Skip to main content
SpringerLink
Log in

Non-financial Disclosure and Materiality: Exploring the Role of CFOs

  • Chapter
  • First Online:
Non-financial Disclosure and Integrated Reporting

Part of the book series: SIDREA Series in Accounting and Business Administration ((SSABA))

Abstract

The attention to corporate sustainability has brought non-financial disclosure (NFD) into widespread use. With the rise of NFD, companies face the challenge of determining what information is material. To date, there is a shortage of qualitative studies that investigate how nonfinancial materiality gets defined and implemented in practice. To fill the gap, through a case analysis of two Italian listed companies, this chapter explores the following research questions: Who participates and which is the role of the CFO/controller in the materiality determination process? Whose information needs are primarily addressed when determining what is material or not? The findings show that the key organizational actors involved in the materiality determination process and their roles (including the CFO and the Chief Audit Executive) are different between the two companies and the related materiality assessment is mainly driven by the information needs of capital providers. Instead, the relevant implications for the materiality process to remark are the complexity of the stakeholder audience, the CFO’s skills, and the extension of managerial proxies to the CFO.

While the chapter is the result of a joint effort of the authors, the individual contributions are as follows: Federica Ricci wrote Sects. 1 and 2, Vincenzo Scafarto wrote Sects. 2.1 and 2.2; Mara Del Baldo wrote Sect. 3.1; Maurizio Cisi wrote Sect. 3.2; and Alessandro Marelli wrote Sect. 4.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 149.00
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 199.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD 199.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Notes

  1. 1.

    The author would like to express special thanks to Dr. Domenico Ciccopiedi and Dr. Desiré Colanzi (internal audit), the Group CFO, and the members of the Board of Directors of Biesse Group for their support and collaboration during the research.

  2. 2.

    The UN Global Compact, the SGDs reporting, the European Commission Communication “Guidelines on non-financial reporting” 2017/C 215/01, “Your guide to ESG reporting” issued by the London Stock Exchange Group

  3. 3.

    The author gratefully acknowledges the availability of the interviewee, dr. Massimo Levrino CFO at Iren, for all the support provided during the research.

References

  • AccountAbility, BT Group, & Lloyds Register Quality Assurance (LRQA). (2006). The materiality report- aligning strategy, performance and reporting. The Institute for Social and Ethical Accountability.

    Google Scholar 

  • Adler, P. S., & Borys, B. (1996). Two types of bureaucracy: Enabling and coercive. Administrative Science Quarterly, 41(1), 61–89.

    Article  Google Scholar 

  • Aureli, S., Del Baldo, M., Lombardi, R., & Nappo, F. (2020). Nonfinancial reporting regulation and challenges in sustainability disclosure and corporate governance practices. Business Strategy and the Environment, 1–12. https://doi.org/10.1002/bse.2509

  • Barth, M. E., Cahan, S. F., Chen, L., & Venter, E. R. (2017). The economic consequences associated with integrated report quality: Capital market and real effects. Accounting, Organizations and Society, 62, 43–64.

    Article  Google Scholar 

  • Baumüller, J., & Schaffhauser-Linzatti, M. M. (2018). In search of materiality for nonfinancial information—Reporting requirements of the directive 2014/95/EU. Nachhaltigkeits Management Forum, 26, 101–111.

    Article  Google Scholar 

  • Bernstein, L. A. (1967). The concept of materiality. The Accounting Review, 42(1), 86–95.

    Google Scholar 

  • Biesse Group. (2017). Biesse Group Sustainability Report 2017. https://www.biessegroup.com/media/files/1535_biessegroup_sustainability_Report_2017_web.pdf

  • Biesse Group. (2019). Biesse Group Sustainability Report 2019. https://www.biessegroup.com/en/biesse_over_the_years/sustainability

  • Biesse Group. (2020a). Sustainability report. https://www.biessegroup.com/en/biesse_over_the_years/sustainability

  • Biesse Group. (2020b). Biesse Group Consolidated non-financial statement. Biesse Annual Report.https://www.biessegroup.com/media/files/1789_Bsg_Bilancio%20Annuale%202019_ENG.pdf

  • Biesse Group. (2020c). Biesse Group strategic plan. 3-years business plan 2020–2022. https://www.biessegroup.com/media/files/1723_Presentazione_PianoTriennale_2020_2022.pdf

  • Calabrese, A., Costa, R., & Rosati, F. (2015). A feedback-based model for CSR assessment and materiality analysis. Accounting Forum, 39(4), 312–327.

