An Integrated Reporting Improvements Proposal Based on Gaps in Governance Systems from State Companies in Brazil

Marchisotti, Gustavo Guimaraes; Farias Filho, Jose Rodrigues de; França, Sergio Luiz Braga; Souza, Rodrigo Gris

doi:10.15728/bbr.2022.1194.en

Gustavo Guimaraes Marchisotti

conceptualization

data curation

formal analysis

investigation

methodology

project administration

resources

supervision

validation

visualization

writing – original draft

writing – review & editing

Universidade Federal Fluminense, Niterói, RJ, Brasil

https://orcid.org/0000-0002-7028-0015

Jose Rodrigues de Farias Filho

conceptualization

validation

writing – original draft

writing – review & editing

Universidade Federal Fluminense, Niterói, RJ, Brasil

https://orcid.org/0000-0003-1843-8695

Sergio Luiz Braga França

conceptualization

validation

writing – original draft

writing – review & editing

Universidade Federal Fluminense, Niterói, RJ, Brasil

https://orcid.org/0000-0003-1783-3167

Rodrigo Gris Souza

conceptualization

validation

writing – original draft

writing – review & editing

Universidade Federal Fluminense, Niterói, RJ, Brasil

https://orcid.org/0000-0003-1441-8638

gustavo.marchisotti@id.uff.br

joserodrigues@id.uff.br

sfranca@id.uff.br

rgris@id.uff.br

Editor associado:

Lucas Godeiro https://orcid.org/0000-0002-3510-776X

Talles Vianna Brugni https://orcid.org/0000-0002-9025-9440

Author’s Contribution

GGM: Conceptualization (Lead); Data curation (Lead); Formal analysis (Lead); Investigation (Lead); Methodology (Lead); Project administration (Lead); Resources (Lead); Supervision (Lead); Validation (Lead); Visualization (Lead); Writing - original draft (Lead); Writing - review & editing (Lead). JRFF: Conceptualization (Supporting); Validation (Supporting); Writing - original draft (Supporting); Writing - review & editing (Supporting). SLBF: Conceptualization (Supporting); Validation (Supporting); Writing - original draft (Supporting); Writing - review & editing (Supporting). RGS: Conceptualization (Supporting); Validation (Supporting); Writing - original draft (Supporting); Writing - review & editing (Supporting).

Conflicts of interest

The authors declare that there is no conflict of interest.

