Materiality in sustainability and integrated reporting contexts: an application of logics

Over the past three decades, sustainability and integrated reporting have become common but there remains considerable variation in the interpretation and application of applicable reporting guidelines, in part because of differences in how ‘materiality’ is defined and operationalised for reporting on extra-financial issues. This research uses institutional logic as a theoretical framework for explaining differences in reporting practices with a focus on materiality determination. The results suggest that different logics interact, giving rise to varied views on the value of integrated reporting, the relevance of stakeholder engagement and the materiality determination process. Specifically, when preparers apply market and professional logics, integrated reporting is seen as a compliance-focused exercise. Stakeholder engagement and the understanding of materiality are framed in finance-centric terms, even when it comes to otherwise important environmental, social and governance metrics. In contrast, as a stakeholder logic takes hold, the value relevance of integrated reporting grows, stakeholder engagement is more developed and materiality determination becomes an interpretive process in the sense that multiple perspectives are identified and balanced.