Sustainability Disclosure Research Articles

Corporate Governance Mechanism for Carbon Emission Disclosure: Evidence from State-Owned Enterprises in Indonesia

Purpose: The purpose of this study is to explore how governance-related determinants affect carbon emission disclosure; if yes, whether government ownership, board diversity, and firm size mediates the relation between these determinants and carbon emission disclosure. We test ownership structure and firm-specific characteristics (board diversity, audit reputation, firm size, audit quality, leverage, and return on asset) towards carbon emission disclosure. Design/methodology/approach: Panel data analysis is used on a final sample of 120 firm-year observations of state-owned enterprises, having published sustainability reports with CED within the last 10 years (2012 - 2021). The direct and mediating effects were tested based on two econometric models and Sobel-Goodman test was conducted to check for the robustness. Findings: Results find that government ownership and board diversity can be employed as a corporate governance mechanism to facilitate public, institutional ownership and audit reputation respectively, towards improved accountability and transparency of CED. Smaller firms with lower financial performance tend to be more motivated to participate in CED in order to attract investment. Research limitations/implications: Several implications arise for various stakeholders including policymakers, and regulatory bodies interested in enhancing sustainability disclosure of firms through good CG mechanism, especially for firms with high government ownership. The findings of this research have wide implications in formulating an efficient CG mechanism for developing countries as SOEs are still prevalent. Originality/value: This study proposes the role of government ownership and board diversity as a CG mechanism and contributes to the voluntary literature, in particular, the link between CG determinants and practices underlying CED.

Development of Sustainability Disclosure Standards as the IFRS Foundation's new area of activities

Development of Sustainability Disclosure Standards as the IFRS Foundation's new area of activities

Effect of mandatory sustainability performance disclosures on firm value: Evidence from listed European firms

AbstractCorporate Sustainability Performance (CSP) reporting is becoming increasingly important to investors who seek to identify and invest in companies that are managing their Environmental, Social and Governance (ESG) risks effectively. The European Union's Non‐Financial Reporting Directive (NFRD), which was implemented in 2017, mandates that certain large companies must disclose their sustainability performance. This study examines the impact of the EU NFRD on the firm value of listed European firms using a difference‐in‐differences regression model. We find that the mandatory disclosure of corporate sustainability performance does not significantly affect firm value at an aggregate level. However, the results suggest minor inter‐industry differences, which can be attributed to varying sustainability performance metrics across industries. These findings contribute not only to the nascent literature on mandatory sustainability disclosures but also to the deliberations of policymakers and regulators across the world who are devising and implementing mandatory corporate sustainability performance disclosure regulations.

Reporting cybersecurity to stakeholders: A review of CSRD and the EU cyber legal framework

The purpose of this article is to explain, through a doctrinal review of the EU sustainability and cybersecurity legal framework, how the cybersecurity obligations contribute to the cybersecurity content and quality of the sustainability reporting. Previous studies are limited to voluntary cybersecurity disclosure in annual reports because they date back to before the adoption of CSRD. The CSRD harmonized sustainability reporting in the EU and introduced the ESRS, the standards for sustainability disclosure. As stated in the ESRS S4, the sustainability reporting should now address how the company manages the risks linked to data usage and data collection. Therefore, cybersecurity measures must be included in the sustainability report. This information can be used by stakeholders to assess the risk appetite and the potential long-term profitability of the company. The cybersecurity measures adopted by companies must comply with the cybersecurity obligations of the EU legal framework. While it is out of the scope of these cybersecurity obligations to inform ex ante the stakeholders of a company of how the company is managing cyber risks, these same obligations can improve the quality and content of the sustainability discourse.

Do Social Interaction Mechanisms Affect University Reputation? Evidence from the UK Higher Education Sector

We investigate the influence of skilful utilization of social interaction dynamics on creating reputations for UK Higher Education Institutions (HEIs) during public funding cuts and scrutiny. The paper employs a content analysis method and follows an empirical design with a unique sample of 148 UK HEIs. To gauge reputation, we rely on participatory data from the Guardian newspaper's 2014–15 environmental and ethical performance ratings for the People & Planet University League. Multiple regression analysis is applied to address the research hypotheses. The results indicate that open, accountable, and transparent sensemaking in sustainable development (SD) practices over the years is the predominant dynamic for enhancing HEIs’ reputation. This paper underscores the need to consider the institutional logics perspective as a theoretical foundation for a comprehensive understanding of the link between sustainability disclosure and an institution's reputation, image, and public goodwill within the higher education (HE) context. HEIs’ leadership should invest in SD and its associated disclosure practices. Policy‐makers and accounting regulators should establish consistent and comparable reporting requirements for sustainable performance within the HE sector. This paper is the first to empirically examine the direct impacts of HEIs’ compliance with sustainability duties on organizational performance.

