Sustainability Reporting and Organisational Factors

Abstract

This study examines the relationship between sustainability reporting and four factors named as industry, size, ownership type and organisation perspective through the lenses of multiple theories (institutional theory, stakeholder theory, legitimacy theory and theory of planned behaviour). We surveyed 240 Australian and New Zealand companies and asked them about the status of their sustainability reporting as well as their perceptions regarding the importance of sustainability indicators. We used the Global Reporting Initiative (GRI) indicators to develop the survey. From an ownership perspective, the results show that companies belonging to the public sector report more sustainability information compared with the private sector. However, from an industry perspective, there were no statistically significant differences between environmentally sensitive and non-environmentally sensitive industries in terms of the content of their sustainability reporting. The results further show that the size of a company does not influence the content of sustainability reporting, but larger firms tend to provide more details in their reports. The results also show a positive relationship between sustainability reporting and organisation perspective (in terms of the level of importance of the GRI indicators). This study contributes to the sustainability literature and reporting theories. Moreover, the results have several implications for managers and promoters of the GRI for improving the adoption of the GRI guidelines and increasing the level of sustainability reporting to amplify the company’s image. The results also allow for effective government policy development through understanding what motivates companies to disclose environmental and social-related activities.

1. Introduction

There is an increasing demand from different groups of stakeholders for more information (considered as value-added information) regarding sustainability reporting to enable them to evaluate organisations’ performances and perform better decision-making (Herremans et al. 2016; Romero et al. 2019). The number of companies paying attention to social and environmental issues in their reporting (also called “sustainability reporting”) has considerably increased (KPMG 2017b). However, sustainability reporting is mostly voluntary (Clarkson et al. 2008; Higgins et al. 2015), and companies often use financial and non-financial reporting to portray a positive social and environmental image (Helfaya et al. 2019; Zharfpeykan 2021).

The literature suggests the association between several contextual factors such as country, size, industry, ownership and the content or level of disclosure of sustainability reports. For example, Legendre and Coderre (2013) found a significant association between sustainability reporting, size and industry, while other studies (for example, Higgins et al. 2018) reported that the institutional dynamic associated with sustainability reporting is not necessarily size-, industry- or geographically based but issues-based. Higgins et al. (2018) argue that “irrespective of their size, some firms that operate in industries where reporting is common, or even in countries where reporting is seen to be popular, may not report or may not undertake other sustainability practices because they have not yet experienced pressure to address sustainability concerns” (Higgins et al. 2018, p. 322). Several studies used content analyses of corporates’ reports to infer companies’ motivations to report (e.g., de Villiers and Alexander 2014; Amoako et al. 2017). Many such studies were limited in scope, focusing only on large listed companies in specific, primarily high-impact, industries (Amoako et al. 2017; de Villiers and Alexander 2014; KPMG 2017b; Orazalin and Mahmood 2020). Relatively few studies have suggested that managers’ perceptions and attitudes towards sustainability influence their decisions to adopt voluntary reporting (Higgins et al. 2015; Farooq 2019; Ismaeel and Zakaria 2019). However, there is limited research on how managers’ perceptions of different aspects of sustainability can influence the sustainability report content. This study focuses on the level of sustainability reporting in Australia and New Zealand. Corporate social responsibility (CSR) is deep-rooted in the Australian and New Zealand business ethics and community (Golob and Bartlett 2007). Australia is a fundamental cause for sustainability study and has a long history of sustainability reporting. However, it seems that the trend of and the frequency of sustainability reporting in both Australia and New Zealand are still poor and less than those of other developed countries (Dobbs and Van Staden 2016; KPMG 2017a). The national rate of corporate sustainability reporting in Australian companies was 81% in 2015 but dropped to 77% in 2017 (KPMG 2017b). For New Zealand companies, the reported rate for 2017 was 69% (KPMG 2017b), while the adoption rates of sustainability reporting in other developed countries such as France, Germany, Japan, the UK and the USA have been reported to be as high as 71% (Laskar and Maji 2016) and increased to 99% in 2017 (KPMG 2017b). Since sustainability reporting is voluntary in both Australia and New Zealand, it is essential to see what factors contribute to it.

Despite there being many studies of sustainability practices worldwide, studies of the sustainability reporting practices of Australia and New Zealand are fairly sparse, especially in terms of addressing influential factors such as ownership structure, and industry or the management’s perspectives (Higgins et al. 2015; Ong et al. 2016; Guthrie and Farneti 2008). The demand for more sustainability reporting on the one hand and the low application rate of this practice in Australasia, on the other hand, raises an important question as follows: what internal and external factors may facilitate or hinder sustainability reporting in organisations in Australasia?

To answer this question, this study examines the relationship between sustainability reporting and the four most popular factors:1 industry, company size, ownership and organisation perspective. The study uses multiple theory lenses (institutional theory, stakeholder theory, legitimacy theory and the theory of planned behaviour) to select factors and interpret results. A survey was developed using the Global Reporting Initiative (GRI) as a framework. The survey was conducted on 240 Australian and New Zealand companies (with different industries, company sizes and ownership styles). This study adopted the GRI definition, which considers sustainability reporting as a means of disclosing and communicating an organisation’s economic, environmental and social activities and their impacts on both their internal and external stakeholders (Alaraji and Aljuhishi 2020).

