Determinants of Sustainability Reporting A Review of Results, Trends
Determinants of Sustainability Reporting A Review of Results, Trends
Determinants of Sustainability Reporting A Review of Results, Trends
Review
a r t i c l e i n f o
a b s t r a c t
Article history:
Received 21 August 2012
Received in revised form
2 July 2013
Accepted 3 July 2013
Available online xxx
Since the end of the 1990s, sustainability reporting has become an increasingly relevant topic in business
and academia. However, literature is still limited in quantity and no major reviews of the latest developments have thus far been presented. This paper provides a review of 178 articles dating from 1999
to 2011 from journals related to business, management, and accounting. Our aim is to identify what
determinants of sustainability reporting are examined in the literature and to identify (in)consistencies,
gaps, and opportunities for future research. We specically illuminate factors inuencing the adoption,
the extent, and the quality of reporting. Based on our ndings we provide an otherwise often missing link
to theory (especially legitimacy, stakeholder, signaling, and institutional theory). Finally, possible future
research themes are discussed by illuminating gaps and underexposed themes in the area of regulation
and governance as well as reporting quality and stakeholder perception.
2013 Elsevier Ltd. All rights reserved.
Keywords:
Sustainability reporting
Literature review
Determinants
Corporate social responsibility reporting
Triple bottom line
Integrated reporting
1. Introduction
A diverse set of stakeholders (e.g., employees, customers, suppliers, creditors, advocate groups, public authorities) pursuing
different economic, environmental, and social interests determines
the success of an organization (e.g., Buchholz and Rosenthal, 2005;
Laplume et al., 2008). An important channel through which organizations1 try to meet these demands is sustainability reporting.
By disclosing sustainability information private companies,
for example, aim to increase transparency, enhance brand value,
reputation and legitimacy, enable benchmarking against competitors, signal competitiveness, motivate employees, and support
Abbreviations: DBL, double bottom line; GRI, Global Reporting Initiative; TBL,
triple bottom line.
* Corresponding author.
E-mail address: [email protected] (R. Hahn).
1
This article reviews research on sustainability reporting in general. Thus, we do
not focus on research that was conducted on private companies only. However,
most research on sustainability reporting to date was carried out in the realm of
private actors (i.e., companies). From now on we use the terms company or rm
when specically focusing private actors or when discussing research that was
conducted on companies. In most cases, however, conclusions can be conferred and
both terms can be used interchangeably.
0959-6526/$ e see front matter 2013 Elsevier Ltd. All rights reserved.
http://dx.doi.org/10.1016/j.jclepro.2013.07.005
Please cite this article in press as: Hahn, R., Khnen, M., Determinants of sustainability reporting: a review of results, trends, theory, and
opportunities in an expanding eld of research, Journal of Cleaner Production (2013), http://dx.doi.org/10.1016/j.jclepro.2013.07.005
2. Research method
A literature review aims at revealing trends, relations, inconsistencies, and gaps in the literature in order to organize and
evaluate existing work in a particular eld. Before we turn to the
specic methodological issues we will delineate the basic terminology to establish understanding of the concepts involved (2.1).
For conducting the review we followed the approach suggested by
Fink (2010): In the rst step, we selected our research questions,
databases, as well as search terms (2.2). Secondly, we used practical
screening criteria to include or exclude studies from the review
(2.3). In the third step, we developed and applied methodological
screening criteria in order to analyze a studys content (2.4). Finally,
we synthesized and assessed our ndings (Sections 3e5).
2.1. Basic terminology
In the following, we will set the stage by picturing a framework
of basic terminology and concepts (see Fig. 1).