EU’s sustainable finance disclosure regulation: does the hybrid reporting regime undermine the goal to reorient capital to climate action?

ABSTRACT Disclosure and reporting are cornerstones of the European Union’s sustainable finance agenda with the goals of reorienting capital flows towards climate and other sustainable investments and minimizing greenwashing. A key component of the regulatory framework is the Sustainable Finance Disclosure Regulation (SFDR), which requires fund managers to calculate and disclose a ‘sustainable investment’ (SI) percentage, aggregating exposure to activities contributing to climate mitigation and adaptation and the other environmental and social sustainability objectives of the European Union. In turn, financial advisors must use SI percentages when advising customers under the Markets in Financial Instruments Directive II. Defining ‘sustainable investments’ in a robust and consistent way is crucial to the effectiveness of SFDR. Based on a review of the regulatory texts and financial sector participant observations this policy analysis article explores the overlapping guidelines framing how market participants are allowed to define sustainable investments, and the implications for achieving the goals of the sustainable finance agenda. The analysis suggests that the ‘unintentionally hybrid’ SFDR regime may perversely incentivize fund managers to forgo the use of the highly detailed EU Taxonomy rules-based approach that precisely defines climate-related ‘substantial contributions’ and apply the vague principles-based approach found in SFDR Article 2.17. This would allow each financial actor to define and determine independently what constitutes a sustainable investment, circumventing the robust, if imperfect, climate-related rules of the EU Taxonomy. The SFDR regime therefore risks undermining the European Commission’s stated goals of increasing capital allocation to sustainable activities and eliminating greenwashing. Key policy insights: A sustainability disclosure regime allowing the choice between robust rules and vague principles risks creating opportunities for greenwashing and reduced comparability. Fund managers are likely to select definitions that are least difficult to apply and maximize Sustainable Investment percentages. The current EU regime risks tacitly sanctioning the use of weak metrics, in turn slowing the reorientation of capital towards climate-related and other sustainable investments. The EU must at a minimum provide binding guidance on interpreting Article 2.17, require equal prominence for both SI percentages and EU Taxonomy-alignment scores, as well as address the usability issues of the existing Taxonomy.

Unveiling universities’ sustainability disclosure antecedents: an empirical analysis during the COVID-19 pandemic

Purpose This study aims to investigate the level of online sustainability disclosure provided by international universities during the COVID-19 pandemic. The ultimate goal is to identify the factors influencing the amount of sustainability information these universities disclose through their websites. Design/methodology/approach This study conducts a manual content analysis to measure the extent to which a sample of 100 international universities disseminate information on sustainability and COVID-19 issues via the web. A multiple regression analysis is performed to test the research hypotheses. Findings The findings confirm that universities worldwide leverage the potential of websites to convey sustainability information beneficial for stakeholders and society. Moreover, while board gender diversity positively affects the level of online sustainability disclosure, board size exerts a negative effect. Furthermore, university size, internet visibility and ranking position have no significant impact on the amount of online sustainability information provided by international universities. Originality/value To the best of the authors’ knowledge, this is the first study that provides insight into the possible determinants of universities’ online sustainability reporting during COVID-19. This study extends prior research mainly conducted in single countries by providing data on the sustainability disclosure level of universities in different geographical regions. Empirical findings also support policymakers’ global action in the past decade to increase the role of women in leadership and governing positions.

THE EFFECT OF COMPANY SIZE AND PROFITABILITY ON SUSTAINABILITY REPORT DISCLOSURE WITH CORPORATE GOVERNANCE AS THE MODERATING VARIABLE

The study examined the effect of company size and profitability on sustainability disclosure moderated by corporate governance. This quantitative research uses descriptive methods and multiple linear regression as the data analysis technique. The population of this research is the mining and basic material sector listed on IDX. Then, the purposive sampling method is used to obtain the sample. The data source is secondary data obtained from 2020-2021 sustainability reports and annual reports of mining and basic material sectors listed on the IDX. The results showed that company size and profitability affect sustainability disclosure, while corporate governance cannot moderate the effect of company size on sustainability disclosure. However, it can moderate the effect of profitability on sustainability disclosure.

