Integrated Reporting Quality under Mandatory Disclosure: Evidence from Chile

1. Introduction

In recent years, the disclosure of environmental, social, and governance (ESG) information has grown substantially (KPMG, 2023). While the benefits of reporting sustainability information have been widely studied, the lack of uniformity in methods and frameworks has resulted in inconsistent and often irrelevant disclosures (de Silva Lokuwaduge & De Silva, 2022). These inconsistencies hinder comparability across firms and limit the accurate assessment of sustainability performance, thereby undermining corporate accountability. Currently, global, and sector-specific standards exist for sustainability disclosures, with the choice of framework depending on the organization's sector, size, and objectives. Establishing uniform standards to ensure consistency, comparability, and accountability in sustainability reporting is crucial, especially to mitigate the risks of greenwashing (Zúñiga et al., 2020a).

The shift from voluntary to mandatory sustainability disclosure reflects growing pressure on firms to adopt corporate social responsibility practices. Many countries have introduced policies mandating sustainability disclosures, whether through standalone sustainability reports or integrated reports. Unlike sustainability reports, integrated reports merge financial and sustainability information into a cohesive narrative. This approach aims to present a holistic view of organizational performance by demonstrating how businesses create value over time through the interaction of various capitals, including financial and non-financial resources (Bagonza et al., 2024). By contrast, standalone sustainability reports primarily focus on ESG impacts without substantial integration with financial information (Zúñiga et al., 2021). While the benefits of integrated reporting (IR) have been extensively discussed (Galeone et al., 2023; Maama & Marimuthu, 2022; Qian et al., 2023; Sciulli & Adhariani, 2023; Zúñiga et al., 2020a), no verification system has been implemented to ensure compliance with the framework's integration principles or to measure its impact on organizational value creation.

The mandatory adoption of sustainability reporting poses challenges regarding the verification of data quality. Unlike financial information, subject to external audits, sustainability data often relies on diverse and subjective sources lacking standardized verification mechanisms. This has two major implications: the risk of superficial compliance through checklist-style disclosures and an increased likelihood of greenwashing, which undermines trust in reported sustainability efforts.

To explore these challenges, this study examines the Chilean market as a unique case of transitioning from voluntary to mandatory integrated reporting within an emerging economy. This context provides valuable insights into the adoption of international standards and lessons applicable to markets with similar regulatory dynamics. Chile represents a compelling context for studying the implementation of mandatory integrated reporting for three key reasons. First, the country introduced the Norma de Carácter General N° 461 (NCG 461) in 2021, becoming one of the first emerging economies to mandate the disclosure of sustainability and corporate governance information under a unified framework. Second, Chile's capital market is relatively developed in comparison with other Latin American countries, yet it faces persistent challenges related to market concentration, corporate accountability, and ESG transparency. Third, the diversity of company sizes and sectors subject to the regulation, ranging from financial institutions to utilities and medium-sized enterprises, offers a rich empirical ground to assess how organizations adapt to new disclosure requirements. These features make Chile an informative case to understand the institutional, organizational, and regulatory factors shaping the effectiveness of mandatory sustainability disclosures in emerging markets.

The research assesses whether information presented in mandatory integrated reports since 2022 complies with the minimum disclosure requirements of the International Integrated Reporting Framework (IIRF). Using an index developed by Zúñiga et al. (2021), the study evaluates six key areas: (1) report structure and effective communication, (2) organizational strategy, (3) materiality, (4) external context, (5) governance, and (6) performance and perspectives (see Appendix 1).

The results indicate that integrated reporting under mandatory requirements shows moderate progress, revealing structural challenges for both companies and regulators. While large corporations achieved an average compliance rate of 61.0% in 2023, compared to 58.8% for medium-sized companies, overall performance remains insufficient to fully adhere to the principles of the IIRF. Notably, the criterion of "Materiality" (67.9% compliance) reflects significant efforts in identifying key aspects, particularly among medium-sized companies reporting for the first time. Sectoral disparities highlight heterogeneity in industries' capacities to implement international standards. Sectors like material processing and renewable resources lead in compliance, likely due to regulatory pressures and sustainability exposure, while sectors like services and healthcare lag significantly.

