Sustainability reporting as a communication tool for economic, social, and environmental performance disclosure

Modern organisations admit that it is not only relevant to put the issue of sustainability on the strategic agenda, but also equally important to ensure that the information about the actions they have taken and the results... [ view full abstract ]

Modern organisations admit that it is not only relevant to put the issue of sustainability on the strategic agenda, but also equally important to ensure that the information about the actions they have taken and the results achieved is communicated to the relevant audiences. Sustainability reporting (SR) serves as a fundamental, most-used tool between the organisations and their stakeholders revealing economic, social and environmental performance of the organisations. SR implies the practice of measuring, disclosing and being accountable to stakeholders (internal and external) for the organisation’s sustainability performance. SR is mostly a voluntary activity; however, it is spreading both in terms of the number of organisations engaging in reporting and the comprehensives of the information provided. In examining SR, the literature mostly covers the internal and external determinants why organisations commit to reporting. However, admitting that the organisation’s future depends on how the key stakeholders perceive its behaviour and evaluate the performance, as well as the question of what constitutes “good” SR still lack adequate analysis. The disclosure of sustainability in terms of comprehensiveness, quality or timeliness of the information is a complicated aspect and requires a clear management vision on the role of reporting, as organisations may adopt different disclosure strategies in order to shed light on what is often invisible or to even reduce what is known about the organisation and its activities. To date, research addressing the issue of the disclosure of economic, social and environmental performance in the reporting is lacking. To respond to this gap, the paper suggests a method for the SR assessment in terms of transparency of reports, quality of reports and correspondence of these reports to SR frameworks. The aim of the paper is to reveal the problematic areas of SR and to present the recommendations for improving accountability after establishing a model for SR qualitative assessment. The paper is focused on the extent to which the sustainability reports of various organisations reflect the transparency, quality and compliance with particular framework criteria. The data refer to organisations that published sustainability reports for 2016 and/or 2017. Twenty-three sustainability reports of organisations operating in Lithuania were evaluated. A qualitative study of SR was carried out using weighted scores. The key empirical findings suggest that organisations underestimate the significance of these reports and do not recognise the potential of SR for the success of the organisation. The results reveal that the level of SR transparency is quite low in terms of information clarity, reliability and relevance; the level of SR quality is quite low in terms of neutrality and verifiability; meanwhile the examined reports’ compliance with the particular framework requirements was rated as high. Based on empirical research, the core suggestions for organisations are as follows: to identify the main shareholders’ interests and enhance their trust; to increase the organisation’s knowledge about the SR benefits; to report more negative aspects while simultaneously seeking to minimise risks; and to perform the reporting audit thus identifying the fields for improvement. The conclusions of the paper underline the relevance of enhancing the disclosure of sustainability in SR focusing on the transparency and quality characteristics.

Keywords: Sustainability reporting, Transparency, Quality of sustainability reporting, Sustainability communication