The Connectivity Between Content Elements and SDGs in the South African Banking Industry

Abstract

Integrated thinking and connectivity have recently attracted particular attention in sustainability reporting. A firm’s reporting on its Environmental, Social, and Governance (ESG) practices should be connected to the other business functions to optimize the ESG information provided through integrated reports. Academic research on the connectivity between ESG information and other business functions is limited. Hence, the main aim of this study is to analyze and characterize the reporting connectivity between the Sustainable Development Goals (SDGs) and other business functions of South African retail banks. This is done using a thematic content analysis of the integrated reports of each bank in the sample from 2016 to 2023. The sample consists of the top five retail banks in South Africa that are listed on the Johannesburg Stock Exchange (JSE). Specifically, the researchers determine the number of occurrences where the SDGs are linked to other business functions through an iterative process. Furthermore, several Analysis of Variance (ANOVA) models are implemented to identify which content elements have the strongest connectivity to the SDGs as well as to identify which elements have the strongest linkage to the various content elements. The results show that SDGs are primarily linked to stakeholders, the business model, and performance. Furthermore, it was found that this sample of South African banks most prominently links these business functions to SDG 8, which aligns with the banks’ purpose of furthering economic development.

1. Introduction

Over the last two decades, business sustainability and environmental performance have attracted significant attention and prominence across the corporate landscape. The rate of change and the complexities related to corporate governance, social challenges, and ecological crises have increased pressure from company stakeholders to disclose information beyond financial information. This includes information on corporate governance, sustainability, and social contributions [1]. Hence, firms are increasingly required to embrace a culture of accountability and transparency. To this end, Erin et al. [2] state that, to create value for their stakeholders in the 21st century, it is essential for corporate organizations to report on the United Nations (UN) Sustainable Development Goals (SDGs). These SDGs were adopted by the member countries of the UN in 2015, replacing the Millennium Development Goals. These SDGs consist of 17 major aims that should be achieved in order to achieve the 2030 global agenda. The major focus of these goals is to promote environmental sustainability, fight inequality, reduce poverty, and provide inclusive development.

Konstantinos et al. [3] provide evidence that SDG reporting has significant implications for corporate reporting and that the integration of SDG into integrated reports will increase the quality of corporate reporting. Furthermore, SDG reporting will allow corporate organizations to holistically consider societal issues beyond the shareholders’ needs. This argument is supported by the IIRC [4], stating that SDG reporting will contribute toward addressing some of the critiques and limitations of current corporate reporting practices. Addressing critiques and limitations is of particular interest because, more than a decade after the introduction of the first integrated reporting framework, many researchers still find that corporate reports are often disjointed with low connectivity, particularly disclosures on non-financial aspects, such as social and environmental issues [5,6,7]. Literature also found evidence of irrelevant and redundant information in integrated reports, making them less valuable to users [8]. Roslan et al. [8] argue that overly complicated and disjointed reports bring negative economic consequences, such as inefficient resource allocations, loss of stakeholder trust, and inaccurate decision making. The IIRC [4] identifies the use of guiding principles and eight content elements. The content elements in the framework provide guidance on disclosure in an integrated report. The content elements, illustrated in Figure 1, are fundamentally linked to one another and are not mutually exclusive.

Of particular interest here is the concept of connectivity, a guiding principle that is emphasized by the 2021 revised Integrated Reporting Framework [4]. This principle contends that a corporate organization should holistically report on the interrelatedness and dependencies between all the factors that have an impact on its ability to create value over the short, medium, and long term [4]. Connectivity as a guiding principle encourages firms to continuously assess the interrelatedness among their capital, operations, and various business functions. Key to this is integrated thinking, which supports the ability to make these connections by actively considering the interrelated capitals, operations, and business functions [4]. Integrated thinking is defined by the IIRC [4] as follows:

Integrated thinking is the active consideration by an organization of the relationships between its various operating and functional units and the capitals that the organization uses or affects. Integrated thinking leads to integrated decision making and actions that consider the creation, preservation or erosion of value over the short, medium, and long term.

In this light, the study by Baboukardos et al. [9] provides empirical evidence that improved connectivity reduces information asymmetry and significantly impacts investment behavior and firm decision making.

The empirical body of knowledge on disclosure connectivity is growing, with the majority of studies focusing on reporting on developed markets and limited research conbducted on IR connectivity in emerging markets. Given the important role that emerging market economies play in reducing poverty and inequality and ensuring environmental sustainability, research on connectivity in emerging markets is essential, particularly research that focuses on sustainability factors and connectivity. Banks play a crucial role in contributing to sustainable development through their ability to distribute capital in a responsible and sustainable manner. Furthermore, in South Africa, the financial industry contributes more than 20% to the overall South African Gross Domestic Product (GDP), as illustrated in Figure 2. Additionally, in 2020, the total assets of the banking sector represented around 88% of the South African GDP in 2020 [10].

In the current body of knowledge, some studies analyze connectivity by considering links between different sections in a report [11]. Other studies measure linguistic connectivity by considering the number of linked words between concepts [11,12]. Some studies analyze the links between different social media and stakeholder communication platforms [11,13,14,15]. There is, however, a lack of research on what companies engage with and how they engage with issues regarding sustainable value creation (SVC). Particularly, very limited research is done that focuses on analyzing the connectivity between a company’s engagement with SDGs and the other business elements in integrated reports.

