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1 Introduction

Today, more and more companies are publishing corporate social responsibility or sustainability reports to supplement their annual report. However, the problem of how to integrate the financial reporting with the non financial reporting has not yet been solved. The presence of different frameworks for financial reporting (IAS-international accounting standards- and IFRS – international financial reporting standards- principles), as well as the presence of several standards for non financial reporting (GRI-Global Reporting Initiative, PwC Value Reporting Initiative), makes the process of integration difficult. In recent decades, several contributions have addressed the issue of the relationship between financial and non financial reporting and focused the limits (transparency, incompleteness, redundancy) of these different approaches and communication tools. At the same time there is increasing speculation that integrated reporting constitutes the preferred solution.

Studies and empirical research in this area have, however, mainly focused on large enterprises, neglecting the integrated reporting of small and medium-sized enterprises (SMEs) and the factors that may facilitate its adoption and effectiveness.

Departing from these premises, the work addresses the issue of the relationship between financial reporting and social, environmental and sustainability reporting both through a literature review and the empirical analysis focused on a case-study and based on the action research methodology, which has been recently developed in the context of social and environmental research, through the direct involvement with the company under investigation.

Why does a company decide to combine financial, social and environmental performance into a single report? Does the so called “integrated report” represent the best tools of accountability and the best solution for reporting? If so, why and for which companies should this apply? Is this only a problem for large, global firms or does it involve SMEs?

The study winds itself around these questions with the aim of contributing to filling the afore-mentioned gap and to offer lines of reflection on the benefits deriving from the adoption of the integrated report (e.g., greater clarity about relationships and commitments, deeper engagement with all stakeholders, better decisions with economic, social and environmental merit and lower reputational risks) and their relationship with specific attributes of SMEs. The empirical analysis – referred to an Italian SME, not listed, which is among the first to have introduced the global report- allows us to identify the benefits of integrated reporting and verify how these stem from the orientation to sustainability, transparency and to the level of responsibility of the entrepreneur, showing that when an authentic commitment to social responsibility and sustainability and transparent disclosure exists, the integrated report improves corporate disclosure and transparency and acts as a driver for stakeholders dialogue and stakeholders commitment.

The research design develops through a deductive and inductive approach. The deductive approach is based on an analysis of the literature regarding financial and non financial reporting and on integrated reporting, and is aimed at describing the theoretical framework (Sects. 9.2, 9.3, 9.4 and 9.5). The inductive method is based on the analysis of a research case focused on an Italian small-sized enterprise and, specifically, on the motivations for adopting the integrated report, the process of implementation, the standard used, as well as the benefits, the criticality and aspects of improvement (Sect. 9.6). A discussion follows regarding aspects which have emerged and concluding reflections (Sect. 9.7).

2 Financial Reporting and Its Limitations

In recent years awareness has increased about the difficulty traditional systems of financial reporting have in thoroughly representing the complexity which typifies companies (Andriessen and Tissen 2001; Lev 2001, 2004; Pike et al. 2001), as well as justifying the stock value attributed to them (Andriessen 2002) and supporting the judgment of stakeholders regarding their performances (Elkington 1997; Kaptein and Wempe 2002).

The growing inadequacy of traditional systems of financial reporting in answering increasingly structured requests for information has been revealed in: a loss of trust in the reliability of information presented in the financial report; too much of a focus on economic performance; and an insufficient consideration of financial, operational, strategic and reputational risks (Slywotzky and Drzik 2005; Fombrun and Gardberg 2000; Rayner 2003). Enron and WorlCom in the USA, HiH, Ansett, and Harris Scarfe in Australia, and Swissair and Parmalat in Europe, are just some examples which demonstrate the failure of international standards (IAS and IFRS) in ensuring the reliability of information contained in the financial report (Satava et al. 2006). In traditional systems of financial reporting weak points seem to remain despite the tightening of regulations. Furthermore there has been an intensification in the efforts of national and international organizations made in improving the quality of information contained in the financial report (Archambault and Archambault 2005). In particular, the IFRS practice statement on management commentary uses KPIs (key performance indicators) to best represent the system of the company’s risks and resources and to visualize intangible resources.

Against such a gradual loss of informational power, there has been a rising demand in information requested by investors (Wasly and Shuang Wu 2006) and an increase in the interests of managers to make available a system of information necessary for guiding increasingly complex organizations (Mendoza and Bescos 2001).

The need to observe and account for the effects generated by corporate management on the globality of performance, sustained by the stakeholders view, has stimulated the managers’ interests in extending the range of observation to the perspective of the triple bottom line (Elkington 1997; Clarkson 1995; Davemport 2000). Only the monitoring of performances in a broad sense allows the measurement and management of corporate sustainability (Funk 2003; Kiernam 2001; Wheeler et al. 2003). The financial reporting represents a limited response in this sense, as it does not allow for a complete vision of economic, financial, social and environmental performance and is therefore considered an insufficient tool for guiding corporate and stakeholder decisions (Jensen 2001; Reynold, et al. 2006; Winn 2001). Furthermore it is limited in expressing judgment on resources which determine prospects of future performance (Barney et al. 2001) and on intangible resources (Aaker 1989).

