Sustainability reporting and financial performance: Evidence from Australia's electricity companies

Mehadi Mamun

doi:10.22495/cgsrv6i1p2

Abstract

This study, based on the stakeholder theory, explores the relationship between Australia’s electricity companies’ sustainability reporting practices and their financial performance. This paper uses the GRI G4 sector-specific guidelines to examine Australia’s electricity companies’ disclosure level on sustainability, return on assets to assess the companies’ performance, and descriptive statistics and multiple regression to test hypotheses. Relying on the secondary data collected from companies’ annual reports, websites, corporate social responsibility (CSR) reports, or standalone sustainability reports, the regression results show that the sustainability reports have a connection with the companies’ performance. Additional analysis also reveals that only economic and social performance disclosures of sustainability reporting significantly influence the companies’ performance. Though earlier studies on the relationship between sustainability reporting and financial performance have mostly been based on international data, this paper inspects the connection between the adoption of sustainability reporting and the financial performance of electricity companies within Australia that provide essential services to society and have a significant influence on sustainable development. Moreover, this research arbitrates prior inconsistent findings (Garg & Gupta, 2020; Bhattacharyya & Rahman, 2019; Sila & Cek, 2017) and adds to the sustainability reporting and firms’ performance literature

Highlights

Sustainability reporting has obtained considerable attention from the business world in recent years
For the first regression model, the coefficient correlation (R) between the independent variable and the dependent variable is 0.692. It means that the association between sustainability reports and the companies’ performance (ROA) is 69.2%
Based on Australia’s electricity companies’ 2018–2019 annual reports, corporate websites, corporate social responsibility (CSR) reports, or standalone sustainability reports, this study finds that the sustainability reports have a relationship with the companies’ performance

Summary

Introduction

Sustainability reporting has obtained considerable attention from the business world in recent years. The KPMG (2017) study, where 4,900 companies including the largest 100 firms in 49 countries were surveyed, found that the sustainability reporting rate has been increased to 72% in 2017 from 53% in 2008. Sustainability reporting is, an important concern for businesses at present as stakeholders such as investors have been increasingly asking for data on companies’ non-financial performance. According to KPMG (2017), sustainability reports include quantitative and qualitative information on the financial, social, and environmental performance of companies in a balanced way. The GRI framework, is considered the most inclusive and widely used framework for its coding structure of companies’ sustainability reports or annual reports (KPMG, 2017)

Objectives

Results

Conclusion