Sustainable Banking in Indonesia and Malaysia: Optimizing Corporate Governance and the Role of CEOs' Social Networks

This study aims to examine the influence of standalone CSR reports, GRI standards, and external assurance services on the quality of ESG sustainability reports between 2 sectors, namely the manufacturing and banking sectors. The data used in this study were 47 banking sectors and 163 manufacturing sectors. The results of this study are expected to provide an understanding of cross-sector sustainability and assist stakeholders regarding information on sustainable reporting practices. This study contributes, firstly, by providing evidence on the level of quality of sustainability reporting in two different sectors, namely the banking and manufacturing sectors. Secondly, this study focuses on standalone CSR disclosures, the use of GRI standards, and external assurance services. The findings show that the quality of ESG sustainability reports in the banking sector is more influenced by external assurance services. Banking companies assume that external assurance services can improve the credibility and quality of sustainability report information if the assurance process is carried out with a focus on meeting stakeholder needs and based on applicable assurance principles and standards. Meanwhile, in the manufacturing sector, the quality of ESG sustainability reports in banking companies is more influenced by their own CSR reports. CSR presented by a separate company is an important type of report because it shows the company's commitment to addressing environmental issues.

The Sustainability Reporting (SR) quality had questioned because there is no standard in preparing SR enforced by standard setters in Indonesia. The SR quality had anticipated by reviewing corporate reporting research. Therefore, this study investigates the quality of SR in corporate reporting research. This study uses a systematic literature review from 2007-2020 through articles based on selected databases. The results showed that the measurement of the SR quality had dominated by the use of codification from the Global Reporting Initiatives (GRI). The accountability of corporate reporting, especially SR, cannot only be reviewed through GRI. The quality of SR in corporate reporting research shows that the codification proposed by other researchers besides GRI can be an alternative as a form of corporate reporting accountability. SR quality as an indicator of accountability for the implementation of the company's sustainability activities. The sustainability reporting quality is not a goal, only a tool to assess the sustainability of activities that an entity has carried out.

'Green Washing’ or ‘Authentic Effort’? An Empirical Investigation of the Quality of Sustainability Reporting by Banks

Purpose: The aims of this research are twofold: (1) to examine the quality of sustainability reporting among publicly traded firms in Indonesia and Malaysia, and (2) to explore the cause-and-effect link between the quality of sustainability reports and corporate value. Design/methodology/approach: The population consisted of manufacturing enterprises in Indonesia and Malaysia that have issued the Sustainability Report. The sampling was conducted using a random sampling approach and the sample size was determined using the Slovin formula. The assessment of sustainability reporting quality was conducted using certain indicators, namely: (1) adherence to regulations, (2) extent of time horizon disclosures, and (3) level of depth in content disclosure. The assessment of corporate worth was determined by the annual increase in market capitalization. The control variables employed were company size, capital intensity, leverage, and profitability. The data was gathered from the annual report and sustainability report coverage for the years 2018, 2019, and 2020, which were published on the company's website and on the stock market. By employing random sampling and ensuring the availability of all necessary data as per the regression analysis model, we acquired a total of 300 samples of manufacturing firms in Indonesia and 274 samples of manufacturing companies in Malaysia. The evaluation of the Indonesia sustainability report's disclosure pertains to the compliance with Financial Services Authority Regulation Number 51 /POJK.03/2017, which outlines the guidelines for the implementation of sustainable finance. The evaluation of Malaysia's sustainability report disclosure pertains to the Global Reporting Initiative (GRI). The study employed panel data regression analysis to investigate the causal association between the quality of sustainability report and corporate value. Findings: The practices of sustainability disclosure in Indonesia and Malaysia exhibit distinct emphases. Indonesia priorities environmental factors, whilst Malaysia focuses more on social disclosure. Companies in Malaysia have higher levels of disclosure compared to those in Indonesia due to the earlier implementation of the Global Reporting Initiative (GRI). Environmental disclosures and social disclosures in Indonesia have a notable impact on the value of the company, as measured by Tobin's Q. The negative coefficient of social disclosure indicates that investors typically react unfavorably. The act of evacuating the environment has a beneficial effect, which is seen in the appreciation shown by investors. The revelation of corporate governance has a favorable impact on the company's value (Tobin Q) in Malaysia, indicating that investors in Malaysia exhibit significant interest in governance matters. Higher levels of governance result in reduced risk and increased desirability for investors. Research limitations/implications: Some corporations do not release sustainability reports, hence researchers must get data from annual reports. The presentation of sustainability information in the annual report lacks organisation, resulting in frequently inadequate data. Originality/values: The research's originality resides in its full measurement of disclosure and its study of each component of disclosure in the sustainability report.

