Sensemaking of Financial Institution Actors in the Adoption and Elaboration of Integrated Reporting.

AutorSanches, Simone Leticia Raimundini

1 Introduction

Adopting and preparing an Integrated Report (IR) as a corporate document for communicating value generation to stakeholders in the short, medium, and long terms (Burke & Clark, 2016; Mio, Marco, & Pauluzzo, 2016) requires organizational changes, such as transitioning from sector-based teams to multi-sector teams, and changes in business vision (Kistruck & Beamish, 2010). These organizational adjustments occur because integrated thinking among the actors involved is a requirement for the development of IRs (Higgins, Stubbs, & Love, 2014; Lodhia, 2015).

Concerning the actors involved, Bommel (2014), Jensen and Berg (2012), and Stubbs and Higgins (2014) stress the importance of observing the reasons that lead companies to voluntarily adopt integrated reporting, the authors' insights, the mechanisms they use, and whether organizational change is taking place. Higgins et al. (2014) identified that as sustainability values have been incorporated into the culture of organizations, individuals have changed along with them, because signification and perception processes are continuous and interwoven.

Perego, Kennedy, and Whiteman (2016) point out that studies on integrated reporting emphasize the structure and concepts of the framework established by the International Integrated Reporting Council (IIRC), as well as the content of the report, but do not investigate the individuals involved in integrated reporting. This gap highlighted by Perego et al. (2016) has been confirmed in Brazilian studies (Abreu, Zaro, Luiz, Bellen, & Vicente, 2016; Freitas & Freire, 2017; Ricardo, Sabrina, & Bortonlon, 2017) as well as international ones (Clayton & Rogerson, 2015; Fasan & Mio , 2017; Garcia-Sanchez & Noguera-Gamez, 2017; Rensburg & Botha, 2014), which all explore the content, structure, or concepts of the IIRC framework for integrated reporting, or of disclosed IRs.

When investigating individuals involved in integrated reporting, one possible approach is sensemaking (Daft & Weick, 2005; Weick, 1973; Weick, 1995)--the creation of senses and meanings by the actors (individuals) regarding an object in a given context. In this study, we understand that sensemaking refers to the actors' actions with regards to producing and reproducing senses and meanings concerning the IR and, consequently, promoting organizational changes for the adoption and preparation of that report in the organization.

Therefore, the question that guides this study is: How does the sensemaking of the actors involved in the process of adopting and preparing an IR occur? The objective is to analyze the sensemaking (Weick, 1995) of the actors involved in the adoption and preparation of IRs at a Brazilian financial institution (Itau Unibanco S.A.). This is an interpretive exploratory case study, based on the content analysis of semi-structured interviews held between the months of November and December 2015.

This case was chosen because the adoption of integrated reporting was internal, conducted exclusively by a specific team--the Working Group (WG)--which is interesting for studying the actors involved and sensemaking. For McNally, Cerbone, and Maroun (2017), when it comes to preparing IRs, trusting third-party consultants can reduce the involvement of those who implement and disseminate the principles of this reporting.

The main result of this investigation evidences that sensemaking in IR adoption and preparation, in this case study, is based on identifying and interpreting ideas, which, when they create sense for an actor, and the latter shares them with other actors (or sectors), constitute an interpretive process regarding what an IR and its elements (business model, capital, material topics, value generation) are. The sensemaking resulting from integrated reporting brings about organizational changes through disruptive actions. It is also adaptive when it fits the elements of organizational culture.

The results of this study can contribute to the investigated organization itself and to organizations interested in adopting integrated reporting, including consulting firms, as well as to the IIRC and to the Brazilian Commission for Monitoring Integrated Reporting [Comissao Brasileira para Acompanhamento do Relato Integrado (CBARI)] when it comes to discussions around IR adoption.

The practical implication is that sensemaking is a critical factor for an organization that intends to adopt integrated reporting. Neglecting this critical factor can be a determinant when it comes to understanding, accepting, and disseminating this practice. It involves stakeholders as well, as it allows them to understand that IRs are a social idea internally built in the organization that issues them; therefore, the analysis of the informational content of said reports will be unique for each company.

