Sustainability Disclosure Research Articles

Issues and Suggestions for the Compliance of Scope 3 Emission Disclosure Requirement of IFRS Sustainability Disclosure Standards

Issues and Suggestions for the Compliance of Scope 3 Emission Disclosure Requirement of IFRS Sustainability Disclosure Standards

The Influence of Sustainability Disclosure on Financial Performance: A Study of Indonesian Firms

This study examines the correlation between the disclosure of sustainability measures and the financial success of companies in Indonesia. The increasing importance of sustainability disclosure, which includes environmental, social, and governance factors, for firms to demonstrate their dedication to sustainable practices, has generated significant debate on its influence on financial results. This study investigates the impact of sustainability disclosures on the financial performance of companies in Indonesia, thus adding to the existing body of knowledge on this topic. The study utilizes a mixed-method approach, incorporating qualitative content analysis of data extracted from annual reports, as well as quantitative analysis derived from financial statements of publicly traded corporations. The sample consists of companies from three major industry sectors, each demonstrating different levels of quality in disclosing their sustainability practices. Accounting-based indicators like return on assets (ROA) and return on equity (ROE) are used to evaluate financial performance. The findings demonstrate a direct and favorable relationship between the caliber of sustainability disclosures and financial performance, specifically in sectors that are highly responsive to environmental concerns. Companies that have more comprehensive and transparent sustainability reporting processes in these industries generally achieve better performance compared to those with less comprehensive reporting. These conclusions have substantial ramifications for firms, investors, and policymakers. Enhancing sustainability disclosure can enhance a company’s financial performance and act as a significant factor for investment choices, providing information about a company’s dedication to sustainability and related risks. Policymakers can utilize these observations to support the implementation of improved sustainability reporting regulations, thereby fostering sustainable economic growth in Indonesia. Ultimately, the research confirms that Indonesian companies who provide detailed and reliable information on their sustainability efforts have a positive correlation with their financial performance. This emphasizes the significance of improving these practices to achieve both economic prosperity and sustainable development objectives.

The Effect of Sustainability Reporting Disclosure, Environment, Social and Governance Rating, and Digital Banking Transactions on Firm Value with Financial Performance as an Intervening Variable (Case Study on Commercial Bank in Indonesia)

The purpose of this study is to examine the effect of disclosure on sustainability reporting(SR), environmental, social, and governance (ESG) ratings, and digital banking transactions on firm value (PBV) with financial performance (ROA) as an intervening variable. This study's population consists of eight Indonesian commercial banks listed on the Indonesia Stock Exchange and classified as KBMI 3 or 4 that released financial and sustainability reports between 2018 and 2022. Thedata analysis approach of this study is quantitative, with a casual design processed using Eviews 12. The result of this study shows that disclosure of sustainability reporting has a positive and significant influence on firm value of KBMI 3 and 4 category banks, whereas ESG ratings, digital banking transactions, and company performance have no effect.

Decoding mood of the Twitterverse on ESG investing: opinion mining and key themes using machine learning

PurposeGrounded in the stakeholder theory and signaling theory, this study aims to broaden the research agenda on environmental, social and governance (ESG) investing by uncovering public sentiments and key themes using Twitter data spanning from 2009 to 2022.Design/methodology/approachUsing various machine learning models for text tonality analysis and topic modeling, this research scrutinizes 1,842,985 Twitter texts to extract prevalent ESG investing trends and gauge their sentiment.FindingsGibbs Sampling Dirichlet Multinomial Mixture emerges as the optimal topic modeling method, unveiling significant topics such as “Physical risk of climate change,” “Employee Health, Safety and well-being” and “Water management and Scarcity.” RoBERTa, an attention-based model, outperforms other machine learning models in sentiment analysis, revealing a predominantly positive shift in public sentiment toward ESG investing over the past five years.Research limitations/implicationsThis study establishes a framework for sentiment analysis and topic modeling on alternative data, offering a foundation for future research. Prospective studies can enhance insights by incorporating data from additional social media platforms like LinkedIn and Facebook.Practical implicationsLeveraging unstructured data on ESG from platforms like Twitter provides a novel avenue to capture company-related information, supplementing traditional self-reported sustainability disclosures. This approach opens new possibilities for understanding a company’s ESG standing.Social implicationsBy shedding light on public perceptions of ESG investing, this research uncovers influential factors that often elude traditional corporate reporting. The findings empower both investors and the general public, aiding managers in refining ESG and management strategies.Originality/valueThis study marks a groundbreaking contribution to scholarly exploration, to the best of the authors’ knowledge, by being the first to analyze unstructured Twitter data in the context of ESG investing, offering unique insights and advancing the understanding of this emerging field.

