existing literature pays little attention to grasping the way that the IR adoption process is stimulated by internal organisational change (Perego et al, 2016), and the internal mechanisms and approaches which the IR adapters employ are poorly understood (de Villiers et al, 2017ba;Gibassier et al, 2018;Guthrie et al, 2017;Hosoda, 2021;. Scholars have recently performed more qualitative studies on the drivers of IR (Hossain et al, 2023).…”