This study aims to contribute toward filling this gap by analyzing the connectivity between content elements in integrated reports and SDGs in the South African banking industry over time. South Africa is considered a forerunner in both modern corporate governance standards as well as IR [16]. Furthermore, companies listed on the JSE are required to publish integrated reports. Research on SDG connectivity of South African firms will, therefore, provide valuable information that could be utilized by firms in countries that are less advanced with regard to integrated reporting.

This study offers unique insights into how this sample of South African banks has shown commitment to sustainable development and contributes to the field in several ways. Firstly, this study contributes toward the scarce body of knowledge on integrated reporting connectivity in emerging markets. Secondly, by focusing on SDG connectivity, this study enhances our understanding of how SDGs are connected to other business elements in the banking industry over time. Lastly, to our knowledge, this is the first study to focus on SDG connectivity in the banking sector. Banks play an essential role in the distribution of capital within the economy and, in particular, contribute to sustainable business finance. Understanding how SDGs are connected and integrated into the banking industry, over time, will provide valuable information that can be used to improve reporting quality and standards.

The remainder of the paper is structured as follows. Firstly, the relevant literature is reviewed, followed by a discussion on the research method applied. Thereafter, the findings are analyzed and presented. Finally, relevant conclusions are made together with recommendations for further consideration.

2. Literature Review

In this study, three key strands of literature related to reporting are reviewed to contextualize and position this study within the broader body of knowledge on corporate reporting. Firstly, literature on the critiques and shortfalls of traditional reporting is considered. Secondly, literature on the arguments for integrated reporting in the context of SVC and SDGs is considered. Thirdly, literature on the incorporation of SGDs into the reporting process is considered.

2.1. Critiques and Shortfalls of Traditional Reporting

Traditional corporate reporting has been criticized by many scholars for focusing only on the shareholders and neglecting social and sustainability factors in the reporting process [12,17,18,19,20]. This is in line with the Shareholder Value Theory, which holds that shareholders should be the core focus of a business and that the primary objective should be shareholders’ wealth optimization [8]. Thus, as criticized in the literature, traditional corporate reporting supports the narrow view maintained by the Shareholder Value Theory, limiting the consideration of other business stakeholders. Furthermore, researchers show that integrated reports are disjointed, with low connectivity and redundant information [5,6,7,8]. Additionally, Nieuwenkamp [21] states that some integrated reports practise “ESG washing”, meaning that companies are reactive in their approach to sustainability, focusing on a limited number of ESG factors that conveniently fit their strategy. This aids in building an image of significant ESG development, whereas, in reality, truly sustainable development is limited.

To address this gap, the Integrated Reporting Framework was introduced by the IIRC to encourage a firm to focus on all the stakeholders by promoting the reporting and integration of non-financial information pertaining to a firm [7]. The Integrated Reporting Framework supports the Stakeholder Theory, which maintains that, in order for a company to be successful over the long term, a company should focus on the value creation of all its stakeholders [8]. By extension, the theory argues that neglecting certain stakeholders will, in the long term, result in a company’s failure. In this light, the Integrated Reporting Framework by the IIRC promotes integrated thinking and supports internal and external decision making that entails an immense range of interrelated elements and consequences.

However, Trucco and Valentina [22] maintain that the current IR framework still emphasizes economic value creation, and, therefore, reporting on the value creation to the broader society is often limited in these reports. Yet, Trucco and Valentina [22] contend that value creation extends beyond the accumulation of financial capital and includes social and environmental issues. Therefore, the concept of value creation should be considered in a much broader context, requiring a paradigm shift whereby social and sustainability issues are integrated into the business thinking process.

2.2. SVC, SDGs, and Integrated Reporting

Several researchers furnish evidence that integrated reports do add significant value and aid in reducing information gaps. Bernardi and Stark [23] provided results that suggest that integrated reports offer useful ESG information in capital markets. Furthermore, integrated reporting assists market participants in understanding risk management of current and future risks in a company [9]. From an internal perspective, companies that engage with integrated reporting foster internal environments that think holistically. This, in turn, promotes the integration of societal and sustainability factors into the value-creation process.

This leads to the concept of SVC, an idea that is gaining considerable attention in recent literature [24]. The concept of SVC is understood as the process of generating economic, social, and environmental value for all stakeholders while minimizing social and environmental harm [24]. The achievement of SVC requires a firm to have a holistic view and understanding of all the elements pertaining to the value-creation process of a company. The SDGs provide companies with tangible, actionable, measurable, and standardized objectives to focus on in order to achieve SVC [22]. Therefore, companies that holistically integrate the SDGs into their various business elements will, by implication, achieve SVC.

In this light, integrated reports should reflect a firm’s integrated approach to SVC, and, by extension, the SDGs. As stated by the IIRC [4], embedding integrated thinking into an organization’s activities will naturally result in the connectivity of information flow into the information systems that support internal and external reporting. Roslan and Saleh [8] identify connectivity as a key guiding principle to address some of the above-mentioned critiques related to integrated reports and SVC promotion.

2.3. The Importance of Connectivity in Reporting to Achieve Sustainability

Research by Eccles et al. and Songini et al. [11,25] shows that the implementation of the connectivity principle encourages integrated thinking. This, in turn, fosters a decision-making environment with a holistic consideration of the factors affecting the organization’s ability to create value over time. This, then, naturally feeds into the reporting process, and many researchers provide evidence that high levels of connectivity quality promote information quality to investors and significantly reduce information asymmetry [1,17,26,27]. This promotes SVC in two ways.

