IDEAS home Printed from https://ideas.repec.org/a/wly/corsem/v30y2023i5p2219-2233.html
   My bibliography  Save this article

Enhancing the materiality principle in integrated reporting by adopting the General Systems Theory

Author

Listed:
  • Roberto Aprile
  • David Alexander
  • Federica Doni

Abstract

This article aims to explore the effectiveness of the materiality principle (MP) within Integrated Reporting (IR) by applying the General Systems Theory (GST) of Ludwig von Bertalanffy. GST, within its holistic approach, can be used to identify the main sub‐systems in which the regulation of IR can be articulated and the relationships between themselves, to make the MP effective, thereby improving the quality of the IR regulation. While much research has analyzed the materiality assessment and its impact on disclosure, little is known about how regulation affects the effectiveness of this principle. This research addresses this gap by explaining that materiality is not a stand‐alone principle but needs to be supported by other principles to be effectively enacted. Our findings can improve the materiality assessment by providing a better understanding of the materiality meaning that can be helpful for managers, standard setters and professional bodies. In terms of research implications, this provides a framework for an alternative thought process for simplification without sacrificing the proper breadth of stakeholder focus.

Suggested Citation

  • Roberto Aprile & David Alexander & Federica Doni, 2023. "Enhancing the materiality principle in integrated reporting by adopting the General Systems Theory," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(5), pages 2219-2233, September.
    • Handle: RePEc:wly:corsem:v:30:y:2023:i:5:p:2219-2233
    DOI: 10.1002/csr.2479
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/csr.2479
    Download Restriction: no
    File URL: https://libkey.io/10.1002/csr.2479?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Niamh Brennan & Sidney J. Gray, 2005. "The Impact of Materiality: Accounting's Best Kept Secret," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 1(1), pages 1-30.
    2. Charl de Villiers & Leonardo Rinaldi & Jeffrey Unerman, 2014. "Integrated Reporting: Insights, gaps and an agenda for future research," Accounting, Auditing & Accountability Journal, Emerald Group Publishing Limited, vol. 27(7), pages 1042-1067, August.
    3. Judy Brown & Jesse Dillard, 2014. "Integrated reporting: On the need for broadening out and opening up," Accounting, Auditing & Accountability Journal, Emerald Group Publishing Limited, vol. 27(7), pages 1120-1156, August.
    4. Chiara Mio & Marco Fasan, 2014. "The determinants of materiality disclosure in integrated corporate reporting," Working Papers 09, Venice School of Management - Department of Management, Università Ca' Foscari Venezia.
    5. Mark Anthony Camilleri, 2015. "Environmental, social and governance disclosures in Europe," Sustainability Accounting, Management and Policy Journal, Emerald Group Publishing Limited, vol. 6(2), pages 224-242, May.
    6. Jan Bebbington & Judy Brown & Bob Frame & Ian Thomson, 2007. "Theorizing engagement: the potential of a critical dialogic approach," Accounting, Auditing & Accountability Journal, Emerald Group Publishing Limited, vol. 20(3), pages 356-381, June.
    7. Chewning, G & Pany, K & Wheeler, S, 1989. "Auditor Reporting Decisions Involving Accounting Principle Changes - Some Evidence On Materiality Thresholds," Journal of Accounting Research, Wiley Blackwell, vol. 27(1), pages 78-96.
    8. Edgley, Carla, 2014. "A genealogy of accounting materiality," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 25(3), pages 255-271.
    9. Mark Anthony Camilleri, 2015. "Environmental, social and governance disclosures in Europe," Sustainability Accounting, Management and Policy Journal, Emerald Group Publishing Limited, vol. 6(2), pages 224-242, May.
    10. Sun, Jiazhe & Wu, Shunan & Yang, Kaizhong, 2018. "An ecosystemic framework for business sustainability," Business Horizons, Elsevier, vol. 61(1), pages 59-72.
    11. repec:eme:aaaj00:aaaj-06-2014-1736 is not listed on IDEAS
    12. Adams, Carol A., 2015. "The International Integrated Reporting Council: A call to action," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 27(C), pages 23-28.
