KPMG (2013) opined that “CR [corporate responsibility] reporting is now undeniably a mainstream business practice worldwide, undertaken by almost three quarters (71%) of the 4,100 companies surveyed in 2013” (p. 10) and the “use of Global Reporting Initiative (GRI) guidelines is almost universal” (p. 11). In terms of who produces quality reports, KPMG states that “large companies in the electronics and computers, mining and pharmaceuticals sectors produce the highest quality CR reports” (p.13). Patten (1992) explains that these industries disclose more environmental information in their annual reports because of the sensitive nature of their activities.
The first generation of environmental performance reports that is from the 1990s contained large volumes of inconsistent and unverified information (Cho et al., 2012). This inconsistency of the quality of the contents of these reports made for lack of comparability, both over time and between companies (Beets & Souther, 1999). Despite subsequent encouragement for a common reporting approach to be adopted (e.g., see Beets & Souther, 1999; Deegan, 2004; Stowers & White, 1999), some recent studies (Amoako et al., 2017; de Franco, Kothari & Verdi, 2011) show that this extreme diversity and lack of comparability continues in some places, reflecting sustainability disclosure being unregulated and discretionary. Elsewhere, however, attempts to regulate reporting have led to improvements in quality. Prior survey results show that regulation results in reports which provide information that is both new and
75
relevant (Amoako et al., 2017; De Franco et al., 2011; de Villiers & Alexander, 2014) as well as valuable to investors for decision making (Healy & Palepu 2001).
One outcome of the ways attempts at regulation have been carried out is that sustainability reporting is country and industry variant to a certain extent (Albelda, 2011; Doorasamy & Garbharran, 2015; KPMG, 2013). Reflecting findings in it reports for earlier years, KPMG (2015) claims that “the main driver for CR [corporate responsibility] reporting continues to be legislative: there is a growing trend of regulations requiring companies to publish non-financial information” (p. 30). Gray, Meek and Roberts (1995) explain that national differences in legal requirements for reporting affect voluntary disclosures because strict requirements may suppress disclosure innovations and so voluntary reporting as well. Similarly, Elango and Sethi (2007) have established that the effect from a multinational company’s country of origin on its sustainability reporting mainly stems from institutional pressures from the government, professional accounting and industry associations, and pressure groups in the country in question. The extent to which a multinational company becomes vulnerable to such pressures differs between companies in relation to cultural, political and legal idiosyncrasies of the respective countries of origin (Buhr & Freedman 2001; Holland & Foo, 2003; Kolk 2005; Momin & Parker, 2013).
There are various other studies of reasons for some sustainability reports being better or worse than others. Some studies on sustainability reporting have indicated a positive influence of foreign ownership on the level of sustainability reporting (such as Cormier & Magnan, 2004; Haniffa & Cooke, 2005), claiming that sustainability reporting is used by foreign business owners due to the need to reduce information asymmetry. However, da Silva Monteiro and Aibar Guzmán (2010a, 2010b), and Ertuna and Tukel (2010) found that there is no relationship between the level of sustainability reporting and foreign ownership.
76
Some authors argue that bigger firms need to comply with regulations more than small and medium-sized companies do, and that larger companies cause greater impacts, are more visible, and therefore face greater stakeholder scrutiny and pressure (Ross & Kovachev, 2009; Gallo & Christensen, 2011). However, other studies argue that sustainability accounting implementation and reporting has not much to do with the size of a company, but rather the type of industry it relates to (Choi, 1998; Frost & Wilmshurst, 1998; Ferreira, Moulang & Hendro, 2010). The latter agree that the more environmentally sensitive an industry is, the more substantial its environmental reporting, as stakeholders are more concerned about environmental information for decision making. Other studies agree with these assertions, adding that companies in industries with high social and environmental impacts may need to engage in sustainability reporting in order to respond to sector-specific stakeholder pressure (Parsa & Kouhy, 2008; Sotorrío & Sánchez, 2010).
The level of sustainability disclosure has been partly attributed to cultural issues surrounding a company. Carels, Maroun and Padia (2013) show how sustainability reporting serves as a device for managing stakeholder expectations and conclude that corporate governance developments and the “integrated reporting project have gone hand-in-hand with an increase in the level of disclosures and the extent to which these disclosures are integrated in corporate reports” (p. 957). However, Mathews (2004) and Carels et al. (2013) argue that there is no guarantee that all organisations perceive integrated reporting as a meaningful medium for stakeholder dialogue, especially if stakeholders such as community members and regulators are hostile. Such situations may need other means of communication than sustainability reports, such as face-to-face. In addition, Khlif, Hussainey and Achek (2015) claim that cultural features such as “individualism, masculinity and long-term orientation moderate the relationship between profitability and corporate social environmental disclosures” (p. 313). Maroun (2015), studying the relationship between corporate social environmental disclosures
77
and financial measures, discovered that sustainability reporting levels in different jurisdictions are affected by the importance of corporate governance systems, differing accounting standards, the use of fair value measures and the relevance to the users of corporate reports.
Other determinants of the extent of sustainability reporting include a high level of indebtedness, leverage, or gearing (Cormier & Magnan, 2003; Stanny & Ely, 2008); non-disclosure of information due to high costs of data collection and reporting (Cormier & Magnan, 2003); disclosure to retain competitive advantage (Daub, 2007) and to retain employees (Welford & Frost, 2006); and disclosure as a risk reduction device (Spence, 2009; Unerman, 2008; Welford & Frost, 2006).
Perez and Sanchez (2009) establish that even though there is a clear evolution in the comprehensiveness and depth of sustainability reports, with context, commitment and social performance scoring high marks and regularly improving, there is still room for improvement in accessibility and assurance of environmental and economic performance. Similarly, Junior et al. (2014), in exploring trends in social and environmental disclosure and the extent of sustainability assurance, found that, although all the organisations they analysed provided some type of information in relation to their social or environmental performance on their official website, not all of them provided assurance, such as auditing, of their sustainability reports.