This study contributes to the literature on influential factors in sustainability reporting. In particular, this study contributes to the literature by adding managers’ perceptions of the importance of sustainability indicators as one of the influential factors in companies’ sustainability reporting. Additionally, by using the survey and incorporating the company’s view, this study offers insights beyond those obtained from the traditional content analysis or single-case study. The results also have implications for managers and promoters of the GRI who wish to increase the adoption of the GRI guidelines and increase the level of sustainability reporting to improve the company’s image. Moreover, as Herremans et al. (2016) suggested, identifying the factors that could potentially influence and facilitate the implementation of sustainability reporting in practice will enable stakeholders to receive more information regarding the performance of their organisations and to make better decisions.

The remainder of the paper is structured as follows. Section 2 presents the relevant literature on sustainability reporting and provides theoretical discussion and the development of hypotheses. Section 3 offers the research method, Section 4 the results and Section 5 the discussion and conclusion.

2. Literature Review

Sustainability reporting is becoming essential for companies to communicate their sustainability plans and performance to their stakeholders. Due to stakeholders’ increasing demands for accountability and improved legitimacy, especially in large and listed companies, its popularity has increased globally (Alonso-Almeida et al. 2015). Sustainability reporting offers financial and social benefits, including social impacts that create trust in civil society (Gazzola et al. 2019).

Despite the increasing importance of sustainability, sustainability reporting is primarily voluntary and has no standard format similar, for example, to financial reporting. Given these characteristics, a predominant theme in corporate sustainability reporting studies is to explain why companies report. One method of study is the analysis of the standalone sustainability reports, an approach going back to the 1990s, where explanations of patterns of reporting have tended to be carried over from the annual report disclosure (Higgins et al. 2015). Some studies focus on global companies’ sustainability reporting patterns, such as those of the Global Fortune 500 by Legendre and Coderre (2013); and the top 100 and global 250 companies in the KPMG’s surveys (KPMG 2017b). Other studies have focused on specific countries or industries (e.g., de Villiers et al. 2014; Dobbs and Van Staden 2016; Higgins et al. 2015; Orazalin and Mahmood 2020; Thoradeniya et al. 2022; Zharfpeykan 2021).

To contribute to the diffusion of sustainability reporting, some studies have investigated the influence of various factors on levels of sustainability reporting in different countries. According to Engert et al. (2016), influential factors can be divided into internal factors (such as company size) and external factors (such as industry). Legendre and Coderre (2013) considered the factors that influence the adoption of the GRI by the world’s 500 largest (Fortune Global 500) companies, using legitimacy and signalling theories. The results showed that company size and industry influenced the adoption of the GRI guidelines by these companies; however, the GRI application level was influenced by the industry of the companies but not by their size. In high-risk industries, the GRI application level was more likely to be considered as a signal for managing the reputational risk than in low-risk industries. Schreck and Raithel (2018) investigated sustainability reporting in 280 companies in environmentally and socially sensitive industries and found that company size significantly affected sustainability reporting. However, findings regarding the relationship between influential factors and sustainability reporting are inconclusive: while some studies (for example, Legendre and Coderre 2013) have found a significant association between sustainability reporting and company size and industry, others (for example, Higgins et al. 2018; Higgins et al. 2015) have reported that the institutional dynamic associated with sustainability reporting is not necessarily size-, industry- or geographically based, but issues-based.

Higgins et al. (2015) conducted an interview survey of managers for all of the Australian business companies that had produced a sustainability report since 1995. They explored whether companies in industries with more or less negative physical environmental impacts are motivated by different factors and whether organisation size makes a difference. They found that sustainability reporting is deeply embedded in a few high-impact industries (i.e., those associated with negative environmental impacts). In contrast, most of the recent improvement in reporting comes from a few companies in a wide range of low-impact industries. They also studied whether there is any relationship between the drivers of reporting and the experiences of different reporting companies. They could not suggest any rationale behind the sustainability reporting practices of early and later adopters of varying company sizes and from various industries. Therefore, they argued that such practices might be due to the maturity of the sustainability issues in Australia. Dobbs and Van Staden (2016) investigated the motivations for voluntary sustainability reporting in New Zealand. Their survey of 122 listed companies and of the content of sustainability reports of 14 respondents who indicated that they reported social and environmental information suggested that the driving force for a sustainability agenda in their sample companies was usually a member of senior management.

As reported in this section, previous studies have addressed the impact of a few factors (including company size, ownership and industry type) on sustainability reporting in different countries. Still, they have produced inconclusive results, probably due to the selected factors (e.g., geographical or cultural factors, etc.) or selected theoretical lens for the study (which will be discussed in the next section). While some studies highlighted significant influence, others indicated no relationship between these factors and a company’s sustainability (Farisyi et al. 2022). This study extends the prior research by adding one extra influential factor named “manager perceptions and behaviour” on different aspects of sustainability issues, which has not been previously considered and investigates the impact of four factors (size, ownership, industry type and manager perceptions) on sustainability reporting in organisations. This study thus seeks to advance our understanding of the impact of different factors on sustainability reporting in different environments and, in particular, to extend the limited studies of Australian and New Zealand companies.