The initial starting point for any considerations on sustainability
or CSR reporting lies in the overarching (normative) concepts of
sustainability and CSR. To provide a distinct reference point we
adopt the latest denition of CSR by the European Commission
which regards CSR as the responsibility of enterprises for their
impacts on society . to integrate social, environmental, ethical,
human rights and consumer concerns into their business operations and core strategy (European Commission, 2011: 6). Quite
similarly, ISO 26000da worldwide standard for social responsibilitydcharacterizes social responsibility as responsibility of an organization for the impacts of its decisions and activities on society
and the environment, through transparent and ethical behaviour
(International Organization for Standardization, 2010: 3) while
directly referring to the maximization of the contribution to sustainable development as the overarching objective for an organization (p. 10).2 These characterizations provide direct links to
sustainability thinking. Following the historical characterization of
the World Commission on Environment and Development, which
puts intra- and intergenerational justice in the middle of thinking,
Dyllick and Hockerts (2002: 131) dene corporate sustainability as
meeting the needs of a rms direct and indirect stakeholders .,
without compromising its ability to meet the needs of future
stakeholders as well. To achieve this goal, companies need to
maintain their economic, social and environmental capital base
(Dyllick and Hockerts, 2002: 132) which directly refers to
Elkingtons (1997) triple-bottom-line (TBL) thinking. Lozano and
Huisingh (2011) present an even more holistic perspective on
sustainability by explicitly including a fourth time-dimension
focusing on short-, long- and longer-term perspectives. They
propose that there are dynamic and simultaneous interrelations
within and between the TBL dimensions, not only at certain points
in time but also over time. In sum, all four dimensionsdincluding
the timedinterrelate at equilibrium. As can be seen from these
characterizations, sustainability and CSR gradually converge (Hahn,
2011) and thus this literature review considers sustainability
(reporting) and CSR (reporting) as consistent concepts.
Based on such a normative grounding, the specic corporate
performance in the area of sustainability and CSR is measured by
means of sustainability accounting. Sustainability(-related) accounting comprises those information management and
2
Here again, the different focus on organizations in general (as by the International Organization for Standardization) and on companies in particular (as by
the European Commission) come to the fore. See again Footnote 1 for our
perspective on the interchangeable use of both terms.
Please cite this article in press as: Hahn, R., Khnen, M., Determinants of sustainability reporting: a review of results, trends, theory, and
opportunities in an expanding eld of research, Journal of Cleaner Production (2013), http://dx.doi.org/10.1016/j.jclepro.2013.07.005
Sustainability
Internal
performance
measurement
Normative
reference and
starting point
Integrated reports
covering
holistic
Extent of sustainability
considerations
isolated
Focus of
literature review
Fig. 1. Overview and relations of basic concepts and terminology relating to sustainability reporting.
3
For the sake of consistency, we will from now on use the term sustainability
reporting when referring to reporting activities that are related to sustainabilityissues since we assume such disclosure to be part of sustainability reporting activities even if they do not cover the entire range of sustainability dimensions in a
single report.
Please cite this article in press as: Hahn, R., Khnen, M., Determinants of sustainability reporting: a review of results, trends, theory, and
opportunities in an expanding eld of research, Journal of Cleaner Production (2013), http://dx.doi.org/10.1016/j.jclepro.2013.07.005
4
This date was chosen to include all relevant papers from 2011 that might have
been added with a certain time lag to the databases.
Please cite this article in press as: Hahn, R., Khnen, M., Determinants of sustainability reporting: a review of results, trends, theory, and
opportunities in an expanding eld of research, Journal of Cleaner Production (2013), http://dx.doi.org/10.1016/j.jclepro.2013.07.005
5
The economic dimension was not separately examined since we assumed it to
be covered in research on nancial reporting.
6
Of the non-empirical papers only one classies as a literature review (Spence
et al. (2010)). All others are conceptual papers. The review articles mentioned in
the introduction were not identied by our search since they were not covered by
our keywords (i.e., not referring to reporting but rather to accounting), in two cases
date from after 2011, or were not included in the databases.
Please cite this article in press as: Hahn, R., Khnen, M., Determinants of sustainability reporting: a review of results, trends, theory, and
opportunities in an expanding eld of research, Journal of Cleaner Production (2013), http://dx.doi.org/10.1016/j.jclepro.2013.07.005
7
Some papers specically focus on environmental reporting. Most, however,
analyze a more extensive sustainability reporting. Due to our overarching focus on
sustainability reporting, we will report on both aspects together.
Fig. 4. Types of media analyzed by document analysis. A single paper may analyze
multiple types of media. Therefore, the numbers might be higher than the number of
empirical papers in each year. Separate reports include social or environmental reports.
corporate size and nancial performance (4.1.1), social and environmental performance (4.1.2), and ownership structure (4.1.3).
4.1.1. Corporate size and nancial performance
Table 1 gives an overview of the most frequently investigated
determinants in terms of corporate size and nancial performance.
