Sustainability Reporting and the Compliance to GRI Disclosure Framework: A Cross-Sectional Study of Indian Companies

Abstract

Sustainability reporting could be viewed as a company’s strategic move to meet the demands of various stakeholders who would play a crucial role in its functioning and existence. Some studies considered legitimacy theory as a conceptual framework for social disclosures. Reviewing major cross-country studies, we find that most studies concentrated on the nature and extent of sustainability reporting worldwide. The findings of these studies were exciting and reported different experiences. However, most previous studies focus on the number of GRI factors covered by the reports; there is little examination of the reasons for the variations. Companies' sustainability reporting in the Nifty 100 National Stock Exchange (NSE) index is examined. Sustainability reporting for a period commencing from 2018-19 to March 2021-22 is measured by the GRI compliance index as the GRI standards are applicable for this period. The relationship between sustainability reporting and Firm Size, Economic Performance, Legacy, Industry and Shareholder Dispersion is analysed using panel data regression. A detailed analysis of the annual reports and the regression results revealed that market capitalisation consistently influences all three levels of compliance, i.e., economic, environmental, and social disclosures. The industry profile predicts environmental disclosures and social disclosures. Return on capital employed only predicts economic disclosures but not environmental and social disclosures. The firm's legitimacy is the significant predictor of all three disclosure dimensions. Shareholder dispersion only influences environmental disclosures, and no impact is found on economic and social disclosures. Stock return is another independent variable that predicts economic and social disclosures. The study has some beneficial policy implications, such as ways of improving non-financial reporting, better and uniform reporting, transparency in reporting, etc.