Over the past decade companies have been facing growing pressures to address social and environmental issues (Young and Marais 2012; Arvidsson 2010; Basu and Palazzo 2008; Kolk 2008; Kolk and Pinkse 2010) and to take into account the conformance to economic, social and ethical expectations from diverse stakeholders groups (Freeman et al. 2010) as well as their impact on society (Lee 2011). Civil society’s awareness of the need for CSR (corporate social responsibility) has rapidly increased in the last years. CSR can be broadly defined as the extent to which firms have integrated on a voluntary basis social and environmental concerns into their ongoing operations and interactions with stakeholders (Godoz-Diez et al. 2011; Uhlaner et al. 2004). In other terms, CSR is “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary bases” (EC 2001).

There are many different ideas, concepts and practical techniques that have been developed under the umbrella of CSR research, including corporate social performance (Carrol 1979; Wood 1991); corporate social responsiveness (Ackerman 1973); corporate citizenship (Waddock 2004); corporate governance (Jones 1980; Freeman and Evan 1990); corporate accountability (Zadek et al. 1997; Gray et al. 1996); sustainability and triple bottom line (Elkington 1994) and corporate social entrepreneurship (Austin et al. 2006). The Brundtland Report explains “Sustainable development is one that meets the needs of the present without compromising the ability of future generations to meet their own needs” (UNWCED, 1987: 43). Freeman et al. (2010) note that “Each of these diverse efforts share the common aim: the attempt to broaden the oblations of firms to include more than financial considerations” (Freeman et al. 2010: 235). Such a broad theme has in the past decade attracted the attention of researchers from diverse disciplines, as well as policy makers and economic operators (Garriga and Melé 2004).

According to companies’ strategy of transparency, information can be the basis for corporate sustainability reporting (Cisi and Bechis 2007). The concepts of CSR and sustainability are linked with the transparency toward stakeholders. Recently, there has been a substantial increase in corporate awareness of environmental and social performance and a concomitant desire to publicly report such results (Murphy 2005). This derives from a variety of reasons: to comply with regulations; to reduce the cost of future compliance; to comply with industry environmental codes; and to improve the relations with the stakeholders. Moreover, reasons of social and environmental reporting are related to expected improvements in competitive advantage, in a company’s legitimacy and reputation and are connected to a sense of social responsibility and desire to adhere to societal standards (Morhardt et al. 2002). As a result, companies, and especially multinational corporations, are increasingly adopting CSR and sustainability reporting practices (Conley and Williams 2005; Cooper and Owen 2007). A recent KMPG survey has revealed that, in 2011, 95 % of the 250 largest global companies now report on their CSR activities.

Even if accurate financial information remains extremely important, it is becoming a less and less complete story in a knowledge economy where an increasing percentage of a company’s intangible assets are not shown and included in the balance sheet. On the one hand, increasingly more managers, analysts and investors are directing their attention toward KPIs to make projections about future financial performance. On the other hand, environmental and social metrics have become more important to investors. “At the same time that the complexity of financial reporting has increased, the need for non financial information has increased” (Eccles and Krzus 2010: 79).

Both these tendencies – the need to recognize and assess the economic and financial performance – as well as the willingness to include the repercussion of corporate activity within the profile of ethical, social and environmental performance, and therefore the responsible conduct of companies and their leaning toward responsibility, explain the increasing need for new tools and methods of accounting (social reports, environmental reports, sustainability reports, codes of conduct and ethical codes, intellectual capital reports).

Different frameworks have been proposed on how to use non financial information to supplement financial reporting. Among the models reviewed in the ICAEW report Institute of Chartered Accountants in England and Wales ICAEW (2003) – in which report 11 proposed business reporting models were included – the most widespread are: the Balanced Scorecard (Kaplan and Norton 1996); the sustainability report guidelines developed by the GRI (G3, G4) (GRI 2006). and the Value-Reporting Framework developed by PwC (2009). The first one was developed mainly for internal management and reporting purposes, although it is relevant for external reporting as well. The GRI and PwC began their work in the late 1990s. The goal of GRI was to produce a reporting framework for providing stakeholders with relevant information on a company’s economic, social and environmental performances. In contrast, the PwC Value Reporting Initiative (the so called Corporate Reporting) was focused on identifying information in which analyst, investors, and chief financial officers were interested in making investment decisions that went beyond the required financial information. Attention has been paid to ESG (environmental, social and governance) factors and to industry-specific frameworks, KPIs, and associated XBRL (extensible business reporting language), developed on the basis of global surveys of analysts, investors, and executives of different industries (Di Piazza and Eccles 2002; Eccles and Krzus 2010).

The response companies have shown to the loss of the informative power of traditional annual reports has been through the development of the aforementioned complementary systems of reporting. These provide management with the opportunity to make available information which is of use in assessing the effectiveness and efficiency of the company with regards to areas of performance not considered in the financial report as well as to add a voluntary communication tool in the disclosure practices of the company.

Initially the need to make available information essential for responsible management capable of contributing to the creation of corporate value favored the start of complementary accountability systems in the form of environmental and social reports. Subsequently these two documents came together to form a single statement seeking a homogenous vision of economic-financial, environmental and social results (Higgins 2002) and played a part in the development of sustainability reports. The complementary informational systems are included in both sustainability and intellectual reporting. The former system accounts for the company’s sustainability over time and represents in a linked form economic, social and environmental performance. The latter system aims at offering a representation of intangible resources available to the company (Pedrini 2007). The intangibles are the main value drivers (Edvinsson 1997) and are referred to the concept of intellectual capital (IC) which embraces human, organizational and relational capital (IFAC 1998; WICI – Work Intellectual Capital InitiativeFootnote 1) (Sveiby 1997a; Nahapiet and Ghoshal 1998; Adler and Kwon 2002).