Type of Capital	Definition and Concepts	Author
Social	It is about the common behavior patterns and values shared within and outside an organization. An organization can demonstrate its concern with the social issue by presenting: 1) relationships with the local community; 2) equal opportunities; 3) respect for human rights; 4) concern with education and training; 5) low employee turnover rate; 6) employees governed by collective agreements; 7) monitoring of employee complaints; 8) existence of codes of ethics and conduct; 9) low rates of accidents at work and absenteeism; 10) analysis of the impact of products or services provided by the organization, on the health of those who use them, and 11) expenses to maintain the level of customer satisfaction.	IIRC (2014IIRC - International Integrated Reporting Council. (2014). The International Integrated Reporting Framework. <https://integratedreporting.org/wp-content/uploads/2015/03/13-12-08-THE-INTERNATIONAL-IR-FRAMEWORK-Portugese-final-1.pdf>. https://integratedreporting.org/wp-conte... ); Dočekalová and Kocmanová (2016Dočekalová, M. P., & Kocmanová, A. (2016). Composite indicator for measuring corporate sustainability.Ecological Indicators,61, 612-623. https://doi.org/10.1016/j.ecolind.2015.10.012 https://doi.org/10.1016/j.ecolind.2015.1... ); Goede (2018Goede, M. (2018). The Corporation: A circular process of value creation.Archives of Business Research, 6(5), 113-124. https://doi.org/10.14738/abr.65.4556 https://doi.org/10.14738/abr.65.4556... ).
Natural	It refers to environmental resources - renewable and non-renewable - and their processes associated with the environment, production of goods or provision of services by an organization. An organization can demonstrate its concern for the environment by presenting: 1) energy efficiency; 2) origin of materials and raw materials; 3) consumption of fuel for transport; 4) Water consumption; 5) amount of land occupied for their activities; 6) waste production; proportion of hazardous and recycled waste; 7) greenhouse gas emissions; 8) number and amounts associated with violations of environmental regulations and 9) investments and expenses to guarantee the environment.	IIRC (2014IIRC - International Integrated Reporting Council. (2014). The International Integrated Reporting Framework. <https://integratedreporting.org/wp-content/uploads/2015/03/13-12-08-THE-INTERNATIONAL-IR-FRAMEWORK-Portugese-final-1.pdf>. https://integratedreporting.org/wp-conte... ); Ambrozini (2017Ambrozini, L. S. (2017). Pressões internas e externas na utilização de padrões de divulgação de informações socioambientais amplamente aceitos: uma análise sobre estrutura de governança corporativa, ambiente institucional e a perspectiva de legitimação.Revista Contemporânea de Contabilidade,14(31), 3-26. http://doi.org/10.5007/2175-8069.2017v14n31p3 http://doi.org/10.5007/2175-8069.2017v14... ); Dočekalová and Kocmanová (2016Dočekalová, M. P., & Kocmanová, A. (2016). Composite indicator for measuring corporate sustainability.Ecological Indicators,61, 612-623. https://doi.org/10.1016/j.ecolind.2015.10.012 https://doi.org/10.1016/j.ecolind.2015.1... ).
Financial	Set of resources available in the organization to produce goods and/or provision of services. The disclosed data must be relevant and faithful to reality, ensuring an effective reduction in information asymmetry. An organization can demonstrate its concern with finances if it presents: 1) costs - total, personnel and operational; 2) investment and return on investments; 3) economic results - sales, profit, added value, turnover, cash flow and market share; 4) supplier reliability; 5) financial value of sanctions; 6) investment in research.	IIRC (2014IIRC - International Integrated Reporting Council. (2014). The International Integrated Reporting Framework. <https://integratedreporting.org/wp-content/uploads/2015/03/13-12-08-THE-INTERNATIONAL-IR-FRAMEWORK-Portugese-final-1.pdf>. https://integratedreporting.org/wp-conte... ); Villiers and Sharma (2020Villiers, C., & Sharma, U. (2020). A critical reflection on the future of financial, intellectual capital, sustainability and integrated reporting. Critical Perspectives on Accounting, 70, e101999. https://doi.org/10.1016/j.cpa.2017.05.003 https://doi.org/10.1016/j.cpa.2017.05.00... ); Dočekalová and Kocmanová (2016Dočekalová, M. P., & Kocmanová, A. (2016). Composite indicator for measuring corporate sustainability.Ecological Indicators,61, 612-623. https://doi.org/10.1016/j.ecolind.2015.10.012 https://doi.org/10.1016/j.ecolind.2015.1... )
Manufactured	Manufactured physical objects or goods - non-natural - available in the organization to produce goods and/or provision of services, such as constructions, buildings, ports, power plants, equipment and infrastructure.	IIRC (2014IIRC - International Integrated Reporting Council. (2014). The International Integrated Reporting Framework. <https://integratedreporting.org/wp-content/uploads/2015/03/13-12-08-THE-INTERNATIONAL-IR-FRAMEWORK-Portugese-final-1.pdf>. https://integratedreporting.org/wp-conte... ); Sukhari and Villiers (2019Sukhari, A., & Villiers, C. (2019). The influence of integrated reporting on business model and strategy disclosures. Australian Accounting Review, 29(4), 708-725. https://doi.org/10.1111/auar.12264 https://doi.org/10.1111/auar.12264... ); Diz et al. (2017Diz, A. J., Mantovani, D. M. N., & Lucas Júnior, D. (2017). A Relação entre a Percepção Sobre a Implantação dos Mecanismos de Governança Corporativa e o Comprometimento Organizacional: A Visão do Colaborador. XIX ENGEMA. São Paulo, SP, Brasil. ).
Intellectual	They are the intangible assets of an organization based on the knowledge generated, such as patents or organizational culture. It must be measured, reported and managed properly so that the value to the business is not only maintained but developed. It is a complex measurement and disclosure capital.	IIRC (2014IIRC - International Integrated Reporting Council. (2014). The International Integrated Reporting Framework. <https://integratedreporting.org/wp-content/uploads/2015/03/13-12-08-THE-INTERNATIONAL-IR-FRAMEWORK-Portugese-final-1.pdf>. https://integratedreporting.org/wp-conte... ); Badia et al. (2019Badia, F., Dicuonzo, G., Petruzzelli, S., & Dell’Atti, V. (2019). Integrated reporting in action: Mobilizing intellectual capital to improve management and governance practices.Journal of Management and Governance,23(2), 299-320. https://doi.org/10.1007/s10997-018-9420-1 https://doi.org/10.1007/s10997-018-9420-... ); Macedo et al. (2015Macedo, Á. F. P. D., Oliveira, A. M., Nobre, L. N., Brito, S. G., & Quandt, C. O. (2015). Governança corporativa e evidenciação de capital intelectual em empresas brasileiras. Revista Evidenciação Contábil & Finanças , 3(1), 18-33. https://periodicos.ufpb.br/index.php/recfin/article/view/20678 https://periodicos.ufpb.br/index.php/rec... ).
Human	These are the skills, abilities and experience of employees, including their ability to innovate. It is understood by the know how; education, qualification and knowledge accumulated by employees over the time they have been working. It also includes aligning and supporting employees with the GS, risk management and the organization’s values.	IIRC (2014IIRC - International Integrated Reporting Council. (2014). The International Integrated Reporting Framework. <https://integratedreporting.org/wp-content/uploads/2015/03/13-12-08-THE-INTERNATIONAL-IR-FRAMEWORK-Portugese-final-1.pdf>. https://integratedreporting.org/wp-conte... ); Hsieh et al. (2019Hsieh, C. T., Hurst, E., Jones, C. I., & Klenow, P. J. (2019). The allocation of talent and us economic growth.Econometrica,87(5), 1439-1474. https://doi.org/10.3982/ECTA11427 https://doi.org/10.3982/ECTA11427... ); Beretta et al. (2019Beretta, V., Demartini, C., & Trucco, S. (2019). Does environmental, social and governance performance influence intellectual capital disclosure tone in integrated reporting?,Journal of Intellectual Capital, 20(1), 100-124.https://doi.org/10.1108/JIC-02-2018-0049 https://doi.org/10.1108/JIC-02-2018-0049... ).

