Sustainability Reporting: A Review and the Way Forward

Abstract

Firms are in the epicenter of sustainability deliverables cascade down from stakeholders. Sustainability reporting is salient to stakeholders as actual non-financial performance is opaque. From an in-depth review of publications on sustainability reporting of the recent decade, this paper identifies three forms of disclosure: mandatory, voluntary and involuntary. Respectively, the regulating mechanism of each form of reporting is rules, market forces and social norms, and is regulated by either regulatory or normative institutional pressure. This review shows that depending on firms’ ability to withstand institutional pressure, firms have discretion over varying degrees of symbolic and substantive reporting. The motives for discretionary reporting primarily stemmed from (1) demands for reporting do not meet the interests of the companies, (2) stakeholders' interests do not align with that of one another. This paper proposes an issue saliency framework that considers both stakeholders’ and companies’ concerns and to optimize value-add and reduce social cost in reporting. The optimal regulating mechanism for overlapped issues for (1) stakeholders and companies is market forces, and (2) multiple stakeholders is rules. For single stakeholder concerns, it is best regulated by social norms. This paper ends with a proposed future agenda.