Integrated Reporting and Sustainable Corporate Governance from European Perspective

27 Pages Posted: 25 Nov 2019 Last revised: 8 Apr 2020

See all articles by Jukka Mähönen

Jukka Mähönen

University of Oslo - Faculty of Law; University of Helsinki - Faculty of Law

Date Written: November 21, 2019


According to the Cadbury Committee (1992) classical definition, corporate governance is ‘the system by which companies are directed and controlled.’ In the Cadbury Report and in other mainstream corporate governance codes, ‘system’ refers only to the ‘financial aspects of corporate governance’, that is, shareholder value and emphasis on the board’s and the management’s accountability to providers of financial capital only. During the last few years however, sustainability has been included through ‘integrated reporting’ in corporate governance codes especially in Africa (South Africa) and Asia (Malaysia, Philippines). For example, the South African King reports on corporate governance connect the use of integrated reporting to report on an organisation’s corporate governance practices and economic-social-environmental triple-bottom-line performance.

The leading normative framework for integrated reporting, the International Integrated Reporting Council’s International Integrated Reporting Framework, is based on an idea of ‘shared value creation’ by providers of the ‘six capitals’ (financial, manufactured, intellectual, human, societal and environmental capitals). As such integrated reporting represents a stakeholder management model already integrated - at least on the text level - in many corporate governance codes, just enlarging the concept of capital providers from shareholders only to other internal stakeholders, and the goal of capital efficiency and profit maximisation from financial capital only to other five forms of internal capital provisions. It is also a new step in the development of social and environmental accounting and reporting, rooting from the 1970s and sustainability reporting from the 1990s.

The concept of a ‘business model’ used in the Framework represents the way how an organisation creates value, comprising all its activities, its relationships with stakeholders and its tangible and intangible assets and liabilities, and finally the boards responsibilities, as for the board, ‘corporate governance’ and sustaining and developing the company’s business model are essentially the same thing. In the end of the day, it is a question what kind of ‘business model’ integrated reporting based corporate governance really reflects, and how it possible varies from shareholder-centred business model.

The purpose of this paper is to test (1) what kind of stakeholder model, if any, integrated reporting and especially International Integrated Reporting Framework represents, (2) what is the impact, if any, of integrated reporting to material corporate governance in the codes it is included in, and (3) if yes, does an integrated view and especially the ‘integrated thinking’ behind the Framework represent a genuine sustainable value creation driven business model based on the boundaries of the planet and social foundation for the humanity, or is it only a view to encourage organisations to take care of the profits of the specific capital providers.

Suggested Citation

Mähönen, Jukka T, Integrated Reporting and Sustainable Corporate Governance from European Perspective (November 21, 2019). University of Oslo Faculty of Law Research Paper No. 2019-58, Nordic & European Company Law Working Paper No. 20-03, Available at SSRN: or

Jukka T Mähönen (Contact Author)

University of Oslo - Faculty of Law ( email )

Karl Johansgt 47
N-0162, Oslo
+4722859534 (Phone)


University of Helsinki - Faculty of Law ( email )

Porthania 5th Floor
P.O. Box 4
Helsinki, FIN-0001 4

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