2.1. Theoretical Discussion and the Development of Hypotheses

In this study, we present the most relevant theories discussed in the literature to explain the motivation/s behind sustainability reporting rather than sticking to only one particular theory and trying to justify our findings from one specific lens. Thus, the whole argument here is that sustainability reporting is not without some theoretical background and justification. Therefore, this study presents the most relevant theories for sustainability reporting first and then looks at our findings to see which theory/s can better explain our results.

Various theories in the literature suggest different motivations for sustainability reporting. Four theories are considered in this paper, which have already been used in the sustainability reporting literature: institutional theory, stakeholder theory, legitimacy theory and the theory of planned behaviour. Legitimacy and stakeholder theories generally focus on strategic motives for reporting, whereas institutional theories explore institutional factors (Mahmood and Uddin 2021), and the theory of planned behaviour is about individual behaviour and perception. Using multiple theoretical lenses has been advocated for a better explanation of phenomena and a more comprehensive view (Khan et al. 2014; Simoni et al. 2020). In the following section, these theories and the development of hypotheses are discussed.

2.1.1. Ownership Structure

Commonly used proxies for measuring ownership structure are the company’s listing age in the stock market, government ownership, percentage of foreign ownership, concentrated or dispersed ownership, etc. (Raquiba 2020). It is argued that fully or partially government-owned companies show good responsibility towards society, such as promoting environmental quality (Dam and Scholtens 2012) and reporting more sustainability reporting information to set a good example in the industry as well as to address more vigorous regulatory requirements (Dissanayake et al. 2019; Fuadah et al. 2019). According to Pilcher (2011), the global trend towards sustainability reporting increases accountability and transparency for the public sector and therefore the public display of sustainability concerns can, in practice, play an essential role in legitimising the activities of government-owned companies (Chang et al. 2019). According to stakeholder theory, organisations are responsible to their stakeholders (Freeman 1983) and must focus on the interests of a wide range of stakeholders. Public sector companies are accountable for using public resources and are therefore under more social pressure and are subject to higher public scrutiny (Larrán Jorge et al. 2019). Stakeholders expect public sector companies to be more accountable, and they need to legitimise themselves.

According to legitimacy theory, companies try to claim legitimacy from external stakeholders by showing the companies’ adherence to social norms and expectations (Nikolaeva and Bicho 2011), for example, through more public sector commitment towards sustainability reporting (Alcaraz-Quiles et al. 2014). Some studies have considered the level of reporting (e.g., coverage of the GRI) in the public sector. For instance, Guthrie and Farneti (2008) discovered “cherry-picking” patterns in the GRI reporting practices of seven Australian public sector companies. Williams et al. (2011) also found that 50% of the respondents from the Australian local government were not reporting any sustainability information.

These studies failed to compare the public sector to the private sector reporting. Chang et al. (2019) compared the quality of sustainability reporting of 100 public-listed financial institutions from different countries and found a higher quality of sustainability reporting among privately owned institutions compared to government-owned ones. In contrast, Raquiba (2020) found that companies with a higher level of government ownership disclosed more information.

Therefore, based on the legitimacy and stakeholder theories, the following hypothesis is proposed:

H1. 

Public sector companies are more likely to report more sustainability indicators than private sector companies.

2.1.2. Industry

It has been reported that the type of industry can affect the level of sustainability reporting. Previous studies identified the industry as a critical institutional pressure determining a company’s approach to social and environmental issues (Delmas and Toffel 2008; Sharma et al. 2020). Jones (2011) argues that some industries significantly impact the environment and advocates studying the relationship between industry and the environment and developing measurement systems to assess the industry’s impact. Traditionally, large companies in environmentally sensitive industries (such as mining and metals) and those with high social public visibility (such as banks) are expected to be influenced more due to legitimacy issues and stakeholder pressure (Higgins et al. 2015) and they are more willing to disclose sustainability-related information to address the pressure (Raquiba 2020).

Various theories (e.g., institutional theory, stakeholder theory and legitimacy theory) have been used to explain the differences in sustainability reporting between industries. Regulators, investors and the public have increasingly asked for more sustainability reporting from different sectors (Delmas and Toffel 2008). Moreover, there are differences among industries regarding the legitimation imposed by key societal actors such as the media (Bansal 2005). This leads to the expectation of differences between sectors in their sustainability reporting.

Organisations in environmentally sensitive industries (e.g., energy, pharmaceuticals, utilities and mining) have overt environmental and social impacts and, therefore, higher levels of sustainability reporting (Dilling 2010). Furthermore, it has been suggested that higher media and stakeholder attention makes these organisations more likely to be regulated (Dissanayake et al. 2016; Engert et al. 2016). The higher pressure for reporting in these industries may be due to their higher consumption of natural resources leading them to use sustainability reporting to counter any threats to legitimacy (Dissanayake et al. 2016). Therefore, due to sector-specific stakeholder and legitimacy pressure, organisations in these industries are inclined to engage in sustainability reporting.