    13. Alessandro Lai & Gaia Melloni & Riccardo Stacchezzini, 2017. "What does materiality mean to integrated reporting preparers? An empirical exploration," Meditari Accountancy Research, Emerald Group Publishing Limited, vol. 25(4), pages 533-552, October.
    14. repec:eme:aaaj00:aaaj-08-2020-4736 is not listed on IDEAS
    15. Jan Bebbington & Judy Brown & Bob Frame & Ian Thomson, 2007. "Theorizing engagement: the potential of a critical dialogic approach," Accounting, Auditing & Accountability Journal, Emerald Group Publishing Limited, vol. 20(3), pages 356-381, June.
    16. Tiziana De Cristofaro & Carmela Gulluscio, 2019. "Integrated Reporting and Materiality Process Disclosure in European Sustainability Oriented Companies," CSR, Sustainability, Ethics & Governance, in: Samuel O. Idowu & Mara Del Baldo (ed.), Integrated Reporting, chapter 0, pages 267-290, Springer.
    17. Andrea M. Romi, 2017. "Differences in Auditor’s Materiality Assessments When Auditing Financial Statements and Sustainability Reports," Social and Environmental Accountability Journal, Taylor & Francis Journals, vol. 37(2), pages 149-150, May.
    18. repec:eme:aaaj00:aaaj-03-2013-1279 is not listed on IDEAS
    19. O'Dwyer, Brendan & Owen, David L., 2005. "Assurance statement practice in environmental, social and sustainability reporting: a critical evaluation," The British Accounting Review, Elsevier, vol. 37(2), pages 205-229.
    20. Carpenter, Brian W. & Dirsmith, Mark W., 1992. "Early debt extinguishment transactions and auditor materiality judgments: A bounded rationality perspective," Accounting, Organizations and Society, Elsevier, vol. 17(8), pages 709-739, November.
    21. repec:eme:aaaj00:09513570710748544 is not listed on IDEAS
    22. Cerbone, Dannielle & Maroun, Warren, 2020. "Materiality in an integrated reporting setting: Insights using an institutional logics framework," The British Accounting Review, Elsevier, vol. 52(3).
    23. Cesar Saenz, 2019. "Creating shared value using materiality analysis: Strategies from the mining industry," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 26(6), pages 1351-1360, November.
    24. Laura Sierra‐García & Ana Zorio‐Grima & María A. García‐Benau, 2015. "Stakeholder Engagement, Corporate Social Responsibility and Integrated Reporting: An Exploratory Study," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 22(5), pages 286-304, September.
    25. Alexander, David & Blum, Véronique, 2016. "Ecological economics: A Luhmannian analysis of integrated reporting," Ecological Economics, Elsevier, vol. 129(C), pages 241-251.
    26. Ans Kolk, 2008. "Sustainability, accountability and corporate governance: exploring multinationals' reporting practices," Business Strategy and the Environment, Wiley Blackwell, vol. 17(1), pages 1-15, January.
    27. Edgley, Carla & Jones, Michael J. & Atkins, Jill, 2015. "The adoption of the materiality concept in social and environmental reporting assurance: A field study approach," The British Accounting Review, Elsevier, vol. 47(1), pages 1-18.
    28. Hugo Cadenas, 2019. "The unity of (social systems) science: The legacy of Bertalanffy," Systems Research and Behavioral Science, Wiley Blackwell, vol. 36(3), pages 274-280, May.
    29. Wolfgang Hofkirchner, 2019. "Social relations: Building on Ludwig von Bertalanffy," Systems Research and Behavioral Science, Wiley Blackwell, vol. 36(3), pages 263-273, May.
    30. Riccardo Torelli & Federica Balluchi & Katia Furlotti, 2020. "The materiality assessment and stakeholder engagement: A content analysis of sustainability reports," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(2), pages 470-484, March.
    31. Emilio Passetti & Lara Bianchi & Massimo Battaglia & Marco Frey, 2019. "When Democratic Principles are not Enough: Tensions and Temporalities of Dialogic Stakeholder Engagement," Journal of Business Ethics, Springer, vol. 155(1), pages 173-190, March.
    32. Jannik Gerwanski & Othar Kordsachia & Patrick Velte, 2019. "Determinants of materiality disclosure quality in integrated reporting: Empirical evidence from an international setting," Business Strategy and the Environment, Wiley Blackwell, vol. 28(5), pages 750-770, July.
    33. John Dumay & Cristiana Bernardi & James Guthrie & Paola Demartini, 2016. "Integrated reporting: A structured literature review," Accounting Forum, Taylor & Francis Journals, vol. 40(3), pages 166-185, September.