The findings underline significant difficulties in integrating financial and sustainability information, posing critical challenges for meeting the core principles of the IIRF. This disconnection is most evident in the low performance of the "Performance and Perspective" criterion (43.2%), particularly in sub-factors such as Connectivity of financial results and other capitals (15.2%) and Extent to which companies achieve their objectives (19.5%). These results suggest a lack of clear articulation between business strategies, operational impacts on various capitals and the outcomes reported. The challenge lies in reconciling the quantitative and auditable nature of financial reports with the qualitative and subjective elements often found in sustainability information. This issue affects not only report credibility but also the ability of companies to effectively communicate how they create value over time through the interaction of financial and non-financial capitals.

These limitations can also be understood through the lens of Legitimacy Theory, which posits that organizations disclose information not only to inform stakeholders but also to sustain or enhance legitimacy. In mandatory settings, this dynamic can lead to symbolic compliance, whereby firms align formal reporting with regulatory expectations without fully embedding sustainability into strategy or performance metrics.

Recent evidence links legitimacy pressures, media scrutiny and disclosure/assurance choices in IR and ESG reporting, reinforcing this mechanism (Gaia et al., 2025; Raimo et al., 2025; Silva, 2021). By exposing these integration gaps, our study advances understanding of how reporting quality shapes credibility and effectiveness under regulatory pressure.

By providing an empirical assessment of integrated reporting in a mandatory setting, this study contributes to the academic literature by bridging the gap between regulatory compliance and the actual integration of sustainability into corporate disclosures. The research enriches the field of corporate sustainability by offering a structured evaluation of how companies connect financial and non-financial information in their reports, identifying persistent weaknesses and sectoral disparities. These insights are relevant for both theory and practice, as they help clarify the effectiveness of integrated reporting frameworks in promoting transparency, comparability, and long-term value creation in emerging markets.

2. Literature Review

3. Data and methodology

4. Results

The results for the Integrated Report Structure and Effective Communication criterion reveal moderate performance among large and medium-sized companies, with overall averages of 63.8% and 63.6% in 2023, respectively (see Table 2). Despite having an additional year of experience, large companies demonstrated no significant improvement from their 64% average in 2022. Medium-sized companies, evaluated for the first time in 2023, exhibited comparable performance, reflecting competitiveness in this initial assessment. Among sub-factors, Report Structure stood out as the highest-rated, scoring 81.7%, indicating progress in the logical and comprehensible presentation of reports. The Optimization of Readability sub-factor also scored well (70.6%), highlighting efforts to enhance clarity through graphical and narrative elements. However, sub-factors like Future Time Dimension (54.9%) and Connectivity of Information (57.7%) recorded lower scores, underscoring persistent challenges in aligning short-, medium-, and long-term strategic perspectives and integrating report components. Sectoral analysis (Appendix 2) revealed notable disparities: Technology & Communication (69.7%), Processing & Materials Extraction (69.0%), and Renewable Resources (69.0%) recorded the highest overall averages, likely reflecting stronger regulatory exposure and greater maturity in sustainability measurement systems. By contrast, Services (45.0%) and Sanitation (48.7%) lagged significantly, which may be linked to limited prior experience and resource constraints in implementing integrated reporting. These findings underscore the need to strengthen connectivity and strategic integration across all industries.

Organizational Strategy (see Table 3) evaluates companies' ability to communicate their strategy, vision, business model, and value creation across time horizons.