3 Non Financial Information

Non financial information comprises three main categories: intangible assets (intellectual capital and other intangibles); key performance indicators, and environmental, social and governance (ESG) parameters (Perrini 2006; ICGN 2008). Non financial information are strictly related to accountability intended as the duty to provide an account (by no means necessarily a financial account) or reckoning of those actions for which one is held responsible (Gray et al. 1996: 38). Accordingly, companies can adopt sustainability or social reporting.

On the one hand sustainability reporting is the practice of measuring, disclosing, and being accountable to internal and external stakeholders for organizational performance toward a goal of sustainable development (KPMG 2008). Sustainability reporting is driven by a growing recognition that sustainability related issues can materially affect a company’s performance, demands from various stakeholder groups for increased levels of transparency and disclosure, the need for companies, and, more generally, for the business community, to appropriately respond to issues of sustainable development (socio environmental, socio-economic and eco-efficiency performances).

On the other hand, the term Social & Environmental Accounting and Reporting (SEAR or SER) is widely used to refer to corporate accounting and self-reporting processes through which quantitative and qualitative information about social and environmental effects are accounted and disclosed (Gray et al. 1995a, b, 1996; Hibbit 2004; Contrafatto 2011). Since the mid-1970s there has been a significant increase in the number of academic researchers embracing social and environmental issues, in the level of consideration being given by governmental institutions (i.e., the EU and UN) and professional (accounting) bodies, and, indeed, in the amount of organizations producing different kinds of social and environmental reports (Mathews 1997; Bebbington 2001; Gray 2002; Deegan 2002; Rusconi 2006; Thomson 2007; Bebbington et al. 2009; Contrafatto 2011).

Various legislative initiatives have been undertaken in the last years by the European Union (i.e., the EU Modernization Directive 2003/51/EC). Furthermore, a few regulatory and legislative requirements, although unsystematic, have recently been passed in several EU countries in order to regulate organizations’ activities for accounting and reporting social and environmental impacts (KPMG International Survey of Corporate Social Responsibility Reporting 2005). Of the various empirical studies carried out, a research done in the year 2008 (Fossati et al. 2009) on a sample of 349 listed Italian companies revealed the classification of public documents to be very varied: the following appear in descending order: Corporate Responsibility Report, Sustainable Development Report, Corporate Social Responsibility Report, other classifications (Activity and Sustainable Development, Sustainable Value Report, Environmental and social Report) and Sustainability Report.

A proliferation of competing sustainability-related frameworks, principles, codes and management systems has arisen. Beyond the GRI guidelines, the list includes: the AccountAbility (AA) 1000 for managing and reporting and reporting sustainability performance; Social Accountability (SA) 8000 for managing labor practices; International Standards Organization (ISO) 26000 on sustainability management (Castka and Balzarova 2008). Among the regulatory principles we can mention: the SEC’s MD&A disclosure rules; the UK’s Enhanced Business Review Requirements; the EU’s Modernization Directive 2003 to include non financial key performances indicators in the annual reports; and the Australia’s National Greenhouse and Energy Reporting requirements.Footnote 2

In the scientific field, a vast literature has developed several strands of research (Contrafatto 2011) including: (1) those studies which have examined mainly motives and drivers for the initiation and/or sustainment of social and sustainability reporting (Buhr 2002; O’Dwyer 2002; Spence 2007; Belal and Owen 2007; Bebbington et al. 2009; Farneti and Guthrie 2009); (2) research exploring the contextual and internal factors (including managerial attitudes) which influence the nature and extent of social and environmental reporting and might contribute or limit change in organizations (Adams 1999, 2002; Adams and McNicholas 2007; Bebbington et al. 2009); (3) studies which have focused on its and to stimulate some kind of organizational change in practices, structures, performance and/or values (Gray et al. 1995c; Larrinaga-GonzÁlez and Bebbington 2001; Larrinaga-Gonzàlez et al. 2001; Adams and McNicholas 2007; Dey 2007; Albelda-Perez et al. 2007); and (4) studies which have specifically analysed the managerial perceptions and views about social, sustainability and environmental reporting and related practices (Belal and Owen 2007; Farneti and Guthrie 2009).

In the last years, this body of literature, has begun to question the perspective of integrated accountability, which is briefly explained in the following paragraph.

4 Integrated Reporting

“One Report doesn’t mean only one report. It simply means that there should be one report that integrates the company’s key financial and non financial information(…). One report has two meanings: the first and narrow meaning is a single document, either in paper or electronically forms (…) The second and broader meaning is reporting financial and non financial information” (Eccles and Krzus 2010: 10–11).

While no single, agreed-upon definition of integrated report exists yet, below are some representative samples.

According to the Integrated Reporting Committee of South Africa “An integrated report tells the overall story of the organization. It is a report to stakeholders on the strategy, performance and activities of the organization in a manner that allows stakeholders to assess the ability of the organization to create and sustain value over the short, medium, and long term, which is based on financial social, economic and environmental systems and on the quality of its relationships with stakeholders”Footnote 3. In other words, it is a report on the value story of the company and on the drivers of its value.

According to the International Integrated Reporting Committee (IIRC 2011) “Integrated reporting demonstrates the linkages between an organization’s strategy, governance and financial performance and the social, environmental and economic context within which it operates. By reinforcing these connections, integrated reporting (IR) can help business to take more sustainable decisions and enable investors and other stakeholders to understand how an organization is really performing”.

