The measurement and potential drivers of integrated report quality: Evidence from a pioneer in integrated reporting

This paper develops a measure for integrated report quality and explores possible drivers of high-quality reporting considering a sample of large listed companies in 2015 and 2016. Data are collected from South Africa where integrated reporting has been established for a number of years and where companies have had the time to interpret and apply reporting guidelines. A detailed content analysis is used to construct a quality measure representing an accumulation of different indicators from the environmental and sustainability reporting literature. The quantity of information disclosed, the emphasis placed on different disclosures and the use of quantitative or qualitative disclosures are considered. Whether disclosures are substantive or symbolic and how easy it is for stakeholders to interpret integrated reports based on the use of infographics is also taken into account when gauging report quality. The results show that, while integrated reporting has become well established in South Africa, there is considerable room for improvement. Most disclosures are qualitative and symbolic rather than quantified and substantive. A combination of Kruskal-Wallis and Mann-Whitney U-tests shows that companies with higher quality integrated reports are those which invest in complementing their integrated reports with a sustainability report and having their disclosures externally assured. Company size, environmental and social impact, the use of a sustainability committee and compliance with the Global Reporting Initiative do not necessarily influence report quality. These findings suggest that, as integrated reporting matures, external factors contribute less to the quality of reporting and internal processes become more relevant.