    34. Charl de Villiers & Leonardo Rinaldi & Jeffrey Unerman, 2014. "Integrated Reporting: Insights, gaps and an agenda for future research," Accounting, Auditing & Accountability Journal, Emerald Group Publishing Limited, vol. 27(7), pages 1042-1067, August.
    35. Antonella Silvestri & Stefania Veltri & Andrea Venturelli & Saverio Petruzzelli, 2017. "A research template to evaluate the degree of accountability of integrated reporting: a case study," Meditari Accountancy Research, Emerald Group Publishing Limited, vol. 25(4), pages 675-704, October.
    36. Flower, John, 2015. "The International Integrated Reporting Council: A story of failure," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 27(C), pages 1-17.
    37. Firth, Michael, 1979. "Consensus views and judgment models in materiality decisions," Accounting, Organizations and Society, Elsevier, vol. 4(4), pages 283-295, October.
    38. Giacomo Manetti, 2011. "The quality of stakeholder engagement in sustainability reporting: empirical evidence and critical points," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 18(2), pages 110-122, March.
    39. David Alexander & Véronique Blum, 2016. "Ecological economics : A Luhmannian analysis of integrated reporting," Post-Print hal-01980803, HAL.
    40. Green, Wendy J. & Cheng, Mandy M., 2019. "Materiality judgments in an integrated reporting setting: The effect of strategic relevance and strategy map," Accounting, Organizations and Society, Elsevier, vol. 73(C), pages 1-14.
    41. Wendy Stubbs & Colin Higgins, 2014. "Integrated Reporting and internal mechanisms of change," Accounting, Auditing & Accountability Journal, Emerald Group Publishing Limited, vol. 27(7), pages 1068-1089, August.
    42. Wendy Stubbs & Colin Higgins, 2014. "Integrated Reporting and internal mechanisms of change," Accounting, Auditing & Accountability Journal, Emerald Group Publishing Limited, vol. 27(7), pages 1068-1089, August.
    43. Giacomo Manetti & Marco Bellucci & Stefania Oliva, 2021. "Unpacking dialogic accounting: a systematic literature review and research agenda," Accounting, Auditing & Accountability Journal, Emerald Group Publishing Limited, vol. 34(9), pages 250-283, September.
    44. Robert G. Eccles & Michael P. Krzus & Jean Rogers & George Serafeim, 2012. "The Need for Sector-Specific Materiality and Sustainability Reporting Standards," Journal of Applied Corporate Finance, Morgan Stanley, vol. 24(2), pages 65-71, June.
    45. Roshan Herath & Samanthi Senaratne & Nuwan Gunarathne, 2021. "Integrated thinking, orchestration of the six capitals and value creation," Meditari Accountancy Research, Emerald Group Publishing Limited, vol. 29(4), pages 873-907, January.
    46. Kenneth E. Boulding, 1956. "General Systems Theory--The Skeleton of Science," Management Science, INFORMS, vol. 2(3), pages 197-208, April.
    47. repec:eme:aaaj00:aaaj-04-2013-1313 is not listed on IDEAS
    48. Judy Brown & Jesse Dillard, 2014. "Integrated reporting: On the need for broadening out and opening up," Accounting, Auditing & Accountability Journal, Emerald Group Publishing Limited, vol. 27(7), pages 1120-1156, August.
    49. Robyn Moroney & Ken T. Trotman, 2016. "Differences in Auditors' Materiality Assessments When Auditing Financial Statements and Sustainability Reports," Contemporary Accounting Research, John Wiley & Sons, vol. 33(2), pages 551-575, June.
    50. Gray, Rob, 1992. "Accounting and environmentalism: An exploration of the challenge of gently accounting for accountability, transparency and sustainability," Accounting, Organizations and Society, Elsevier, vol. 17(5), pages 399-425, July.
    51. Kristof Van Assche & Vladislav Valentinov & Gert Verschraegen, 2019. "Ludwig von Bertalanffy and his enduring relevance: Celebrating 50 years General System Theory," Systems Research and Behavioral Science, Wiley Blackwell, vol. 36(3), pages 251-254, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nuradhi Kalpani Jayasiri & Sriyalatha Kumarasinghe & Rakesh Pandey, 2023. "12 years of integrated reporting: A review of research," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(2), pages 2187-2243, June.
    2. Dimes, Ruth & de Villiers, Charl, 2024. "Hallmarks of Integrated Thinking," The British Accounting Review, Elsevier, vol. 56(1).