Integrated approach for sustainability assessment and reporting for civil infrastructures projects: Delivering the UN SDGs

Large civil infrastructure projects, such as airports, highways, railways, townships, and other developments, are critical for contributing to the social, economic, and environmental pillars of sustainability along with the UN-SDGs. However, it is not enough to simply assess their impacts; organizations and stakeholders involved in creating, operating, and maintaining these projects must also report on them. Recent reports by UNEP indicate that the civil infrastructure sector is slow in adopting these principles of sustainability assessment and reporting. The aim of this study is to develop an integrated approach for assessing the sustainability of civil infrastructure projects and sustainability reporting for organizations and stakeholders while achieving the UN-SDGs. To achieve this aim, the study employs a two-step process. In the first step, a correspondence matrix is derived from the sustainability assessment parameters of various infrastructure rating tools (InRTs), Global Reporting Initiative (GRI) standards, and UN-SDGs targets. In the second step, a composite indicator called the Sustainability Alignment Index (SAI) is developed. The SAI comprises two sub-indices, namely the TBL-Sustainability Coverage Index (TSCI) and the TBL-Sustainability Disclosure Quality Index (TSDQI). The correspondence matrix, indices, and sub-indices are then used to evaluate the quantitative and qualitative aspects of the sustainability disclosures of selected civil infrastructure companies in Asia and Europe. The study's findings question the comprehensiveness of the evaluating criteria used in InRTs. It also reveals the lack of alignment between an infrastructure project's sustainability assessment criteria, GRI standards, and UN-SDGs targets. Moreover, the results emphasize the insufficient coverage of environmental sustainability assessment and reporting parameters in the disclosures made by the companies. The developed correspondence matrix, indices, and sub-indices can be used by organizations for comparing both quantitative and qualitative measures to understand their relative positions. Additionally, it will enable the public, policymakers, and other key stakeholders to compare different dimensions of sustainability more effectively.

Analysts’ recommendations on peer-relative comparable sustainability disclosure

This study delves into the financial impact of standardized sustainability disclosure on industry-wide risks and opportunities. Focusing on U.S. firms adhering to Sustainability Accounting Standards Board standards, our findings reveal heightened analyst coverage and favorable recommendations. Notably, these recommendations favor buy positions while discouraging sell positions. The research provides ex-post evidence on the financial implications of peer-relative standardized sustainability reporting, highlighting its value relevance for financial analysts’ recommendations.

Sustainable accounting quality and its impact on financial success aligned with SDGs

Purpose Financial and nonfinancial disclosures (sustainable accounting) are crucial in the annual financial reports of many firms. This study aims to explore the dynamic relationship between sustainability disclosure quality (SDQ) and financial performance (FP) within mandatory disclosure frameworks. SDQ is evaluated across six dimensions, encompassing both the quality and quantity of disclosures, aiming to understand their reciprocal influence. Design/methodology/approach Using the generalized method of moments (GMM), this research analyzes data from 2013 to 2019, focusing on 99 listed Indian firms within the S&P Bombay stock exchange (BSE) 500 index. The study uses rigorous measurement criteria to assess SDQ and uses statistical methods to unveil the causal link between SDQ and FP. Findings The results show a positive causal connection between SDQ and FP, where organizations with good FP make relatively higher disclosures across FP proxies than their counterparts. Additionally, the study investigates the impact of research and development (R&D) expenditure and dividend payments (DIVD) on SDQ. Notably, lower R&D spending is associated with higher quality SDs, and companies with superior SDQ exhibit increased DIVD. Practical implications The findings advocate for strengthened regulatory compliance, incentivized sustainable practices and heightened reporting standards for a transparent business environment and achieving the relevant United Nations Sustainable Development Goals. Originality/value This research contributes original insights by uncovering the intricate relationship between SDQ and FP, shedding light on the impact of R&D expenditure and DIVD on SDQ. These findings contribute to a nuanced understanding of the interplay between FP and sustainability reporting within the context of mandatory disclosure frameworks.

