Assurance Of Sustainability Reports Research Articles

Issues in sustainability reporting assurance: evidence from interviews

Purpose This paper aims to examine the processes of sustainability reporting assurance (SRA) and the influence they have on shaping perception from disclosures. Given the evidence of inconsistencies and ambiguities in assurance processes, this paper examines how legitimacy is attained and maintained at different stages of SRA. Design/methodology/approach Evidence collected from 23 semi-structured interviews with assurance providers (APs), consultants, professionals and non-governmental organisations (NGOs) (non-APs) was used to conduct a thematic analysis from the perspectives of interviewees. Findings APs and non-APs are united in recognising the value of SRA, although, perspectives on transparency between the two groups differ. Experience and industry knowledge are essential to SRA delivery with non-APs preferring accounting APs. Nevertheless, non-APs are concerned about the role of companies in deciding assurance scope, as it can affect scrutiny. APs favour data accuracy (as opposed to data relevance) assurance due to team dynamics and internal review influences, with the latter also restricting assurance innovation. APs are interested in accessing better evidence and stakeholder engagement evaluations. Providing advisory services was not rejected by all APs. The perspectives of APs and non-APs demonstrate how progress in SRA has gained pragmatic legitimacy with noticeable gaps that serve to undermine attainment of moral legitimacy. Research limitations/implications SRA is a developing practice that will adopt changes as it continues to mature; some of these changes could impact findings in this research. General perspectives on SRA were sought from interviewees, this affected the ability for an in-depth focus on any of the range of interesting SRA issues that arose over the course of the research. Interviews were conducted with relevant parties in the SRA space that operate in the UK. Perspectives from parties outside the UK were not solicited. Practical implications Companies make an important decision to commission SRA. Findings in this research have highlighted specific non-APs issues of concern that can be useful in structuring operations and reporting regimes to facilitate assurance procedures. The findings will also be helpful to APs as they can direct more emphasis on stakeholder concerns towards demonstrating greater stakeholder accountability. Regulatory and standard setters can enact appropriate policies that can potentially drive the practice forward for assessment of cognitive legitimacy. Social implications The findings provide relevant account of stakeholder voices on the quality of corporate disclosures that has a direct effect on the wellbeing of communities and sustainability of societies. Collective stakeholder input on expectations can shape sustainability discourse. Originality/value This research demonstrates the applicability of financial audit quality indicators in SRA processes, extends the debate around the effectiveness of new audit fields and highlights the challenges of maintaining legitimacy with different audiences.

Pengaruh Tekanan Stakeholder dan Ukuran Perusahaan terhadap Sustainability Report Assurance: Studi Empiris pada Perusahaan Terdaftar di Bursa Efek Indonesia Periode Tahun 2017-2021

This study aims to analyze the effect of environmental pressure, employee pressure, government pressure, and company size on sustainability report assurance in companies listed on the Indonesian Stock Exchange (BEI) for the 2017-2021 period. The dependent variable in this study is sustainability report assurance which is measurement using dummy variables which are divided into 2 categories. While the independent variables in this study consists of 4 variables, namely the first is environmental pressure with its measurement using a dummy variable which is divided into 2 categories, the second is employee pressure with its measurement using the natural logarithm (Ln) of the number of employees, the third is government pressure with the measurement uses a dummy variable which is divided into 2 categories, and the fourth is company size with its measurement using the natural logarithm (Ln) of total assets. This Research is a quantitative research. The research data used is Secondary data obtained from the IDX and the official websites of each company. The selection of research samples was carried out using purposive sampling technique and obtained a sample of 51 companies with a total of 255 objects of observation. The analysis technique used is binary logistic regression analysis. The research results that environmental pressure and employee pressure have a positive effect on sustainability report assurance, while government pressure and company size have a negative effect on sustainability report assurance.