Institutional theory has also been applied at the industry level to explain and analyse organisations’ approaches to sustainability (Liu and Anbumozhi 2009) but with conflicting results. The institutional theory argues that a company’s behaviour cannot be studied without considering its institutional context (Chatelain-Ponroy and Morin-Delerm 2016), and its decisions concerning the characteristics of its sustainability reporting are influenced by political, social and economic systems (Cho et al. 2014). Institutional isomorphism is a process whereby companies with similar environmental conditions are expected to look identical (Jackson and Apostolakou 2010). This institutional pressure can be either coercive, such as regulatory requirements, mimetic, such as conformist imitation, normative or harmonising (Chatelain-Ponroy and Morin-Delerm 2016).

However, companies may cherry-pick the information they disclose to portray a positive image within their specific institutional ecosystem (Zharfpeykan 2021). Sustainability reporting can be considered a tool to control a company’s reputation risk (Michelon 2011). Some studies have shown a positive link between the level of sustainability reporting and high-risk industries or those with a high impact on the environment (e.g., Legendre and Coderre 2013; Zharfpeykan 2021). Gallego (2006) studied the sustainability reporting of 19 Spanish companies from four sectors (finance and insurance, transformation, transport and communication, energy and water) and found that industry type can influence sustainability reporting. Using legitimacy theory, Zharfpeykan (2021) found a more greenwashing strategy in the sustainability reports of Australian financial services compared to mining and metals companies.

In contrast to the above studies’ suggestion of a relationship between sustainability reporting and industry type, Dissanayake et al. (2016), in their study of Sri Lanka’s organisations, Higgins et al. (2015) in Australian companies and Barkemeyer et al. (2015) in multinational enterprises found no association.

Our study sought to consider the influence of industry categorisation (environmentally sensitive and non-environmentally sensitive industries) on sustainability reporting content. Based on the insights from the literature, the following hypothesis is proposed:

H2. 

Companies in environmentally sensitive industries are more likely to report more sustainability indicators than companies in non-environmentally sensitive industries.

2.1.3. Size

Company size is an internal factor, which some argue influences the company’s internal sustainability practices (Dissanayake et al. 2016; Michelon et al. 2013; Tauringana 2021), while others suggest that corporate sustainability commitment should be the duty of all organisations regardless of their size (Yu and Chen 2014).

According to the principles of legitimacy and stakeholder theories, larger companies should have higher reporting levels due to their more comprehensive range of stakeholders, more significant resources, and the greater influence of their performance on society compared to smaller companies (Artiach et al. 2010; Raquiba 2020). Some studies have found company size to positively impact sustainability reporting practices (e.g., Balogh et al. 2022; Khan 2010; Prado-Lorenzo et al. 2009; Orazalin and Mahmood 2020; Sharma et al. 2020). For example, Orazalin and Mahmood (2020) found firm size influences the extent, nature and quality of the sustainability reporting practices of Kazakhstani companies. Prado-Lorenzo et al. (2009) found direct relationships between corporate size and the disclosure of the proposed GRI indicators on greenhouse gas emissions and climate change worldwide. Khan (2010) studied the development of sustainability reporting in the banking sector in Bangladesh and found that bank size affects sustainability reporting.

On the other hand, some studies could find no association between an organisation’s size and its sustainability disclosure. Lungu et al. (2011) used companies’ asset values and revenues as size measures and found a very weak correlation between company size and the level of environmental and social disclosure. They suggested that this may be because, in large organisations, stakeholders’ trust has already been assured through the organisation’s stated concerns about sustainability. The value that sustainability disclosure may bring does not change that previously earned reliability. In another study, de Villiers et al. (2014) compared the sustainability disclosure of 18 mining companies in South Africa in 2007. They used these companies’ market capitalisations to categorise them as large or small. There were statistically significant differences in social disclosure but not in environmental exposure. These findings are consistent with the legitimacy theory in that larger organisations feel more pressure to be legitimate socially and disclose more. However, for the environmental section, they concluded that either organisation in the industry had reached their level of maturity in environmental reporting and therefore reported similarly, or that, as suggested by institutional theory, organisations tried to mimic leading organisations in their field.

In this study, the following hypothesis is proposed:

H3. 

There is a positive association between the size of a company and its sustainability reporting.

2.1.4. Organisational Perception of Sustainability Issues

According to Staw et al. (1983), corporate reports are the means for companies to publicly disclose their past performance, future expectations and any other information that the managers feel is significant to reveal to the relevant stakeholders. Previous studies argue that managers’ perceptions and attitudes towards corporate sustainability influence related strategies (Maon et al. 2008) and highlight how managers’ perceptions about the usefulness of sustainability reporting influence the extent to which companies engage in sustainability reporting and the nature of the sustainability information reported (Dissanayake et al. 2021). Engert et al. (2016) suggest that middle managers’ attitudes tend to reflect those of top management. Thus, “implementation and organisational change are the key issues on which the sustainability agenda demands action. This requires a change of thinking, a change of attitude that usually needs to start with leadership” (Millar et al. 2012, p. 491).