Integrated reporting brings together material information about an organization’s strategy, governance, performance and prospects in a way that reflects the commercial, social and environmental context within which it operates. It provides a clear and concise representation of how an organization demonstrates stewardship and how it creates and sustains value. An integrated report should be an organization’s primary reporting vehicle.

Many companies voluntarily produce integrated reports in various format, but few jurisdictions mandate this type of reporting (Deloitte 2011). Among the number of initiatives developed by governmental and nongovernmental groups the IIRC holds the promise of increased collaboration, convergence and conformance among the emerging frameworks of standards in the new perspective of integrating reporting.

Even if only one country has mandated comprehensive, fully integrated reprint to date (South Africa), other countries (Denmark, Sweden and the UK) have adopted reporting requirements to various extents, expecting companies therefore to disclose with complete transparency non financial information. Nevertheless, “despite the lack of widespread mandatory reporting on ESG issues, the integrated reporting movement continues to gain momentum” (Deloitte 2011: 6). In contrast to intangible assets and KPIs separate ESC or CSR reports are being issued by an increasing number of companies in different countries for the period 1992–2008. A 2007/2008 survey by KPMG and SustainAbility of more than 2,000 business people, NGO members, labor leaders, investors, consultants, academics, provides conclusive evidence that broad public opinion across different stakeholders strongly supports the idea of “one report”: 70 % of respondent agreed with the statement “Future sustainability reporting should be integrated with the annual report” (Eccles and Krzus 2010: 167; Eccles and Serafeim 2011; Krzus 2011).

Since the 1990s instruments for measuring the companies’ intangible resources have developed (Carrol and Tansey 2000; Sullivan and Sullivan 2000; Zambon and Marzo 2007) as well as systems which on the one hand tend to attribute a monetary value to the intangible resources of a company based both on financial quantitative methods (founded on market values and time-discounting of cash flows generated by intangible reources - Lev and Zarowin 1997), and non financial ones (Roos and Roos 1997; Lev 2001; Edvinsson 1997; IFAC 1998). Such paths have however highlighted numerous elements of convergence between sustainability and intangibles reports as well as between financial and non financial reporting (Molteni 2004; Pedrini 2007; Eccles et al. 1999; Eccles and Krzus 2010: 10). However, there are still many difficulties tied to the lack of homogeneity in the standards of drafting the two documents.

On the one hand, the hypothesis of a single integrated report is supported by the existence of elements which pool together experiences of sustainability reporting and intellectual capital reporting. A first element is that for both the methodology envisages the use of non financial quantitative indicators. A second element concerns the attention divided between the management of human capital and the management of relational capital which find space both in sustainability and intangibles reports.

On the other hand, the complete observation of performance in terms of tangible and intangible resources and stakeholder management is essential to verify the strategic approach to responsibility and sustainability and to create “holistic” value (economic, social and environmental value). A system of integrated reporting does indeed offer an informational heritage far superior to the one provided by the separate drafting of the two reporting systems as it allows a simultaneous monitoring of the results of stakeholder management activities and the performance obtained by a management of tangible and intangible resources. It also allows for an understanding of the relationships between them.

Different empirical researches reveal that there is growing commitment to integration between the financial and sustainability report and that a gradual integration between sustainability report and intellectual capital report is already happening.

The first trend is confirmed both by the use of a model for calculating distributed and created added value (a model which enables the use of information in the financial report to indirectly measure the level of satisfaction of stakeholders’ economic expectations and to understand the level of distributional equity on the part of the company) and by the publication of the two documents in a single moment using a single channel of communication.

With regards to the second trend, the process of integration between sustainability and intangibles reporting manifests itself in the introduction of a synthesis of results obtained relative to intangible resources in the financial report.

The frequency with which such processes of convergence have been observed reveals that there is a level of descriptive and strategic integration which is gradually developing. The main factors which favor integration are the attempt to manage the company in the perspective of the bottom line and the willingness to respond to corporate responsibility as a dimension of the strategy.

Firstly, attention to the triple bottom line is revealed as a factor capable of stimulating the development of integrated reporting systems, corroborating the hypothesis of a greater benefit in observing performance in an extended (holistic) way through a combined accountability of economic, financial, social, environmental and ethnic performance, which allows for a homogenous vision of the company and a complete judgment of corporate competitiveness.

Secondly, companies have a greater tendency to develop a system of integrated reporting in which the undertaking of responsibility is a dimension of the strategy and in which the activities of stakeholders’ engagement (detailed in the sustainability reports) are considered essential in order to generate competitive advantages and to integrate the results of intangible resources management within the sustainability reports.

Thirdly, the tendency toward a system of integrated reporting is stronger in companies in which responsibility is a dimension of the strategy.

In fourth place, a feature which joins the companies committed to the development of systems of integrated reporting is the attempt to predominantly use narrative (qualitative) indicators compared to quantitative types.

Finally, companies are exploring integration and interpreting the development of an integrated accountability system as an opportunity to understand whether the practices of responsibility are contributing to the development of intangible resources.