Non-financial information assurance: a review of the literature and directions for future research

PurposeThis study aims to review the literature on non-financial information (NFI) assurance including external assurance of sustainability reports (SRA) and integrated reports (IRA). The objectives are as follows: provide an overview of academic research; understand the nature of NFI assurance engagements by organising the literature around the five key elements of an assurance engagement; develop a framework for understanding NFI assurance; and provide directions for future research.Design/methodology/approachThe study undertakes a structured literature review of 179 articles published from 1999 to 2023.FindingsThe review identified 324 researchers located in 35 different countries who published 179 articles on SRA and IRA. The researchers, their locations, journals, methods, theories and themes are examined. The literature is structured around the definition of an assurance engagement including a tripartite arrangement, subject matter, a suitable criterion, sufficient appropriate evidence and a written assurance report. A framework for understanding NFI assurance is offered. Avenues for future research, structured around the five elements of an assurance engagement, are presented.Practical implicationsResearchers will benefit from an overview of the literature and guidance on areas for future research. Lecturers can use the findings to develop content for their auditing courses. Reporting managers will benefit from a better understanding of this new form of assurance. Regulators can use this study’s insights to better inform the development of laws and corporate governance codes mandating NFI assurance. Standard setters can use these findings to guide the emergence of the new assurance standards. Assurance practitioners may use this research to inform practice.Social implicationsThe findings may prove useful in addressing capture, which deters NFI assurance from enhancing disclosure credibility and fulfilling its transparency and accountability role. This is to the detriment of the wider society.Originality/valueThe consolidation of the literature around the five key elements of an assurance engagement is unique. The framework devised offers useful insights into the dynamics of assurance generally and NFI assurance more specifically. The study is timely given the new European Union regulations on NFI reporting and assurance and the work of the International Audit and Assurance Standards Board in developing a specialist NFI assurance standard.

A SYSTEMATIC REVIEW OF SUSTAINABILITY REPORTING ASSURANCE: CURRENT PRACTICES AND ISSUES FOR FUTURE

Sustainability reporting (SR) is an important area of modern corporate reporting that is rapidly expanding. Despite the fact that the number of reports has increased, their quality has been questionable. Moreover, the credibility of sustainability information without assurance is frequently criticized. According to SR practice, external assurance provides stakeholders with transparency and credibility of sustainability information. Although sustainability reporting assurance (SRA) is still a vital activity, there is a lack of a shared understanding and approach to the practice. The objective of the study is to explore the current SRA practices and the prospects for SRA by conducting a systematic literature review (SLR). Through the SLR using the PRISMA framework, 55 published articles in the last 17 years, from 2004 to 2020, were carefully examined. The predetermined data elements such as year of publication, country of study, research method, focus of literature, and analytical approaches were analyzed using a chronological and content analysis of these articles. This methodology employs a rigorous process to identify and select the most important literary contributions in this field. The results are intended to contribute to the development and evolution of SRA in the future, as well as guide researchers in designing their future studies.

The Effect of Company Characteristics on Company Value with Sustainability Report Assurance as a Moderation Variable

This study aims to examine and analyze the effect of firm characteristics on firm value with sustainability report assurance as a moderating variable. The population of this study consists of mining firms that will be listed on the Indonesia Stock Exchange between 2019 and 2021. This research uses quantitative research methods and is classified as causality research. Then this research uses a purposive sampling method so as to produce 57 observational data. Furthermore, the data analysis method used is multiple linear regression so that the results of this study are profitability and liquidity have a positive effect on firm value while firm size and leverage have no effect on firm value then sustainability report assurance as a moderating variable can only moderate and weaken leverage on firm value. Keywords: Company Size, Profitability, Liquidity, Leverage, Firm Value, Sustainability Report Assurance. DOI: 10.7176/RJFA/14-9-04 Publication date: May 31 st 2023

The Role of Long-Term Institutional Ownership in Sustainability Report Assurance: Global Evidence

Focusing on the role of the institutional investment horizon as a monitoring mechanism that enhances companies’ sustainability reporting reliability, this study investigates the association between long-term ownership and companies’ decisions to assure their sustainability report. Further, the study examines the moderating effect of the quality of governance on this association. Consistent with the critical mass theory, the study argues that long-term ownership should reach a certain threshold to have an influence on companies’ assurance decisions. The study’s results support the argument and find that long-term ownership is positively and significantly associated with companies’ assurance decisions, and the association is positive and significant only for a high level of long-term ownership in comparison to low- and medium-level long-term ownership. Moreover, the study finds that the association between long-term ownership and assurance is negatively moderated by the quality of governance at both the company and country levels.