Firstly, integrating and connecting stakeholders, like the broader society and the environment, to the business strategy and the business model could result in business activity generating value toward these stakeholders directly. Research shows that firms could achieve the SDGs through integrated thinking and reporting, by aligning business models with the SDGs [27,28]. This aligns with Ludeke-Freund’s [24] SVC Through Business Models Framework. This framework shows how social and environmental value could be created by a business model that considers the roles played by each stakeholder and understands the various ways in which the business model can create new value for each individual stakeholder. Ludeke-Freund [24] argues that SVC through business models requires a strong relationship between a firm and the stakeholders and that such a stakeholder-orientated business model will create direct value for the stakeholders.

Secondly, through integrated reporting, more connected reports will provide information that is more comprehensible, coherent, and concise for investors. This should enhance investors’ understanding of how a business contributes toward social and environmental issues through its strategy and business model. The growing awareness and willingness of investors to allocate funds toward projects and firms that create value toward social and environmental issues will attract investment funds toward these businesses [8]. This links to Akerlof’s [29] Information Asymmetry Theory, which maintains that holistic and detailed company disclosures will reduce adverse selection and moral hazards caused by information asymmetries, which, in turn, will enhance efficient capital allocation and promote market efficiency. It is clear how this will create a positive feedback loop, whereby companies that integrate social and environmental value creation into their strategy and business mode will attract investment funds, which, in turn, furthers their ability to create more value.

Roslan and Saleh [8] state that there is no homogeneous method for assessing and analyzing the connectivity of capital in integrated reports. Hence, the concept of connectivity has been measured and analyzed in several different ways. Andronoudis et al. [30] quantify the connectivity between future cash flows and discount rates by counting the number of times these concepts are mentioned interrelatedly. Arrubla and Grima [14] measure connectivity by means of the number of feedback loops and cross-referencing in an integrated report. Grassmann et al. and Giorgino et al. [12,31] analyze connectivity through content analysis, hence, also considering the frequency at which capitals are textually related to other capitals and business elements. Similarly, the study by Nichita et al. [32] employs content analysis and develops an interconnectedness score based on counts. Furthermore, several researchers have conducted work on identifying the determinants of connectivity [1,33,34]. Key determinants in the literature include board diversity, the characteristics of the audit and sustainability committee, the reporting process, meeting frequency by the board of directors, the type of industry, ownership structure, and organizational size. Bucaro et al. and Vitolla et al. [1,35] also identify government regulation and governance factors, at firm and country levels, as determining factors.

A key issue in reporting that could vastly benefit from integrated thinking and connectivity is the drive toward sustainability. This is particularly relevant for achieving the 17 SDGs set out by the UN in 2015. Sustainable development is complex, particularly within a business context [22]. Furthermore, Trucco and Valentina [22] state that, without integrating sustainable development principles and goals into the strategy and business model, a company will create limited value toward achieving very important goals. According to Trucco and Valentina [22], the challenge of identifying the interdependencies among the various business elements and capital limits the successful implementation of strategies by companies to achieve the SDGs. Similarly, Nichita et al. [36] state that integrating sustainability concepts into the reporting process has been a challenge because this is often not considered an integrated element within the business process. Hence, particular focus should be given to SDGs and how these are connected to business capital and business elements within integrated reports [2].

Adams [37] highlights the importance of integrated reporting in SDG reporting and introduces a five-step framework to show how companies can use integrated reporting to incorporate SDGs within their business through connectivity and integrated thinking. According to Trucco and Valentina [22], following the connectivity principle in SDG reporting will aid a company in identifying the trade-offs, conflicts, interdependence, and synergies among the different SDGs, the capitals of a business, and the various business elements. It will also assist in identifying risks and opportunities related to the various SDGs and will, therefore, aid a business in developing integrated strategies to align with the SDGs. Dimes and de Villiers [27] highlight three essential types of connectivity that will assist a company in contributing toward achieving the SDGs. Firstly, there should be connectivity between financial and other information, and, secondly, connectivity between quantitative and qualitative information by means of developing key performance indicators for qualitative information. Thirdly, there should be consistency and connectivity between information related to a firm’s external accountabilities and the information used internally by the board and management.

As reviewed above, several researchers have attempted to determine the level of integrated reporting connectivity. However, research focusing specifically on the connectivity among SDGs, business models, and other aspects of integrated reporting is very limited, especially in an emerging market setting. Given the importance of achieving the SDGs, and the important role that connectivity plays in doing so, this study aims to contribute toward this research gap by analyzing the connectivity between different elements of the integrated report and SDGs in the South African banking industry over time. These reports are publicly available and are under the “investors’ relationship” section of a company’s website.

3. Sampling and the Research Method

3.1. Sampling

This study was conducted on the South African banking industry because of the significant role banks play in the economy [38,39]. Firstly, this sample of South African banks plays a pivotal role in the allocation and distribution of capital in South Africa. Hence, this sample of South African banks is a major driver of fixed investment into projects and infrastructure, rendering their orientation toward SDGs and sustainability essential. Secondly, the banking industry contributes significantly toward the total GDP of South Africa, as illustrated in Figure 2.

The study adopted a purposive sampling technique, which is a familiar sampling method for qualitative studies [40]. The top five banks were selected from the JSE Banking Industry (Sector code: 301010) based on the top five market capitalization at the time of data collection. The sample represented approximately 91% of the total market capitalization of the companies under the banking sector code on the JSE, and is, therefore, a good representation of the South African banking industry.

3.2. Data and Research Method

The data for this study were the audited integrated reports of the top five JSE-listed banks from 2017 to 2023. The reason for starting the analysis in 2017 is to give banks enough time to understand the SDGs that were adopted by the UN in 2015 to provide meaningful disclosures on SDGs in integrated reports. Integrated reports were used in similar studies concerning connectivity in integrated reports [12,14]. These reports were gathered from the official company website of each respective bank.