Corporate size (measured by total assets, turnover, sales, number of
employees, or market capitalization) can be considered to have a
positive effect on the adoption and extent of sustainability
reporting, assuming that larger companies cause greater impacts,
become more visible, and therefore face greater stakeholder scrutiny and pressure (e.g., Fortanier et al., 2011; Gallo and Jones
Christensen, 2011). Furthermore, small companies might have
higher marginal costs of disclosure (e.g., Haddock, 2005). Empirical
results widely support this thinking. When turning to a companys
nancial performance, research frequently assumes protability
(measured by market returns, return on assets, or return on equity)
to increase the ability and exibility of a company to bear the costs
of sustainability reporting and/or to cope with the consequences of
disclosing potentially damaging information (e.g., Cormier and
Magnan, 2003; Haniffa and Cooke, 2005; Kent and Monem,
2008). Empirical results, however, are rather mixed. A high level
of indebtedness, leverage, or gearing can be assumed to decrease
the ability and exibility of a company to bear the costs of reporting
and/or face the consequences of disclosing potentially damaging
information (e.g., Cormier and Magnan, 2003; Stanny and Ely,
2008). However, Haniffa and Cooke (2005) also argue that sustainability reporting might be used to legitimize corporate activities toward creditors and shareholders, thus providing incentives
to engage in reporting. Empirical research on this determinant
provides contradictory results.
Four other variables are also used as proxies for nancial performance. However, they received far less academic attention. Results are ambiguous for all.
First, a higher market-to-book value (or Tobins q) could imply a
higher level of information asymmetry between a company and its
investors regarding intangible assets, and future growth prospects
may foster reporting activities in order to help investors to predict
future incomes, thereby reducing capital costs. Only Prado-Lorenzo
et al. (2009b) indicate a positive association between a companys
market-to-book value and the extent of reporting. Others deny a
signicant relation to its adoption (Stanny and Ely, 2008), extent
(Clarkson et al., 2011), and quality (Clarkson et al., 2008, 2011).
Second, high capital intensity could also be considered to
coincide with more extensive sustainability reporting, assuming
companies want to signal the newness of assets and technologies
and related reductions of environmental impacts such as
Please cite this article in press as: Hahn, R., Khnen, M., Determinants of sustainability reporting: a review of results, trends, theory, and
opportunities in an expanding eld of research, Journal of Cleaner Production (2013), http://dx.doi.org/10.1016/j.jclepro.2013.07.005
Table 1
Overview of most frequently examined internal determinants of sustainability reporting.a
Determinant
Dependent
variable
Authors
Conclusion
Corporate size
Adoption
Extent
Quality
Financial
performance
Protability
Adoption
Extent
Quality
Indebtedness,
leverage, or
gearing
Adoption
Extent
Quality
Indifferent results
() positive inuence of determinant on dependent variable. (o) no signicant inuence, () negative inuence, (mixed) mixed results on different sub-aspects.
Please cite this article in press as: Hahn, R., Khnen, M., Determinants of sustainability reporting: a review of results, trends, theory, and
opportunities in an expanding eld of research, Journal of Cleaner Production (2013), http://dx.doi.org/10.1016/j.jclepro.2013.07.005
Please cite this article in press as: Hahn, R., Khnen, M., Determinants of sustainability reporting: a review of results, trends, theory, and
opportunities in an expanding eld of research, Journal of Cleaner Production (2013), http://dx.doi.org/10.1016/j.jclepro.2013.07.005
Table 3
Overview of research ndings on sector-afliation.a
Conclusion
Determinant
Dependent
variable
Authors
Conclusion
Media
exposure
Positive inuence
acknowledged
Sectorafliation
Adoption
Rather
indifferent
results
Adoption
Extent
Quality
Positive inuence
widely
acknowledged
Extent
No signicant
inuence found
but research still
scarce
a
() positive inuence of determinant on dependent variable, (o) no signicant inuence, () negative inuence.
Quality
Positive
inuence
widely
acknowledged
Positive
inuence
acknowledged
a
(U) signicant inuence of determinant on dependent variable, (o) no
signicant inuence, (c) conceptual paper.
