Factor Influencing Sustainability Reporting Assurance: A Study of Indonesian Public Listed Companies

Riescha  Utami; Fedi Ameraldo; Marsi  Fella Rizki; Abdullah Jihad Rabaya

doi:10.21070/jas.v8i2.1785

(1) Riescha Utami Universitas Teknokrat Indonesia
Indonesia
(2) * Fedi Ameraldo Universitas Teknokrat Indonesia
Indonesia
(3) Marsi Fella Rizki Universitas Teknokrat Indonesia
Indonesia
(4) Abdullah Jihad Rabaya Palestine Technical University
Palestine, State of
(*) Corresponding Author

DOI: https://doi.org/10.21070/jas.v8i2.1785

Abstract

General Background: In the era of globalization, companies are evaluated not only on their financial performance but also on their social and environmental impact. Specific Background: Sustainability reporting serves as a critical medium for communicating a company's efforts to achieve its sustainability objectives, mitigating its negative impacts on society and the environment, and fostering trust. The Global Reporting Initiative (GRI) is widely regarded as the standard for these reports, enhancing their credibility. Knowledge Gap: While previous studies have largely focused on major multinational companies, there is limited research on the assurance of sustainability reports within the context of developing economies, particularly Indonesia. Aims: This study aims to examine the effects of the sustainability committee, industry type, and awards on sustainability reporting assurance among companies listed on the Indonesia Stock Exchange in 2022. Results: Logistic regression analysis reveals that both sustainability committees and awards positively influence sustainability reporting assurance, whereas industry type shows no significant impact. Novelty: This research fills a gap by analyzing sustainability assurance practices within Indonesia, providing insights into the factors influencing assurance in emerging markets. Implications: The findings suggest that sustainability committees and awards can enhance reporting assurance, thereby boosting stakeholder confidence in corporate sustainability practices. This underscores the importance of establishing effective sustainability governance structures and recognizing exemplary efforts to drive transparency and accountability in sustainability reporting.

Downloads

Download data is not yet available.

Metrics

Metrics Loading ...

References

Ahmad, N. N., Wan Abdullah, W. M. F, A., Manap, M. I., & Jamil, N. N. (2019). Green governance for environmentally sensitive industries in Malaysia: An overview. IEBMC 2019 9th International Economics and Business Management Conference, 2357–1330. https://doi.org/10.15405/epsbs.2020.12.05.23

Al Farooque, O., & Ahulu, H. (2017). Determinants of Social and Economic Reporting: Evidence from Australia, the UK and South African Multinational Enterprises. International Journal of Accounting & Information Management, 25(2), 177–200. doi: 10.1108/%0AIJAIM-01-2016-0003

Al-Matari, E.M. (2019). Do characteristics of the board of directors and top executives have an effect on corporate performance among the financial sector? Evidence using stock. Corporate Governance, 20(1), 16-43. https://doi.org/10.1108/CG-11-2018-0358

Amin, A., Ur Rehman, R., Ali, R. and Ntim, C.G. (2022). Does gender diversity on the board reduce agency cost? Evidence from Pakistan. Gender in Management, 37(2), 164-181. https://doi.org/10.1108/GM-10-2020-0303

Ameraldo, Fedi & Mohd Ghazali, N.A. (2021). Factors Influencing the Extent and Quality of Corporate Social Responsibility Disclosure in Indonesian Shari’ah Compliant Companies. International Journal of Business and Society, 22(2), 960–984. https://doi.org/10.33736/ijbs.3775.2021

Arayssi, M., Jizi, M., & Tabaja, H. H. (2020). The impact of board composition on the level of ESG discloser in GCC countries. Sustainability Accounting, Management. Policy Journal, 11(1), 137–161. https://doi.org/10.1108/SAMPJ-05-2018-0136

Arda, O. A., Bayraktar, E., & Tatoglu, E. (2019). Mediating roles of quality performance and environmental proactivity. Business Strategy and the Environment. International Journal, 64–78. https://doi.org/%0A10.1002/bse.2190

Bagnoli, M., & Watts, S. G. (2017). Voluntary assurance of voluntary CSR disclosure. Journal Economics and Management Strategy, 26(1), 205–230. https://doi.org/10.1111/jems.12171

Benjamin, S.J. and Biswas, P.K. (2022). Does winning a CSR award increase firm value?. International Journal of Disclosure and Governance, Vol. 19 No. 3, pp. 313-329, doi: 10.1057/s41310-022-00142-8.