This study aims to analyse the diffusion level of non-financial reporting (sustainability reporting, corporate social responsibility, and integrated reporting) in companies listed on the Indonesia Stock Exchange and analyse the quality of sustainable reporting standalone. Indonesia, which is one of the emerging market countries, has not yet established independent sustainable reporting regulations, but a small number of companies in Indonesia are committed to following global regulations to support sustainable development. The study was conducted on public companies listed on the Indonesian stock exchange and examined 240 sustainability reports from 2016 to 2019. For the quality of sustainable reporting standalone, we used the disclosure of triple bottom-line items (economic, environment, social) in accordance with GRI and content analysis to analyze the quality of sustainability reporting based on the GRI (Global Reporting Initiative) principles to measure quality: clarity and accuracy, timeliness, and engagement, stakeholders, comparability, and reliability. This analysis follows, whos argue that in Indonesia public companies, there do not yet require the preparation of a standalone sustainability report. This study shows that the diffusion of sustainability reports is still shallow compared to mandatory social responsibility reports. The quality of sustainability reports based on disclosure is also still low, but industry groups vary in quality. The quality of Sustainability Reporting is based on timeliness and stakeholder engagement, and comparability, satisfactory. However, for clarity and accuracy, the results are acceptable, while reliability is less acceptable.

This study posits that, in the absence of extensive mandatory regulation and auditing, differences in internal and external corporate governance (CG) mechanisms will explain variations in choices concerning corporate sustainability reporting and the interrelated and underlying corporate sustainability performance (CSP). Specifically, we explore whether board monitoring effectiveness as a major internal CG mechanism and stakeholder engagement as a key external CG mechanism are positively associated with sustainability reporting quality (SRQ), compliance with generally accepted sustainability reporting standards (SRC) and guidelines, and CSP for a sample of Dutch firms that have voluntarily disclosed sustainability reports during the years 2012–2016. In addition to these direct effects, we also investigate the potential indirect effects of the CG mechanisms on SRQ and SRC via CSP and distinguish between nonlagged and lag effects. Using structural equation modeling, our results show that, in the short term, monitoring effectiveness positively affects SRQ and SRC. Stakeholder engagement positively affects SRQ and SRC in the short term and is positively related to SRQ via CSP in the longer term, indicating that active stakeholders, over time, may drive companies toward more sustainable business conduct. Finally, the findings that CSP is positively related to SRQ but negatively related to SRC provide further support for signaling and legitimacy theory, respectively. Companies with superior CSP disclose high‐quality information on CSP to signal the firm's superior sustainability performance, whereas poor performing companies legitimize their inferior CSP by complying with more reporting standards, rather than by directly improving their underlying CSP.

ABSTRACTSustainability reporting and its assurance are increasingly becoming globally mandatory, alongside the issuance of international standards for sustainability assurance aimed at boosting the confidence and trust of investors, regulators and other stakeholders in sustainability‐related disclosures. The objective of this paper is to investigate how the interplay between external assurance and an effective audit committee (AC) might influence the quality of GRI standalone sustainability reporting. Using the GRI Standards (2016), a disclosure index with 32 items referring to six quality indicators was developed to assess the quality of the sustainability reports of 104 chemical firms from 36 countries for the years 2020, 2021 and 2022. Our panel regression showed that increased numbers of AC members, along with their higher levels of independence, directly improve the quality of sustainability reporting. However, when external assurance is involved as a moderating variable, sustainability reporting quality is further enhanced by smaller AC size, greater sustainability expertise and a higher proportion of female AC members. This study makes an original contribution by addressing a gap in the literature regarding the impact of AC sustainability expertise, as well as the moderating role of external assurance on the relationship between AC characteristics and the quality of sustainability reports. The research provides a valuable assessment tool for chemical firms to benchmark the quality of their sustainability reporting and offers insights for shaping sustainable business strategies. The findings will help raise awareness among regulators, policymakers and industry stakeholders about the need to incorporate sustainability experts, achieve better gender balance in AC and engage external auditors in the sustainability reporting process.

