The Effects of Sustainability Reporting on Stakeholder Perception

Sustainability reporting is an integral component of corporate social responsibility. It allows companies to demonstrate their dedication to sustainable development while building their company’s brand image.

However, prioritizing sustainability aspects can be challenging. This paper proposes a systematic quantitative approach for materiality assessment in sustainability reporting.

Impact on Financial Performance

Sustainability reporting is a form of transparency that shows a company’s dedication to social and environmental responsibility, making an impressionable case to investors when making investment decisions. Companies using sustainability reports can also use them as a competitive advantage by drawing in customers and employees alike.

Recent changes to society have resulted in an increasing need for transparency from businesses and brands. Consumers want assurances that those they support are ethical and reliable; sustainability reporting provides one method for companies to demonstrate this value.

This research explored the influence of government, stakeholder, and green technological innovation pressures on sustainability disclosure performance by analyzing 48 listed firms using the partial least squares structural equation model. Results demonstrated that customer pressure has a major effect on sustainability disclosure performance while green technological innovation acts as a buffer between them.

The findings suggest that firms should prioritize cultivating positive relationships with stakeholders and focus on sustainability activities that align with their interests. Furthermore, research shows that sampled firms do not report information that meets stakeholder requirements.

Impact on Reputation

As global eco and social problems continue to emerge, companies are under increasing pressure to act ethically. This trend has lead to greater regulatory oversight and penalties for those that do not meet minimum standards; businesses who conduct effective sustainability reporting can protect their reputation while avoiding fines.

One of the key challenges of sustainability reporting lies in aligning it with stakeholders’ priorities. Most firms tend to prioritize society over consumer needs or governance-related risks, which may cause their credibility with customers and end-users to falter.

Reporting frameworks and guidelines that offer clear structure for data collection and verification help to reduce this problem, with GRI standards being widely utilized by businesses worldwide as an example of such reporting guidelines that give stakeholders a way to check on the quality of a company’s sustainability information while simultaneously increasing operational efficiency by streamlining workflow and eliminating redundant efforts.

Impact on Investment Decisions

Investors increasingly favor firms that can sustain operations and have positive environmental effects. Firms may adopt and report on sustainable practices as a signal to stakeholders that they are committed to transparency and accountability (Osei & Mensah, Citation2020).

Through sustainable reporting, your organization can become a leader in its industry. Doing so allows it to stay ahead of trends and requirements that may be introduced by government bodies or other organizations.

Additionally, sustainability reporting allows your organization to build internal processes and capabilities to meet upcoming reporting compliance demands. This ensures your company is prepared to adapt quickly to any changes in the ESG landscape or potential legal liabilities; ultimately leading to lower financial costs in the long run. Initial expenses related to sustainability reporting typically include selecting an appropriate framework and creating channels for sharing information within your organization.

Impact on Business Strategy

Companies looking to remain competitive in an ever-evolving world must take note of the sustainability and reliability of their actions, in order to stay competitive. Customers and potential business partners increasingly demand evidence that businesses care about the environment, community and other stakeholders – thus sustainability reporting has become more than a trend but an integral component of corporate strategy.

Signaling theory suggests that firms use ESG reports to demonstrate their commitment to transparency and accountability when it comes to sustainability issues, but our findings indicate there remains little alignment between reporting practices and stakeholders’ needs.

Content analysis and questionnaire survey findings revealed that sampled firms emphasize more of the society dimension than stakeholders do, likely as an attempt to show their commitment to social responsibility (Rudyanto & Veronica Siregar, Citation2021). It may also have been an effect of COVID-19’s pandemic; companies could have increased ESG efforts so as to retain customer loyalty and retain existing resources (Citation2021).