Disclosure Compliance with Different ESG Reporting Guidelines: The Sustainability Ranking of Selected European and Hungarian Banks in the Socio-Economic Crisis Period

As the relevant European Union directives require in-depth sustainability reporting from large institutions, banks are among the concerned with disclosure obligations. Several institutions prepare self-structured recommendations by which companies are indirectly fostered to make their operation more sustainable through reporting and to help compliance with the upcoming Corporate Sustainability Reporting Directive (CSRD) regulations. However, in the preparation period, differences can be found in the actual sustainability disclosure practices across Europe (primarily by a western–eastern European relation). To examine this issue, this study aimed to investigate if there was any variation in the reporting compliance with aspects (key performance indicators—KPIs) of three reporting guidelines (Global Reporting Initiative—G4, Financial Services Sector Disclosures—GRI; Alliance for Corporate Transparency—ACT; ISO 26000:2010—ISO) between top European and Hungarian banks according to their 2021 sustainability/ESG reports, using content analysis-based disclosure scoring. The results revealed no significant differences among the general (aspect-pooled) scores for different guidelines, while the differences were significant for each guideline between the two bank groups. In the aspect-level evaluation, the European banks had higher scores in most cases, with the Hungarian banks receiving higher scores in 4 of 49 GRI, 1 of 16 ACT, and 2 of 37 ISO aspects. Significant correlations were indicated in disclosure score values between the two bank groups, which suggested similar preferences for the aspects demonstrated; however, elaboration levels differed. These findings showed that the European and Hungarian banks could be differentiated by their sustainability disclosure patterns. The results suggest a better CSRD-level preparedness of the top European banks than of the Hungarian ones, with the latter being introduced as a model group of the region. This reflects the need for more efficient adoption of best practices by financial institutions in the eastern parts of Europe.

Does ESG disclosure really influence the firm performance? Evidence from India

In this paper, we examine the influence of ESG disclosure scores on firm performance of companies listed in the National Stock Exchange (NSE). The study uses 167 sample firms from 2010 to 2020. We capitalise overall ESG disclosure scores taken as a proxy to measure the effect of sustainability disclosure on firm performance. Further, we consider the return on assets (ROA), return on equity (ROE), Tobin’s Q, and Price Earnings ratio (P/E ratio) as firm performance measures. We employ dynamic panel data regression analysis to examine the influence of ESG disclosures on performance of the firm. In order, to address the endogeneity issues, we apply Generalised Method of Moments (GMM) model. The study results show a positive relationship between ESG disclosure and firm performance. It suggests that companies’ desire to enhance their performance need to pay more attention towards sustainability disclosures.

The cooperative ESG disclosure index: an empirical approach

AbstractGrowing concern about Environmental, Social, and Governance (ESG) performance is pushing businesses, including social economy enterprises such as cooperatives, to seek solutions for Sustainable Development (SD) challenges. This study explores the current landscape of ESG reporting by Spanish cooperatives, adding to the limited knowledge about their sustainability disclosure practices. We propose a specific framework for these entities based on non-financial indicators as a preliminary step to develop an index for ESG reporting, the Cooperative ESG Reporting Index (COOPESG). In terms of methodology, the first step is to create an ad hoc database of primary data sourced through the analysis of cooperative websites. Then, by reviewing the indicators reported by these companies, these primary data are then used to develop an index. Our findings show that only half of the sampled cooperatives have a specific section on their website for ESG reporting. Regarding formats, Codes of Ethics were the most frequent type of report used, followed by the publication of information on SDGs. In terms of content disclosed, the social and governance blocks stand out, while the least information is disclosed on the economic and environmental blocks. Furthermore, there is evidence of a size and sector effect on the disclosed content. All this provides valuable insights for scholars and practitioners alike. Thus, the main practical contribution of this paper for cooperative managers is that it supports the effective disclosure of ESG in line with prevailing good practice, addressing emerging social regulation in the context of the European Union. Also, for academia this study offers a practical breakthrough in the analysis of this subject, helping to fill the gap on cooperatives found in the ESG reporting literature and setting a new research agenda.