The study used thematic content analysis as the research method. Thematic content analysis is a common research method in integrated reporting [12,31]. Content analysis is a qualitative data analysis method and primarily focuses on the context and frequency of phrases or words within a text [31]. Even though thematic content analysis shares similarities with a grounded theory approach, it was not the focus of the study to develop a theory from the qualitative analysis performed.

The thematic research method implemented six steps, as illustrated in Figure 3. The method employs layers of analysis to derive meaning from codes through an iterative process between the authors [41]. Similar to Van Wyk and Els [42], the analysis in the research aims to explore the meaning of the text and identify connections made between a bank’s SDG reporting and content elements. Triangulation between the SDG reporting and content elements was crucial as part of the method applied [43].

Before the initial coding is implemented, researchers must attain a clear understanding of the data being analyzed. By reviewing the latest integrated reports by some of the banks, an understanding of the type of disclosures and the structure of reporting SDGs in integrated reports was reached. The study mainly focuses on the connectivity between SDGs and the content elements of integrated reporting, as per the IIRC [4]. However, based on the initial understanding of the data, certain exceptions to this approach were made. Firstly, the basis of preparation and presentation was excluded from the study because very limited connections were made to these content elements and the SDGs, making them redundant in the analysis. Furthermore, the SVC Through Business Models Framework by Ludeke-Freund [24] emphasizes the importance of stakeholder relationships to promote SVC. It was also noted that references to SDGs were frequent within stakeholder relationship disclosures in the integrated reports. Therefore, stakeholder relationship disclosures were included in the study to determine the connectivity between stakeholder relationships and SDGs, even though it is a guiding principle in integrated reporting, not a content element.

Table 1. Coding scheme applied to thematic analysis. Source: authors’ analysis.

Question	Business Element/Guiding Principle	Code Assigned	Code Descriptor
Does the IR describe how the organization understands, takes into account, and responds to the stakeholders’ legitimate needs and interests through the SDGs?	Stakeholder relationships	SDG_Stakeholders SDG_Stakeholders_SDG1-17	A description, figure, or diagram of how the company considers and responds to the stakeholders’ legitimate needs and interests referring to the SDGs.
Does the organization appropriately connect the nature and purpose of the entity to the SDGs?	Organizational overview and external environment	SDG_Purpose SDG_Purpose_SDG1-17	Textual description, figure, or diagram of the nature of the company’s business, purpose, or mission with a clear link to the SDGs.
Does the organization articulate how the governance structure is created to support its ability to create value by linking it with the SDGs?	Governance	SDG_Governance SDG_Governance_SDG1-17	Textual description, figure, or diagram of the governance structures (including remuneration policies) and how they link with the SDGs.
Does the organization appropriately articulate the business model and connect it to the SDGs?	Business model	SDG_Business Model SDG_Business Model_SDG1-17	Textual description, figure, or diagram of the business model with a connection to the SDGs.
Does the organization appropriately identify the risks and opportunities and connect them with the SDGs?	Risks and opportunities	SDG_Risks&Opportunities SDG_Risks&Opportunities_SDG1-17	Textual description, figure, or diagram of the risks and opportunities and how they are linked to the SDGs.
Does the organization describe its resource allocation plans for implementing strategies and how they link with the SDGs?	Strategy and resource allocation	SDG_Strategy SDG_Strategy_SDG1-17	Evidence and description of how resources are used in business models to achieve strategic objectives and how they link with the SDGs.
Does the organization explain the outcome of its assessment of achieving its strategic objectives for the period and how it connects with the SDGs?	Performance	SDG_Performance SDG_Performance_SDG1-17	Evidence (quantitative or qualitative), including textual references, figures, or diagrams, which indicates a performance measurement contributing to the SDGs. Evidence can also be displayed in the following ways: Outcome Key performance Indicator (KPI) - Rating - Index - Ratio
Does the organization appropriately explain the challenges and uncertainty that affect the entity’s prospects and make connections to the SDGs?	Outlook	SDG_Outlook SDG_Outlook_SDG1-17	Evidence (quantitative or qualitative), including textual references, figures, or diagrams, which indicates the company’s prospects and how they link with the SDGs.

provides the coding scheme used to assign codes based on the initial understanding obtained from the data in the integrated reports. The codes were independently checked by the co-author.

The initial coding was performed through Atlas.ti 24 using “SDG” in the word search function to identify instances where references are made to the SDGs in the integrated reports. The purpose of this was to identify the number of references to SDGs over the sampled period, aligning with the method applied in the literature [30,32]. The next step of the approach was to analyze the text of each of the quotations and any additional diagrams or figures related to the SDGs and understand the context and meaning of the disclosure in the integrated reports. In this phase, the authors coded SDG connections to a particular content element based on the coding scheme in Table 1. In other words, if SDG was referred to in the text, or in a figure, the authors considered the context of that reference to SDG and determined if the context was related to any business element. For example, if SDG were to be mentioned in the context of a particular bank’s business model, the code “SDG_Business Model” would be allocated to that specific reference. Furthermore, references to specific SDGs, i.e., SDGs 1 to 17, and a similar connectivity coding process were followed. Any references made to SDGs that could not be linked to a particular element were not awarded additional coding. Examples of such instances would be when a bank referred to SDGs from a general perspective and did not make pertinent connections to their operations or functions.