5 Integrated Reporting in SMEs

In the vast literature on these issues (non financial reporting and integrated reporting), very few studies have been addressed to SMEs. Only recently, some contributions have provides insights regarding the current trend toward sustainability reporting, the status of global sustainability and integrated reporting guidelines, and explored opportunities that arise for small and mid-sized entities considering an integrated reporting approach. Among these, James (2013) states that integrated reporting may provide significant benefits for SMEs and may, in the long-run, enhance a company’s economic success. Integrated report is not only a new chance for giant entities – i.e. Microsoft, Hewlett-Packard, Volkswagen – but is also relevant for SMEs since these are the growth engine of economies all over the world: they create jobs and new products, spur innovation, they are essential to a competitive and effective market, they are critical for poverty reduction and play a particularly important role in developing countries.

The principles of integrated reporting are applicable regardless of size. SMEs are likely to have a greater degree of integrated thinking and connectivity due to their flexibility, lower organizational complexity and the richness of interpersonal relationships. Although the integrated report is primarily aimed at investors, it is of benefit to other stakeholders significantly affected by the company’s activities, products and services and entities/individuals whose actions affect the entity’s ability to successfully implement its strategies.

Through integrated reporting, SMEs will enhance strategies, understand how strategy is affected by environmental, social, financial, and economic issues. They also enhance risk management, explore new and innovative opportunities in their products, services, processes, and markets, and improve strategic decision-making and performances (James 2013). Finally, through integrated reporting, SMEs can increase reputation among stakeholders, gain trust from funders, lower cost of capital, become more competitive in the market place, enhance brand value, improve customer support, and experience better employee loyalty, as the following case demonstrates.

6 Case Study. BoxMarche and Its Integrated Report: The Global Report

6.1 Research Object and Methodology

As stated in the introduction, the aim of this empirical section is to offer lines of reflection on the benefits (greater clarity about relationships and commitments, deeper engagement with all stakeholders, better decisions with economic, social and environmental merit, lower reputational risks) deriving from the adoption of integrated report and their relationship with specific attributes of SMEs.

The study was developed using a qualitative approach and a methodology based on a single case-study (which constitutes an explorative and exemplary case) (Yin 1994; Eisenhardt 1989; Eisenhardt and Graebner 2007). The fieldwork approach facilitates the involvement of the researchers in the actual activities of the companies with a view to studying the processes and the organizational practices of social and sustainability reporting (Adams 2002). This methodology consists of identifying the internal factorsFootnote 4 that, together with the corporate characteristics and the general contextual factors, explain the complexity of the social and sustainability reporting and, in addition to influencing its nature and extent, impact the company’s social engagement profile and the system of governance. Furthermore, the case method constitutes a valuable instrument for utilizing the results to attain cognitive aims and normative substance, indicating best practices and suggesting criteria for further action (Craig 2003).

With specific regard to the methodologies and approaches used in this field, we adopted an action research approach (Adams and McNicholas 2007) to undertake the empirical study in order to investigate, among others, factors that might impact (hinder or inhibit) the development of integrated report and its potential to produce effects on the organizational context and to act as a catalyst for change in organizations’ performances and practices. The action research approach uses interviews as a primary means to gather data and information. In addition, other research methods (such as observations, visits and meeting participations, documents analysis and questionnaires) are largely adopted to supplement and enrich the information and data gathered through interviews.

With reference to the research questions at the base of this study, BoxMarche was selected for its excellence relative to the CSR and sustainability orientation which is characterized by a plurality of attributes. First, we mention the presence of a philosophy of governance and a socially oriented management shared by the leaders of the firm (the entrepreneurial family and the managing director) which is diffuse throughout the entire organization and is reflected in its mission and its governance. Second, it should be underlined the adoption of processes of social and environmental certification and CSR and sustainability-oriented strategies. Finally, BoxMarche stands out for the adoption of CSR tools of communication and accountability (e.g., the regular publication of social reports and of integrated reports) and for the recognitions/awards received for its robust and authentic activities of social responsibility and the sensibility to the diffusion of best practices of CSR in the local and extra-local context in which it is found.

The research was developed across a multi-year period, beginning in 2009 and continuing today and was based on information acquired during several in-depth semi-structured interviews with entrepreneurs, managers, and different stakeholders, on direct observation during visits to company; and on the analysis of documentary sources (social reports, global reports, statement of values, as well as information posted on the company’s internet sites). The scope of this triangulated approach was to make use of different advantages and strengths offered by the various method of data collection. Direct observations in the firms offered the possibility of comparing the results of the interviews with the reality inside the business. In addition, a participant observation approach has been used, involving the entrepreneur, the managers and their collaborators in laboratories, conferences and seminars that set the stage for the informational and interview phases.

6.2 Company’s Profile

BoxMarche Spa is a company based in the small town of Corinaldo in the Marches region (Central Italy), and is a typical example of the Italian socio-economic system based on SMEs and a historical craftsmen tradition (Fuà 1988). It is a regional leader in the design and execution of packaging for the foodservice housewares, small electronics, and cosmetic-pharmaceutical sectors. The firm was set up in 1969 through the initiative of the Baldassarri family, predominantly given to agriculture; people who came from the land, from solid principles – workers of few words: “One’s word is his bond” is a recurrent expression in the farmer’s world, where behaving with integrity and virtue means adhering to principles of goodness and responsibility.

In 40 years of history the company has grown and by the end of the year 2011 it had reached a total turnover of over 10 million euro providing work to 50 employees. During its history BoxMarche has always followed the principles that “competition is that of ideas and of relationships”, basing on innovations in “technology, processes, products and relationships”.

6.2.1 Mission

The mission of BoxMarche is to be an excellent company, of solid principles (Table 9.1), which works to enrich all of its stakeholders: customers, providers, employees, partners, the territory and the outside community.