Empirical Study of the Effect of Sustainability Accounting Disclosures on Financial Performance of Brewery Firms in Nigeria: Evidence from Nigerian Breweries PLC

The main motivation of this study stemmed from the dearth of empirical evidence of the effect of sustainability accounting disclosure on financial performance of Brewery firms in Nigeria and also to provide empirical proof on “governance disclosure” as one of the explanatory variables of sustainability accounting disclosure. Consequently, this study ascertained the effect of sustainability accounting disclosure on financial performance of Brewery firms in Nigeria. An ex–post facto research design approach was adopted for the study. The population of this study comprised five (5) Brewery firms quoted on the floor of the Nigeria exchange group (NGX), and Nigerian Breweries Plc was purposively used as the sample size of this study. Secondary data were carefully sourced from the financial statement/annual reports and sustainability reports from 2013 to 2022 of the Brewery firms quoted on the Nigeria exchange group (NGX). Least regression analysis by aid of E-views 10.0 software was used to test for statistical significance of the effect of sustainability accounting disclosure on financial performance of Brewery firms in Nigeria. The results showed that Economic Sustainability disclosure indexes do not significantly affect Net Profit Margin of Brewery firms in Nigeria. The findings further revealed that Environmental Sustainability disclosure indexes significantly affect Net Profit Margin of Brewery firms in Nigeria. More so, results showed that Social Sustainability disclosure indexes do not significantly affect Net Profit Margin of Brewery firms in Nigeria. Finally, the result established also that Governance Sustainability disclosure indexes do not significantly affect Net Profit Margin of Brewery firms in Nigeria, this study recommends among others; that managers of Brewers in Nigeria should improve and sustain full disclosure practices on economic, environmental, social and governance disclosures following the guidelines of the Global Reporting Index(GRI) as they are capable of exerting significant effect on financial performance of firms in Nigeria.

A meta-analytic review of the sustainability disclosure and reputation relationship: aggregating findings in the field of social and environmental accounting

PurposePrevious research has explored the link between sustainability disclosure and reputation but produced contradictory results. This study aims to clarify the sustainability disclosure–reputation relationship through a quantitative analysis of the correlations between these variables reported in empirical research papers. The second objective was to determine how various moderators affect the sustainability disclosure–reputation link.Design/methodology/approachThe meta-analysis was based on a systematic review of the literature covering empirical research on the corporate sustainability disclosure and reputation relationship. A total of 92 articles were meta-analyzed to compile their findings on four extrinsic moderators: company size, ownership, stock listing status and activity sector.FindingsThe findings confirm that a significant positive correlation exists between corporate sustainability disclosure and reputation. The moderator analysis also revealed that companies’ different characteristics can explain researchers’ divergent results.Practical implicationsThe results have considerable practical relevance for organizational management. First, they can motivate managers to improve and disclose their company’s social and environmental impacts to strengthen their reputation, which in turn will help accelerate the achievement of the Sustainable Development Goals. Second, the findings can ensure organizations develop disclosure and reputation management strategies adapted for each firm’s size, ownership, stock listing status and activity sector.Social implicationsThe results have considerable practical relevance for organizational management. First, they can motivate managers to improve and disclose their company’s social and environmental impacts to strengthen their reputation, which in turn will help accelerate the achievement of the Sustainable Development Goals. Second, the findings can ensure organizations develop disclosure and reputation management strategies adapted for each firm’s size, ownership, stock listing status and activity sector.Originality/valueTo the best of the authors’ knowledge, this meta-analysis is the first to clarify the link between disclosure and reputation, which makes a unique contribution to the field of social and environmental accounting. A larger sample of primary research was collected, and key extrinsic moderators were examined to explain prior studies’ contradictory findings.

Assessing the Impact of Policy Uncertainty, Geopolitical Risk, and Sustainable Disclosure on Corporate Performance

Assessing the Impact of Policy Uncertainty, Geopolitical Risk, and Sustainable Disclosure on Corporate Performance

Bridging the Gap Between Legitimacy and Neutralisation Strategies in Sustainability Reporting

Amid global sustainability challenges, such as climate change, companies operating in different industries face increasing demands for accountability and transparency. To meet these demands, sustainability reporting (SR) has become a mainstream business practice in communicating companies’ positive and negative sustainability impacts. This short paper aims to increase our understanding of how companies may release negative information while seeking to maintain their legitimacy. For this purpose, the paper bridges the gap between legitimacy strategies, impression management and neutralisation techniques by reviewing their associated literature. The nature of neutralisation techniques and how organisations use them in the SR context is underexplored by scholars. Finally, the paper presents prospective discussions of an ongoing study that examines negative sustainability disclosure in the tourism transportation context, namely the airlines.