Initial themes were developed from the codes developed. The themes were evaluated against the content elements and the coding framework applied. The authors followed an iterative process, including testing and consultation, to confirm or recode the initial codes to ensure consistency of the connections identified, similar to Terblanche and de Villiers [44]. Once all the codes were finalized, connectivity themes were constructed by counting the number of code occurrences within a given report. The counts were then used to construct variables that proxied the connectivity between the various content elements and SDGs. Examples of variables based on frequency are business-model–SGDs and governance–SDGs. These two variables proxy the connectivity between the business model and SDGs and between governance and SDGs, respectively. The assumption is that the higher the connection frequency between a specific SDG and a given element, the better the connection quality. These variables were analyzed in two main ways. Firstly, the counts were compared to each other to identify the content elements that were linked to SDGs most frequently. This was achieved by means of visual representation and also through an ANOVA and the Tukey test to assess which content elements were linked to SDGs most frequently [45]. Secondly, the variables were analyzed over time by means of a trend analysis. The model specification of the ANOVA is as follows:

$${Content element frequency}_{ij}=\mu +{\tau }_i+{\epsilon }_{ij}$$

(1)

where

$j$ = the $j$-th observation in the i-th group;

$\mu$ = the mean of the frequency for a given variable;

$\tau$ = the effect of the i-th group; and,

$\epsilon$ = the error term for the $j$-th observation in the i-th group.

The Tukey test result was calculated as follows:

$$q={\displaystyle \frac{[{\mu Y}_i-\mu Y_j]}{\sqrt{\frac{MSE}{n}}}}$$

(2)

where

${\mu Y}_i and \mu Y_j$ = the sample means of the $j$-th and i-th groups;

$MSE$ = the mean squared error of the ANOVA; and,

$n$ = the number of observations per group.

4. Results and Findings

4.1. Aggregated Connectivity of SDGs Across the Content Elements

In this section, the connectivity between the content elements and SDGs is considered across the largest banks in South Africa. To start, consider the ANOVA results in

Table 2. Results from ANOVA performed. Source: authors’ outputs from SPSS https://www.ibm.com/spss.

ANOVA
Count
	Sum of Squares	df	Mean Square	F	Sig.
Between Groups	6003.143	8	750.393	7.616	0.000
Within Groups	5320.571	54	98.529
	11323.714	62

, which were used to determine if there is a statistically significant difference between the connectivity frequency of SDGs and the various content elements.

The null hypothesis of the ANOVA test is that there is no statistically significant difference between the connectivity frequency of SDGs and the various content elements. Given a p-value (Sig) of 0.000, the null hypothesis was rejected at a 99% confidence level. Therefore, there was a statistically significant difference between the number of times the SDGs were connected to the various content elements. This justified a further analysis to identify where the differences were and determine which elements were most prominently connected to the SDGs.

Figure 4 depicts the aggregated number of times the SDGs were connected with a content element or guiding principle, hereafter referred to as the elements. In Figure 3, the total count (total frequency) is depicted on the y-axis. This provides a broad idea of which elements have the highest level of connectivity with the SDGs in the integrated reports of the largest banks in South Africa. This, in turn, gives an idea of which areas in the integrated reports banks consider the most relevant to communicate their contribution to the SDGs.

The highest SDG connectivity count was stakeholder relationships, with a count of 278, followed by the business model, with a count of 260, performance, with a count of 197, and strategy, with a count of 146. The Tukey HSD results and the ANOVA results are presented in

Table 3. Tukey test results. Source: authors’ outputs from SPSS.

Factors		Mean Difference	p-Value
Business Model	Governance	18.286	0.028
	Organizational Purpose	13.714	0.022
	Performance	3.714	0.999
	Risk and Opportunities	22.571	0.003
	Stakeholders	0.857	1
	Strategy	19.286	0.017
	Targets	25.429	0
	Trade-offs	25.571	0
Governance	Business Model	−18.286	0.028
	Organizational Purpose	−4.571	0.994
	Performance	−14.571	0.056
	Risk and Opportunities	4.286	0.996
	Stakeholders	17.429	0.043
	Strategy	1	1
	Targets	7.143	0.912
	Trade-offs	7.286	0.903
Organizational Purpose	Business Model	−13.714	0.022
	Governance	4.571	0.994
	Performance	−10	0.063
	Risk and Opportunities	8.857	0.762
	Stakeholders	−12.857	0.029
	Strategy	5.571	0.979
	Targets	11.714	0.416
	Trade-offs	11.857	0.399
Performance	Business Model	−3.714	0.999
	Governance	14.571	0.056
	Organizational Purpose	10	0.062
	Risk and Opportunities	18.857	0.021
	Stakeholders	−2.857	1
	Strategy	15.571	0.01
	Targets	21.714	0.004
	Trade-offs	21.857	0.004
Risk and Opportunities	Business Model	−22.571	0.003
	Governance	−4.286	0.996
	Organizational Purpose	−8.857	0.762
	Performance	−18.857	0.021
	Stakeholders	−21.714	0.004
	Strategy	−3.286	0.999
	Targets	2.857	1
	Trade-offs	3	1
Stakeholders	Business Model	−0.857	1
	Governance	17.419	0.043
	Organizational Purpose	12.857	0.029
	Performance	2.857	1
	Risk and Opportunities	21.714	0.004
	Strategy	18.429	0.026
	Targets	24.571	0.001
	Trade-offs	24.714	0.001
Strategy	Business Model	−19.286	0.017
	Governance	1	1
	Organizational Purpose	−5.571	0.979
	Performance	−15.571	0.01
	Risk and Opportunities	3.286	0.999
	Stakeholders	−18.429	0.026
	Targets	6.143	0.962
	Trade-offs	6.286	0.956
Targets	Business Model	−25.429	0
	Governance	−7.143	0.912
	Organizational Purpose	−11.714	0.416
	Performance	21.714	0.004
	Risk and Opportunities	−2.857	1
	Stakeholders	−24.571	0.001
	Strategy	−6.143	0.962
	Trade-offs	0.143	1
Trade-offs	Business Model	−25.571	0
	Governance	−7.286	0.903
	Organizational Purpose	−11.857	0.399
	Performance	−21.857	0.004
	Risk and Opportunities	−3	1
	Stakeholders	−24.714	0.001
	Strategy	−6.286	0.956
	Targets	−0.143	1

. These results show exactly where the differences in frequency lied.

