Stakeholder engagement in sustainability reporting: the case study of Ukrainian public agricultural companies

Abstract

Purpose. The paper aims at finding out how significantly stakeholders are consulted and involved by preparers, Ukrainian publicly-listed agricultural companies, while compiling sustainability reporting (SR) and by assurance providers, during assurance processes of SR. The paper’s main research question may be formulated as follows ‘How deeply stakeholders are involved at Ukrainian agricultural companies in the preparation of their sustainability reporting and assurance?’ 
 Methodology / approach. The study utilizes widely used techniques in this field content analysis of sustainability reports based on suggested coding rules which in turn grounded in the leading literature. Authors use a multidimensional coding system (with a maximum score of 12 points) which consists of three elements and offers an aggregate assessment of the information disclosure of the involvement of stakeholders in sustainability reporting. Also authors base on frameworks for classification of the stakeholders’ engagement level into three levels (information, response and involvement strategies). The paper’s sample although tiny, only five years/company observations, is comprehensive since it includes all Ukrainian agricultural companies presented in GRI SDD database one of the largest databases of its kind. To analyze only the latest relevant experience, authors have limited the report type to the latest GRI modification – GRI Standards. As a result of five steps in the sample formation process, it is equal to 3 companies that produced 5 reports in the period between 2017 and 2019 years. 
 Results. While the used coding structure allowed for a maximum of 12 points, the analysed reports were able to reach only half of this as one report earned 7, one – 6 and the rest was marked with 5 points. From the three companies from our sample frontrunner is Astarta Holding. Astarta Holding excels in materiality relevance (4 points) and is the only company assured its sustainability report. Authors find that the engagement strategy of the companies being analyzed mostly consists of action intended to inform (level 1) as well as consult and support stakeholders (level 2), whilst deep involvement strategy (level 3) is being almost neglected. In regards to focus, we find that the most cited stakeholders in engagement actions are on level 1 employees, consumers and suppliers. Consumers also alongside authorities and local communities are the most cited stakeholders on the level of response strategy, whereas the authorities are the single stakeholders' group being honoured to be treated on the highest third level. The authors’ general impression is that for the most part legitimacy theory is the best theory to explain the behaviour of compilers of reports from the sample because mostly management uses rhetorical tools to cover its activities, while the reporting itself lacks specifics about negative externalities. For authors, it looks like an exercise in self-legitimization. It appears that the companies studied has not yet fully performed the transfer from ‘stakeholder management’ to ‘stakeholder engagement’. It is the authors’ understanding that all this has roots in the very perverted perception of sustainability reporting as a continuation of financial reporting although it is not. In financial reporting, materiality is defined internally as a percentage of some indicators in the balance sheet and/or statement of financial performance, in sustainable reporting, materiality is not only important in the assurance, but it is a cornerstone in the preparation of SR itself.
 Originality / scientific novelty. To the best of our knowledge, this study is the first that extends the analysis the stakeholders’ engagement in the sustainability reporting to the Ukrainian agricultural companies, thus shedding some light on that unexplored (underexplored) practice. 
 Practical value / implications. First, sustainability reporting practices in Ukraine is in its infancy, and therefore any shortcomings identified will be a guide to action to adjust these approaches in the future. Secondly, our analysis can also be seen as the dissemination of best practices. The companies we have chosen are pioneers in this matter, so they can at the same time be considered as role models for others, but taking into account the experience gained by them. Besides, in addition to companies, our findings can be useful for regulators and public authorities alike in terms of adjusting the approach to regulating this area.

Stakeholder engagement practices and impression management

“…Sustainable organisations are expected to disclose who their stakeholders are and what issues concern them. In line with Pasko et al (2021), our results for the whole sample show that employees are by far the most frequently cited stakeholders (89.04%). The second most cited are governments (65.75%), closely followed by clients (64.38%) and local communities (61.64%).…”

“…We show that for a large body of Canadian organisations that publish a sustainability report on the GRI database, sustainability disclosures represent a way for them to construct the impression of sustainability they wish to create and alter their stakeholders’ perceptions of their true motives for engaging in sustainability (Leary and Kowalski, 1990; Highhouse et al , 2009). In line with the findings of Pasko et al (2021), an important proportion of Canadian companies can use sustainability reporting as a rhetorical tool that helps them legitimate their activities. It appears that organisations can manage their perceived corporate image and reputation by disclosing generic information about their stakeholder engagement.…”

“…They used sustainability disclosures on stakeholder engagement to show off, despite low engagement levels (Stocker et al, 2020) and to create the impression that they are committed to shared value creation. However, on further investigation, it becomes clear that the practices disclosed belong to the realm of "business as usual" and can, at best, inform stakeholders and maintain the status quo through reducing the risk of reputation loss (Burchell and Cook, 2006;Gray, 2006;Pasko et al, 2021). Perhaps, one of the reasons why companies engage their stakeholders in a generic way is that they produce their sustainability report using the same approach they use for their annual report.…”

“…We know very little about how the stakeholder engagement process actually plays out in organisations. In their exploratory study, Pasko et al (2021) examined the disclosures of three Ukrainian agricultural companies in relation to stakeholder participation in sustainability reporting. These sustainability reporting practices are mainly depicted as informative initiatives that are at times meant to provide advice and support but are practically never intended to involve stakeholders.…”

“…These sustainability reporting practices are mainly depicted as informative initiatives that are at times meant to provide advice and support but are practically never intended to involve stakeholders. The authors underlined the lack of consideration Ukrainian agricultural companies give to materiality in sustainability reporting and concluded that the entire process resembles an exercise in self-legitimisation (Pasko et al , 2021).…”