Biswas, P. K., Mansi, M., & Pandey, R. (2018). Board composition sustainability committee and corporate social and environmental performance in Australia. Pacific Accounting Review, 30(4), 517–540. https://doi.org/10.1108/PAR-12-2017-0107

Boiral, O., Heras-Saizarbitoria, I. and Brotherton, M.-C. (2020). Professionalizing the assurance of sustainability reports: the auditors’ perspective. Accounting, Auditing & Accountability Journal, Vol. 33 No. 2, pp. 309-334. https://doi.org/10.1108/AAAJ-03-2019-3918

Braam, G., & Peeters, R. (2018). Corporate sustainability performance and assurance on sustainability reports: diffusion of accounting practices in the realm of sustainable development. Corporate Social Responsibility Environmental Management., 25(2), 164–181. https://doi.org/10.1002/csr.1447

Buallay, A. (2020). Sustainability reporting and firm’s performance: Comparative study between manufacturing and banking sectors. International Journal of Productivity and Performance Management, Vol. 69 No. 3, pp. 431-445. https://doi.org/10.1108/IJPPM-10-2018-0371

Burke, J. J., Hoitash, R., & Hoitash, U. (2019). The Heterogeneity of Board-Level Sustainability Committees and Corporate Social Performance. Journal of Business Ethics, 154(4), 1161–1186. https://doi.org/10.1007/s10551-017-3453-2

Clarkson, P., Li, Y., Richardson, G. and Tsang, A. (2019). Causes and consequences of voluntary assurance of CSR reports: International evidence involving Dow Jones Sustainability Index Inclusion and Firm Valuation. Accounting, Auditing & Accountability Journal, 32(8), 2451-2474. https://doi.org/10.1108/AAAJ-03-2018-3424

De Beelde, I., & Tuybens, S. (2015). Enhancing the credibility of reporting on corporate social responsibility in Europe. Business Strategy and the Environment, 24(3), 190–216. https://doi.org/10.1002/bse.1814

Deegan, C.M. (2019). Legitimacy theory: Despite its enduring popularity and contribution, time is right for a necessary makeover. Accounting, Auditing & Accountability Journal, Vol. 32 No. 8, pp. 2307-2329. https://doi.org/10.1108/AAAJ-08-2018-3638

Du, K. and Wu, S. J. (2019). Does external assurance enhance the credibility of CSR reports? Evidence from CSR-related misconduct events in Taiwan. Auditing: A Journal of Practice and Theory, 38(4), 101–130. doi: 10.2308/ajpt-52418.

Elmaghrabi, M. E. (2021). CSR committee attributes and CSR performance: UK evidence. Corporate Governance, 21, 892–919. https://doi.org/10.1108/CG-01-2020-0036

Faisal, F., Tower, G., & Rusmin, R. (2012). Legitimising Corporate Sustainability Reporting Throughout the World. Australasian Accounting. Business and Finance Journal, 6(2), 19–34. https://ro.uow.edu.au/aabfj/vol6/iss2/3/

Farooq, M. B., & De Villiers, C. (2019). How sustainability assurance engagement scopes are determined, and its impact on capture and credibility enhancement. Account Audit. Account. J., 33(2), 417–445. https://doi.org/10.1108/AAAJ-11-2018-3727.

Fernandez-Feijoo, B., Romero, S., & Ruiz, S. (2015). Multilevel approach to sustainability report assurance decisions. Aust. Account., 25(4), 346–358. https://doi.org/%0A10.1111/auar.12104.

Global Reporting Initiative (GRI). (2013). The external assurance of sustainability reporting. Amsterdam: Author. Retrieved from https://www.globalreporting.org/resourcelibrary/GRI Assurance.pdf

Jamil, A., Mohd Ghazali, N. A., & Nelson, S. P. (2020). The influence of corporate governance structure on sustainability reporting in Malaysia. Social Responsibility Journal, 17(8), 1251–1278. https://doi.org/10.1108/SRJ-08-2020-0310

Hamrouni, A., Bouattour, M., Ben Farhat Toumi, N. and Boussaada, R. (2022). Corporate social responsibility disclosure and information asymmetry: does boardroom attributes matter?. Journal of Applied Accounting Research, 23(5), 897-920. https://doi.org/10.1108/JAAR-03-2021-0056

International Auditing & Assurance Standards Board (IAASB). (2016). Discussion paper: Supporting credibility and trust in emerging forms of external reporting: Ten key challenges for assurance engagements. New York: Author. https://www.iaasb.org/publications/supporting-credibility-and-trust-emerging-forms-external-reporting-ten-key-challenges-assurance