    Article  Google Scholar 

  • CDP, CDSB, GRI, IFRS, IIRC, ISO, SABS. (2016). Statement of common principles of materiality of the corporate reporting dialogue. https://corporatereportingdialogue.com/wp-content/uploads/2016/03/Statement-of-Common-Principles-of-Materiality1.pdf

  • Deegan, C., & Rankin, M. (1997). The materiality of environmental information to users of annual reports. Accounting, Auditing & Accountability Journal, 10, 562–583.

    Article  Google Scholar 

  • Eccles, R. G., Krzus, M. P., Rogers, J., & Serafeim, G. (2012). The need for sector-specific materiality and sustainability reporting standards. Journal of Applied Corporate Finance, 24(2), 65–71.

    Article  Google Scholar 

  • Eccles, R. G., & Youmans, T. (2016). Materiality in corporate governance: The statement of significant audience and materiality. Journal of Applied Corporate Governance., 28(2), 39–46.

    Google Scholar 

  • Edgley, C. (2014). A genealogy of accounting materiality. Critical Perspectives on Accounting, 25(3), 255–271.

    Article  Google Scholar 

  • Edgley, C., Jones, M. J., & Atkins, J. (2015). The adoption of the materiality concept in social and environmental reporting assurance: A field study approach. British Accounting Review, 47, 1–18.

    Article  Google Scholar 

  • Egan, M., & Tweedie, D. (2018). A “green” accountant is difficult to find. Can accountants contribute to sustainability management initiatives? Accounting, Auditing & Accountability Journal, 31, 6, 1749–1773.

    Article  Google Scholar 

  • Ernst & Young. (2017). Is your nonfinancial performance revealing the true value of your business to investors?https://assets.ey.com/content/dam/ey-sites/ey-com/en_gl/topics/purpose/purpose-pdfs/ey-nonfinancial-performance-may-influenceinvestors.pdf

  • Farooq, M. B., & de Villiers, C. (2019). Understanding how managers institutionalise sustainability reporting. Evidence from Australia and New Zealand. Accounting, Auditing & Accountability Journal, 32(5), 1240–1269.

    Article  Google Scholar 

  • Fasan, M., & Mio, C. (2017). Fostering stakeholder engagement: The role of materiality disclosure in integrated reporting. Business Strategy and the Environment, 26(3), 288–305.

    Article  Google Scholar 

  • Forbes, D. P., & Milliken, F. J. (1999). Cognition and corporate governance: Understanding boards of directors as strategic decision making groups. Academy of Management Review, 24, 489–505.

    Article  Google Scholar 

  • Gerwanski, J., Kordsachia, O., & Velte, P. (2019). Determinants of materiality disclosure quality in integrated reporting: Evidence from an international setting. Business Strategy and the Environment, 28, 750–770.

    Article  Google Scholar 

  • Gond, J. P., Grubnic, S., Herzig, C., & Moon, J. (2012). Configuring management control systems: Theorizing the integration of strategy and sustainability. Management Accounting Research, 23(3), 205–223.

    Article  Google Scholar 

  • Grabner, I., & Moers, F. (2013). Management control as a system or a package? Conceptual and empirical issues. Accounting, Organizations and Society, 38, 407–419.

    Article  Google Scholar 

  • Green, W. J., & Cheng, M. M. (2019). Materiality judgements in an integrated reporting setting: The effect of strategic relevance and strategy map. Accounting, Organizations and Society, 73, 1–14.

    Article  Google Scholar 

  • GRI (Global Reporting Initiative). (2013). G4 sustainability reporting guidelines.

    Google Scholar 

  • GRI (Global Reporting Initiative). (2016). GRI 101: Foundation. Author.

    Google Scholar 

  • Guthrie, J., & Parker, L. D. (1990). Corporate social disclosure practice: A comparative international analysis. Advances in Public Interest Accounting, 3, 159–175.

    Google Scholar 

  • Hahn, R., & Kühnen, M. (2013). Determinants of sustainability reporting: A review of results, trends, theory, and opportunities in an expanding field of research. Journal of Cleaner Production, 59, 5–21.

    Article  Google Scholar 

  • International Integrated Reporting Council (IIRC). (2013). Materiality background paper for IR. https://integratedreporting.org/wp-content/uploads/2013/03/IR-background-Paper-Materiality.pdf

  • International Integrated Reporting Council (IIRC). (2021). The international <IR> framework. https://integratedreporting.org/wp-content/uploads/2021/01/InternationalIntegratedReportingFramework.pdf

  • Johnstone, L. (2019). Theorising and conceptualising the sustainability control system for effective sustainability management. Journal of Management Control, 30, 25–64.

    Google Scholar 

  • Jones, P., Comfort, D., & Hillier, D. (2016). Managing materiality: A preliminary examination of the adoption of the new GRI G4 guidelines on materiality within the business community. Journal of Public Affairs, 16(3), 222–230.