Analisis Hubungan Karakteristik Perusahaan Dengan Kesesuaian Pernyataan Jaminan Pada Laporan Keberlanjutan

This study aims to determine the relationship between the characteristics of the company and the conformity of the assurance statement in the sustainability report. The accounting information tested in this study is industry sensitivity, profitability, leverage, and company age. This study uses panel data samples (unbalanced) on ASSRAT participating companies on the NCSR website as many as 77 companies for the 2018-2021 period. The analysis technique used is multiple linear regression. The results showed that the variables of industry sensitivity, profitability, leverage, and company age were positively correlated to the statement of assurance of the sustainability report. This explains that the high sensitivity of the industry to the company will encourage the guarantee statement mechanism. The better profitability of the company fosters companies to attract investors to invest. High corporate leverage makes the company motivated to implement a statement of sustainability assurance to restore stakeholder trust. Furthermore, companies that have been operating for a long time will tend to make social disclosures, this recommends the application of a sustainability report assurance statement. The results of this study can theoretically confirm the theory of Stakeholders and Legitimacy which play an essential role in the company's sustainability.

The Effect of Profitability, Disclosure Sustainability Finance, Sustainability Report Assurance on Cost of Debt

The Effect of Profitability, Disclosure Sustainability Finance, Sustainability Report Assurance on Cost of Debt

The value relevance of mandatory sustainability reporting assurance

Sustainability reporting assurance (SRA) ensures the credibility of sustainability information disclosed by companies. This practice has continued to evolve, particularly within regulatory frameworks. The SRA is widespread among the largest French and South African companies because of the requirements of GRENELLE II and KING III laws. The increased regulation of SRA and the increased rate of obtaining assurance motivated us to conduct our study. This study examines the impact of mandatory SRA on firm value. We run a fixed-effects ordinary least squares (OLS) panel model to test our hypothesis for the 2007–2018 period on a sample of 88 South African listed companies on the Johannesburg Stock Exchange (JSE) and 83 French listed companies on the SBF120 index. We use Tobin’s Q to measure firm value. Our results show a significant positive association between mandatory SRA and firm value. This finding implies that SRA regulations positively affect investors’ perceptions of firm performance, particularly firm value, for two reasons. First, mandatory SRA may strengthen firm legitimacy and establish a good reputation. Second, the adoption of SRA regulations plays an important role in reducing asymmetric information between various actors and solving agency problems between managers and shareholders. Regulators may be interested in the findings when considering current and future assurance requirements for sustainability reporting, and shareholders when considering SRA as an investment choice criterion.

Navigational space for the absence of sustainability assurance in China

PurposeThis case study presents a critical analysis of why and how corporate managers in China are reluctant to adopt sustainability reporting assurance (SRA) provided by externally independent third-party assurers, despite the fact that it is acknowledged as a value-adding activity globally.Design/methodology/approachA longitudinal fieldwork case study was conducted from 2014 to 2019 in a Chinese central state-owned enterprise (CSOE), a pioneer in sustainability reporting practice since the mid-2000s, to collect first-hand empirical data on managerial perceptions of the adoption of external SRA. Semi-structured interviews with 25 managers involved in sustainability (reporting) practice were conducted. The interview data were triangulated with an analysis of archival documents and board meeting minutes pertaining to the undertakings of sustainability practices in the case study organization.FindingsOur empirical analysis suggests that while managers recognize the benefits of adopting external SRA in enhancing the legitimacy of sustainability accountability, they oppose SRA because of their deep-rooted allegiance to the dominant logic of sociopolitical stability in China. SRA is envisaged to risk the stability of the socialist ideology with which CSOEs are imbued. Therefore, any transformational approach to accepting a novel (foreign) practice must be molded to gain control and autonomy, thereby maintain the hegemony of stability logic. Instead of disregarding external verification, managers of our case SOE appear to harness sustainability reporting as a navigational space to engage in internally crafted alternative manners in order to resist the rationality of SRA.Originality/valueThe empirical analysis presents a nuanced explanation as to why internal managers have hitherto been reluctant to embrace the embedding of independent assurance into the sustainability reporting process. Our prolonged fieldwork provides ample context-specific, intra-organizational evidence regarding the absence of SRA in Chinese CSOEs, which warrants more attention given their considerable presence in the global economy. In addition, the empirical analysis contributes to our understanding of the managerial capture of sustainability issues in a specific context of state capitalism and how organizations and individuals in an authoritarian regime interpret and respond to novel discourses derived from distinct institutional settings.

