SUSTAINABILITY DISCLOSURE CATEGORIES: WHO REPORTS WHAT?

Abstract

The objective of this research is to identify the characteristics and scope of sustainability reporters and the factors influencing those sustainability reporters. Furthermore, our primary goal is to illustrate the nature and types of sustainability reporting irregularities within various industrial segments listed in the Colombo Stock Exchange (CSE). Sustainability disclosure as indicated above was utilized as an indicator for measuring the magnitude of sustainability disclosure; as such it represented the dependent variable of this research. The sustainability indices that comprised of five indicators (General Sustainability Disclosure Index [GSDI], Economic Sustainability Disclosure Index [ECSDI], Social Sustainability Disclosure Index [SOSDI] Environmental Sustainability Disclosure Index [ENSDI] and Overall Sustainability Disclosure Index [OVSDI]) were developed specifically for this research. In addition, the items that comprise each sustainability index applied in this study were established according to relevant GRI standards. Our final data set consisted of 83 firms that were listed on CSE and operated in ten industrial sectors including Power & Energy (P&E), Plantation (PL), Manufacturing (MN), Construction & Engineering (C&E), Bank Finance & Insurance (BF&I), Beverage Food & Tobacco (BF&T), Land & Property (L&P), Hotels & Travels (H&T), Oil Palm (OP) and Chemicals & Pharmaceuticals (C&P). The data used in this study were obtained through an examination of Annual Reports and Sustainability Reports that were issued during the fiscal year ended in 2018. We found that firms generally reported higher amounts of sustainability related information regarding economic issues compared to all other areas. Additionally, we observed that firms recorded the lowest level of sustainability reporting regarding environmental concerns. Our regression model supported findings indicating that whether or not firms operate in the financial industry influences the degree to which they provide sustainability related information. Specifically, we noted that firms operating in the financial sector reported relatively fewer amounts of sustainability-related information. This observation may result from relatively less pressure from stakeholders and expectations for these entities to engage in sustainability activities. We documented that company size measured by Total Asset significantly and positively relates to the amount of General, Economic, Social and Overall Sustainability Content firms report to stakeholders. Additionally, the Age and Profitability of the Companies did not demonstrate statistically significant relationships to any of the Sustainability Disclosure Indices we examined. Consistent with previous studies and signaling theory premises, we concluded that Operating Leverage (Debt-to-Equity Ratio) demonstrated a statistically significant and positive association to Sustainability Disclosure Indices. Finally, we identified that Economic and Social Considerations prevailed over Environmental Considerations when Boards influenced the Sustainability Reporting processes of their respective firms. The results of our study will contribute toward a better understanding and prediction of Sustainability Reporting Practices among Sri Lankan firms toward furthering private sector accountability in sustainable development agendas. The results of our study also contribute to the existing body of knowledge concerning sustainability reporting from a developing nation perspective.