Integrated Reporting and Corporate Performance Measurement

This thesis purposes to understand the Performance Measurement Systems (PMS) of some integrated reporting (IR) financial services’ adopters. This paper investigates the following question: How to successfully implement a Performance Measurement System within the conceptual International Integrated Reporting Framework? In seeking to understanding this implementation, I considered indispensable to perceive the progress of integrated reporting within the corporate reporting landscape. Through interviews with integrated reporting practitioners, I identified several similarities and divergences in the practices, views and opinions of IR forerunners (AEGON and PwC) and late adopter of IR (ABN AMRO). Through an in-depth literature review on sociological theories, I studied the development of reporting processes toward on institutionalization of the integrated reporting concept. Integrated reporting poses a number of questions regarding the impact of the IR process on organizations’ business model. Numerous conclusions can be drawn in investigating the depth, breadth and quality of Key Performance Indicators (KPIs). I found an increasing awareness for the importance of sustainability measures in the managers’ discourse. They agreed that KPIs are based on internal information with the purpose to public disclosure. In addition, they emphasized that several KPIs are company or industry-relevant/specific. The link between NFI and performance measurement systems represent further academic challenges, for instance the integration and quantification of non-financial performance. Moreover, this thesis demonstrated that the information function performed by integrated reports benefits both report users and makers in decision making. Besides, the interviewees recognized that integrated reporting serves the vital purpose to enhance the organizational value creation’ storytelling. Furthermore, I recognized that the strategic focus on value creation – and subsequently the audience of the report – represents one of the main difference between IR and sustainability reporting. In addition, the interviews highlighted the necessity of starting the processes of performance measurement and integrated reporting through an exhaustive stakeholder engagement mechanism. Regarding the transformation function, interviews evidenced bigger changes in the integrated thinking than in the corporate systems. Hence, the adoption of integrated reporting has not undoubtedly stirred innovative disclosure mechanisms. Consequently, IR integrated reporting seems more likely to reinforce rather than transform business models.