Purpose Sustainable development (SD) is widely acknowledged as the center around which all development efforts should revolve. Banking is a crucial component of SD, and the adoption of sustainable banking practices by various banking institutions is a powerful catalyst for its achievement. This paper aims to investigate the level of adoption of environmental, social and governance (ESG) indicators in India and the extent to which financial institutions use these strategies. In addition, the banks have been classified according to their sustainable banking performance and showing a relationship between ESG and sustainability. Design/methodology/approach An ESG framework has been developed for the Indian banking system that focuses on the behavior of banks. The evaluation of literature helps to identify the gaps in particular frameworks for analyzing sustainable banking practices in developing nations because of the variation in economic criteria between developed and developing countries. An attempt to construct a common framework for measuring the banking sector’s sustainable efforts has been done in the past. Specifically in India, where the social and environmental dimensions of sustainability are of equal importance to governance indicators, these studies fall short of providing relevant indicators. Multiple financial reports, nonfinancial reports, corporate social responsibility reports and business responsibility reports of this sector were analyzed using content analysis techniques against ESG indicators for sustainability attainment. Findings The result of this study shows that both the sectors are disclosing their environmental indicators more as compared to other dimensions. While the analysis says that private companies are going better than public companies in terms of disclosing their ESG indicators. As compared to the international banking sector, adoption of Global Reporting Initiatives standards, United Nations Environment Programme Financial Initiatives (UNEP FI), Green Credit Policy and Equator Principles (EP) is near to the ground in India. IDFC bank is the only entity that started implementing EP practices and Yes bank also is doing a wonderful implementation of the green policies and is the signatory to UNEP FI. Practical implications The current state of sustainable banking in India is reflected in the implementation of the proposed framework. To better integrate sustainability problems into banking, this study provides helpful information for banks and other stakeholders. In addition, this study corrects the lack of research in the Indian context on sustainable banking. Originality/value To the best of the authors’ knowledge by far, this is one of the prime studies to inspect the degree of ESG disclosure by the Indian banking sector in their sustainability report.

This research aims to examine the effect of proprietary costs towards the quality of sustainability reports and the moderating effect of ownership structure on proprietary costs with the quality of sustainability reports. Based on previous research, one of the factors that affect companies to limit disclosure of information which impacting the quality of published sustainability reports is proprietary costs, and to minimize this effect by percentage or total ownership structure. The population in this research is based on data from the Global Reporting Initiative (GRI) for the period of 2013-2016. The samples in this research are determined by purposive sampling technique in which they are 92 sustainability reports from 36 companies listed on the Indonesia Stock Exchange. This research is analyzed using regression analysis and moderated regression analysis. The results show that proprietary costs have a positive effect on the quality of sustainability reports and foreign ownership moderates the negative effects of proprietary costs on the quality of sustainability reports.

PurposeThe purpose of this study is to assess the extent of Sustainable Development Goals (SDGs) disclosures among Vietnamese listed firms and identify key influencing factors.Design/methodology/approachThe authors analyse SDG-related disclosures of the top 100 listed firms by market capitalisation on the Hanoi and Ho Chi Minh stock exchanges as of December 31, 2023, using an established reporting methodology. Data were sourced from annual, corporate governance, ESG, financial and sustainability reports. A regression model was used to examine factors influencing SDG disclosure.FindingsSDG disclosure among Vietnamese firms is relatively low. Corporate governance, firm size, government ownership, industry and Global Reporting Initiative (GRI) usage positively influence disclosure levels, while auditing firm type and firm age show a negative association. Financial firms tend to use sustainable development reports and GRI indicators more frequently.Practical implicationsPractically, strengthening governance frameworks and promoting GRI adoption can improve the quality and extent of sustainability reporting among Vietnamese firms. Socially, enhanced SDG disclosure supports improved corporate practices that align with the United Nations SDGs, fostering a more sustainable and transparent economy in Vietnam.Originality/valueTo the best of the authors’ knowledge, this is the first study examining SDG disclosure and influencing factors in Vietnamese listed (2021–2023), using the GRI (2016) standard. This study contributes to transparency in Vietnam’s financial markets and sustainability practices, offering insights for preparers and policymakers.