The average score was 65.4% in 2023, indicating moderate adherence to the IIRF. Large companies achieved a slightly higher score (67.5%) compared to medium-sized ones (62.5%). While large companies showed a marginal improvement from 66.1% in 2022, progress remained limited given their prior experience. Sub-factors like Business Activities and Market (96.9%) and Culture, Ethics, and Values (86.5%) excelled, reflecting a focus on disclosing key activities, markets, and ethical principles. However, sub-factors such as Capital Utilization (52.6%) and Effects of the Value Created (53.2%) pointed to deficiencies in articulating resource impacts on value creation. Sectorally, the transportation (74.2%) and materials processing sectors (76.4%) performed well, likely due to regulatory pressure and sustainability focus, while sanitation (47.5%) and services (46.7%) showed weaker performance, attributed to resource limitations and lack of integrated practices.

The Materiality criterion (see Table 4) achieved an overall average of 67.9% in 2023, a slight improvement from 65.8% for large companies in 2022. This criterion measures companies' ability to identify, quantify, and communicate material aspects affecting their capacity to create value. Existence of a Process was the best-performing sub-factor, scoring 70.3%, with large companies achieving 74.3%, showing significant progress from 66.3% in 2022. Medium-sized companies scored 70.2%, reflecting notable progress in initial adoption. However, the Impact on Strategy and Value Creation sub-factor had the lowest average score (49.1%), indicating challenges in evaluating and communicating the material aspects' strategic relevance. Meanwhile, Reliability and Integrity emerged as a strong point, with an average of 89.9%, driven by robust internal and external controls. Materiality, Technology & Communication (81.0%) and Renewable Resources (80.9%) recorded the highest levels of compliance, reflecting a strong alignment between disclosure practices and stakeholder expectations. In contrast, Sanitation reached only 54.2%, highlighting persistent weaknesses in identifying and communicating material issues (Appendix 2).

The External Environment criterion (see Table 5) scored an average of 64.5% in 2023, a slight decline from 67.5% for large companies in 2022. This criterion assesses organizations' ability to integrate external environmental information, societal interactions, and adaptability to risks and opportunities. Interaction was the top-performing sub-factor (65.8%), reflecting advances in communicating stakeholder relationships. However, Adaptation Strategy and Business Model scored the lowest (63.4%), highlighting challenges in adapting strategies to external dynamics. Sector analysis revealed disparities, with the materials processing sector leading at over 71%, while the services sector showed the weakest performance (38.9%).

The Governance criterion (see Table 6) scored an average of 54.2%, a slight improvement from 52.7% for large companies in 2022. Policies and Procedures performed best (80%), while Governance Declaration Existence was the weakest (46.4%). Medium-sized companies outperformed large ones in governance declarations, scoring 52.3% versus 40.0%, suggesting a greater willingness to adopt this sub-factor. Sector analysis highlighted significant variability, with the materials processing and technology sectors leading, while the sanitation and services sectors lagged substantially.

The weakest area was Performance and Prospects (see Table 7), with an average compliance of 43.2%. Firms exhibited moderate adherence to strategic planning, with 62.8% compliance in defining strategic objectives over time. However, while large firms improved their strategies in place (from 50.2% in 2022 to 64.0% in 2023), medium firms struggled, with only 46.6% compliance. Resource allocation planning remains one of the weakest areas, averaging 34.0%, reflecting significant challenges in linking strategy to tangible investments and actions. Although firms showed improvement in reporting quantitative and qualitative indicators (58.6%), this did not translate into clear performance tracking, as seen in the low 19.5% compliance with achieving stated targets. The ability to assess and communicate the organization's effects on capitals was slightly stronger (59.0%), but the persistent gap in Connectivity between financial performance and other capitals (14.9%) remains a fundamental weakness. This highlights the struggle of firms to demonstrate how financial outcomes are influenced by sustainability factors and other intangible elements, which is a core principle of integrated reporting.