Khan et al. (2014) considered top-level management participation to be crucial in implementing sustainability reporting. Disterheft et al. (2015) argue that companies are not blindly devoted to institutional norms but are more likely to follow institutional rules and expectations when matched with their internal organisational benefits. Ismaeel and Zakaria (2019) also found that managers have different perceptions of sustainability reporting depending on the scope of their company’s operations, while Dissanayake et al. (2021) found that Sri Lankan company managers attempt to accept sustainability projects that are beneficial not only to their companies but also to the development of the country. On the other hand, Thoradeniya et al. (2015) found that managers’ intention to engage in sustainability reporting does not translate to actual reporting, and Thoradeniya et al.’s (2022) findings highlight that the support of top management to improve the quality of sustainability reporting is constrained by resource availability.

Previous studies have shown the effectiveness of the theory of planned behaviour (TPB) as a basis for examining managerial decisions affecting the organisations’ environmental and social performance (Thoradeniya et al. 2012). The TPB considers “a person’s overall evaluation of performing the behaviour in question” (Ajzen 2006, p. 5). Fishbein and Ajzen (1975, p. 401) argue that “a person’s subjective norm is his belief that important others think he should or should not perform a given behaviour.” Therefore, the subjective norm indicates a person’s sense of social pressure to behave acceptably.

Applying the TPB and the influence of managers’ perceptions on strategy formulation and performance, this study tries to see the link between the managerial perceptions of the importance of GRI indicators and the content of sustainability reports. Materiality is defined as “determining the relevance and significance of an issue to an organisation and its stakeholders. An issue is deemed material if it will influence the decisions, actions and performance of an organisation or its stakeholders” (Accountability 2008, p. 12). In this study, we look at the materiality from the perspective of sustainability reporting managers (SRMs) regarding the relevance and importance of GRI indicators for their company. Therefore, the following hypothesis is proposed:

H4. 

There is a positive association between managers’ beliefs regarding the importance of sustainability indicators and reporting them.

3. Research Method

The survey questionnaires were developed using the general G4-GRI guidelines, which focus significantly on materiality2 and are applicable and relevant to all industries. The guidelines prescribe indicators in three main categories: economic, environmental and social. The first part of the survey contained general questions about the company’s name, location, turnover, type, sector and size. For type, there were four choices: public sector, private corporation, private partnership and sole ownership, which were further categorised into the public and private sector. The GRI standard industry categorisation was used to classify companies according to their industry sector, and participants selected their industry. In this categorisation, there was a category named “others” for companies with no specific indicators.

In the second part of the survey, participants were asked about their perceptions of the importance of each GRI indicator in their company’s performance using a 3-point Likert scale (0: not important, 1: possibly important and 2: important). They were also asked whether their company reported those indicators in their sustainability reports. A pilot study was conducted by sending the survey questionnaire to 10 academics, and no further adjustment was suggested.

The survey was sent to top managers of Australian- and New Zealand-registered companies from various industries3 (listed in Appendix A). The survey targeted companies’ top managers responsible for sustainability performance (sustainability reporting managers (SRMs)). To ensure the most appropriate person completed the survey; a control question at the beginning of the survey filtered out people who were not responsible for sustainability reporting.

There is a database of companies in Australia and New Zealand without specific filtering.4 The survey was sent out to all companies in the database, and no companies were pre-selected. As long as the companies were registered and existed in the database, they received the survey. The database is the property of the “research now” company, and we do not have access to the list.

The survey was sent to 26,795 managers, 23,695 from Australia and 3100 from New Zealand. Of the 26,795 participants, 1882 started and 240 finished the survey.5

Participants were classified according to their countries (Australia and New Zealand), ownership structure, industry and company size. Participants were grouped into private sector companies (private corporation, private partnership and sole ownership, whether publicly listed or not) and public sector companies. The Australian Bureau of Statistics defines public sector companies as “those government units and units controlled by the government”.6 

Table 1. Sample descriptive information.

Category		Total	%
Country	Australia	186	77%
	New Zealand	54	23%
Ownership structure	Public sector	62	26%
	Private sector	178	74%
Industry	Environmentally sensitive industries	64	27%
	Non-environmentally sensitive industries	176	73%
Size	Small	137	57%
	Medium	33	13.80%
	Large	66	27.50%
	Size not specified	4	1.70%

provides descriptive information about the sample.

Companies in various industries were further categorised into two categories: environmentally sensitive industries and non-environmentally sensitive industries. Guided by the literature (Clarkson et al. 2008; Elijido-Ten 2010; Zharfpeykan and Akroyd 2022), agriculture, airport operators, automotive, chemicals, construction and real estate, electric utilities, food processing, forestry and paper, manufacturing, mining and metals, oil and gas and water utilities were classified as environmentally sensitive industries and the rest as non-environmentally sensitive. This placed 64 companies in the environmentally sensitive category and 176 in the non-environmentally sensitive category.

Previous studies have used various proxies for company size, such as total assets, total sales, annual turnover, market capitalisation and the number of employees (Dilling 2010; Dissanayake et al. 2019; Dienes et al. 2016; Fuadah et al. 2019). This study used the number of employees. Companies’ numbers of employees enabled them to be grouped into small (fewer than 50), medium (fewer than 250) and large (more than 250 employees) (European Commission 2022). Out of 240 participants, four companies did not specify their sizes, and therefore, we excluded them from the analyses regarding their sizes.