PurposeThe purpose of the study is to investigate the factors that influence the adoption of new sustainability reporting (SDG) and external assurance (EXTA) practices. This study also examines the relationship between sustainability reporting activity and corporate economic performance for a sample of 99 companies in Gulf Cooperation Council (GCC) countries that addressed SDGs in their sustainability reports published in 2019.Design/methodology/approachUsing a two-stage analysis, this study examines how firms’ characteristics and corporate governance variables affect SDG and economic performance, as well as the firm’s decision to adopt EXTA statements for a sample of companies in that addressed SDGs in their sustainability reports published in 2019. The authors collected data from the Global Reporting Initiative’s (GRI) Sustainability Disclosure database and the Bureau van Dijk for Orbis database.FindingsThe results show that the variables firm size, profitability, big 4 auditors and government ownership significantly affect SDG and economic performance. The results also reveal that firms operating in the manufacturing sector are positively correlated with SDG and the firm’s decision to adopt EXTA statements. Furthermore, the results indicate that board independence positively affects SDGs and EXTA.Research limitations/implicationsThe results can be particularly relevant and timely in helping large GCC companies promote their engagement to sustainable development practices by adopting more sustainable long-term strategies and policies. The findings could also guide managers in the strategic direction to identify firms’ characteristics and corporate governance features essential to promote sustainability reporting, an increasingly important performance indicator for investors and to enhance their confidence in the capital market. The results may also have practical implications to policymakers and other regulators in GCC countries to define effective frameworks that promote sustainable development reports and the use of EXTA.Originality/valueThe results make significant contributions by providing new insights to the existing literature on sustainability reporting in emerging markets by examining a unique perspective on the influence of firms’ characteristics and corporate governance features on the adoption of new sustainability reporting practices. The authors further add to the previous literature on the relationship between a firm’s economic performance and sustainable reporting by providing evidence from large companies in GCC countries, which might benefit from the adoption of multiple conceptual lenses, in this case, legitimacy and stakeholder theories. Lastly, through the empirical findings, this study provides economic validity to the 2018 joint initiative of the GRI and the United Nations Global Compact to strengthen corporate actions to achieve the United Nations SDGs.

This study aims to examine the role of green governance in the quality of sustainability reports. We also examine the moderating role of sustainability commitment between green governance and the quality of sustainability reports. This research is a quantitative study by using unbalanced data panels. The study retrieves the samples from the companies listed on the ASEAN Stock Exchange that published sustainability reports from 2015 to 2019. The research finding shows that the board’s independence, board diversity, and sustainability commitment are significantly associated with the quality sustainability reports. Moreover, the board size indicates a low effect on the reliability and the chief sustainability officer on the conciseness of sustainability reports. Meanwhile, it has not been possible to prove that the presence of sustainability committee can lead effect on the report quality. The sustainability commitment also moderates female directors and the quality of sustainability reports. Other findings are obtained from the company’s characteristics where company size and type of industry are positively correlated with the quality of sustainability reports. This study has several limitations. First, some companies that are under observation spend money on social costs, but the amounts are not clearly disclosed. Second, this research only focuses on three quality aspects: conciseness, clarity, and reliability. These research findings contribute to the following scopes. First, how green governance and commitment to sustainability help improve the quality of corporate reporting. Second, the investors should invest in companies that apply good green governance and sustainability commitment. Third, companies with strong commitments to sustainability and good corporate governance are competitive resources that support businesses in growing, attracting more investment, and earning stakeholders’ trust. Lastly, this research also contributes to the agency and the resource-based view theories related to the green governance and the sustainability reports’ quality of ASEAN countries.

