Sustainability reporting practices and environmental performance amongst nordic listed firms

Abstract

Corporate social responsibility (CSR) initiatives have increasingly been adopted for legitimacy purposes. Sustainability reporting practices have also been widely debated. In this study, we investigate whether sustainability reporting practices, such as sustainability reports, Global Reporting Initiative (GRI) Standards, and external assurance, are associated with environmental performance. We study a sample of 210 Nordic-incorporated listed firms from 2002 to 2020 across Denmark, Finland, Norway, and Sweden. The baseline model with ordinary least squares regression shows that issuing sustainability reports and reporting under GRI Standards are positively associated with environmental performance whilst external assurance is insignificant. However, we find that environmentally non-certified and CSR awards non-receiving firms have all considered sustainability reporting practices positively related to environmental performance. Employing the substantive versus symbolic approach to legitimacy, we argue that firms with inadequate environmental commitment or reputation might be under immense pressure to achieve corporate legitimacy and may thus use sustainability reporting practices as a substantive approach to legitimacy. Our findings have important policy relevance in the context of the increasing focus on sustainability reporting standards in Europe and other countries. We suggest that quality-enhancing sustainability reporting practices which may curtail firms' symbolic behaviour should be required under mandatory regimes. Meanwhile, firms’ existing practices and initiatives should be considered to provide complementary effects related to environmental performance.