The overall quality of integrated reports reveals a mixed performance across different evaluation criteria (see Table 8). Large firms achieved a total average compliance of 61.0%, while medium firms followed closely at 58.8%, resulting in an overall industry average of 59.8%. Among the six dimensions analyzed, Materiality (67.9%) and Organizational Strategy (65.4%) ranked highest, suggesting that companies are prioritizing the identification and disclosure of relevant information. However, the persistent gaps in Governance (54.2%) and Performance and Prospects (43.2%) underscore deficiencies in strategic integration and decision-making alignment. While large firms demonstrated slight improvements across most dimensions from 2022 to 2023, the marginal gains in Integrated Reporting Structure (63.8%) and External Environment (64.5%) suggest that firms are still struggling to integrate financial and non-financial disclosures into a cohesive narrative. The Performance and Prospects category remains the weakest, reflecting the continued difficulty in aligning long-term strategic objectives with measurable financial and sustainability outcomes. The discrepancy between high compliance in Materiality (67.9%) and the significantly lower connectivity of financial performance (14.9%) suggests that while companies recognize key sustainability issues, they struggle to integrate these into value-creation models effectively.

A key observation across all criteria is that companies perform relatively well in structural and procedural aspects (e.g., report organization, materiality processes, policies), yet struggle with strategic integration and connectivity of information. Reports often present fragmented narratives where financial and sustainability data coexist without clear linkages, reinforcing the idea that integrated reporting is treated as a compliance exercise rather than a value-driven practice. Sectoral disparities further reinforce this point. Industries facing strong regulatory pressures, such as material processing and renewable resources, tend to perform better, while service-oriented sectors and sanitation exhibit weaker compliance. This may be due to lower perceived risks or less direct regulatory enforcement in those industries.

Medium-sized firms face additional challenges compared to large corporations, particularly in aligning their reporting frameworks with strategic objectives. The resource constraints, lack of specialized sustainability reporting teams, and the complexity of adapting to new regulatory requirements make it more difficult for medium enterprises to achieve a seamless integration of financial and non-financial information. This highlights the need for targeted support mechanisms, such as regulatory incentives, training programs, and sector-specific guidelines, to assist medium-sized firms in strengthening their reporting capabilities and fostering a more meaningful application of integrated reporting principles. These findings underscore the need for stronger regulatory guidance and organizational capacity-building efforts to ensure that integrated reporting serves as a mechanism for value creation rather than a procedural obligation. Moving forward, companies should not only improve their technical reporting capacity but also develop a culture of integration where financial and non-financial metrics are aligned with long-term strategic objectives.

5. Discussion of results

The findings of this study reveal both advancements and persistent challenges in the adoption of integrated reporting under mandatory disclosure requirements. While overall compliance levels indicate moderate adherence to the IIRF, critical deficiencies in specific areas suggest that firms struggle with the fundamental principles of integrated reporting.

A key insight from the sectoral analysis is that industries facing higher regulatory pressures, such as renewable resources and material processing, exhibit superior compliance levels compared to service-oriented sectors. This aligns with the theory of legitimacy, which posits that firms operating in industries with higher environmental and social scrutiny are more likely to engage in voluntary or mandated sustainability reporting as a strategy to maintain legitimacy (Luft Mobus, 2005).

Beyond legitimacy considerations, our findings reveal a persistent "procedural-strategic gap." While firms demonstrate relatively strong performance in structural aspects of reporting, they struggle to embed integrated thinking into strategic planning and resource allocation. This imbalance suggests that companies are meeting disclosure requirements procedurally, but without transforming their decision-making processes. The results therefore indicate that mandatory disclosure regimes alone are insufficient to ensure substantive integration of sustainability into corporate strategies. In contrast, service-oriented sectors, where sustainability risks are perceived as lower, may lack the incentives or resources to prioritize high-quality integrated reporting.

The Chilean context helps explain these results. The introduction of General Rule No. 461 represented a rapid transition from voluntary to mandatory reporting, creating strong compliance incentives but limited time for organizational learning. In a capital market characterized by concentration and high reliance on financial information, sustainability metrics historically received less regulatory and investor scrutiny, which may account for the weaker performance in governance and performance dimensions. Medium-sized firms, in particular, faced significant capacity constraints, as they were required to comply with the same framework as large corporations despite having fewer resources and less reporting experience. These contextual factors suggest that the observed "procedural-strategic gap" is not only a firm-level issue but also a systemic challenge tied to the regulatory and institutional environment in Chile.

