Interconnecting financial and sustainability information: does the multi-capital approach explain adherence to the IIRC framework?

Abstract

ABSTRACT Integrated Reporting (IR) is a major innovation encompassing both financial and sustainability information. The multi-capital approach that characterises the International Integrated Reporting Council (IIRC) framework aligns with resource dependency theory. On this basis, we design a disclosure index to assess adherence to the IIRC framework in Down Jones Sustainability Europe Index (DJSEI) company reports, and examine whether the value drivers embedded in the capitals explain it. We posit that integrated corporate thinking drives business practices and is reflected in the communication strategy through IR. Results confirm a high degree of use of the framework. Regarding the multivariate analysis, natural capital has a significant and positive association with the level of adherence; but human-related capital is negatively associated, mainly due to intellectual capital. Firms that state following the IIRC guidelines adhere more to the framework. This highlights the need for framework clarification to prevent IR misuse as an impression management tool.