Table 9.1 BoxMarche’s values and culture
Full size table

BoxMarche distinguishes itself for its holistic approach to CSR and sustainability and is characterized by the following attributes (Del Baldo 2010, 2012):

  • presence of a framework of ethically connoted values, and values shared by the leaders of the firm (entrepreneurial proprietor/family, managing director) and diffuse throughout the organization;

  • adoption of strategies of social responsibility with an adhesion to CSR codes;

  • adoption of processes of social and environmental certification;

  • regular publication of social, environmental and intangible resource reports and, more recently, of integrated report;

  • fulfillment of ample and significant initiatives of social responsibility both on the local, national and international level;

  • recognitions/awards received for different CSR and sustainability-oriented projects; sensibility to the diffusion of best practices of CSR in the local and extra-local context in which they are found.

Social responsibility and sustainability orientation are not considered merely an opportunity for raising the firm’s visibility and reputation, but above all as drivers which actively contribute to the construction of a better socio-economic environment, with a rich return on its tangible (economic and financial performance) and intangible profile. BoxMarche exemplifies a strategic and structured approach to CSR and sustainability and align business values, purpose and strategy with the social and economic needs of stakeholders, while embedding responsible and ethical business policies and practices throughout the company. Responsibility and sustainability are experienced as a “way of doing business”. Key attributes at the basis of social commitment and engagement of BoxMarche are the following: a strong system of shared values; an orientation toward CSR and sustainability strongly desired by the owner-management team, whose own genuine values and behaviors influence such orientation; the presence of a vision and a system of values constantly reinforced through the company’s culture and continuously communicated within/beyond the organization, through relations with stakeholders. Accordingly, the decision-making process is based on collaboration, sharing and transparency and on a relational approach centered on trust. Moreover, BoxMarche is characterized by a strong embeddedness to its socio-economic environment, historically characterized by a solid rural tradition, typical expression of the Marchegian culture, the cohesion to stakeholders and the affiliation in local, national, international networks aimed at promoting CSR and sustainability standards and actions. Consequently, the fronts of engagement and the forms of communication of CSR and sustainability are systematic and creative and manifest themselves in a variety of forms. The following provides a brief “picture” of several projects produced by BoxMarche and a list of some of the awards obtained by this company for its excellence in CSR (Table 9.2). With the project “The passion for improving activities for a responsible business model” BoxMarche participated in the third edition of the “Sodalitas Social Award”Footnote 5 and in 2005 came in first place in the SME category. A second concrete example of stakeholders engagement pertains to the Italian Prize for the Social Responsibility of Businesses given to 24 Italian companies in 2005, and awarded to BoxMarche for being “a solid reality that donates 15 % of its earnings in corporate giving, and pays close attention to the environment, research and development, and society.” The third example relates to the Balance Oscar 2007 (Milan, Stock Exchange), in which BoxMarche won the first prize for the category of SMEs, thanks to the 2006 Global Report (integrated report), centered on the innovation of the “3Ps”: Products, Processes and People (Table 9.2).

Table 9.2 BoxMarche’s certifications, awards, CSR and sustainability-oriented tools and projects
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6.3 Governance

Its governance is characterized by the presence of an open family-owned economic subject: shareholders and managers are not formed exclusively by members of the entrepreneurial family, but also by external subjects not tied to kinship bonds. The words of BoxMarche’s Managing Director and General Manager (Tonino Dominici) reveal his high esteem for the values inherited from the founding family’s culture and tradition. Entrepreneurial and managerial leadership is based on transparency, sharing of strategies and responsibility, and dialogue.

The Global Report (“Identity and Sustainability” section) dedicates ample space to describe the composition of the shareholders, the roles of the partners in governing the company and caring for the minority, and to the activities of investor relations. “We provide constant updates on the management of the company to our shareholders, who are an important part of our company; we have therefore provided, in addition to the annual balance sheet and budget as required by law, the illustration and audit of the triennial plans and budgets, and monthly meetings with our associates to elaborate strategies and communicate how the company is going” (T. Dominici, 11 May 2012). The diverse categories of stakeholders enjoy numerous collective initiatives, from the annual presentation of the social balance/global report to the bimonthly report, to the creation of virtual communities (such as Internet forums).

6.4 Accountability

The idea of social report (adopted for the first time in 2003) was born “from the need to show the population the values of a business and the necessity of transparency for the stakeholders” (T. Dominici, Managing Director). From the social report, BoxMarche was added to the third edition of the global report in 2008, which represents an example of integrated report both published and distributed among stakeholders and available on the Internet company site. This report comprises in a unique document the asset and liability statement and the income statement (financial reporting), the sustainability and environmental reports and – since 2006 – the analysis of intellectual capital (the reporting statement for firm’s intangibles assets – intellectual capital report). BoxMarche’s global report represents an instrument of accountability or, rather, an integrated system of CSR and sustainability, which instates (and, at the same time, is the fruit of) an authentic dialogue and engagement process with stakeholders born from the authentic desire to make business activities transparent, responsible and sustainable. Such a document is a “constitutive element” of the business philosophy and is part of a system of management called “quality-security-environment-social responsibility”. The global report of BoxMarche is a concrete sign of a process of involvement and communication, of stakeholder relationships, engagement and reporting.