Since the survey participants were from both Australia and New Zealand, a t-test and Levene’s Test for Equality of Variances were conducted for any statistically significant difference between the average reporting and the level of importance scores of each sustainability indicator. The results were not significantly different between the two countries for either level of importance or level of reporting for each sustainability category; therefore, the results of both countries are combined in the following analyses. Overall, the average sustainability reporting score of the participants was low (mean = 12.97, std. deviation = 19.41) with a minimum of zero and a maximum of 91 reported indicators.

Responses for the total participants (240) were tested for normality using the Shapiro–Wilk test (Shapiro and Wilk 1965). The results were statistically significant for all the indicators in the survey (p-value < 0.05), indicating that the data are not normally distributed, and therefore, non-parametric tests should be applied. Multiple regression was used to evaluate the relationship between sustainability reporting and other contextual factors. The following model was used:

Equation (1): Regression model for sustainability reporting.

$$S{R}_j=\alpha +{\beta }_{1}Ownership structure+{\beta }_{2}Industry+{\beta }_{3}Size+{\beta }_4{L}_{GR{I}_j}+{\epsilon }_j$$

(1)

where: j = 1, …, 240

• $S{R}_j$: Sustainability reporting score (total number of reported indicators of company j)
• $Ownershipstructure:$Dummy variable of 1 (public) or 2 (private) sector.
• Industry: Binary coding of 1 when the company is in environmentally sensitive industries or two when it is not.
• Size
• $L_{GR{I}_j}$(level of importance): Principal component analysis (PCA) factor for the GRI indicators

To calculate the level of importance of indicators in each GRI category, the results were first coded as “0: not important”, “1: possibly important” and “2: important”. When large multivariate datasets are analysed, it is most desirable to reduce their dimensionality (Jolliffe 2002). Since there are 91 indicators in the GRI list, principal component analysis (PCA) was used to reduce its dimensionality to analyse the impact of managers’ perceptions on reporting, collected from the survey. Principal component analysis (PCA) is a mathematical algorithm that reduces the dimensionality of the data while maintaining most of the variation in the dataset (Jolliffe 2002). By using fewer components, each sample can be signified by relatively fewer numbers rather than by values for thousands of variables (indicators here), which makes it possible to visually evaluate similarities and differences between samples and identify whether samples can be grouped (Ringnér 2008).

To do so, it is important to determine whether applying PCA is a suitable option for the data here. The Kaiser–Meyer–Olkin measure of sample adequacy (KMO) and Bartlett’s Test of Sphericity were conducted to test if the data were suitable for PCA. The KMO was 0.74, above the commonly recommended value of 0.6, and the Bartlett test was significant (p = 0.000) for all the GRI categories. The maximum likelihood factor analysis with Kaiser’s criterion of eigenvalues greater than 1 (Field 2009) yielded a one-factor solution as the best fit, accounting for 74% of the variance in managers’ perception of the importance of the GRI standards scores.

4. Results

First, various assumptions about using multiple regression were tested: linearity, multicollinearity and outliers. Linearity was checked by drawing scatter plots between each independent variable and the dependent variable. These showed that all the independent variables had a linear relationship with the dependent variable, thus meeting the assumption of linearity.

Multicollinearity was checked by calculating the correlations among independent variables. There should not be any perfect correlation (correlation of one) or high correlations (above 0.8 or 0.9) among independent variables (Field 2009).

Table 2. Correlations among the regression’s independent variables (ownership structure, industry, size and level of importance).

	Ownership Structure	Industry	Size	Level of Importance
Industry	−0.045	1
Size	−0.395 ***	0.003	1
Level of importance	−0.049	0.049	0.076	1

*** Correlation is significant at the 0.01 level (2-tailed).

shows that the only statistically significant negative correlations were between ownership structure and company size, which suggested that some of the public companies in the sample were larger than the private companies. None of the independent variables were above 0.7 (above 0.80 indicates potential multicollinearity). Moreover, the Variance Inflation Factor (VIF) and tolerance, the reciprocal of VIF (1/VIF), were calculated to test for multicollinearity, and none were below 0.2: it is, therefore, reasonable to assume that the assumption of non-multicollinearity was not violated (Menard 1995).

Independent errors were also tested using the Durbin–Watson test. The result was 1.989, which is above one and below three: it can, therefore, be concluded that the residuals are independent (Field 2009).

The results of the regression ANOVA test (R² = 0.657, F (4, 230) = 110.349, p = 0.000) suggest that the regression model has explanatory power. The R² is 0.657, which shows that the regression model explains 65.7% of variances in the dependent variable (total number of reported indicators) (Field 2009). The relatively high R² score shows that contextual factors included in the model are reasonably able to explain part of the reasons why companies provide sustainability reporting. The results of the regression coefficients are presented in

Table 3. Regression model—reporting score is dependent, and ownership structure, industry, size and level of importance are independent variables.