The Tukey test results confirm that the business model, performance, and stakeholders had statistically significantly higher connectivity with SDGs, on average, relative to all the other content elements. However, these three elements did not have a statistically significant difference between one another. Therefore, the connectivity of the three elements with SDGs was considered to be fairly equal. These results thus provide evidence that other crucial elements like strategy, trade-offs, targets, purpose, risks, and opportunities had a statistically significant lower level of connectivity relative to the business model, performance, and stakeholders. Interestingly, even though it visibly appears that strategy had a higher count than some of the elements, the Tukey test shows that these higher counts were statistically insignificant.

Stakeholder relationships are crucial in contributing to the SDGs, and, therefore, this was expected to have a relatively high count. This aligns with the “SVC Through Business Models Framework” by Ludeke-Freund [24], emphasizing the importance of stakeholder relationships in promoting SVC. This is also supported by the findings of Dimes and de Villiers [27] which highlight the importance of stakeholder relationships in sustainability.

The relatively high count indicates that this sample of South African banks generally does take a stakeholder-inclusive approach in terms of contributing to sustainable development through the SDGs. In addition, banks often refer to the importance of the ‘ecosystem’ in which they operate, a fact which also highlights the importance of meaningful stakeholder relationships within this ecosystem to create value for these stakeholders and contribute to the SDGs. This suggests that banks are aware of the importance of creating societal value through a sustainable, stakeholder-orientated approach, thereby attracting investments into banking operations, as pointed out by Roslan and Saleh [8]. This aligns with the stakeholder theory, showing that banks consider it important to integrate their SDG developments and contributions with their stakeholder relationships [1].

Another important observation is the level at which the banks integrate the SDGs within their business models, resulting in high connectivity between the banks’ business models and how they contribute to the SDGs. By integrating the SDGs into the business model, banks can create value across many aspects of the business, including the six capitals and the relevant stakeholders [27]. The results also show that SDGs are relatively frequently connected with bank strategies. This supports the effective development of strategies to contribute toward the SDGs and could indicate that banks apply integrated thinking as part of their strategies [25]. Equally, it indicates the importance of integrated thinking as a catalyst for connectivity in integrated reports [11]. This aligns with the “SVC Through Business Models Framework” by Ludeke-Freund [24] which shows that SVC should be integrated into a firm’s strategic thinking and business model. It also aligns with the IIRC framework [4], which supports the integration of sustainability and societal issues into the business model. These results suggest that the South African banking industry is oriented toward achieving SVC.

The performance measurement was also frequently connected to the SDGs, showing how banks disclose their performance concerning the SDGs identified as part of their business model, together with relevant KPIs. Within these disclosures, the banks explain how they perform on each of the SDGs identified within their business models, and connect the contribution to the SDGs to what they are doing as part of their business models. The SVC Through Business Models Framework points to performance considerations as a central underpinning of an integrated understanding of how value is created within the business model [24]. Thus, according to this framework, it is essential for a firm to link SDGs with business performance. It is, therefore, encouraging to see that this sample of South African banks frequently connects SGDs to performance.

Interestingly, one of the lower-connected aspects was how trade-offs were connected with the SDGs. It was expected that banks would make a connection between the trade-offs they have to make among different SDGs and other potential capitals. As an example, it is essential for banks to ensure decent economic growth and job opportunities (SDG 8) as part of what they do as a business; however, it is important for them to also contribute to other societal matters such as reducing inequalities (SDG 10) and performing from an environmental point of view as well by driving clean energy finance (SDG 7). Similarly, the findings show that relatively limited links are made between the SDGs and risks.

4.2. Aggregated Time Analysis of the Connectivity Between the SDGs and Key Elements

This section considers the connectivity between key elements and the SDGs over time. This was achieved by considering the aggregated number of times a given element co-occurs with the SDGs in a given year across all the banks in the study. Figure 5 depicts the connectivity between the key elements and the SDGs over time, with time on the x-axis and frequency on the y-axis.

Overall, a considerable increase was noticed in the integration of the SDGs within the integrated reports, since the inception year of the study. This indicates that, over time, this sample of South African banks is becoming more aware of the importance of integrating the SDGs into their thinking, operations, and reporting. At an individual element level, the results show that connectivity between the business model and the SDGs increased from three counts in 2017 to 61 counts in 2019. The co-occurrence counts decreased from 2019 to 26 in 2021 and then increased again to 60 in 2023. Similarly, the co-occurrence counts between risk and opportunities and performance increased between 2017 and 2019 and then decreased from 2019 to 2022. The co-occurrence counts for these elements then increased again close to the 2019 levels in 2023.