Correction: Pereira et al. Do the Levels of Environmental Sustainability Disclosure and Indebtness Affect the Quality of Earnings? Sustainability 2023, 15, 2871

The authors would like to make the following corrections about the published paper [...]

Board Flexibility in Diversity, Experienced CEOs and Corporate Sustainability Disclosure: Evidence from the Emerging Market

Board Flexibility in Diversity, Experienced CEOs and Corporate Sustainability Disclosure: Evidence from the Emerging Market

Do CAMEL and Sustainability Influences a Bank Performance?

Do CAMEL and Sustainability Influences a Bank Performance?

Sustainability performance disclosure and family businesses: a perspective article

PurposeThe deeper understanding of the disclosure of external and internal dynamics of family firms necessarily places the issue of sustainability as one of the most pressing needs from both a research and managerial perspective. Therefore, this perspective article contributes to the debate of sustainability performance disclosure in family firms, proposing a research agenda.Design/methodology/approachThis study has organized the discussion around those elements that most significantly impact the propensity to disclose, with a specific focus on the interconnections and interrelations within them. The proposed research agenda is developed around three key elements: “how” firms disclose, “the reason why” they do it and “what” disclose of their performance(s).FindingsTo better understand “how” family firms should disclose their performance, it is suggested to engage in proactive stakeholder engagement to preserve long-term socioemotional wealth. “The reason why” for disclosure is still associated with the legitimization of family firms from an economic, social and environmental point of view. Finally, the “what” depends on several factors, such as the regulatory framework and the market involved.Practical implicationsThis paper contains suggestions for family firm managers, consultants and policymakers that are approaching corporate social responsibility (CSR) and non-financial reporting or sustainability disclosure overall, providing an overview of relevant factors influencing this transition process.Originality/valueThis paper suggests a logical framework to combine these three elements of the debate as strictly interrelated to foster the sustainability performance disclosure of family firms.

Sustainability disclosure in the pharmaceutical and chemical industries: Results from bibliometric analysis and AI-based comparison of financial reports

Climate change is a pressing global challenge, and companies are under increasing pressure to adopt sustainable practices and transparently disclose their environmental performance. This study focuses on the Italian pharmaceutical industry to gain insights into the level of stakeholder and management attention to climate change and the growth of academic research in this critical area. We employ a bibliometric analysis of scientific literature and a content analysis of financial statements to examine sustainability practices and reporting in both pharmaceutical and chemical companies.Our findings reveal a significant difference in stakeholder expectations and commitment to addressing climate change between the two industries. The chemical industry has demonstrated a stronger focus on sustainability, as evidenced by higher academic research and environmental disclosure levels. In contrast, the pharmaceutical sector has shown a comparatively lower level of environmental reporting and sustainability practices. However, our analysis shows a positive trend in pharmaceutical companies’ voluntary disclosure of environmental information in their financial reports.These results highlight the need for increased focus and effort in the pharmaceutical industry to address climate change and improve sustainability practices. Pharmaceutical companies can build stakeholder trust, improve environmental sustainability, increase transparency in reporting, align practices with global sustainability goals, enhance their reputation, and reduce their environmental impact. This research provides valuable guidance for policymakers, researchers and practitioners in promoting sustainable practices in the pharmaceutical industry and contributes to the broader understanding of ESG disclosure and climate change.

Effect of Sustainability Reporting on Financial Performance of Quoted Pharmaceutical Companies in Nigeria

The thrust of this study was to ascertain the effect of sustainability reporting on financial performance of quoted pharmaceutical companies in Nigeria for a period of ten (10) years spanning from 2012 to 2021. Ex-post facto and longitudinal research design was adopted. Sustainability disclosure which is the independent variable was captured using employee health and safety disclosure, social disclosure, environmental disclosure, and governance disclosure while financial performance which served as the dependent variable was measured using return on investment (ROI). Panel data were obtained from annual reports and accounts of the sampled health care companies and subjected to preliminary data tests such as descriptive analysis, correlation analysis, variance inflation factor analysis and hausman effects tests for the study period. Multiple panels least regression analysis was employed via E-Views 12. The results of the tested hypotheses revealed that employee health and safety disclosure, and social disclosure have positive and significant effect on financial performance of health care companies in Nigeria which was statistically significant at 95% confidence level respectively while a negative but insignificant effect was documented against environmental disclosure, governance disclosure and financial performance of health care companies in Nigeria. In conclusion, the findings shed light on the substitute and complementary relationship between performance and the increase in sustainability disclosure quality.