Voluntary Assurance of Sustainability Reports: Evidence from Indonesia

Purpose : This study aims to prove the determinants of the adoption of assurance statements in companies in Indonesia. Several companies in Indonesia have included assurance reports in their sustainability reports as a voluntary disclosure. This phenomenon motivates this study, considering that sustainability report assurance is gaining interest among companies, but there is still very little literature discussing this issue, specifically in Indonesia. This research will fill the research gap on sustainability report assurance. 
 Method : Using data from companies participating in ASRRAT (Asian Sustainability Report Rating) for five years (2017 – 2021), this study assesses the influence of governance, profitability, and company age on the company’s decision to adopt assurance on sustainability reports. Total unit analysis are 140 sustainability reports from 28 companies. 
 Findings : The results show that governance, profitability, and the company age significantly influence the adoption of assurance on sustainability reports. This study provides preliminary evidence of the willingness of companies to adopt assurance of sustainability reports in Indonesia by identifying characteristics that distinguish Indonesia from other countries concerning the choice to implement an assurance for sustainability reports. 
 Novelty : This research uses governance measures based on the GRI standard of governance disclosure standards, consisting of 29 disclosure indicators. Previous studies linking governance with sustainability reports only tested specific governance mechanisms, such as the audit committee, board of directors, or diversity.
 Keywords : Assurance Statement; Corporate Governance; Sustainability Report

Assurance process for sustainability reporting: Towards a conceptual framework

This paper seeks to provide insights into the sustainability report assurance process by exploring how reporting firms and assurance providers work together to produce high-quality and credible assurance outcomes. In this literature review, the assurance process is conceptualised as a systematic procedure that incorporates the detail of assurance work along with associated barriers and ethical issues. Based on a review of 87 identified papers on this topic covering 2003–2021, this paper develops a conceptual framework of the assurance process by dividing it into five steps—assurance provider selection, identification, screening, validation and evaluation—and then explains the logic underlying these steps by synthesising the findings from the identified papers. Furthermore, barriers that impede the adoption of and issues that constrain the benefits of sustainability assurance are also identified, such as the absence of stakeholder engagement or independence of the assurance provider. Overall, this paper focuses on the assurance process for sustainability reports, contributing to the conceptual development of sustainability reporting and providing a comprehensive framework for future study in this emerging field. In addition, this paper also provides both assurance providers and reporting firms with a detailed roadmap for decision-making regarding sustainability assurance.

Does religiosity lead to sustainability reporting assurance? Evidence from European companies

PurposeThis paper aims to investigate whether religiosity and religious diversity affect the adoption of sustainability reporting assurance (SRA) by companies based in predominantly Roman Catholic and Protestant countries. To this aim, a theoretical framework is developed using the social norm, signalling and agency theories.Design/methodology/approachA pooled logit regression model is applied on a sample of 2,541 firm-year observations collected from the most sustainable companies in Europe in the period between 2004 and 2015 to test the effect of religiosity on SRA adoption. Different analyses are used to check for the robustness of the findings and a generalized method of moments (GMM) is used to address potential endogeneity issues.FindingsThe results of this study show that companies based in highly religious countries are more likely to adopt SRA practices to show compliance with the religious social norms of their stakeholders. The results also show that companies based in predominantly Roman Catholic countries are more likely to adopt SRA practices than those operating in Protestant countries. This may be due to the fact that the structural organization of Catholicism is based on a vertical, top-down control system, which does not foster trust and requires constant assurance. This explains the emphasis placed on SRA by stakeholders adhering to Catholicism. Stakeholders from Protestant countries, on the other hand, tend to rely more on the principles of social ethics and social mutual control that characterize their doctrine and, therefore, do not need any additional, external assurance of corporate commitment to sustainability.Originality/valueThis paper provides new insights into the influence that religiosity and religious diversity have on SRA. This study also provides evidence on the usefulness of social norm theory for conducting empirical research into corporate practices and could set an example for future studies in this field.

