Planetary Boundaries: Disclosure Quality of Sustainability Reports

Abstract

This study develops a new framework to analyze the disclosure quality of planetary boundary information in firms’ sustainability reports. Specifically, we construct a comprehensive disclosure index by mapping each planetary boundary to existing Global Reporting Initiative (GRI) standards, and by deriving a set of criteria to measure the quality of disclosure. Next, we employ a text mining technique to apply the disclosure index to analyze the sustainability reports lodged by the top 100 companies listed on the Australian stock exchange (ASX100) over the period from 2016 to 2020. We find an increase in reporting quality across the nine Planetary Boundaries over the five years of our analysis. A cross-sectoral analysis shows that firms in industries with a higher environmental impact, such as those in the Materials and Energy sector, tend to have a higher reporting quality. We validate our text-mining results against a manual analysis and examine the robustness of the results by showing positive associations of our disclosure scores with environmental performance measures from other data sources. This is the first academic study to examine planetary boundary disclosures of large, listed companies. Researchers and decision-makers may consider using the framework and method to identify potential planetary boundary risks for decision-making purposes.