Model	Unstandardised Coefficients		Standardised Coefficients	t	Sig.
	B	Std. Error	Beta
(Constant)	23.238	5.306		4.379	0.000 ***
Ownership structure	−4.685	1.897	−0.105	−2.469	0.014 **
Industry	−2.395	1.694	−0.055	−1.414	0.159
Size	1.231	0.941	0.055	1.308	0.192
Level of importance	15.368	0.754	0.790	20.380	0.000 ***

*** Correlation is significant at the 0.01 level (2-tailed). ** Correlation is significant at the 0.05 level (2-tailed).

.

The regression F-value is highly significant, which indicates that the combined model variables are statistically different from zero. The results show that the ownership structure and the perception of managers about the importance of the GRI indicators can explain around 65.7% of variations in the company’s sustainability reporting score.

The result shows a statistically significant negative relationship between the ownership structure and reporting score. This suggests that the ownership structure influenced the total number of reported indicators. As public companies are coded as 1 in our sample and private companies as 2, the negative correlation indicated that the public companies had a higher level of reporting of the GRI indicators. Therefore, H1 is accepted. The regression results did not show any statistically significant relationship between the industry and sustainability reporting score nor between the size of a company and the sustainability reporting score. Therefore, both H2 and H3 are rejected.

The aim was to see whether managers’ perceptions influence sustainability reporting scores; PCA was used to reduce the number of indicators in the GRI. There was one component for the level of importance (considering the eigenvalue one). The regression results showed that managers’ perceptions of the significance of the GRI indicators could positively influence the reporting scores of the companies. This influence was more extensive (Beta is 15.368) than the other factor(s), so H4 is accepted.

According to the regression results, when considering all the stated factors, the model shows that the ownership structure and managers’ perceptions of the importance of the GRI indicators influenced the reporting of the sustainability indicators. Still, organisation size and industry type did not significantly affect the number of reported indicators.

5. Discussion and Conclusions

This study surveyed 240 companies’ managers from Australian and New Zealand companies. Respondents were responsible for sustainability reporting due to the screening question at the beginning of the survey. This study examined the impact of four factors—the ownership structure of a company, the industry, organisation size and the managers’ perceptions of the importance of indicators—on the level of sustainability reporting.

The results show that the ownership structure of a company influences the sustainability reporting score, with a higher frequency of reporting in the public sector than in the private one. This is in line with some of the previous studies that suggest the public sector report more sustainability reporting information to set a good example in the industry as well as to address more vigorous regulatory requirements (Dissanayake et al. 2019; Fuadah et al. 2019; Raquiba 2020). Public sector companies are under more social pressure from stakeholders. According to stakeholder theory, companies try to satisfy the need of their stakeholders, and therefore, if stakeholders have more scrutiny over the operations of the public sector, these companies try to report more. In addition, a higher frequency of reporting by public sector companies can be explained through legitimacy lenses. Since public sector companies use public funds, they are under more pressure to reveal their performance. Therefore, as suggested in the literature, public sector companies try to claim legitimacy from external stakeholders by showing their adherence to social norms and expectations, for example, through more public sector commitment towards sustainability reporting.

The results showed that the industry factor and company size do not influence sustainability reporting. This finding agrees with the results of some of the previous studies such as Dissanayake et al. (2016), in their study of Sri Lanka’s organisations, Higgins et al. (2015) in Australian companies and Barkemeyer et al. (2015) among multinational companies. Following stakeholder theory and legitimacy theory, a higher level of reporting is expected in larger companies from more negative physical/environmental impact industries, which will feel more pressure from the public and, therefore, to legitimise themselves, will try to report more and imitate the performers of best practice in their industry. One explanation here may be that while sustainability reporting is still voluntary and the reporting rate is relatively low, sustainability concerns have deep roots in Australia and New Zealand. Therefore, it is expected that companies that adopted these voluntary disclosures, in either environmentally sensitive or non-environmentally sensitive industries, have already reached their maturity level of reporting. They, therefore, exhibit no statistically significant differences (as also suggested by de Villiers and Alexander 2014; Higgins et al. 2015). Another explanation is that companies in environmentally sensitive industries are under more pressure from the public to disclose their environmental performance. In contrast, those with high social public visibility (such as banks) are assumed to pursue a legitimacy rationale, reporting more on their social performance to respond to stakeholder pressures. For instance, there has been a series of scandals among Australian financial services companies that were highlighted by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Royal Commission Final Report 2019), which underlines the importance of transparency for these companies (Higgins et al. 2020). Therefore, they are under more pressure to disclose more of their social performance. However, since the total number of reported indicators was considered here, it was impossible to differentiate between social and environmental reporting.

In addition, as already mentioned, 28% of the sample companies belonged to environmentally sensitive industries and 72% to non-environmentally sensitive ones. Just over half of the companies in both industry categories were small. The reporting scores in both industry categories showed similarities in their reporting patterns, which can be explained by the institutional and legitimacy theories. According to Jackson and Apostolakou (2010), institutional isomorphism is a process whereby companies with similar environmental conditions are expected to look identical. As the majority of companies in both industry categories are small, they may feel less pressure from different stakeholders (such as the media or society). Therefore, smaller companies in environmentally sensitive industries may feel less mimetic or normative pressure since larger companies in the same industry categories are not reporting comprehensively. Large companies in non-highly polluted industries seem to be more careful in the information they reveal, thus gaining or keeping a good reputation by not reporting in areas where they are not performing well.