The co-occurrence between the SDGs and the strategy increased considerably between 2017 and 2021 from nine to 30 counts, with a slight decline in 2022, but was back to 27 in 2023. Co-occurrence between the purpose of the banks and the SDGs followed a similar path initially, with a peak in 2018 and then an increase in co-occurrence in 2022. The co-occurrence between stakeholders and the SDGs increased from 11 in 2017 to 42 in 2018. Since 2018, the co-occurrence between stakeholders and the SDGs has remained relatively stable, showing that banks consistently consider their stakeholders to be integral in terms of the SDGs, aligning with the findings of Dimes and de Villiers [27] regarding the importance of meaningful stakeholder engagement in contributing to the SDGs.

Interestingly, the co-occurrence between governance and the SDGs increased between 2017 and 2019 from three to 39 counts. However, it then systematically decreased again to a low count of three in 2023. A deeper analysis indicates that one specific bank included an exceptional amount of detail within their governance disclosure by linking many of the board members’ KPI responsibilities with the SDGs, something which was regarded as good connectivity and indicated the significance of the SDGs from a governance perspective. However, these disclosures were not evident again from 2020 onward. The low level and declining connectivity between governance and the SDGs over time are concerning, given that governance plays a key role in the successful execution of strategic objectives and contribution to the SDGs. By linking the SDGs to the KPIs of board members and committees, clarity is provided in terms of how banks are governed to contribute meaningfully to the SDGs.

The co-occurrence between outlook and the SDGs was low during the initial seven years of reporting after the introduction of the SDGs, but then increased drastically in 2023. This increase could indicate that banks initiated reporting on forward-looking information on the SDGs to support value creation over the short, medium, and long term. A similar trend of increasing connectivity between the SDGs and trade-offs was observed, a phenomenon which indicates that, over time, banks have matured in their reporting of the SDGs and have begun to understand the relationship between different SDGs and how they support sustainable development within the banking industry of South Africa. This also supports the findings of Trucco and Valentina [22], indicating that improved connectivity will also improve identification and connections with trade-offs between different capitals and different SDGs. Therefore, even though the actual count is relatively low, the increased awareness of the interplay between the SDGs and the outlook, as well as between the SDGs and trade-offs, is encouraging.

An interesting observation is that the most significant elements, such as business model, stakeholder relationships, and performance, have very closely related connectivity reporting patterns, which are illustrated in Figure 6. Again, this aligns with the findings of Dimes and de Villiers [27], who referred to the importance of stakeholder involvement as part of organisations’ business models and overall sustainability. Upon investigation by the researchers, the decline in counts could be mainly attributed to the banks consolidating their reporting on the SDGs to promote the IIRC principle of conciseness, after the initial adoption of the SDGs in the banking business of these banks. Interestingly, in 2021, banks started to link the key elements considered in this study to specific SDGs, rather than just the SDGs in general, which is why the counts increased again. The linking of specific SDGs to key elements from 2021 provided richer detail in terms of reporting information. In this light, the main four elements are further analyzed in Section 4.3 to understand how the individual SDGs relate to these elements within the integrated reports and how the individual SDGs relate to one another.

4.3. Individual SDGs in Business Models, Strategy, Stakeholder Relationships, and Performance

This section considers the co-occurrence of the three elements most integrated with the SDGs: business models, stakeholder relationships, and performance. Figure 7 depicts the disaggregated connectivity between the individual SDGs reported within the business model, stakeholder relationships, and performance measurement of all five banks combined. It is essential to note the close relationship these three elements have with one another, especially considering the connectivity with the individual SDGs within each element.

By analyzing Figure 7, it seems that this sample of South African banks most prominently connects their business model, stakeholder relationships, and performance to decent work and economic growth (SDG 8). The ANOVA results are presented in Appendix A. The results confirm that the SDG 8 was significantly more frequently connected to the business model, stakeholder relationships, and performance relative to the other SDGs. The exceptions to this are SDGs 4 and 10, which proved to have an insignificant difference in counts relative to the SDG 8. This makes sense, since banks are regarded as a significant role player in the economy. In particular, this sample of South African banks has an essential role in building the economy and creating job opportunities, mainly through their financing activities. In this light, banks play a key role in financing organizations that can grow and create more job opportunities and finance key infrastructure projects. The findings also align with other studies performed on the reporting of the SDGs. Hamad et al. [28] analyzed disclosures on SDGs in Malaysia, which is also a developing country, in Asia, and found that the SDG 8 was the most reported SDG.

The visual analysis also points to reduced inequalities (SDG 10), clean and affordable energy (SDG 7), quality education (SDG 4), and gender equality (SDG 5) as having relatively high counts. However, in the case of the business model, these SGDs proved to have an insignificantly different connectivity frequency relative to the other SDGs with the business model. Yet in the case of performance and stakeholder relations, the SDG 5 and SDG 10 were significantly more connected to some of the other SDGs, such as SDGs 2, 6, 14, and 17. However, the SDG 8 is certainly the main SDG to which banks connect their business model, performance, and stakeholder relationships.

Similar to the discussion above, banks play a key role in promoting these SGDs through their financing activities. Given the importance of these SDGs, the engagement of this sample of South African banks with these SDGs is encouraging and could lead to SVC in these areas. However, the results show that this sample of South African banks makes very limited connections to the following SDGs: zero hunger (SDG 2), sustainable consumption and production patterns (SDG 12), life below water (SDG 14), life on land (SDG 15), and partnerships for the goals (SDG 17). The lack of connectivity between the main four elements identified in this study and these SDGs is further discussed in the conclusion and recommendations section.

Since the SDG 8 was most frequently used across the major elements identified, further analysis was performed on the SDG 8 to understand which other SDGs co-occurred with the SDG 8 within the major elements. Figure 8 illustrates how the other SDGs relate to the SDG 8 within business models, strategy, stakeholder relationships, and performance management.