Jensen, M. C. (1993). The modern industrial revolution, exit, and the failure of internal control systems. Journal Finance, 48, 831–880. https://doi.org/10.1111/j.1540-6261.1993.tb04022.x

Khatri I, Kjærland F. (2023). Sustainability reporting practices and environmental performance amongst nordic listed firms. Journal of Cleaner Production, 418:138172. https://doi.org/10.1016/j.jclepro.2023.138172

Kilic, M., & Kuzey, C. (2017). Factors Influencing Sustainability Reporting: Evidence from Turkey. Recent Issues in Accounting Finance and Auditing Trakya University, Edirne. 139–175. https://doi.org/10.2139/ssrn.3098812

Kurpierz, J.R. and Smith, K. (2020). The greenwashing triangle: adapting tools from fraud to improve CSR reporting, Sustainability Accounting. Management and Policy Journal, Vol. 11 No. 6, pp. 1075-1093. https://doi.org/10.1108/SAMPJ-10-2018-0272

Kuzey, C., & Uyar, A. (2017). Determinants of sustainability reporting and its impact on ﬁrm value: Evidence from the emerging market of Turkey. Journal of Cleaner Production, 143, 27–39. https://doi.org/10.1016/j.jclepro.2016.12.153

Li, Z., Jia, J. and Chapple, L.(E). (2023). The corporate sustainability committee and its relation to corporate environmental performance. Meditari Accountancy Research, Vol. 31 No. 5, pp. 1292-1324. https://doi.org/10.1108/MEDAR-06-2021-1341

Ong, T. and Djajadikerta, H.G. (2020). Corporate governance and sustainability reporting in the Australian resources industry: an empirical analysis. Social Responsibility Journal, Vol. 16 No. 1, pp. 1-14. https://doi.org/10.1108/SRJ-06-2018-0135

Orazalin, N. and Mahmood, M. (2020). Determinants of GRI-based sustainability reporting: evidence from an emerging economy. Journal of Accounting in Emerging Economies, Vol. 10 No. 1, pp. 140-164. https://doi.org/10.1108/JAEE-12-2018-0137

Orazalin, N., Kuzey, C., Uyar, A. and Karaman, A.S. (2024). Does CSR contribute to the financial sector's financial stability? The moderating role of a sustainability committee. Journal of Applied Accounting Research, Vol. 25 No. 1, pp. 105-125. https://doi.org/10.1108/JAAR-12-2022-0329

Pricewaterhouse Cooper (PwC). (2023). Global Investor Survey 2022. Retrieved from https://www.pwc.com/gx/en/issues/esg/global-investor-survey-2022.html#overview

Sahari, S., Ansari, N., & Yusof, E. (2018). Corporate Social Reporting: Construction Industry in Malaysia. Journal of Global Business and Social Entrepreneurship, 4(10), 139–150. https://myjurnal.mohe.gov.my/filebank/published_article/77451/15.pdf

Sawani, Y., Zain, M. M., & Darus, F. (2010). Preliminary insights on sustainability reporting and assurance practices in Malaysia. Social Responsibility Journal, 6(4), 627–645. https://doi.org/10.1108/17471111011083482

Shwairef, A., Amran, A., Iranmanesh, M., & Ahmad, N. H. (2021). The mediating effect of strategic posture on corporate governance and environmental reporting. Review of Managerial Science, 15, 349–378. https://doi.org/10.1007/s11846-019-00343-6

Sierra García, L., Bollas-Araya, H.M. and García Benau, M.A. (2022). Sustainable development goals and assurance of non-financial information reporting in Spain. Sustainability Accounting, Management and Policy Journal, Vol. 13 No. 4, pp. 878-898. https://doi.org/10.1108/SAMPJ-04-2021-0131

Simoni, L., Bini, L. and Bellucci, M. (2020). Effects of social, environmental, and institutional factors on sustainability report assurance: evidence from European countries. Meditari Accountancy Research, Vol. 28 No. 6, pp. 1059-1087. https://doi.org/10.1108/MEDAR-03-2019-0462

Thompson, E.K., Ashimwe, O., Buertey, S. and Kim, S.-Y. (2022). The value relevance of sustainability reporting: does assurance and the type of assurer matter?. Sustainability Accounting, Management and Policy Journal, Vol. 13 No. 4, pp. 858-877. https://doi.org/10.1108/SAMPJ-08-2021-0329.