The results of this study did not show that company size can influence the sustainability reporting score, which is similar to the results of Higgins et al. (2018); de Villiers et al. (2014) and Lungu et al. (2011). However, comparing small and large companies shows that larger companies provide slightly more information in their reports. This can be explained through the lenses of institutional theory, stakeholder theory and legitimacy theory. It can be argued that larger companies feel more institutional pressure through having to deal with more regulation and/or trying to mimic the other large companies in their industry. Additionally, stakeholders expect larger companies to report more comprehensively due to their more significant usage of resources and more substantial influence on the environment and social issues. Therefore, larger companies will try to report more to satisfy the needs of their stakeholders and gain legitimacy by giving more information.

Finally, the findings indicate that managers’ perceptions of the importance of sustainability indicators can influence their companies’ sustainability reporting. Therefore, following the theory of planned behaviour (TPB), companies without any regulatory requirements are expected to report those indicators that managers believe will be important to indicate the company’s performance. Moreover, stakeholder theory suggests that for companies to survive, they need to support what their stakeholders want. It can be argued that managers know their stakeholders’ needs and try to adjust their level of sustainability reporting accordingly. Therefore, if managers think a particular indicator is essential for their stakeholders, they report on it. Managers’ contribution to, and influences on, sustainability adoption have been studied at Australian universities (e.g., Disterheft et al. 2015). It was argued that proactive leadership exerted by senior management teams in universities is a significant cause of some universities’ commitment to sustainability reporting. The results of our study also support managers’ contribution to the sustainability reporting decision in a company.

The results of this study have several implications. By incorporating the company’s perception of sustainability issues, this study offers insights beyond those obtained from traditional content analysis and those with closer analyses of single-case-study companies. From the manager’s standpoint, the results show that regardless of the differences in the ownership structure and size of a company or industry, managers considered the GRI indicators to be the most appropriate performance tool and that different types of companies have adopted them. Therefore, managers looking for credible sustainability reporting guidelines could embrace the GRI guidelines. Managers can have a pivotal influence in supporting the integration process of sustainability at all levels of a company. In addition, since the managers’ perception of the importance of sustainability issues was found to be influential in reporting them, it can be argued that an “outside-in” process can be used to analyse a company’s sustainability strategy through the perusal of their published reports.

Additionally, the results indicate that companies with sustainability reporting do not report on all the indicators. Therefore, the results of this study can be helpful for managers and sustainability reporting preparers to decide on the benchmark they want to be at concerning their reporting strategy. They can look at their peers’ level of reporting (from the same type, industry or company size) and decide how they want to differentiate themselves. Moreover, smaller companies in low-risk industries, whose managers might face budgetary constraints, could still adopt the GRI guidelines and demonstrate their goodwill without having to make excessive investments. In contrast, managers of larger-sized companies might want to adopt a higher level of reporting to deal with higher stakeholder pressures to stay legitimate.

The results also have implications for the promoters of the GRI. The study identified two determinants of GRI indicator reporting, namely company ownership structure and the perceptions of sustainability reporting managers on the importance of the GRI indicators regardless of their company size or industry. Therefore, to increase the adoption of the GRI guidelines, promoters should target the sustainability reporting managers of the companies. Furthermore, to promote the GRI application and increase the level of reporting, the advocates might try to develop more specific marketing strategies for targeting companies with different types of ownership.

The results may also facilitate effective government policy development by increasing the understanding of what motivates companies to disclose environmental and social-related activities. Sustainability reporting preparers can also be guided towards planning for sustainability reporting obligations to improve their company’s image.

Contributing to the literature, this study explores managers’ viewpoints regarding sustainability reporting and develops a model that can provide opportunities for future research into sustainability reporting guidelines and/or regulations. By incorporating the company’s perceptions, this study offers insights beyond those obtained from traditional content analysis and those with closer analyses of single-case-study companies. In particular, this study contributes to the literature by showing that ownership structure and managers’ perceptions of the importance of sustainability indicators can influence their companies’ sustainability reporting.

This study has some limitations. First, the analysis is based on a limited survey of 240 companies. Since the survey was anonymous, the participants’ sustainability reports were not accessed. Moreover, the results showed only whether the indicators were reported, not the indicators’ disclosure level. Additionally, due to the anonymous nature of the survey, this study could not consider the age of the participants’ companies. Older and more established companies are likely to disclose more sustainability information due to their longer reporting experience. This study shows that the perception by managers of the importance of the GRI indicators can influence their reporting of them. This study looked at the perceptions of managers in two developed countries. However, as is widely known, environmental and labour standards are weaker in many developing countries. Therefore substantial pressure has built upon growing country companies to address their social and ecological impacts (Christmann and Taylor 2006). Future studies can also look at managers’ perceptions in developing countries and evaluate whether there is any link with reporting these indicators. More extensive reporting by growing country companies may thus reflect a greater exposure of these companies to several CSR challenges specific to the contexts they operate in. Future studies can also update the results of this survey by examining whether and how the introduction of the materiality matrix and the concept of “double-materiality” have impacted the content of sustainability reporting or the factors that contribute to the sustainability disclosure; do the influential factors discussed here still have the same impact?