Does sustainability reporting improve financial and non financial performance in Indonesia Companies?

Abstract

Responsibility disclosure of a company is very important for implementing government regulations and public demands related to the disclosure of the company's sustainability in terms of economic, social, environmental which has a major impact on the company's performance in terms of both financial and non-financial. This study aims to examine the impact of sustainability reporting on financial and non financial performance of PROPER companies in Indonesia. The sample used in this study is The sample used in this study were companies which won green industry award that is listed on the Indonesian stock exchange and has published a sustainability reporting in 2015-2020. The secondary data used was taken from financial reports and sustainability reporting in 2015-2020. From this study, it showed that the economic variable has a significant positive effect on financial performance and an insignificant effect on the market and operational performance. Sustainability reports that can be seen from social, economic, and environmental factors are For example, the case of hot mudflow which was caused by Lapindo Brantas Inc., an oil and gas company. Sustainability Reporting Exposure is growing.sustainability report as measured by economics had a positive and significant effect on Tobin's Q, while the social, environmental variables on market performance and company operations affected but it was not significant. While total assets have a significant negative effect on financial performance as measured by Tobin's Q, but have no significant effect on market performance and company operations as measured by MBR and ROA. Leverage has a significant negative effect on ROA but has no significant effect on MBR and Tobin's Q.

Corporate Characteristics and Sustainability Disclosure in Bangladesh: An Analytical Study Based on Global Reporting Initiative Guideline 4

“…Atan, Razali, Said, and Zainun (2016) found no association between environmental social and governance (ESG) disclosure level and the firm's financial performance. Similarly Wahyuningtyas, Susesti, and Murtadho (2022) found no substantial consequence of sustainability reporting on financial performance of companies. Tarmuji, Maelah, and Tarmuji (2016) found the influence of ESG practices on economic performance.…”

“…A standardized method of sustainability reporting would help to reduce the limitations of voluntary initiatives and recover the overall voluntary reporting mechanisms (Coulmont, Berthelot, & Gagne, 2022). However, consciousness and empathy about sustainability reports in Indonesia are still deficient while the government has made sustainability reports obligatory (Wahyuningtyas, Susesti, & Murtadho, 2022). Global Reporting Initiative (GRI) is dedicated to developing and providing universal guidance for sustainability disclosure (Wachira, Berndt, & Romero, 2019;Islam, 2020).…”

The Effect of Profitability and the Board Directors on the Disclosure of Sustainability Report

“…Profitability is a ratio that measures a company's ability to earn profits based on its sales, assets, and equity [41]. Profitability measurement is a process that allows management to be more open and flexible in disclosing corporate social responsibility to shareholders [11].…”

“…Profitability refers to a company's ability to create profits to raise the value of its shareholders. Lodhia et al (2020) [6], Wahyuningtyas et al (2022) [11], and Madani and Gayatri (2021) [12] discovered that the higher the level of corporate social responsibility disclosure, the higher the level of profitability. This implies that corporations with large profits may afford to cover the costs of social responsibility disclosure.…”

The Influence of Environmental, Social, Governance, and Corporates Scandals on the Stock Volatility

“…In the Indonesian context, ESG is a relatively new concept, and efforts are still being made to implement it. In order to encourage companies to implement ESG in 2017, the Financial Services Authority (OJK) issued the OJK Ihsani et al (2023), Kartika et al (2023), Lubis & Rokhim (2021), Tanjung (2023), Wahyuningtyas et al (2022), andZahroh &Hersugondo (2021). However, research on the influence of ESG on stock market performance is still limited, suggesting an area that has potential for deeper exploration.…”