    Article  Google Scholar 

  • Knauer, A., & Serafeim, G. (2014). Attracting long-term investors through integrated thinking and reporting: A clinical study of a biopharmaceutical company. The Journal of Applied Corporate Finance, 26, 57–64.

    Article  Google Scholar 

  • Lai, A., Melloni, G., & Stacchezzini, R. (2017). What does materiality mean to integrated reporting preparers? An empirical exploration. Meditari Accountancy Research, 25(4), 533–552.

    Article  Google Scholar 

  • Lantto, A. M. (2014). Business involvement in accounting: A case study of international financial reporting standards adoption and the work of accountants. European Accounting Review, 23, 335–356.

    Article  Google Scholar 

  • Lee, K. W., & Yeo, G. H. H. (2016). The association between integrated reporting and firm valuation. Review of Quantitative Finance and Accounting, 47, 1221–1250.

    Article  Google Scholar 

  • Malmi, T., & Brown, D.A. (2008). Management control systems as a package—Opportunities, challenges and research directions. Management Accounting Research, 19(4), 287–300.

    Article  Google Scholar 

  • Marelli, A. (2015). The evolving role of environmental management accounting in internal decision-making: A research note. International Journal of Accounting, Auditing and Performance Evaluation, 11(1), 14–47.

    Article  Google Scholar 

  • Messier, W. F., Jr., Martinov-Bennie, N., & Eilifsen, A. (2005). A review and integration of empirical research on materiality: Two decades later. Auditing a Journal of Practice and Theory, 24(2), 153–2014.

    Article  Google Scholar 

  • Mio, C. (2013). Materiality and assurance: Building the link. In C. Busco, M. L. Frigo, P. Quattrone, & A. Riccaboni (Eds.), Integrated reporting: Concepts and cases that redefine corporate (pp. 79–94). Springer.

    Chapter  Google Scholar 

  • Mio, C., Fasan, M., & Costantini, A. (2020). Materiality in integrated and sustainability reporting: A paradigm shift? Business Strategy and Environment, 29, 306–320.

    Article  Google Scholar 

  • Moroney, R., & Trotman, K. T. (2016). Differences in auditors’ materiality assessments when auditing financial statements and sustainability reports. Contemporary Accounting Research, 33, 551–575.

    Article  Google Scholar 

  • O’Dwyer, B., Unerman, J., & Hession, E. (2005). User needs in sustainability reporting: Perspectives of stakeholders in Ireland. European Accounting Review, 14, 759–787.

    Article  Google Scholar 

  • Page, N., & Spira, L. F. (2016). Corporate governance as custodianship of the business model. Journal of Management and Governance, 20, 213–228.

    Article  Google Scholar 

  • Pistoni, A., Songini, L., & Bavagnoli, F. (2018). Integrated reporting quality: An empirical quality. Corporate Social Responsibility and Environmental Management, 25(4), 489–507.

    Article  Google Scholar 

  • Puroila, J., & Mäkelä, H. (2019). Matter of opinion: Exploring the socio-political nature of materiality disclosures in sustainability reporting. Accounting, Auditing & Accountability Journal, 32(4), 1043–1072.

    Article  Google Scholar 

  • Pye, A., & Pettigrew, A. (2005). Studying board context, process and dynamics: Some challenges for the future. British Journal of Management, 16, 27–38.

    Article  Google Scholar 

  • Reimsbach, D., Schiemann, F., Hahn, R., & Schmiedchen, E. (2020). In the eyes of the beholder. Experimental evidence on the contested nature of materiality in sustainability reporting. Organization & Environment, 33(4), 624–651.

    Article  Google Scholar 

  • Sarens, G., & De Beelde, I. (2006). Internal auditors’ perception about their role in risk management: A comparison between US and Belgian companies. Managerial Auditing Journal, 21(1), 63–80.

    Article  Google Scholar 

  • Schaltegger, S. (2017). Sustainability as a fundamental challenge for management accountants. In L. Goretzki & E. Strauss (Eds.), The role of management accountants, local variations and global influences (pp. 274–291). Routledge.

    Chapter  Google Scholar 

  • Schaltegger, S., & Zvezdov, D. (2015). Gatekeepers of sustainability information: Exploring the roles of accountants. Journal of Accounting & Organizational Change, 11(3), 333–361.

    Article  Google Scholar 

  • Schoeneborn, D., Morsing, M., & Crane, A. (2020). Formative perspectives on the relation between CSR communication and CSR practices: Pathways for walking, talking, and T(w)alking. Business and Society, 59(1), 5–33.

    Article  Google Scholar 

  • Sentuti, A., Sgrò, F., Chamochumbi, G. D., Palazzi, F., & Ciambotti, M. (2020). The management process underpinning the non-financial reporting: A case study of a listed Italian company. In M. Del Baldo, J. Dillard, M. G. Baldarelli, & M. Ciambotti (Eds.), Accounting, Accountability and society, CSR, sustainability, Ethics & Governance (pp. 19–42). Springer.