Do board attributes influence environmental sustainability disclosure in manufacturing firms? Evidence from sub‐Saharan Africa

AbstractThe study builds and extends on the literature on the environment, corporate governance, and sustainability by examining how board attributes impact environmental sustainability disclosure (ESD) and, if so, whether each of the two strands of board attributes, namely, board diversity and structural attributes, influence ESD for manufacturing firms in the sub‐Saharan Africa (SSA) region. Based on insights drawn from the human capital theory and board composition, the study developed a model that connects board attributes with ESD. Using a sample of 200 manufacturing firms from 2010 to 2022, the study found an inverse link between gender diversity and ESD, whereas a positive connection was seen between foreign nationals and ESD. Regarding structural attributes, an inverse link was found between board size and ESD, while a positive connection exists between the separation of the board chair from the chief executive officer and ESD. In summary, the findings urge policymakers in the SSA region to strengthen policies on board diversity and structural attributes to promote ESD. Moreover, the findings advise the board of directors to ensure effective and transparent disclosure of environmental‐related issues to stakeholders to guarantee sustainable reporting practices.

DETERMINANTS OF SUSTAINABILITY REPORTING PRACTICE IN TÜRKİYE

The aim of the study is to analyze the level and determining factors of sustainability reporting practice in Türkiye. A GRI-based sustainability disclosure index was employed to evaluate the sustainability reporting practice. It was documented that listed companies in Türkiye are soft sustainability disclosurers and prefer to disclose environmental-related information more than economic and social information. The findings suggest that profitability, company size, leverage, and company age are positively associated with the level of sustainability disclosure in Türkiye. Moreover, the cash flow capacity of the companies has a significant and negative impact on the level of sustainability disclosure. Specifically, the results of the additional analysis indicate that company size is a significant determining factor of economic, environmental, and social sustainability disclosure.

Efektivitas Ketua Komite Audit dan Kinerja Perusahaan: Peran Moderasi Pengungkapan Keberlanjutan

This study aims to analyze the role of moderation of sustainability disclosure in relation to the effectiveness of the chairman of the audit Committee which consists of accounting expertise, tenure, monitoring expertise, expertise experience of the chairman of the audit Committee on the performance of the company. Through data collection sourced from the IDX website, there are 21 companies with a total of 139 data. This study uses multiple linear regression analysis method. Researchers used the IDX website to collect data, then processed using SPSS version 25.0. Based on the results of the study concluded that the variable accounting expertise of the chairman of the audit committee affect the performance of the company, while the variable tenure of the chairman of the audit committee, monitoring expertise of the chairman of the audit committee, expertise experience of the chairman of the audit committee does not affect the performance of the company. The variable of sustainability disclosure is able to moderate the influence of experience expertise of the chairman of the audit Committee on the performance of the company, while the disclosure of sustainability is not able to moderate the influence of accounting expertise, tenure, monitoring expertise of the chairman of the audit Committee on the performance of the company.

Institutional investor stewardship and material sustainability information: Evidence from Taiwan

Institutional investors generally promote better sustainability disclosure and performance quality, which emphasize environment, social, and governance (ESG) development. Utilizing the SASB standards that improve the financial materiality of sustainability information, we find that institutional investors in Taiwan foster both material and immaterial ESG disclosure and performance. Thus, institutional investors seem to target the common good and follow the stewardship code instead of focusing only on ESG performance that closely relates to firm value. Our findings are driven by domestic rather than foreign institutional investors, suggesting that domestic institutions enjoy some information advantage and therefore drive ESG improvements more efficiently.

From reporting to responsibility: investigating the influence of sustainability disclosure on earnings management

From reporting to responsibility: investigating the influence of sustainability disclosure on earnings management

Corporate board, assurance and sustainability reporting practices: a focus on selected African countries

PurposeIn recent times, stakeholders have called on corporate organizations especially those charged with governance to embrace full disclosure on non-financial issues, especially sustainability reporting. Based on this premise, this study aims to examine the influence of corporate board and assurance on sustainability reporting practices (SRP) of selected 80 firms from 8 countries in sub-Saharan Africa.Design/methodology/approachTo measure the corporate board, the authors use both board variables and audit committee variables. Also, the authors adapted the sustainability score model as used by previous authors in the field of sustainability disclosure to measure SRPs. The analysis was done using both ordered logistic regression and probit regression models.FindingsThe results show that the combination of board corporate and assurance has a positive and significant impact on the sustainability reporting practice of selected firms in sub-Saharan Africa.Practical implicationsThe study places emphasis on the need for strong collaboration between the corporate board and external assurance in evaluating and enhancing the quality of sustainability disclosure.Originality/valueThe study bridged the gap in the literature in the area of corporate board, assurance and SRP of corporate firms which has received little attention within sub-Saharan Africa.