The sectoral disparities also suggest that regulatory exposure and operational externalities shape the quality of disclosures. Regulated industries, such as renewable resources and materials processing, reveal stronger discipline in articulating connectivity because they have longer experience in measuring non-financial risks and responding to public scrutiny. In contrast, service-oriented and sanitation firms exhibit weaker integration, which indicates not only resource limitations but also the absence of established systems for tracking non-financial capitals. These results highlight the importance of sector-specific dynamics in determining how firms internalize integrated reporting practices.

The disparities in Connectivity between financial results and other capitals (15.2%) and Performance and prospects (43.2%) highlight a fundamental gap in how firms articulate the interaction between financial and non-financial information. This suggests that firms primarily approach integrated reporting as a compliance exercise rather than a strategic tool. The theory of signaling provides an alternative explanation, where firms that effectively integrate sustainability and financial data may differentiate themselves in the market, signaling superior governance and long-term value creation. However, the low scores in these areas indicate that most companies have yet to leverage integrated reporting as a strategic differentiator.

From a governance perspective, the study finds that governance practices exceeding legal requirements scored an average of 45.2%, suggesting that many firms adopt a minimum compliance approach rather than embedding integrated thinking into their decision-making processes. This corroborates prior studies that emphasize the agency theory perspective, where the absence of strong governance incentives results in firms fulfilling onlybaseline requirements rather than voluntarily enhancing transparency.

Taken together, the findings reveal that Chilean firms have made measurable progress in adopting integrated reporting under a mandatory regime, yet critical deficiencies persist in connectivity and performance. They suggest that the most pressing barrier is not the availability of disclosure frameworks but the capability of firms, especially medium-sized enterprises, to translate strategic objectives into measurable outcomes. Finally, they indicate that without targeted support and stronger verification mechanisms, mandatory disclosure risks remaining at a compliance level, limiting its transformative potential for corporate sustainability and value creation.

6. Limitations and future research

Despite its contributions, this study is not without limitations. First, the analysis is primarily descriptive and restricted to the 2022-2023 reporting period, which limits the ability to capture longer-term dynamics of compliance and integration. Second, the focus on Chile, while valuable as a pioneering emerging-market case, constrains the generalizability of the findings to other institutional contexts. Third, although the coding procedure was conducted manually and cross-checked to enhance reliability, the evaluation of disclosure quality inevitably involves a degree of subjectivity. These limitations suggest that future research should extend the analysis to longer time horizons, apply statistical techniques such as factor analysis and correlations across disclosure dimensions, and compare results across countries. Such efforts would provide a more comprehensive understanding of how mandatory integrated reporting regimes shape disclosure quality and organizational practices over time.

7. Conclusions

This study set out to assess whether mandatory integrated reports in Chile comply with minimum requirements of the International IR Framework and to identify where integration is most and least effective. In summary, the analysis shows that Chilean companies have achieved a moderate level of compliance with the IR Framework, with relative strengths in materiality and structural aspects of reporting, but persistent weaknesses in connectivity and performance integration.

Sectoral differences reflect varying levels of regulatory pressure and measurement maturity, while medium-sized firms face additional capability constraints compared to large corporations.

From our perspective, these findings confirm that mandatory disclosure is an important step but not sufficient to ensure integrated thinking in practice. In the Chilean context, the rapid implementation of General Rule No. 461 has accelerated adoption, yet it has also exposed structural and organizational limitations that are likely to be mirrored in other emerging economies transitioning to mandatory regimes. Overall, the evidence indicates partial compliance with IR principles and underscores the need to close the procedural-strategic gap if integrated reporting is to realize its intended purpose. Thus, beyond its descriptive findings, the study contributes to the literature by providing one of the first empirical assessments of mandatory integrated reporting in an emerging economy, offering insights into the institutional challenges and theoretical tensions that shape the quality of disclosure.