    3. Stefania Veltri & Antonella Silvestri, 2020. "The value relevance of corporate financial and nonfinancial information provided by the integrated report: A systematic review," Business Strategy and the Environment, Wiley Blackwell, vol. 29(8), pages 3038-3054, December.
    4. Daniel Reimsbach & Geert Braam, 2023. "Creating social and environmental value through integrated thinking: International evidence," Business Strategy and the Environment, Wiley Blackwell, vol. 32(1), pages 304-320, January.
    5. Filippo Vitolla & Nicola Raimo & Michele Rubino, 2019. "Appreciations, criticisms, determinants, and effects of integrated reporting: A systematic literature review," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 26(2), pages 518-528, March.
    6. Amir Hossain & Sudipta Bose & Abul Shamsuddin, 2023. "Diffusion of integrated reporting, insights and potential avenues for future research," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(2), pages 2503-2555, June.
    7. Roszkowska-Menkes, Maria & Aluchna, Maria & Kamiński, Bogumił, 2024. "True transparency or mere decoupling? The study of selective disclosure in sustainability reporting," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 98(C).
    8. Chiara Mio & Marco Fasan & Antonio Costantini, 2020. "Materiality in integrated and sustainability reporting: A paradigm shift?," Business Strategy and the Environment, Wiley Blackwell, vol. 29(1), pages 306-320, January.
    9. Jannik Gerwanski & Othar Kordsachia & Patrick Velte, 2019. "Determinants of materiality disclosure quality in integrated reporting: Empirical evidence from an international setting," Business Strategy and the Environment, Wiley Blackwell, vol. 28(5), pages 750-770, July.
    10. Marco Fasan & Chiara Mio, 2017. "Fostering Stakeholder Engagement: The Role of Materiality Disclosure in Integrated Reporting," Business Strategy and the Environment, Wiley Blackwell, vol. 26(3), pages 288-305, March.
    11. Trébucq, Stéphane & Magnaghi, Elisabetta, 2017. "Using the EFQM excellence model for integrated reporting: A qualitative exploration and evaluation," Research in International Business and Finance, Elsevier, vol. 42(C), pages 522-531.
    12. Valentina Minutiello & Patrizia Tettamanzi, 2022. "The quality of nonfinancial voluntary disclosure: A systematic literature network analysis on sustainability reporting and integrated reporting," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 29(1), pages 1-18, January.
    13. Federico Barnabè & Sarfraz Nazir, 2022. "Conceptualizing and enabling circular economy through integrated thinking," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 29(2), pages 448-468, March.
    14. Stefan Bezuidenhout & Charl de Villiers & Ruth Dimes, 2023. "How management control systems can enable, constrain, and embed integrated reporting," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(4), pages 4251-4273, December.
    15. Niccol? Comerio & Patrizia Tettamanzi, 2019. "Systematic literature network analysis in accounting: A first application on integrated reporting research," FINANCIAL REPORTING, FrancoAngeli Editore, vol. 2019(2), pages 73-95.
    16. Warren Maroun, 2020. "A Conceptual Model for Understanding Corporate Social Responsibility Assurance Practice," Journal of Business Ethics, Springer, vol. 161(1), pages 187-209, January.
    17. Klarissa Lueg & Rainer Lueg, 2021. "Deconstructing corporate sustainability narratives: A taxonomy for critical assessment of integrated reporting types," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 28(6), pages 1785-1800, November.
    18. Patrick Velte, 2022. "Does sustainable corporate governance have an impact on materiality disclosure quality in integrated reporting? International evidence," Sustainable Development, John Wiley & Sons, Ltd., vol. 30(6), pages 1655-1670, December.
    19. Josua Oll & Sabrina Rommerskirchen, 2018. "What’s wrong with integrated reporting? A systematic review," Sustainability Nexus Forum, Springer, vol. 26(1), pages 19-34, December.
    20. Francesca Manes-Rossi & Adriana Tiron-Tudor & Giuseppe Nicolò & Gianluca Zanellato, 2018. "Ensuring More Sustainable Reporting in Europe Using Non-Financial Disclosure—De Facto and De Jure Evidence," Sustainability, MDPI, vol. 10(4), pages 1-20, April.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:corsem:v:30:y:2023:i:5:p:2219-2233. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://doi.org/10.1002/(ISSN)1535-3966 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.