We maintain that the Global Report is the most adept instrument for spreading the value of maintaining our values, that which drives us to move forward with enthusiasm and love toward all that we do. It’s a form of communication that unites numbers, images and words, and which allows us to share with every stakeholder our particular reality. (S. Pierfederici, Letter from the President, Global Report 2007)

The global report is an expression of a precise communicative strategy. It places itself alongside other instruments of communication and dialogue adopted by the company, based both on direct and personal relations (multi-stakeholders forums at local and national level, conventions, open houses) and on indirect relations (websites, corporate newsletters, company’s magazine, sector’s trade magazines). It represents the synthesis of BoxMarche’s value creation process in which the economic, social, environmental and ethical performance of the company is presented in an integrated way. BoxMarche’s integrated report is a “document” which emits strong entrepreneurial passions, a sense of belonging and a sincere desire for self-representation. A notable aspect is the excellence achieved in the communication of BoxMarche’s strategy and in actively incorporating interlocutors, sustained by the desire to provide tangible evidence of best practices and to spread out the ethical matrices of the firm into its surrounding territory through multiple channels. With the global report BoxMarche, although small, was able to insert itself fully into the national context among businesses that are better obtain and communicate their own socio-economic and environmental performances.

We here at BoxMarche like to communicate. We see relationships everywhere, everywhere there’s the possibility to pick out, from another part of the line, someone who shares our respect and our recognition. (T. Dominici, Letter from the Managing Director, Global Report 2007)

Our Global Report is not only a report of numbers, but also of values. It permits our stakeholders to have a dependable idea of how the business fulfills that sort of delegation that civil society has conferred to produce a better world for all goods, services and human relationships.(…) First CSR, which is a fact of “faith”, then good governance, which is its outcome. (T. Dominici, 6 July 2012)

The national and international standards utilized as referenced are represented by the GBS (2001) and by the GRI guidelines, as well as those promoted by the project Q-RES for the quality of the ethical-social responsibility of the firmFootnote 6 and by the Italian Ministry’s Project CSR-SC (2003). A panel at a multi-stakeholder forum was also held to compare the results they achieved and the proposals for improving. BoxMarche’s CSR-SC framework thus rests upon the adoption of 98 qualitative-quantitative indicators, all developed in a 3-year trend along four principal directives: structural capital, human capital, relational capital, clients and market.

The process of accounting, reporting and accountability is looked after by an internal coordinator and by a working team formed by the managers of the principal functions and areas of the company, which operates in close collaboration with external consultants who come from the professional and academic world. Currently they are in the midst of diverse initiatives aimed at improvement: forecasting further indicators, introducing the detailed budget, analyzing the competitors’ assessments (sector benchmarking) and enhancing the solvency of clients and of providers. Another element of innovation is the section “Value Chain” introduced in the 2007 version of the global report, which, in an additional section (called “Together with us”) gives visibility to the providers of BoxMarche and offers them the possibility to talk about their experiences with the firm and the outcomes.

As previously mentioned, BoxMarche’s integrated report includes the economic and financial report, the social and environmental report and the intellectual capital report. It is structured in five macro-sections, which comply with the suggestions of external consultants, the relationship with the board of statuary auditors, and the minute of the shareholders’ meeting.

The first section describes the company’s identity and presents synthesized data concerning the principle results achieved (highlights). It contains references to the firm’s vision and its values, to its mission, to governance, and to business strategies. Letters from the Managing Director and the President of the Board are also featured. The second section contains the asset and liability statement, the profit and loss account, and a supplementary note. The third outlines the administrative relations (directors’ reports/annual statement – complete with financial accounting, cost analysis, research and development initiatives) included in the sections of sustainability and analysis of intellectual capital and intangible assets.

The fourth section (sustainability section) is articulated in the following parts: the creation and distribution of added value, the social relations/social report (distinguished through the categories of: personnel, shareholders, financial community, clients, competitors, providers, financial partners, the State, local organizations and Public Administration, community and territory, environment); research and development, events and awards, and proposals for improvement.

The analysis of intellectual capital (fifth section) is based on a descriptive approach and on the use of qualitative and quantitative indicators. The main references are represented by models such as the balanced-scorecard (Kaplan and Norton 1992), the intangible asset monitor (Sveiby 1997a) and the value chain scoreboard (Lev 2001). BoxMarche groups together the indicators into homogenous classes, referring to three categories:

  • Structural capital: the analysis proposes to translate into indicators the drivers of values of the firm (Fig. 9.1): “tension” to innovation, research for new solutions, problem solving capacity, efficacy and efficiency of production processes, production flexibility, quality and efficacy of the work, focus on long-term growth over short-term profit, and attention to security.

    Fig. 9.1
    figure 1

    BoxMarche’s model for the creation of shared value

    Full size image

  • Human capital: the analysis integrates information about the staff supplied in the social report section and gives prominence to collaborators’ competencies and to the company’s commitment to spreading and developing competences and know-how. Human capital is measured through indices of potential and result. These reflect both the company’s point of view and that of the collaborators (indices of satisfaction and of leadership quality with reference to managers and the managing director) obtained by the results of surveys completed in anonymity.

  • Relational capital: the analysis focuses attention on the capacity of the firm to develop relationships with external interlocutors, with particular attention to clients, for assessing the coherence of the firm with respect to its vision statement and to its business strategy, and to minimize the risk of informational redundancy. The information integrates the data contained in the client section of the social report. The analysis is expressed through qualitative and quantitative indicators relative to the quality of relations (i.e., customer satisfaction, customer loyalty, the percentage of turnover coming from new clients and degree of disagreement with clients, etc.).