This study advances the integrated reporting literature by exploring the actors involved, but also points out the need to continue research from this perspective, involving the actors at the different stages of IR adoption in domestic or international organizations. Moreover, it complements the literature with a focus on the IIRC framework and its content.

2 Sensemaking and Integrated Reporting

The understanding involved between generating and disseminating information is a process pertaining to an object or phenomenon in a certain context (Heijden & Cramer, 2017). For Weick (1973), processes are interconnected individual behaviors. Thus, informational behavior is related to the understanding and processing of information in the organizational environment; to the individual's subjectivity in obtaining, processing, and sending information; and to the influence of managers when creating strategies to pass on information (Daft & Weick, 2005) in order to meet the informational needs of users.

The proposal of IRs is to integrate financial and non-financial information, showing the relationship between the organization's strategy, governance, and financial, environmental, social, and economic performance (Stubbs & Higgins, 2015). This relationship includes the business model and all performance dimensions, for long-term value creation (Burke & Clark, 2016). Considering these elements, we understand that adopting and preparing an IR involves changes in the informational behavior of the organization, and the actors giving a new meaning to their activities.

Sensemaking emphasizes the way in which actors make sense of the object or phenomenon they interpret in a context (Daft & Weick. 2005; Weick, 1973; Weick, 1995), it promotes critical thinking (Guiette & Vandenbempt, 2017), and it captures elements in the subjective process of formal and informal interactions, asymmetries of knowledge, experience, and collaborative motivations (Heijden & Cramer, 2017). Our understanding of IR-applied sensemaking is that it is a continuous process involving the systemic organization of financial and non-financial information through the scanning (Weick, 1995) of information from different sectors in a company. To do so, the actor interprets the information obtained and propagates the realization of an action (integrated thinking and IR preparation). As this action is propagated, the perception and interpretation of the information contained in the IR is changed, creating new senses or meanings. This feeds back the actor's interpretation cyclically. Thus, each IR is unique and dynamic in its presentation and structure, and coherent with the organization's business model.

For Weick (1995), sensemaking is a process based on seven properties (Table 1), which are interactive and have interrelated implications.

Considering that these sensemaking properties are the fundamental elements for the actors to disseminate integrated thinking and IRs in any organization, we suggest correlating the properties in a final version (Table 2). These properties are based on IIRC Framework 1.0 and on the literature on integrated reporting (Bommel, 2014; Higgins et al, 2014; Jensen & Berg, 2012; Lodhia, 2015; Perego et al., 2016; Stubbs & Higgins, 2014).

These properties were analyzed in the case study and they suggest that individual sensemaking, when shared and integrated, generates collective sensemaking (Choo, 2003; Daft & Weick, 2005; Ivanova-Gongne & Tornroos, 2017; Sheng, 2017; Zilber, 2002). therefore, an IR is not a department-exclusive document, but rather a report that depicts what the organization and its sustainability are.

3 Methodological Procedures

This research involves a single, exploratory, and interpretive case study (Bryman, 2012; Chua, 1986; Kistruck & Beamish, 2010; Myers, 2013) conducted at Itau Unibanco. Data were collected from semi-structured interviews held in loco between November and December 2015. The interview script (Appendix B) was prepared based on Appendix A and Lodhia (2015).

We analyzed the interviews using the content analysis technique (Bardin, 2016) because we interpreted the meaning the actors (the interviewees, our unit of analysis) gave to the IR. After transcribing the interviews, we performed a pre-analysis--that is, we skimmed this material, preparing it for exploration. We started exploring the transcribed interviews by organizing the paragraphs according to the interviewees' statements (context unit).

Afterwards, we coded the paragraphs of each interview according to the IR-applied sensemaking properties (Appendix A). With that done, we grouped the context units by code and found that we had reached data saturation. We interpreted the coded reports with the aid of the Atlas*TI software, version 8, and noticed that the properties initially proposed should be adjusted (Table 2). The interpretation was validated by the institution in a presentation at a CBARI meeting, in March 2017.

4 Sensemaking of IR actors

In this section, we present the results from the analysis of the interviews with the actors involved in integrated reporting at Itau Unibanco. We...

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