Sustainability Reporting and its Impact on Corporate Financial Performance: A Literature Review
Keywords:
Corporate Financial Performance, Corporate Governance, Corporate Social Responsibility (CSR), Environmental Responsibility, Stakeholder Engagement, Sustainability ReportingAbstract
Sustainability is the most critical issue faced by an organization today; having the potential to influence overall performance and profitability of organization. The purpose of this study is to examine the impact of sustainability reporting on corporate financial performance through review of extant literature. Various researches have been conducted over the last decade for examining this relationship. The results are mixed, inconsistent and often contradictory; ranging from positive, to negative, to statistically insignificant relationship; depending upon the choice of measure of sustainability reporting, measure of financial performance, sample composition, time-period, and control variables. We, however, observed that the majority of studies suggest positive relationship. This paper attempts to critically analyze the existing researches to lay down scope for further research which may provide better and more consistent results. Further, the laws, regulations and standards on sustainability reporting are contemplated to become more stringent and mandatory in near future. Thus, the companies should adopt sustainability reporting as early as possible to avoid regulatory actions in future. Another important issue which needs to be addressed is concern over the reliability of sustainability reports. To resolve this issue, firms should get their sustainability reports externally assured from credible assurance providers like KPMG, EY, etc. to establish their image as a credible reporter in the perception of stakeholders. Without the credibility and trust that is put by stakeholders, business is impossible to run.
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