Determinants and Value Relevance of Voluntary Assurance of Sustainability Reports in a Mandatory Reporting Context: Evidence from Europe

This paper investigates the determinants of sustainability report (SR) assurance and whether this assurance is value relevant within the context of the European Union (EU), where, under the Non-Financial Reporting Directive (NFRD), sustainability reporting is mandatory for large public interest entities (PIE) as of fiscal year 2017. Using a sample of 1832 firm-year observations from 660 European listed companies over the period 2017–2020, the results of a logistic regression analysis indicate that firm size, environmental, social and governance (ESG) performance and industry affiliation are important drivers of the demand for SR assurance. The value relevance regressions suggest that SR assurance is positively associated with the stock market value. The study contributes to the existing knowledge on SR assurance by documenting its determinants and value relevance in a context where sustainability reporting is mandatory and that is predominantly stakeholder-oriented. The results may be of interest to companies that consider to adopt SR assurance in such a context and to the European Commission (EC), which has included a mandatory SR assurance requirement in the proposed Corporate Sustainability Reporting Directive (CSRD), the successor to the NFRD.

Voluntary sustainability assurance in small and medium‐sized entities: The role of country origin in Europe

AbstractThe assurance of sustainability information by small and medium‐sized entities (SMEs) has not attracted much research interest to date. To rectify this, we draw on a sample of European firms (from the EU, the United Kingdom and Norway) extracted from the Global Reporting Initiative (GRI) database and explore the disclosure variable in relation to country‐specific factors. Assurance rates are found to be low among SMEs, and moreover, the level of disclosure is limited. The assurance market is dominated by accounting firms, above all by the Big Four. Legal origin is found to be a highly relevant factor, with Scandinavian countries presenting the highest percentage rates of sustainability report assurance. Among the cultural variables analysed, power distance, masculinity and uncertainty avoidance have a significant negative impact on the decision to assure sustainability information. Overall, the study serves to enhance understanding of SME practices in different countries of origin.

The Impact of Board Gender Diversity on Sustainability Reporting and External Assurance: Evidence from Lower-Middle-Income Countries in Asia and Africa

Based on the notion that a diverse board will pay greater attention to social responsibility and stakeholder concerns, this article examines the effect of board gender diversity on the adoption of new sustainability reporting practices (i.e., SDG reporting) and on the use of external assurance. After controlling for corporate governance as well as companies’ performances, sustainability commitment, industries, and regions, we find that gender-diverse boards are positively associated with sustainability reporting and the involvement of an external assurance provider. This article consolidates and provides information on the relationship between women participation on corporate boards and sustainability reporting activities of 366 large Asian and African companies. Additionally, it addresses the understudied question of how the gender diversity of board resources affects the adoption of the external assurance of sustainability reporting and the types of assurance providers.

Creating sustainability reports that matter: an investigation of factors behind the narratives

PurposeThis paper aims to provide a novel approach to examine sustainability report narratives by considering key features of these narratives including, forward-looking content, risk content, tone and sustainability-specific content.Design/methodology/approachUsing a sample of UK firms' sustainability reports from 2014 to 2018, the authors capture the report content by compiling a collection of words using a computational linguistic technique that attempts to identify specific attributes of sustainability reports.FindingsThe findings show the main factors that determine the content of sustainability reports are: (1) external governance-related factors, including the voluntary adoption of sustainability reporting assurance, the choice of assurance provider, stakeholder engagement and ownership concentration; (2) internal governance factors, including board quality and the existence of a sustainability committee; and (3) reporting behaviour including the publication of standardised Global Reporting Initiative (GRI) sustainability reports and financial reporting quality.Research limitations/implicationsThe authors limit our sample to companies operated in the UK. Future research can explore the results in other institutional contexts such as North America or Asia–Pacific where the governance of sustainability reporting and other factors determining the content of sustainability reports could be different. Also, it would be interesting to interview managers and other stakeholders to obtain their opinions with regard to sustainability reporting and assurance practices and to understand their opinions regarding the GRI guidelines and its appropriateness. This study combines different research streams to advance our understanding of sustainability disclosures and factors that determine sustainability narratives.Practical implicationsCorporate managers need to strengthen their internal and external governance mechanisms to enhance the comprehensiveness and credibility of sustainability reports and are encouraged to engage stakeholders in the sustainability reporting process. Policymakers can mandate the assurance of sustainability reports and establish reporting formats and standard words to control the tone of sustainability reports. Finally, researchers, professionals as well as policymakers need to monitor sustainable development goals and targets to increase awareness, knowledge and practices that can be operationalised to ensure a global society that can afford sustainable living.Originality/valueTo the best of our knowledge, no study has yet examined sustainability report narratives by considering key features of these reports, including forward-looking content, risk content, tone and sustainability-specific content.