Please cite this article in press as: Hahn, R., Khnen, M., Determinants of sustainability reporting: a review of results, trends, theory, and
opportunities in an expanding eld of research, Journal of Cleaner Production (2013), http://dx.doi.org/10.1016/j.jclepro.2013.07.005
10
regarded as such a trend and Marshall et al. (2010: 478) even see a
paradigm shift . that . incorporates a sustainability mandate,
refuting clearly the old thinking of limitless resources, unbounded
growth, and technologically derived solutions. Other than traditional nancial reporting, which largely caters to shareholders
information needs, sustainability reporting (supposedly) offers
valuable information to a broader audience and thus helps to cater
to their information needs by offering explanations of how a
company answers to the societal call for sustainable business
conduct. It can be assumed that large numbers of (powerful)
stakeholders directly increase the need for these companies to
positively explain their business conduct. In this context, the
disclosure of sustainability-related information can be regarded as
an instrument to shape the perceived legitimacy of the company
(Campbell et al., 2003) which, in turn, builds the bridge to signaling
theory.
Signaling theory suggests that in situations of asymmetric distribution of information, one party tries to credibly convey information about itself to a second party (Spence, 1973; Connelly et al.,
2010). The sustainability performance of a company can be regarded as such asymmetric information since it is difcult, for
example, for parties outside the company to gain credible information on these aspects. Companies might want to reduce this
information asymmetry by proactively reporting on their
sustainability-related activities to ensure legitimacy. However,
whether or not the addressee perceives the given information as
plausible and trustworthy greatly inuences the potential effect
such signaling efforts have. In sum, a greater exposure to a large
number of (potentially powerful) stakeholders (and media
coverage) could inuence a companys need to actively secure its
legitimacy by signaling sustainability efforts in respective reports.
As outlined above, the positive inuence of corporate size on the
adoption, extent, and quality of sustainability reporting is widely
acknowledged in previous research supporting the idea that
especially large companies which are exposed to a diverse set of
stakeholders feel the need to engage in signaling activities such as
sustainability reporting to secure their legitimacy in society. Similarly, the positive inuence of media exposure on the adoption and
extent of reporting is also often mentioned (albeit with a much
smaller focus in extant research) which directly points to the need
to engage in signaling. This exposure can also be assumed to be
positively related to corporate size as well as other factors (such as
sector-afliation) so that the cause-effect relationship between
media exposure and corporate size on the one hand and the three
mentioned theoretical anchors on the other hand remains somewhat ambiguous. Nevertheless, all three theories can indeed help
explaining the proliferation of sustainability reporting in the last
decade.
Less clarity, however, exists for aspects of institutional theory
which suggests that corporate activities do not necessarily follow a
business rationale but instead answer to the institutionalized expectations of the environment (Meyer and Rowan, 1977). If this
would be the case for sustainability reporting, the adoption, extent,
and quality of sustainability reporting would gradually align due to
institutional isomorphisms (DiMaggio and Powell, 1983) instead of
being subject to other external determinants. Research so far,
however, produced mixed results on these aspects (compare, e.g.,
Chen and Bouvain, 2009 with Fortanier et al., 2011).
5.2. Underrepresented streams of researchdpossible avenues for
future research
Beyond the focus on determinants of sustainability reporting
there seem to be some major shortcomings when turning to other
topics of potential interest. In the following we will highlight such
Please cite this article in press as: Hahn, R., Khnen, M., Determinants of sustainability reporting: a review of results, trends, theory, and
opportunities in an expanding eld of research, Journal of Cleaner Production (2013), http://dx.doi.org/10.1016/j.jclepro.2013.07.005
11
2010). Considering that developing a more or less smooth system (Dubbink et al., 2008: 402) of mandatory nancial reporting
has taken a considerable amount of time, one should take into
account that regulation on sustainability reporting is still at an early
stage of development (Hess and Dunfee, 2007). An example of
rather progressive regulation can be found in South Africa where
companies at the Johannesburg stock exchange are required to
publish an integrated TBL report, or explain omission (Adams
and Simnett, 2011; Integrated Reporting Committee of South
Africa, 2011). Moreover, the European Commission recently intensied its endeavors to introduce mandatory sustainabilityrelated disclosure (European Commission, 2013). Such new developments warrant future research.
When turning to internal aspects of corporate governance, we
identied another research gap. Certain governance structures, for
example audit committees, sustainable development committees
or the presence (or absence) of non-executive or independent directors on the board might inuence reporting. Such structures
could signal the intention to be transparent, accountable, and
committed to sustainability (e.g., Haniffa and Cooke, 2005; Kent
and Monem, 2008). From our sample, only Ertuna and Tukel
(2010) and Kent and Monem (2008) discuss the mentioned committees with mixed results, whereas the inuence of non-executive
directors is examined by Brammer and Pavelin (2006), Ertuna and
Tukel (2010), Haniffa and Cooke (2005), and Prado-Lorenzo et al.
