Reporting on Key Performance Indicators Related to Non-financial Capitals: Evidence from Sri Lankan Integrated Report Preparers

The International Integrated Reporting (IRIntegrated Reporting (IR)) FrameworkFrameworks guides companies when considering a broad range of capitalsCapitals, includingNon-financial capitals non-financial capitalsFinancial capital, in the process of value creationValue creation and reporting. Companies’ approaches to incorporating non-financial capitalsFinancial capital into their strategiesStrategy, decision-makingDecision making, and value creationValue creation have hitherto received little attention. This chapter examines how integrated reportIntegrated report preparersPreparers in Sri LankaSri Lanka use Key Performance Indicators (KPIsKey Performance Indicators (KPIs)) to explain the use and transformation ofNon-financial capitals non-financial capitalsFinancial capital to create value. Three categories of integrated reportIntegrated report preparersPreparers are identified based on the duration of integrated reportIntegrated report preparation. Data was collected from 2018 company reports. The study finds that the disclosureDisclosure of KPIsKey Performance Indicators (KPIs) relating toNon-financial capitals non-financial capitalsFinancial capital increases with companies’ maturity in preparing integrated reportsIntegrated report. Nearly half of the integrated reportIntegrated report preparersPreparers have failed to display the necessary alignment betweenNon-financial capitals non-financial capitalsFinancial capital, topics material to stakeholdersStakeholders, risk managementRisk management and company strategyStrategy. The formats used to disclose KPIsKey Performance Indicators (KPIs) and the periods covered by the KPIsKey Performance Indicators (KPIs) are inconsistent, hindering comparability of company performancesPerformance on capitalsCapitals between companies and across periods. Most companies have not set targets in relation to KPIsKey Performance Indicators (KPIs) on non-financial capitalsFinancial capital, making performance evaluationPerformance evaluation difficult. More narrative content and less result-oriented quantitative informationInformation has been provided on critical non-financial capitalsFinancial capital related to sustainabilitySustainability. The findings raise doubts about companies’ ability to leverage integrated thinkingIntegrated thinking, a fundamental enabler of integrated reportingIntegrated Reporting (IR) and the genuineness of companies’ commitment to sustainabilitySustainability.