Purpose – This study aims to determine the influence of stakeholder pressure and ownership structure on the quality of sustainability reports in non-financial sector companies listed on the Indonesian Stock Exchange (IDX) from 2021 to 2023.Design/methodology/approach – This research is causal research using a quantitative approach. The sampling method used was purposive sampling, resulting in 78 non-financial sector companies listed on the Indonesia Stock Exchange (IDX) from 2021 to 2023. This study uses data from annual reports and corporate sustainability reports which are analyzed using panel regression.Findings – The results show that foreign ownership has a positive effect on the quality of sustainability reports. Meanwhile, other factors such as employee pressure and shareholder pressure do not affect on the quality of sustainability reports. Therefore, the results of this study indicate that foreign ownership is the most influential factor in the quality of sustainability reports. Originality/value – This study makes a novel contribution to the literature on stakeholder pressure and ownership structure in relation to sustainability report quality by focusing on the Indonesian context as an emerging market. This research not only fills a gap in the existing literature, but also provides valuable insights into the challenges and opportunities faced by companies in Indonesia in implementing quality sustainability reports. Research limitations/implications – Research on sustainability report disclosure is still limited in Indonesia, mainly because there are still many companies that have not disclosed sustainability report quality practices. As a result, the availability of data from companies that disclose sustainability report quality information is limited. Furthermore, this study also has generalization limitations from the sample and research period which may provide opportunities for further research. The findings of this study may motivate companies to adopt more comprehensive and accurate sustainability reporting practices that are aligned with international reporting standards. The results of this study make a significant contribution to the existing literature on the impact of stakeholder pressure and ownership structure on the quality of sustainability reports.Keywords: Sustainability report quality; stakeholder pressure; ownership structure.Article Type: Research Paper

The aim of this study is to examine the effect of comprehensive stakeholder pressure and corporate governance on the quality of sustainability reports for LQ45 companies on the Indonesia Stock Exchange for the 2019-2021 period. The comprehensive stakeholder pressure component consists of shareholders and employees, while the corporate governance component consists of the board of commissioners and the audit committee. The sampling technique used purposive sampling method with a sample of 75 companies and data analysis techniques using linear regression. This research uses legitimacy theory and stakeholder theory. The results showed that the components of shareholders, employees, the board of commissioners and the audit committee had no effect on the quality of the sustainability report. Limitations in the study, namely not all LQ45 companies disclose sustainability reports and the lack of variables in the study. Suggestions for future researchers can focus on companies that have disclosed sustainability reports and can use more other variables so they can provide further explanation about the factors that affect the quality of sustainability reports so they can provide more accurate information.

PurposeThis study explores the quality of sustainability reporting (QSR) and the impact of regulatory guidelines, social performance and a standardised reporting framework (using the Global Reporting Initiative [GRI] guidelines) on QSR in the context of banks in Bangladesh.Design/methodology/approachUsing a sample of 315 banking firm-year observations over 13 years (2002–2014), a content analysis technique is used to develop the 11-item QSR index. Regression analysis is used to test the research hypotheses.FindingsInitially, QSR evolved symbolically in Bangladesh's banks but, over our investigation period, with QSR indicators gradually improving, the trends became substantive. The influences on QSR were sustainable banking practice regulatory guidelines, social performance and use of the GRI guidelines. However, until banks improve reporting information, such as external verification and trends over time, QSR cannot be regarded as fully substantive.Research limitations/implicationsThis study advances QSR research and debate among academic researchers. With regulatory agencies and stakeholders increasingly using sustainability reporting information for decision making, the information's quality is vital.Originality/valueThis study is the first on QSR in the banking industry context, with previous research mostly investigating the quantity of sustainability reporting. The current study also synthesises QSR with sustainability regulation and social performance factors which have rarely been used in the sustainability literature. To gain a holistic understanding of QSR, existing QSR measures are advanced by combining external reporting efforts with banks' internalisation initiatives.