GS’s Gaps	IR GS Assessment Items	Observations
Harmful political influence	No reference.	There is no way to visualize the direct impact of harmful political influence, poor project management/governance, and the impact of conflicts generated by partnerships/cooperation in the IR GS’s assessment.
Bad project management
Conflicts in Cooperation and Partnerships
GS not focused on results	“Actions by those responsible for governance to influence and monitor the organization’s strategic direction and risk management.”	There is partial concern that the GS is driving the organization’s objectives in line with organizational strategy but not in terms of goals.
Inadequate People Management	“Governance leadership framework - skills, diversity, as well as demonstrating how this framework meets regulatory requirements.”	There is partial concern with the leaders responsible for governance, but not with the other organization managers.
Organizational Culture not aligned with GS	‘Strategic decision-making process and monitoring of culture, including attitude to risk and linked to ethics and integrity.” & “How culture, ethics and values are reflected in the capitals present in the organization, including the relationship with different stakeholders.”	There is total concern with the organizational structure and culture.
Inadequate organizational structure	“Governance leadership framework - skills, diversity, as well as demonstrating how this framework meets regulatory requirements.”
Bureaucratic and Complex Processes	“Strategic decision-making process and monitoring of culture, including attitude to risk and linked to ethics and integrity.”	There is a partial concern with the processes, in this case, the decision-making process. A broader concern is lacking.
Unbalanced Controls	“Strategic decision-making process and monitoring of culture, including attitude to risk and linked to ethics and integrity,” & “Actions by those charged with governance to influence and monitor the organization’s strategic direction and risk management.”	There is partial concern with monitoring leadership, strategic planning and risks.

GS’s gaps	IR Capitals (Most relevant)	Observations
Harmful political influence	Financial Capital	There is a more evident relationship between political influence and poor project management in reducing the organization’s productivity.
Bad project management	Financial Capital
GS not focused on results	All	It is assumed that a GS not focused on results impacts all the capitals present in an organization.
Inadequate People Management	Human Capital	There is a more evident relationship between people management, with the skills, abilities and experiences of employees.
Organizational Culture not aligned with GS	Intellectual Capital	There is a more evident relationship between organizational culture, organizational structure and process management, with the tacit knowledge of an organization.
Inadequate organizational structure
Bureaucratic and Complex Processes
Conflicts in Cooperation and Partnerships	All capitals	It is assumed that conflicts in partnerships and unbalanced controls have the potential to equally impact any of the capitals present in an organization.
Unbalanced Controls

[1] gustavo.marchisotti@id.uff.br

Brasil

Brasil

An Integrated Reporting Improvements Proposal Based on Gaps in Governance Systems from State Companies in Brazil

ABSTRACT