The Influence of Governance Structure and Strategic Corporate Social Responsibility Toward Sustainability Reporting Quality

Abstract

Increased business complexities coupled with enhanced global transformation have propelled corporations to behave as responsible citizens to drive the sustainability agenda. Many corporations incorporate their affirmative commitment to sustainable business practices into their corporate identities and give evidence for this in their sustainability reports. This paper examines the role of the board of directors in sustainability reporting quality (SRQ) in the Asia‐Pacific region. Based on a cross‐sectional study of 113 companies from 12 countries in the region, we find that the SRQ in the region leaves much room for improvement. However, we find that the institutionalization of the concept of corporate social responsibility (CSR) in an organization provides a sound foundation for enhancing SRQ. We find that the value of CSR anchored in the vision and/ or mission statement and strategic alliances fostered with non‐governmental organizations are positively associated with SRQ.This study contributes to strengthening the understanding, promoting discussion on the state of sustainability reporting in the Asia‐Pacific context and laying a solid foundation for more aggressive efforts to enhance SRQ. The study identifies the significant drivers currently associated with SRQ. The weak role of the board of directors in upholding the sustainable development agenda through the reporting process is highlighted. Copyright © 2013 John Wiley & Sons, Ltd and ERP Environment.

Does the Institutional Environment Affect CSR Disclosure? The Role of Governance

“…Since one of the functions of this committee is to ensure the quality of the company's sustainability disclosure, the existence of a CSR Committee can be viewed as a sign of the company's commitment to stakeholders, in line with the evidence found by Michelon and Parbonetti (2012) and Amran et al (2014).…”

“…However, the credibility and quality of CSR reports have been challenged (Boiral, 2013;Amran et al, 2014). Consequently, companies have started to implement some more complex CSR disclosure practices in order to make their reports more credible.…”

“…Based on these arguments, several researches (Amran et al, 2014;Haniffa & Cooke, 2005;Michelon & Parbonetti, 2012;Rodríguez et al, 2014;Said et al, 2009) have tried to identify the CG mechanisms that have an effect on CSR disclosure practices.…”

“…There are several BD characteristics (BD size, level of activity of the BD, presence of independent directors in the BD), as well as other CG mechanisms (the existence of a CSR Committee in the company and the presence of a Reference Shareholder), that seem to show an effect on sustainability disclosure practices (Amran et al, 2014;Said et al, 2009).…”

“…We used an index intended to reflect CSR reporting practices; we considered also the actions taken to increase the credibility and quality of such disclosures (Amran, Lee, & Devi, 2014;Boiral, 2013); the extent to which the disclosed information followed the Global Reporting Initiatives (GRI) guidelines; whether such adequacy was subject to external checking; and, finally, whether the information had been assured. With regard to CG mechanisms, we focused on the ones indicated by the literature as having an influence on CSR reporting practices: Board Size, Board Independence, Board Activity, CSR Committee, and Reference Shareholder.…”