Integrated reporting quality and sustainability performance: does firms' environmental sensitivity matter?

Abstract

PurposeThis study examines the effect of the environmental sensitivity of firms on the relationship between integrated reporting (IR) quality and sustainability performance. Prior research works focus on the nexus between IR quality and sustainability performance with little attention to factors that moderate this relationship.Design/methodology/approachOrdinary least squares (OLS) and other robust estimations are employed to analyse the data of firms on the Johannesburg Stock Exchange (JSE).FindingsThis study finds a positive association between IR quality and sustainability performance. However, the strength of this relationship is found to be weaker among environmentally sensitive firms, thereby raising concerns that such firms may be reporting less sustainability information with the mandatory implementation of IR on the JSE.Practical implicationsThe findings highlight the need for regulatory bodies to consider additional sustainability disclosure requirements for firms in environmentally sensitive industries.Social implicationsThe findings should make regulatory bodies aware of the possible actions of environmentally sensitive firms in relation to sustainability information within a mandatory setting of IR.Originality/valueThe study extends the existing literature on IR and sustainability performance by considering the effect of firm environmental sensitivity as a moderating factor.

The impact of corporate governance on integrated reporting (IR) quality and sustainability performance: evidence from listed companies in South Africa

“…The IR framework seeks to advance the concept of integrated thinking using a mediumto long-term perspective (Appiagyei et al, 2016;Baboukardos et al, 2021;de Villiers and Sharma, 2020;Raimo et al, 2020). This approach is expected to enable organisations to link their strategic goals and value drivers and improve the understanding of their activities (Dumay and Dai, 2017).…”

Board Diversity and Corporate Sustainability Performance: Do CEO Power and Firm Environmental Sensitivity Matter?

“…According to Li et al [99], environmentally sensitive firms are those whose operations are considered to have higher chances of degrading or polluting the environment. The literature mostly classifies firms within the mining, industrial, oil and gas, fisheries, forestry, agriculture, construction, etc., as environmentally sensitive firms [52,[99][100][101][102]. Due to their high potential for polluting the environment, environmentally sensitive industries are mostly subjected to stricter scrutiny concerning sustainability [5][6][7]52].…”

“…In this regard, a section of the literature projects that environmentally sensitive firms are more likely to present better environmental or sustainability disclosures than nonenvironmentally sensitive firms [101,103], in adherence to the need for survival as postulated in the lens of stakeholder theory [49,50]. However, other empirical assessments also posit that environmentally sensitive firms are more prone to negative sustainability impli-cations [5,7,52]. Hence, they resort to impression management or greenwashing concerning their sustainability disclosures [5,104,105].…”

“…Aligned with agency and stakeholder theories, ample literature has assessed the antecedents of corporate sustainability performance, e.g., [8,9,19,[24][25][26][27][28]52,68]. For example, the effects of board structure, composition, characteristics, expertise, and gender diversity on corporate sustainability performance have been assessed in the literature, e.g., [24][25][26][27][28].…”

“…Furthermore, stakeholder theory projects that the survival of firms is tied to their relationship with society as sustainability concerns increase [49,50]. Consequently, firms' level of engagement with society is affected by industry type (i.e., environmentally and non-environmentally sensitive industries) [51,52], as environmentally sensitive firms are subjected to more stringent sustainability issues [53]. Moreover, according to Cumming and Leung [29], the effects of diversity centre on industry type and nature of diversity, while certain industries are also noted to be male-dominated [8].…”