Sustainability reporting refers to the practice of companies producing information that indicates the environmental, economic, and social impacts caused by its operation in a country (White, 2009). It also includes a firm's governance model and values. Furthermore, the publication also comprises an institution's strategy and commitment in ensuring that they attain sustainability on a global level. Besides, it is an element of integrated reporting which combines financial and non-financial performance analyses (Godemann & Michelsen, 2011). Lastly, the report can be described as a corporate social responsibility (CSR), triple bottom line, environmental social governance writing (ESG), ecological footprint statement, and non-financial information. The organizations present the sustainability report as an annual company statement, triple bottom line account, social impact description, stand-alone sustainability report, or an environmental report.
Sustainability reporting is an important activity for every corporation because it helps a company to evaluate, measure, and understand before communicating their social, economic, and environmental performance (White, 2009). It helps them to set goals and track their progress from time to time to ensure that they are moving towards creating a sustainable economy. Besides, it assists the business to create a positive public image since it shows transparency and accountability for the actions done (Godemann & Michelsen, 2011). Sustainability reporting is a standard platform that enterprises use to announce their sustainability performance, progress, and their impact on a region.
Companies operating in all sectors of the economy worldwide are required to produce the sustainability reports on an annual basis. Thereby, the report helps the concerned bodies to follow their progress hence give them the best tactics to use to improve performance (Hirigoyen, Chant-Hall, & Reid, 2005). Most firms prepare the reports based on the Global Reporting Initiative (GRI) guidelines. GRI is an independent international body concerned with setting standards and procedures for sustainability reporting. It dictates that all firms and governments communicate the impact of their operations on human rights, climatic changes, and corruption.
GRI organization is based in Amsterdam, Netherlands, and it is one of the largest standards body globally. There are more than 7,500 companies and organizations using GRI guidelines for sustainability reporting worldwide (Hirigoyen et al., 2005). Apart from GRI, other associations that provide sustainability reporting rules include the International Organization for Standards (ISO), United Nations Global Compact (UNGC), and the Organization for Economic Cooperation and Development (OECD). The ISO provides the international values for social responsibility guidelines under code ISO 260000 (Godemann & Michelsen, 2011). On the other hand, the OECD issues the OECD's plans for multinational enterprises while the UNGC gives the communication on progress strategies.
This chapter reviews parent literature for the study and gives the objectives, importance and limitations of the paper. The major theoretical frameworks and literature used in this research include GRI framework, sustainability reporting, legitimacy theory and stakeholder theory. Apart from that, the literature review section will give secondary studies and elaboration of the GRI framework, which will help in determining the motives and commitments of the Saudi Arabian companies in providing sustainability reporting.
1.1 Problem Statement
According to a study carried out by Tamkeen (2007), Saudi Arabian companies and organizations do not meet international requirements for sustainability reporting. The research also indicated that the firms are reluctant in the social responsiveness and the general social corporate responsibility. It further stated that Saudi Arabian officials and leaders are driven by their personal gains and values rather than the company's progress (Tamkeen, 2007). Most businesses do not get enough motivation from the current market conditions to engage in dedicated corporate social duty and sustainability reporting. Other than that, the report indicated that the average consumers and the general public do not understand the meaning and importance of sustainability reporting and its framework. Additionally, sustainability reporting in Saudi Arabia and the rest of the Middle East is built on traditions of philanthropic giving engrained across the religion. In the Arab faith, generosity is rooted in strong cultural and religious traditions and in social values of compassion to the fellow humans (Godemann & Michelsen, 2011). Further, the scenario validates the importance of this study to find out the level of sustainability reporting in Arabian companies and, also, to determine the major motivations of the Saudi Arabian firms in providing good sustainability reports.
1.2 Importance of the Study
The study will be helpful to the Saudi Arabian companies and organizations in realizing their mistakes during sustainability reporting hence enabling them to improve. It will act like a mirror line against which institutions will reflect and see the major concerns arising due to their current sustainability reporting practices.
