Sustainability Reporting on Financial Performance, the Role of CSR Committee, Evidence from Indonesia

Abstract

Companies in running their business compete to improve their respective performance reporting. ESG issues have gained considerable attention as companies increasingly focus on disclosing both financial and non-financial information. This research aims to assess the partial and simultaneous impact of ESG performance on Return on Assets (ROA) and Tobin's Q, with moderation by the CSR committee. Disclosure information and financial data for companies in the energy sector in Indonesia were sourced from financial reports and sustainability reports. encompassing a total of 78 companies period the years 2013 to 2022. After applying criteria for companies disclosing ESG information, a subset of 43 companies was identified. Using Chow test, Lagrange, and Hausman tests before moderation, followed by tests after moderation by the CSR committee using STATA. The research finding, before moderation by the CSR committee, revealed that ESG performance had a positive and significant impact on ROA, while its effect on Tobin's Q was negative and insignificant. Then moderation by the CSR committee, indicated that the presence of a CSR committee positively moderated the impact of ESG performance on ROA and Tobin’ Q, albeit insignificantly. Further examinations post-moderation revealed that the presence of a CSR committee does not exert a significant moderating effect. Consequently, within energy sector companies, the CSR committee seems to serve as a symbolic tool, implying the company's adherence to proper operational practices without significantly altering the impact of ESG performance.