    Google Scholar 

  • Stubbs, W., & Higgins, C. (2014). Integrated reporting and internal mechanisms of change. Accounting, Auditing & Accountability Journal, 27(7), 1068–1089.

    Article  Google Scholar 

  • Thomas, M., & McElroy, M. (2016). The MultiCapital scorecard. Chelsea Green.

    Google Scholar 

  • Torelli, R., Ballucchi, F., & Furlotti, K. (2020). The materiality assessment and stakeholder engagement: A content analysis of sustainability reports. Corporate Social Responsibility and Environmental Management, 27, 470–484.

    Article  Google Scholar 

  • Unerman, J., & Zappettini, F. (2014). Incorporating materiality considerations into analyses of absence from. Sustainability reporting. Social and Environmental Accountability Journal, 34(3), 172–186.

    Article  Google Scholar 

  • Uyar, A., Kuzey, C., Kilic, M., & Karaman, A. S. (2021). Board structure, financial performance, corporate social responsibility performance, CSR committee, and CEO duality: Disentangling the connection in healthcare. Corporate Social Responsibility and Environmental Management.

    Google Scholar 

  • Velte, P., & Stawinoga, M. (2020). Do chief sustainability officers and CSR committees influence CSR-related outcomes? A structured literature review based on empirical-quantitative research findings. Journal of Management Control, 31(4), 333–377.

    Article  Google Scholar 

  • Veltri, S., & Silvestri, A. (2020). The value relevance of corporate financial and nonfinancial information provided by the integrated reporting: A systematic review. Business Strategy and Environment, 29(8), 3038–3054.

    Article  Google Scholar 

  • Wickert, C., Scherer, A. G., & Spence, L. J. (2016). Walking and talking corporate social responsibility: Implications of firm size and organizational cost. Journal of Management Studies, 53(7), 1169–1196.

    Article  Google Scholar 

  • Wouters, M., & Wilderom, C. (2008). Developing performance-measurement systems as enabling formalization: A longitudinal field study of a logistics department. Accounting, Organizations and Society, 33(4/5), 488–516.

    Article  Google Scholar 

  • Zhang, H., & Gao, T. (2006). An empirical research on the status and role of listed companies’ CFO in corporate governance. Canadian Social Science, 6(2), 93–98.

    Google Scholar 

  • Zhou, S., Simnett, R., & Green, W. (2017). Does integrated reporting matter to the capital market? Abacus, 53(1), 94–132.

    Article  Google Scholar 

  • Zoni, L., & Pippo, F. (2017). CFO and finance function: What matters in value creation. Journal of Accounting & Organizational Change, 13(2), 216–238.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Department of Management, University of Torino, Torino, Italy

    Maurizio Cisi

  2. Department of Economics, Society and Politics, School of Economics, University of Urbino “Carlo Bo”, Urbino, Italy

    Mara Del Baldo

  3. Faculty of Political Science, University of Teramo, Teramo, Italy

    Alessandro Marelli

  4. Department of Law and Economics of Productive Activities, Sapienza University of Rome, Rome, Italy

    Federica Ricci

  5. Department of Human, Social and Health Sciences, University of Cassino and Southern Lazio, Cassino, Italy

    Vincenzo Scafarto

Authors
  1. Maurizio Cisi
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Mara Del Baldo
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Alessandro Marelli
    View author publications

    You can also search for this author in PubMed Google Scholar

  4. Federica Ricci
    View author publications

    You can also search for this author in PubMed Google Scholar

  5. Vincenzo Scafarto
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Alessandro Marelli .

Editor information

Editors and Affiliations

  1. Institute of Management, Sant’Anna School of Advanced Studies, Pisa, Italy

    Lino Cinquini

  2. Department of Management and Business Administration, “G. d’Annunzio” University of Chieti-Pescara, Pescara, Italy

    Francesco De Luca

Rights and permissions

Reprints and permissions

Copyright information

© 2022 The Author(s), under exclusive license to Springer Nature Switzerland AG

About this chapter

Check for updates. Verify currency and authenticity via CrossMark

Cite this chapter

Cisi, M., Del Baldo, M., Marelli, A., Ricci, F., Scafarto, V. (2022). Non-financial Disclosure and Materiality: Exploring the Role of CFOs. In: Cinquini, L., De Luca, F. (eds) Non-financial Disclosure and Integrated Reporting. SIDREA Series in Accounting and Business Administration. Springer, Cham. https://doi.org/10.1007/978-3-030-90355-8_26

Download citation

Publish with us

Policies and ethics

Search

Navigation