Cultural and gender diversity for ESG performance towards knowledge sharing: empirical evidence from European banks

PurposeThis study aims to investigate the effects of board cultural diversity (BCD) and board gender diversity (BGD) of the board of directors on environmental, social and governance (ESG) performance in the European banking sector using resource-based view (RBV) theory. In addition, this study analyses the linkages between BCD and BGD and knowledge sharing on the board of directors to improve ESG performance.Design/methodology/approachThis study selected a sample of European-listed banks covering the period 2021. ESG and diversity variables were collected from Refinitiv Eikon and analysed using the ordinary least squares model. This study was conducted in the European context regulated by Directive 95/2014/EU, which requires sustainability disclosure. The original population was represented by 250 banks; after missing data were excluded, the final sample comprised 96 European-listed banks.FindingsThe findings highlight the positive linkages between BGD, BCD and ESG scores in the European banking sector. In addition, the findings highlight that diversity contributes to knowledge sharing by improving ESG performance in a regulated sector. Nonetheless, the combined effect of BGD and BCD negatively impacts ESG performance.Originality/valueTo the best of the authors’ knowledge, this is the first study to measure and analyse a regulated sector, such as banking, and the relationship between cultural and gender diversity for sharing knowledge under the RBV theory lens in the ESG framework.

Shifting perspectives: unveiling the dual nature of sustainability materiality in integrated reports

PurposeIntegrated reporting enhances the meaningfulness of non-financial information, but whether this enhancement is progressive or regressive from a sustainability perspective is unknown. This study aims to examine the influence of the Integrated Reporting (<IR>) Framework on the disclosure of financial- and impact-material sustainability-related information in integrated reports.Design/methodology/approachUsing a disclosure index constructed from the Global Reporting Initiative’s G4 Guidelines and UN Sustainable Development Goals, the authors content analysed integrated reports of 40 companies from the International Integrated Reporting Council’s Pilot Programme Business Network published between 2015 and 2017. The content analysis distinguished between financial- and impact-material sustainability-related information.FindingsThe extent of sustainability-related disclosures in integrated reports remained more or less constant over the study period. Impact-material disclosures were more prominent than financial material ones. Impact-material disclosures mainly related to environmental aspects, while labour practices-related disclosures were predominantly financially material. The balance between financially- and impact-material sustainability-related disclosures varied based on factors such as industry environmental sensitivity and country-specific characteristics, such as the country’s legal system and development status.Research limitations/implicationsThe paper presents a unique disclosure index to distinguish between financially- and impact-material sustainability-related disclosures. Researchers can use this disclosure index to critically examine the nature of sustainability-related disclosure in corporate reports.Practical implicationsThis study offers an in-depth understanding of the influence of non-financial reporting frameworks, such as the <IR> Framework that uses a financial materiality perspective, on sustainability reporting. The findings reveal that the practical implementation of the <IR> Framework resulted in sustainability reporting outcomes that deviated from theoretical expectations. Exploring the materiality concept that underscores sustainability-related disclosures by companies using the <IR> Framework is useful for predicting the effects of adopting the Sustainability Disclosure Standards issued by the International Sustainability Standards Board, which also emphasises financial materiality.Social implicationsDespite an emphasis on financial materiality in the <IR> Framework, companies continue to offer substantial impact-material information, implying the potential for companies to balance both financial and broader societal concerns in their reporting.Originality/valueWhile prior research has delved into the practices of regulated integrated reporting, especially in the unique context of South Africa, this study focuses on voluntary adoption, attributing observed practices to intrinsic company motivations. To the best of the authors’ knowledge, it is the first study to explicitly explore the nature of materiality in sustainability-related disclosure. The research also introduces a nuanced understanding of contextual factors influencing sustainability reporting.

Exploring the antecedents of local governments' sustainability disclosure: The role of the mayor

This work aims to enhance the understanding of Local Governments (LGs)’ sustainability disclosure (SD) practices through their official websites. The ultimate goal of this study is to assess the extent to which certain mayor's personal traits are likely to influence the level of online sustainability information provided by LGs. To this end, a manual content analysis was performed on the official websites of the Italian LGs with more than 40,000 inhabitants to assess the level of SD. A multivariate regression analysis was estimated to examine the extent to which mayors' gender, political ideology, age and education influence the level of sustainability information provided by LGs through websites. Empirical results highlight the crucial role that certain characteristics of LGs' mayor profiles exert on the level of SD. The present work offers an important contribution to the existing literature, as it extends the knowledge of SD practices in an underexplored context, like the LGs and the impact of the mayor's profile on SD levels in LGs.