Enhancing the materiality principle in integrated reporting by adopting the General Systems Theory

This article aims to explore the effectiveness of the materiality principle (MP) within Integrated Reporting (IR) by applying the General Systems Theory (GST) of Ludwig von Bertalanffy. GST, within its holistic approach, can be used to identify the main sub-systems in which the regulation of IR can be articulated and the relationships between themselves, to make the MP effective, thereby improving the quality of the IR regulation. While much research has analyzed the materiality assessment and its impact on disclosure, little is known about how regulation affects the effectiveness of this principle. This research addresses this gap by explaining that materiality is not a stand-alone principle but needs to be supported by other principles to be effectively enacted. Our findings can improve the materiality assessment by providing a better understanding of the materiality meaning that can be helpful for managers, standard setters and professional bodies. In terms of research implications, this provides a framework for an alternative thought process for simplification without sacrificing the proper breadth of stakeholder focus.