The report will also help the international bodies to understand why the Saudi Arabian corporations engage in the current methods of sustainability reporting. Additionally, the research paper will keep them abreast of the factors that shape the recent trends in the corporate publication in Saudi Arabia, therefore, make it possible for the institutions to design mechanisms that will assist in boosting sustainability reporting in Saudi Arabia and the Middle East.
Apart from that, the paper will determine whether the Saudi Arabian companies are committed to providing quality sustainability reports, hence, enable the overseeing bodies to come up with strategies of ensuring that they engage in better sustainability reporting.
1.3 Objectives of the Research Study
The major objectives of the research study include the following:
i.To explain in details how the Saudi Arabian companies carry out sustainability reporting
ii. To determine the factors that drive the Saudi Arabian companies to provide sustainability reports.
iii. To find out if the Saudi Arabian companies are committed to providing high sustainability reports.
1.4 Limitations of the Study
Although the research was successful in giving the major motivations of the Saudi Arabian companies in engaging in sustainability reporting, it has some limitations. Firstly, the paper does not give the causes and impacts of the current sustainability disclosure practices in Saudi Arabia. The information would have been important to the firms as it would have helped them in developing practices of sustainability reporting. Secondly, it does not help in the development of theories and major frameworks that might reflect or explain why the Saudi Arabian firms have their current practices of sustainability reporting. Lack of the models is because the report does not engage in the collection of the needed data and analysis to help in the establishment of such systems. The creation of the schemes and agendas from the research studies is an important aspect since it can be used by future researchers to explain the changes in trends and practices. Lastly, the research does not reflect and explain how sustainability reporting has evolved in the Saudi Arabian corporations over the years. The information would have been important in explaining if the businesses' sustainability practices are improving or deteriorating
1.5 Scope of the Study
Understanding the scope of the study is an important aspect when conducting a research. It helps the researcher to focus on the set objectives and answer the required research questions. The study will focus on establishing how the Saudi Arabian companies carry out sustainability reporting. Also, the investigation will determine the factors that drive the Saudi Arabian companies to provide sustainability report. Last but not least, the paper will find out if the corporations are committed to develop high sustainability reports as per the set standards and guidelines.
1.6 Why Companies Engage in Sustainability Reporting
Companies usually engage in sustainability reporting for a number of reasons. The first motive is to boost their image and reputation. Sustainability reporting is a sign of transparency and accountability of a firm's activities and actions. It increases the public trust in a corporation hence enhancing the business's status. Secondly, the institutions participate in sustainability reporting to attract and retain employees. The publications ensure that they highlight means of safeguarding staff's health and the social welfare (White, 2009). The reports also highlight the mechanisms for protecting the personnel from hazards and harmful by-products hence enabling the firm to keep the workers.
Additionally, the corporate reporting enables the companies to involve the stakeholders in their activities. It acts as the main reporting tool that the investors use to track an organization's progress and watch out for areas that require their input. Another importance of sustainability reporting to institutions is that it steers competition among peer companies hence spurring research and innovations. Sustainability reports are usually evaluated and the major trends highlighted by other firms (Hirigoyen et al., 2005). Consequently, competition emerges that enhances the global sustainability initiatives. Finally, the sustainability reporting is important for a company because it helps it to track its goals, vision, and mission (Godemann & Michelsen, 2011). The follow-up assists the firm to stay focussed and dedicated in achieving its aims and targets.
1.7 Advantages of Sustainability Reporting
Sustainability reporting has many advantages to a business, an organization, or the government. The first advantage is that it helps a firm to have a better reputation in the community and market. Sustainability reporting relates to an institution's transparency and concern for the public that builds trust among the people (Schaltegger, Bennett, & Burritt, 2006). It shows that a business values its community members as much as it cherishes its operations and activities hence attracting more customers. According to a report published by the Boston College Centre for Corporate Citizenship, 50% of the respondents stated that sustainability reporting has helped their companies improve a reputation. The same report also indicated that sustainability reporting and transparency were the core aspects that helped the firms to gain public trust and draw more clients.
