Drivers of sustainability reporting quality in Australian listed companies: An empirical test of a conceptual model

Purpose – This study tested a proposed conceptual model by investigating drivers of sustainability reporting quality. The drivers are stakeholder engagement, stakeholder power and sustainability strategic posture. The study conducted further analyses by unpacking the components of sustainability reporting quality to examine the relationships between these drivers.
Design/methodology/approach – Information from three data sets provided in annual reports, sustainability reports and the websites of the top 200 Australian companies listed in the Australian Stock Exchange were content analysed to measure sustainability reporting quality and to examine the relationships between the three drivers by initially measuring sustainability reporting quality based on Global Reporting Initiative principles for defining the quality of sustainability reporting. Stakeholder engagement was measured using the AA1000 Stakeholder Engagement Standard in addition to the Global Reporting Initiative standards. Stakeholder power was measured based on the reference to powerful and marginalised stakeholders. Finally, sustainability strategic posture was measured based on the reference to reactive decision-making and proactive sustainability strategies.
Findings – The findings from this study show that stakeholder engagement and sustainability strategic posture are drivers for sustainability reporting quality in the top 200 listed companies (based on market capitalisation) in the Australian Stock Exchange, using three data sets − annual reports, sustainability reports and websites. The findings also reveal that stakeholder power is a driver for sustainability reporting quality when using annual reports and website data but not when employing sustainability reports. There is a positive relationship between stakeholder power and sustainability strategic posture when using data from annual reports, sustainability reports and websites. Additionally, there is a positive relationship between stakeholder engagement and sustainability strategic posture across all three data sets. There is a positive relationship between stakeholder power and stakeholder engagement when using annual reports and website data. However, when using sustainability reports the relationship between stakeholder power and stakeholder engagement is not supported. Finally, the balance and reliability of sustainability reporting quality components can be considered the common drivers for the positive relationship between sustainability reporting quality and the independent variables of stakeholder engagement, stakeholder power and sustainability strategic posture when using all three data sets.
Research limitations/implications – The focus is on the Australian context. Future research could include an international context or the context of emerging economies. Furthermore, the sources of data were annual reports, sustainability reports and websites. Future research could consider additional sources such as newspapers, media reports and newsletters.
Practical implications – This results of this study direct the attention of standard setters and policymakers to consider the three identified drivers − stakeholder engagement, stakeholder power and sustainability strategic posture. This may guide future discussions between standard setters and policymakers regarding mandatory sustainability reporting.
Originality/value – This study adopted a novel approach in measuring sustainability reporting quality based on the six Global Reporting Initiative principles − balance, comparability, accuracy, timeliness, clarity and reliability. Moreover, a new combination of three drivers of sustainability reporting quality − stakeholder engagement, stakeholder power and sustainability strategic posture – was established.
Keywords: Sustainability reporting quality, Stakeholder engagement, Stakeholder power, Sustainability strategic posture, Australia.