The Influence of Financial Indicators on Vietnamese Enterprise’s Sustainability Reports Disclosing Process

Sustainability reporting has become increasingly crucial for businesses worldwide, communicating environmental, social, and governance (ESG) performance to stakeholders. Despite the growing importance of sustainability reporting, there remains a gap in understanding how financial indicators influence the disclosure process, particularly in Vietnamese enterprises. This paper aims to address this gap by investigating the influence of financial indicators on the sustainability reporting practices of Vietnamese companies. Employing a mixed-methods approach, combining a quantitative analysis of financial data with a qualitative assessment of sustainability reports, the research seeks to uncover the nuanced relationship between financial performance metrics and the quality and extent of sustainability disclosures. The research was conducted to identify, evaluate, and measure financial factors affecting the quality of companies’ sustainability reports in Vietnam. The research is based on scoring the sustainable development reports of the top 100 listed joint stock companies on the HOSE—Ho Chi Minh City Stock Exchange. Based on the research model of Dissanayake, in the case of Vietnam, we build a scoring model for the sustainable development report based on GRI standards and add additional criteria appropriate to the situation of each listed company on the Vietnam stock exchange. Based on the research overview, our team tested hypotheses related to the short-term current ratio, total asset turnover ratio (AT), return on equity ratio (ROE), and debt-to-equity ratio (DE). The empirical results show that the AT and ROE significantly positively affect the sustainability reports; the DE hurts the sustainability reports. The findings are expected to provide valuable insights into the factors shaping sustainability reporting practices in Vietnam and contribute to the existing literature on corporate disclosure and sustainability.

Unveiling the impact of SFDR on unlisted real estate funds: a J-Curve and panel regression analysis

PurposeThis paper investigates the relationship between the sustainable finance disclosure regulation (SFDR) and the performance of unlisted real estate funds.Design/methodology/approachWhile existing literature has primarily focused on the impact of voluntary sustainability disclosure, such as certifications or reporting standards, this study addresses a significant research gap by constructing and analyzing the financial J-Curve of 40 funds under the SFDR. The authors employ a panel regression analysis to examine the effects of different SFDR categories on fund performance.FindingsThe findings reveal that funds categorized under Article 8 of the SFDR do not exhibit significantly poorer performance compared to funds categorized under Article 6 during the initial phase after launch. On average, Article 8 funds even demonstrate positive returns earlier than their peers. However, the panel regression analysis suggests that Article 8 funds slightly underperform when compared to Article 6 funds over time.Practical implicationsWhile investors may not anticipate lower initial returns when opting for higher SFDR categories, they should nevertheless be aware of the limitations inherent in the existing SFDR labeling system within the unlisted real estate sector.Originality/valueTo the best of our knowledge, this study represents the first quantitative examination of unlisted real estate fund performance under the SFDR. By providing unique insights into the J-Curves of funds, our research contributes to the existing body of knowledge on the impact of sustainability regulations in the financial sector.

Capital market effects of corporate transparency and sustainability: evidence from an emerging economy

PurposeThe study aims to examine the association between corporate transparency and firm value (capital market effect) and investigate whether auditor choice moderates this relationship.Design/methodology/approachThis study uses the Malaysian Institute of Corporate Governance (2017) data set, which provides scores on anti-corruption commitment, organisational transparency and sustainability of Malaysia’s top 100 listed firms. The methodology entails an ordinary pooled least square regression method for empirical research.FindingsThe positive association between corporate transparency and firm value is more evident in anti-corruption and sustainability initiatives. More importantly, government-linked companies have higher scores. Firms with enhanced anti-corruption commitment are more likely to have higher firm value, and this relationship is more evident for politically connected firms. This study also finds that auditor choice is associated with the firm value in the sampled listed firms.Practical implicationsThe findings provide implications for investors and regulators on the role of corporate transparency in an emerging capital market.Social implicationsThe study recommends that emerging market regulators continue enhancing corporate governance codes and practices to improve reporting transparency for listed firms.Originality/valueThis study contributes to the growing literature on sustainability disclosures by incorporating corporate reporting transparency, explicitly relating to firms’ commitment to anti-corruption, organisational transparency and sustainability.