Furthermore, the sustainability reporting also helps businesses to meet their employees' expectations. A report published by Ernest and Young (EY) in 2011 indicates that the workers are the primary audience for sustainability reports and they have great impacts on a company's public image and public trust (Schaltegger et al., 2006). Moreover, the corporate publication helps organizations to improve on wastes handling, the control of chemical release into the air, better site management, and the use of protective gear during work. It then helps a firm to safeguard its employees' health and welfare hence meeting their demands.
In addition, the sustainability reporting helps organizations to have improved access to capital. Research indicates that companies with high sustainability ratings have a lower Kaplan-Zingales score. The mark indicates that they have fewer constraints in accessing funds from the banks and other lenders. On the other hand, institutions with less sustainability reporting have a higher Kaplan-Zingales score indicating that they have more restrictions in accessing loans from financial institutions. Sustainability reporting also gives firms an opportunity to increase efficiency and reduce on wastes. It assists a firm to put in place strategies that will aid in reducing the amounts of garbage, the recycling of waste products, and disposing off unwanted stuff appropriately thus improving a company's efficiency (Savitz & Weber, 2013). The report also increases the institution's effectiveness through the improvement of the decision-making process.
Last but not least, the reporting enables an organization to improve the stakeholders' engagement in the company's activities (Schaltegger et al., 2006). Sustainability reporting shows that a firm's accountability for its undertakings and transparency in its operations attracts the investors to corporate and participate more in the institution's actions.
1.8 Disadvantages of Sustainability Reporting
On the other hand, the creation of sustainability reports has some disadvantages to a company. Its first demerit is the presentation of weak institution's goals and initiatives. Sustainability reports must be built around strong objectives to impress the stakeholders (Savitz & Weber, 2013). Failure to impress the investors might lead to criticism and rebuke that affects an organization negatively.
Apart from that, the publication can disclose a firm's mismanaged financial data, therefore, leading to mistrust among the general public and investors (Jones & Ratnatunga, 2012). It can also disclose a company's disordered priorities and their failure to follow the set guidelines and rules when preparing and presenting the reports, hence, putting the company in a position that they are unable to do business with other parties (Hirigoyen et al., 2005). In addition to the above disadvantages, sustainability reporting can also lead to strenuous comparisons against industry peers that are not healthy for small companies. The persistent assessments can stretch a firm's expenditure in sustainability reporting leading to losses (Jones & Ratnatunga, 2012). Apart from that, the corporate publication can also cause the setting of unreachable objectives due to the competition among organizations. The unattainable targets impact negatively on an institution's reputation due to the damaging feedback from the media and the general public.
Sustainability reporting can also disclose a corporation's short-term thinking. It mainly involves establishing sustainability goals with short-term expectations rather than focusing on the long-term benefit of an activity (Jones & Ratnatunga, 2012). The scenario affects the company's image badly as it attracts negative comments from the press. Besides, reporting on positive improvement in all areas of the sustainability report might make stakeholders to be skeptical and doubtful, hence, spurring distrust and negative feedback from the concerned parties (Savitz & Weber, 2013).