Assurance of corporate social responsibility reports: Does it reduce decoupling practices?

AbstractRecent research shows the existence of a selective corporate social responsibility (CSR) disclosure strategy that creates a gap between CSR disclosure and actual performance. These CSR decoupling practices compromise the credibility of CSR reports and have triggered a demand for the adoption of credibility enhancement mechanisms, such as adherence to the global reporting initiative (GRI) reporting guidelines, and the external assurance of CSR reports. The effectiveness of such mechanisms is not clear, however. This paper draws on legitimacy theory and addresses the issue of symbolic versus substantive use of assurance, and compliance with GRI reporting standards, by analysing their effect on CSR decoupling using an international sample of 1,939 companies (15,219 observations from 2002 to 2017). Analysis of a sub‐sample of 708 firms (3,730 observations from 2011 to 2017) also shows that the application of GRI guidelines and the specific characteristics of the assurance provider—accountant, experience and specialisation—reduce CSR decoupling practices. The results provide researchers, managers, assurance providers, investors, stakeholders and regulators with additional insight into the value of the external assurance of sustainability reports and have important managerial and policy implications.

Effects of Carbon Emissions, Environmental Disclosures and CSR Assurance on Cost of Equity in Emerging Markets

The objective of the paper is to empirically test the relation between carbon emissions, environmental disclosures, assurance of sustainability reports and firms’ Cost of Equity (COE) measured by an Ex-Ante proxy model. The methodological approach uses the Generalized Method of Moments (GMM) required to control endogeneity problems using a sample of 929 firms that are included in the Morgan Stanley Emerging Market Index. The data panel includes 5328 observations from 30 emerging countries covering the period 2014 to 2019. Our results indicate that firms with higher carbon emissions have higher COE, which implies that capital providers penalize highly polluting firms. Contrarily, evidence shows that firms with greater environmental disclosures, and the those who externally assure their corporate social responsibility reports decrease their COE. Our study expands the literature regarding carbon emissions and its relation with firms’ COE from an emerging market perspective covering a multi-country sample, with findings that confirm that higher emitters are penalized in terms of COE. Moreover, our research confirms in this setting the negative relation between environmental, social and governance disclosure scores and COE. Moreover, we evidence as well that the assurance of sustainability reports also promotes legitimacy and decreases information asymmetries, in the sense of reducing COE. The value of our findings is especially relevant as it may encourage listed companies in emerging countries to engage in more sustainable practices—e.g., reduce carbon emissions.

The assurance of sustainability reports and their impact on stock market prices

The publication of non-financial information is a trend in recent decades in listed companies. From this fact, the need arises to provide credibility to the information by verifying an independent professional who provides a guarantee of the published information. Therefore, this article analyses whether the verification of sustainability reports influences the stock prices of Ibex-35 companies. With this aim, a content analysis has been prepared that allows us to quantify aspects as relevant as the commissioning and the objective of the assurance requested by the company, the auditor’s independence or the result of the verification process. The results obtained show that Ibex-35 companies maintain a growing trend in their social commitment and greater recognition of the transfer of verified information to the different stakeholders of the companies. In addition, the efforts made by companies are valued positively by investors, especially in response to the level of assurance requested from the guarantee provider of the sustainability report.