(2009a). This leaves room for further investigations. Finally, only
two papers (Chen and Bouvain, 2009; Fortanier et al., 2011)
investigate whether adherence to global standards such as the GRI,
the UN Global Compact, ISO 14001 or others may increase the
comparability of sustainability reports by overcoming otherwise
existent variations in reporting practice.
Table 4 provides a brief overview of possible future research
streams regarding regulation and governance and posits related
research questions.
5.2.2. Research regarding reporting quality and stakeholder
perception
Few studies specically examine reporting quality which is a
central issue for providing a true and fair view of a companys
Table 4
Overview of research gaps on regulation and governance.
General topic
Governance issues at
company and country
level
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opportunities in an expanding eld of research, Journal of Cleaner Production (2013), http://dx.doi.org/10.1016/j.jclepro.2013.07.005
12
whereas Simnett et al. (2009), Chen and Bouvain (2009), and Kolk
and Perego (2010) identify factors determining the demand for
assurance. Only two studies analyze the contribution of assurance
to the perception of the respective reports using experimental
designs. Both nd that perceived credibility increases when a
sustainability report is assured and when assurance is provided by
professional accountants (Hodge et al., 2009; Pugrath et al., 2011).
With regard to the quality of assurance (thus indirectly to the
quality of reporting), Smith et al. (2011) conceptually discuss how
managerial inuence on the assurance process might impede
credibility and accountability. Additionally, Fonseca (2010) and
Manetti and Becatti (2009) evaluate assurance statements and note
problems stemming from a low level of stakeholder involvement.
Thomson and Bebbington (2005: 517) explicitly underline that the
quality of reporting . is intimately linked to the quality of stakeholder engagement. It is noticeable that there are only isolated
endeavors addressing this issue. From a conceptual perspective,
Reynolds and Yuthas (2008) conclude that current reporting and
accountability standards enhance transparency but fall short of
engaging stakeholders in discourse, whereas Hess (2008) criticizes
corporations for limiting stakeholder engagement to a mere management of legitimacy risks. Empirical research also indicates that
companies hardly ever involve stakeholders in decision making on
the content of reports (Manetti, 2011; Perrini, 2006), which might
compromise the materiality and relevance of disclosed information. One reason might be that businesses are simply not aware of
how to deal with certain stakeholders (e.g., Onkila, 2011), so
Habisch et al. (2011) identify a gap between literature and practice
about the importance of stakeholder dialogs with regard to sustainability reporting.
Research on stakeholder pressure and legitimacy aspects as
determinants of sustainability reporting is remarkably scarce. In an
early conceptual study, Lewis and Unerman (1999) propose that
varying moral values result in different legitimation strategies and
correspondingly in different reporting patterns in order to fulll
distinctive stakeholder expectations. In line with this, Buhr (2002)
and Husillos-Carqus et al. (2011) infer from interview data that
reporting is initiated following insufcient communication with
Table 5
Overview of research gaps on reporting quality and stakeholder perception.
General topic
Reporting quality
Stakeholder engagement
and perception
External assurance
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opportunities in an expanding eld of research, Journal of Cleaner Production (2013), http://dx.doi.org/10.1016/j.jclepro.2013.07.005
13
All 178 papers included in the literature review are marked with a *.
Please cite this article in press as: Hahn, R., Khnen, M., Determinants of sustainability reporting: a review of results, trends, theory, and
opportunities in an expanding eld of research, Journal of Cleaner Production (2013), http://dx.doi.org/10.1016/j.jclepro.2013.07.005
14
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Please cite this article in press as: Hahn, R., Khnen, M., Determinants of sustainability reporting: a review of results, trends, theory, and
opportunities in an expanding eld of research, Journal of Cleaner Production (2013), http://dx.doi.org/10.1016/j.jclepro.2013.07.005
17
Please cite this article in press as: Hahn, R., Khnen, M., Determinants of sustainability reporting: a review of results, trends, theory, and
opportunities in an expanding eld of research, Journal of Cleaner Production (2013), http://dx.doi.org/10.1016/j.jclepro.2013.07.005