1.9 Content of the Report
Chapter one of the paper that is also the introduction gives the general overview of the topics and briefs the reader of what the subject of the report entails. The introduction describes the major frameworks and theories used and explains the concept of sustainability reporting. It further gives the importance of the study, the reason companies engage in sustainability reporting, the problem statement, and the objectives of the research. Also, it provides the importance of the discussion, the limitations of the report, the scope of the study, and the advantages and disadvantages of sustainability reporting for companies. The second chapter gives the research questions that need to be answered by the end of the study. The problems are followed by the third chapter that expounds on sustainability reporting. It also highlights the frameworks, theories, and other aspects of corporate reporting. Chapter four deals with the literature review of sustainability reporting. It focuses on the trends in annual reports, environmental reports, and social reports. The next chapter is about the motives of sustainability reporting. It discusses the significance of sustainability reporting in the society and the current trends. Chapter six puts emphasis on sustainability reporting in Saudi Arabia. The chapter gives the key issues of corporate publication in the country. Chapter seven is about the analysis of the relevant literature in sustainability reporting and it gives the theoretical frameworks and major discoveries on it. The eighth chapter evaluates the concepts of responsibility, governance, and sustainability in details. It also highlights the practical applications of corporate governance and its application value, the required standards and guidelines, and the analysis of global sustainability. Additionally, it describes the models used in sustainability reporting and the sustainable company management. The ninth chapter deals with sustainability reporting in relation to the corporate and social responsibility. The chapter further evaluates the corporate's social responsibility, the use of corporate governance to achieve sustainability, terms and definitions, and how the non-governmental organizations help in improving sustainability. Chapter ten discusses sustainability reporting in relation to stakeholders and the factors that influence it. On the other hand, chapter eleven describes the frameworks including the triple bottom line, connected reporting outline, the integrated reporting context, the UNGC structure, the specific management-based agenda, the sector specific frameworks and the global reporting initiative. It further describes the GRI guidelines, its performance indicators and the case studies on sustainability reporting from Saudi Arabia.
Chapter twelve is on the sustainability reporting standards while chapter thirteen discusses the research problem. Chapter fourteen gives the purpose of the study and chapter fifteen gives the conclusions on sustainability reporting in Saudi Arabia. Chapter sixteen gives a description of the theoretical frameworks, the stakeholder theory, and the legitimacy theory. On the other hand, chapter seventeen provides the hypotheses of the study while the next chapter states the methodology used in the report. Chapter eighteen defines qualitative and quantitative research methods, theoretical paradigms, and the summary of the chapter. It further gives the research design, sampling design, data sources, and data collection methods. Chapter nineteen is about the data analysis and it highlights the measurement of variables and the descriptive analysis. Additionally, it describes the Pearson correlation, independent sample tests, multivariate analysis, and the discussion of results. Finally, the chapter discusses the ethical considerations, the validity and reliability, and the limitations and demerits.
Calculations part is an essential step in the data analysis process. It helps a researcher to determine the variance, probability, mean, summation and regression of data, which is essential for analysis. Determination of these results helps a researcher to know how the dependent and independent variables are related and determine how such variables affect the study subject. In this research, the researcher uses sustainability disclosure index as the dependent variable and the number of directors, multinational status, ROA, ROE, industry sensitivity, use of the executive chairman, CEO educational level, auditor type, industry profile, presence of female directors, firm size and years listed as the independent variables. The researcher uses the hypothesized regression model in calculating the relations between the different variables and how they affect a firm's sustainability reporting. Apart from that, the researcher also uses standard deviation and variance to determine relationships between the variables. The researcher also employs the use of independent sample t-tests and the Pearson correlation to help in determining the relationships between the variables and the subject matter. A detailed explanation of these calculations is in chapter nineteen; analysis section of this report.
In general, it is evident that sustainability reporting is an essential activity for any business, organization or firm. Sustainability reporting helps in boosting the image and reputation of a company, improves access to capital, helps a company to meet employees' expectations, helps in reduction of wastes and improves stakeholder engagement in company activities. Sustainability reporting is also advantageous to a company or corporation because it serves as a corporate social responsibility, which unites community members with businesses. In addition to this, sustainability reporting helps in the publishing of both financial and nonfinancial data which is essential in gaining transparency in operations and trust of stakeholders. From the above discussion, it is then clear that sustainability reporting is an essential activity for every business and needs to be practiced in all industries.
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