7 Discussion

The case provides many causes for reflection, and two aspects in particular should be considered with references to the research questions posited at the base of the study.

First, BoxMarche is without a shadow of a doubt a proactive and “transparent” business, which denotes an evolved socio-economic-environmental commitment and which for its origin has tried to raise awareness of the context in which it is found and to “convert to CSR and sustainability orientation all whom it meets” through multiple relationships that the course of activity brings with it (Del Baldo 2013, 2014).

The second aspect pertains to the efficacy of how the company communicates its stakeholder commitment, its orientation toward a socially responsible management and the development of the intangible capital or, in other words, its values. Specifically, under the profile of communicating CSR, one can underscore the “discovery” of communication as an element that enriches the fundamental ethical energy. BoxMarche’s form of communication aims to be thick with coherent messages based on values, on human processes, on dynamism. BoxMarche’s integrated report signifies its capacity for disclosure, which is rare – if not unique – among SMEs, and notable for being based on innovative reporting that pivots on the integration of informative qualitative and quantitative content that includes sustainability assessments and intangible assets. BoxMarche believe that an ongoing dialogue, supported through the integrated reporting, rather than an end-of-year conversation only based on the presentation of the financial reporting, better addresses its stakeholders needs and the way to “give voice” to its own way of doing business. The result is greater transparency about the company’s performance and how it has been achieved, and greater internal and external social cohesion. The disclosure that enables stakeholders to evaluate BoxMarche’s CSR performance is strictly connected to its capability “to weave the threads” of authentic relationships with its various stakeholders, based on the sharing of authentic values that the company is able to communicate and transfer out. Accordingly, the authenticity and integrity of its “way of doing and being” makes possible a full disclosure and a truly effective social and environmental reporting and performance (Norman and MacDonald 2004), even related to “incommensurable values”.

The origins of the motivations which supported the choice to produce the integrated report (shifting from the social balance, adopted in the early years) is mainly internal. The entrepreneurs, sharing this choice with managers and the responsible of different company functions promoted this choice and in a second step they shared the same choice with external stakeholders (customers, providers, banks, investors, and community). We can assert that the choice is authentic, and not attributable to a “mimetic” or normative processes (due to the imitation of competitors or to legal obligations), nor to a fashion (DiMaggio and Powell 1991). The values that have guided the choice are mainly of two kinds: transparency and the willingness to communicate in a consistent and complete way the economic, financial, ethical, social and environmental value produced through the management of corporate activities.

In BoxMarche the choice of integrated reporting is developed through a shared path and a systematic process which has marked the period of adopting quality environmental and social certifications as well as the adoption of the social report in 2003 and more recently the integrated report in 2006 and continues today. The administration and finance departments were directly involved and supported by external consultants but all the operational and strategic choices were shared and were the result of informative meetings among collaborators. Since its inception, the process of improvement has been gradual. Improvements in the forms and instruments of accountability (for example, the enrichment of indicators in the intangible capital section) are the result of a process of review developed internally and externally (comparing itself to the choices made in other companies and between the managers of differing corporate roles).

The benefits generated by the choice have been numerous (and include the awards obtained for the quality of the integrated reporting) and in particular have affected the reinforcement of corporate culture and the process of stakeholder engagement/stakeholders dialogue.

The criticisms which have emerged have not been signaled out by the managers interviewed, nor by corporate operators or stakeholders interviewed (clients, banks and suppliers), with the exception of some comments related to informational abundance (the report is over 200 pages long and enriched by significant graphs and figures).

Finally, as it has emerged from the analysis and been revealed from the interviews, integrated reporting is not seen as an end, but an important driver to increase the reputation and credibility of the company, the multiple relations with stakeholders and to improve the corporate climate. Undoubtedly this represents for BoxMarche, by nature tends to excel, an intermediary step, a path from which, as the Managing Director asserts “we will not turn back because this is our faith”.

Concluding Remarks

The aim of the analysis, both on the empirical and theoretical perspective, was to contribute to formulate the hypothesis (which has to be verified in the future of the research, through in-deep qualitative study as well as through a quantitative-based study focused on the diffusion of the integrated report in SMEs) that integrated reporting represents a real and effective choice not only for large and public companies, where is mainly demanded by investors, but also for SMEs where it appears as an authentic choice, supported by the willingness of entrepreneurs to ask and give account for their activity.

As the analysis of the case demonstrates, the integrated reporting can be appreciated as a path of transparency and synthesis of a tendency toward responsibility and holistic development. This path flows naturally into the homogenous representation of corporate performances when (and if) it is the result of an authentic choice and therefore not of “green washing” or “window dressing”.

Under the deductive profile, the study reveals that the question of “integrated reporting” arises, especially for large companies. The tendency toward a “conceptual company”, that is to say a knowledge-based company, speeds up the “coming age of integrated reporting”. This kind of reporting represents the most suitable tool, compared to other financial and non financial reports, to explain in a transparent and complete way the company’s capacity to create value over time and allow stakeholders to have a whole vision which explains the “value creation history” of the company. However, this is not only true and valuable for large companies. As some recently contributions have revealed, and in line with the reflections which have emerged in this explorative study, the integrated reporting is also an effective choice for SMEs and a possible “journey” which can be accomplished through an evolving process and different phases (planning the integrated reporting process; engaging with stakeholders, and identifying the report content). Thereby creating a dialogue between the various kinds of reporting as Eccles and Krzus state (2010), sustainable strategies require integrated reporting.