Through the analysis of Figure 8, it can be observed that the SDG 8 is closely associated with reducing inequalities (SDG 10) in South Africa. It indicates that banks are ’in tune’ with national imperatives by recognizing the need to reduce inequalities within South Africa through their business model. Furthermore, gender equality (SDG 5) is also closely associated with creating jobs while growing the economy, also speaking to reducing inequalities from a gender perspective to ensure equal opportunities for all genders and reduce discrimination. Quality education (SDG 4) is also closely related to the SDG 8, a finding which highlights that banks understand the importance of quality education in growing the economy and reducing unemployment. It is interesting to note that no poverty (SDG 1) does not feature that strongly, together with the SDG 8. It could be because banks consider it as a secondary implication, i.e., if the economy grows, there is enough employment and inequality is reduced.

Another interesting observation is that SDGs relating to environmental sustainability do not frequently co-occur with the SDG 8 over the sample period. This indicates that environmental issues, even though very important, are still considered a secondary sustainability issue behind issues such as unemployment and inequality in South Africa. However, this could raise a question of whether true sustainability is achieved if economic decisions are taken without consideration of environmental aspects, since environmental issues become a social issue if they impact the livelihoods of the citizens of the country.

A similar trend was observed in relation to stakeholder relationships, strategy, and SDG performance. This indicates that banks manage to provide a single story of value creation across the integrated report for SDGs and provide evidence of integrated thinking across these elements.

5. Recommendations and Conclusions

The results show that this sample of South African banks most frequently connects the SDGs to stakeholder relations, business models, strategies, and performance. These are all key elements in achieving SVC, and the integrated thinking displayed by this sample of South African banks between these elements and the SDGs is encouraging. However, banks generally fail to provide deeper insights into how trade-off risks and opportunities are considered. According to the IIRC framework [4], it is essential to consider trade-offs in order to optimize resources, manage risks, and achieve long-term sustainability. Hence, the limited connections between the SDGs and trade-offs in the South African banking sector could hamper these banks’ ability to optimally contribute toward the SDGs. We suggest that this sample of South African banks fully engages and reports on the various trade-offs posed by the SDGs, both between each other and at an operational level. Furthermore, social and environmental issues pose several risks, ranging from idiosyncratic to existential ones, which could alter the long-term sustainability of a firm. It is, therefore, essential to understand how those risks connect to the SDGs and how SDG contributions could aid in limiting those risks.

The time analysis provides evidence that, overall, the integration of the SDGs with key elements has improved considerably since the inception year of the study. Furthermore, the results show that the connectivity counts for the most significant elements, i.e., business model, stakeholder relationships, strategy, and performance, increased sharply from 2017 to 2019, then decreased slightly from 2020 to 2021, and then increased again from 2022 to 2023. This is to promote the IIRC principle of conciseness. The increase in counts from 2022 to 2023 is largely due to the connections made to specific SDGs, a finding which is encouraging. It is also clear that there has been an increase in focus in recent years to connect the SDGs to the outlook and targets, trade-offs, and risks and opportunities. The increasing trend in these counts is positive; however, the actual counts remain relatively low, and we recommend that these elements should be considered more frequently with the SDGs in the integrated reports. The banks should also pay particular attention to connecting governance to the SDGs.

Furthermore, the results show that this sample of South African banks most prominently connects their business model, stakeholder relationships, strategy, and performance to decent work and economic growth (SDG 8). On the other hand, the results show that this sample of South African banks makes very limited connections to the following SDGs: zero hunger (SDG 2), sustainable consumption and production patterns (SDG 12), life below water (SDG 14), life on land (SDG 15), and partnerships for the goals (SDG 17). The SDG 17 is a goal that is aimed at the governmental level and is, therefore, not as applicable to the banking sector. However, given the importance of SDGs 2, 12, 14, and 15, and the key role that banks could play in achieving these SDG goals within a country, the lack of reporting integration and connectivity between key elements and these SDGs is concerning. As discussed in this article, banks play a key role in capital allocation, and, therefore, could play a key role in promoting sustainable agriculture and achieving food security, which falls under zero hunger (SDG 2), and in shaping sustainable consumption and production patterns (SDG 12). Banks should focus on providing funding for sustainable production projects and avoid funding projects that engage in unsustainable projects. In a similar vein, banks should actively refrain from funding any activity that could lead to compromising life on land and sea, which relates to SDGs 14 and 15. Actively seeking to fund sustainable projects, and avoiding the funding of unsustainable projects, should be part of the business model and strategy of South African banks. This should be reflected in the integrated reports through the connectivity between key elements and these SDGs. We, therefore, recommend that this sample of South African banks pays particular attention to these SDGs and ensures that these SDGs are sufficiently connected to the key business elements in future integrated reports.

6. Limitations and Future Research

This study has two limitations. Firstly, the study has a limited time horizon, given that the SDGs were only adopted in late 2015 and it took some time for banks to incorporate these SDGs into their reports. A new study could be conducted once more integrated reports become available. Secondly, this study is also limited to JSE-listed banks, because only these banks in South Africa are obligated to produce integrated reports. There are several areas for further research that could benefit the field in South Africa. Firstly, research could be conducted to determine the drivers and determinants of connectivity in banks. Secondly, research could be conducted to establish how SDG connectivity impacts reporting quality. Thirdly, a similar study to this one could be conducted on other key sectors, such as mining, manufacturing, and logistics, in terms of sustainability.