The “why” and the “how” of the IR journey in medium-sized firms. Insights and implications from empirical cases

Structured Abstract Purpose – Integrated reporting (IR) represents a new reporting model that has been attracting growing academic attention. However, very few current studies address small to medium-sized enterprises (SMEs), and only a few pioneering works have focused on how early SME adopters are managing and implementing the IR framework. Accordingly, this work aims to deepen a still underdeveloped field of research and operation and devote some attention to IR adoption in the context of SMEs. The research design includes two main areas of inquiry: 1) why the IR journey has been experienced, to understand which types of companies and which entrepreneurial/managerial attributes favor, or hinder, the IR process in a medium-sized company; and 2) how the IR journey has transpired (in terms of time, the resources involved, its difficulties, and the resulting benefits or outcomes). Design/methodology/approach – This topic is explored through a qualitative empirical case-study of two Italian companies that pursued different steps along their IR journey. Both cases were among the pilot companies in the Italian Network Business Reporting (NIBR) and were involved in releasing the Integrated Reporting Implementation Guidelines for SMEs. Following the action research approach, in-depth semi-structured interviews with both companies’ interlocutors was supplemented with data derived from informal discussions with NIBR members (scholars, entrepreneurs, managers, IIRC representatives, chartered accountants, consultants agencies, and banks) gathered during focus groups, workshops, and round tables, as well as from the analysis of company reports and technical documents issued by the NIBR working group. Originality/value – The empirical analysis outlines the need for, and the efficacy of, simplified and friendly guidelines for SMEs’ aimed at operationalizing IR’s basic concepts and principles, such us materiality, integrated thinking, and connectivity. Further analysis finds support for: the need to clearly define the relationship between sustainability and integrated reporting; “fine-tune the main concepts of IR” the main concepts of IR; and understanding the benefits derived from integrated reporting. Findings – The results emphasize both the main criticalities and benefits derived from the IR process in medium-sized companies. They suggest the most effective path to IR requires preparation and management and should be explained in different steps with a roadmap that spans several years. Process-driven and incremental logic are necessary to drive the evolution of entrepreneurship and organizational cultures towards IR. Moreover, the results highlight the importance of creating an internal IR working group and the benefits to be gained from such a group’s direct involvement in the NIBR. Practical implications – It is hoped this research will motivate scholars and practitioners to focus attention on the diffusion of IR among SMEs – a research field which has not been yet adequately investigated. Drawing on the analysis of pioneering Italian experiences helps to support managers, entrepreneurs, and practitioners to critically evaluate the implications of IR and subsequently adapt the IR framework with specific features to meet the needs of SMEs.